UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended March 31, 2010
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
Commission file number 000-24293
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
K-V Pharmaceutical Company Fifth Restated Profit Sharing Plan and Trust
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
K-V Pharmaceutical Company
One Corporate Woods Drive
Bridgeton, MO 63044
REQUIRED INFORMATION
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(a)
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Financial Statements. Filed as part of this Report on Form 11-K are the financial statements and the schedules thereto of the K-V Pharmaceutical Company Fifth Restated
Profit Sharing Plan and Trust as required by Form 11-K, together with the report thereon of Brown Smith Wallace, LLC, independent registered public accounting firm, dated September 27, 2010.
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Exhibit No.
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Description
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23.1
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Consent of Brown Smith Wallace, LLC.
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K-V P
HARMACEUTICAL
C
OMPANY
F
IFTH
R
ESTATED
P
ROFIT
S
HARING
P
LAN
AND
T
RUST
F
INANCIAL
S
TATEMENTS
W
ITH
R
EPORT
OF
I
NDEPENDENT
R
EGISTERED
P
UBLIC
A
CCOUNTING
F
IRM
MARCH 31, 2010
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
To the Participants of the K-V Pharmaceutical Company Fifth Restated Profit Sharing Plan and Trust and
The Board of Directors of KV Pharmaceutical Company
We have audited the accompanying statements of net assets available for benefits of the K-V Pharmaceutical Company Fifth Restated Profit Sharing Plan and
Trust as of March 31, 2010 and 2009, and the related statements of changes in net assets available for benefits for the years then ended. 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.
We conducted our audits in accordance with the auditing standards of
the Public Company Accounting Oversight Board (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. The plan is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits of the K-V Pharmaceutical Company Fifth Restated Profit Sharing Plan and Trust as of March 31, 2010 and 2009, and the changes in its net assets available for benefits for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted
for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes at end of year 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 2010 basic financial statements and, in our opinion, is fairly stated in all material respects in
relation to the 2010 basic financial statements taken as a whole.
/s/ Brown Smith Wallace, LLC
September 27, 2010
1
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Statements of Net Assets Available for Benefits
March 31, 2010 and 2009
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2010
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2009
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ASSETS
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Investments at fair value (Note 4):
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Mutual funds
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$
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36,040,134
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$
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25,997,423
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Common stock
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2,256,246
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3,053,028
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Interest in common trusts
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5,425,984
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6,238,346
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Participant loans
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923,608
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1,735,480
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Total Investments
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44,645,972
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37,024,277
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Receivables:
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Company contributions
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132,549
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133,472
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Participant contributions
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162,286
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163,901
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Total Receivables
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294,835
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297,373
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LIABILITIES
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Reinstatement payable (Note 7)
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—
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(72,159
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)
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Excess contributions payable
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(94,126
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—
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Total Liabilities
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(94,126
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(72,159
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NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE
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44,846,681
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37,249,491
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Adjustment from fair value to contract value for fully benefit-responsive investment contracts
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(32,866
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)
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141,696
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NET ASSETS AVAILABLE FOR BENEFITS
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$
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44,813,815
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$
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37,391,187
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The accompanying notes are an integral part of these financial statements.
2
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Statements of Changes in Net Assets Available for Benefits
Years ended March 31, 2010 and 2009
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2010
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2009
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Additions:
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Contributions and other additions:
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Employer contributions
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$
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1,183,538
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$
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2,671,666
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Participant contributions
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3,512,481
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7,459,633
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Participant rollover contributions
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313,036
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2,019,620
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Total contributions and other additions
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5,009,055
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12,150,919
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Deductions:
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Benefits paid to participants
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10,971,250
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6,732,246
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Excess contributions
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94,126
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—
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Administrative and other expenses
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7,520
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24,630
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Total deductions
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11,072,896
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6,756,876
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Investment income (loss):
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Interest and dividends
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542,920
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1,111,386
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Net realized and unrealized appreciation (depreciation) in fair value of investments
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12,943,549
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(29,149,197
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)
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Total investment income (loss)
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13,486,469
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(28,037,811
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NET INCREASE (DECREASE) IN NET ASSETS AVAILABLE FOR BENEFITS
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7,422,628
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(22,643,768
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Net assets available for benefits, beginning of year
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37,391,187
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60,034,955
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Net assets available for benefits, end of year
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$
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44,813,815
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$
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37,391,187
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The accompanying notes are an integral part of these financial statements.
3
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements
March 31, 2010
1. Description of Plan
The following
description of the K-V Pharmaceutical Company Fifth Restated Profit Sharing Plan and Trust (“the Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s
provisions.
General
The Plan is a defined contribution plan established for the benefit of all employees of K-V Pharmaceutical Company, ETHEX Corporation, Ther-Rx
Corporation, and Particle Dynamics, Inc. (collectively referred to as “the Company”). The Plan was established under the provisions of Section 401(a) of the Internal Revenue Code (IRC), which includes a qualified cash or deferred
salary arrangement as described in Section 401(k) of the IRC, for the benefit of eligible employees of the Company. The Plan was established March 31, 1959 to offer the employees of the Company a means of saving funds, on a pre-tax basis
or after-tax basis, for retirement. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Participation is voluntary.
The Plan is administered by the executives of the Company. Fidelity Investments Institutional Services Company, Inc. serves as the Plan trustee and
record keeper (“the Trustee”).
Participation
Full-time employees are eligible to participate in the Plan immediately upon hire. Full-time employees are eligible to participate in the profit sharing
portion of the Plan upon completion of one year, or 1,000 hours, of service for the Company and reaching 21 years of age. Each employee may become a participant of the Plan on the first pay period coinciding with, or following, the fulfillment of
the eligibility requirements.
Contributions
Plan participants may contribute between 1% and 60% of their covered compensation, up to the maximum allowable under the IRC. Contributions may be made
prior to federal and certain other income taxes pursuant to Section 401(k) of the IRC. Contributions are allocated to investment funds, as determined by the eligible participant.
The Company matches 50% of a participant’s contribution not to exceed 7% of a participant’s covered compensation. These contributions are
allocated as directed by the participant.
The Company may also make a profit sharing contribution on a discretionary basis on behalf of all
eligible participants, as defined in the Plan, whether or not they make an elective contribution for the Plan year. Profit sharing contributions are based on the Company’s profitability, are allocated to participant accounts based on
compensation levels, and are 100% participant directed. These contributions are recognized by the Plan when authorized by the board of directors of the Company and are also subject to certain limitations. There were no contributions authorized by
the Board of Directors of the Company in 2010 and 2009.
4
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
Vesting
Participants are always 100% vested in the value of their contributions and the earnings thereon. Vesting of the Company’s matching contributions and
the earnings thereon is determined based on participants’ years of vesting service. A participant is vested 20% after each year of service beginning on the second year of employment and becomes fully vested after six years of service or if
employment terminates by reason of death, permanent disability, or retirement. Profit sharing contributions made by the Company vest based on the number of years of service as follows: 0% if less than 3 years of service and 100% if 3 or more years
of service.
Forfeitures
Forfeitures are held in a forfeiture account until allocated by the plan administrator. These amounts may be used to pay administrative expenses of the
Plan, reduce future Company matching contributions, and fund the Company’s discretionary profit sharing contribution to eligible participants. The amounts forfeited were $75,424 and $404,066 in 2010 and 2009, respectively.
Payment of Benefits
Upon termination, retirement or disability, the participants have the option to receive a lump-sum distribution equal to the vested value of the funds
allocated to the participants’ accounts or periodic payments of equal amounts over a period not exceeding the participant’s life expectancy.
Upon death subsequent to retirement, the beneficiary of the deceased participant will receive payments as determined by the method of distribution of
benefits then in force. Upon death prior to retirement, the beneficiary of the deceased participant can elect to receive a lump-sum distribution or annual periodic payments of substantially equal amounts not to exceed five years.
Upon termination, the participant will receive their vested profit sharing account balance, if under $1,500, on the valuation date coincident with the
Plan year in which the participant’s break-in-service occurred.
Participant Loans
Participants of the Plan may borrow funds from their accounts up to 50% of the total vested balance, not to exceed $50,000, less the participant’s
highest outstanding loan balance for the previous 12-month period. The minimum loan amount is $1,000. Loans are repayable through payroll deductions over a period of one to five years or up to 10 years for the purchase of a primary residence. The
loans are secured by the vested balance in the participant’s account and bear interest at a rate of prime (3.25% at March 31, 2010) plus 0.5% on the day the loan was granted. Interest income on the loan fund is included as interest income
in the participants’ fund accounts based on their elected loan allocation.
Plan Member Accounts
Each participant’s account is credited with the participant’s contribution, the Company’s matching contribution, and the
allocation of (a) the Company’s profit sharing contribution, (b) Plan earnings, and (c) forfeitures of terminated participants’ nonvested accounts, and is charged with an allocation of administrative expenses. Allocation of
the profit sharing contribution and forfeitures are based on compensation. Allocation of earnings and administrative expenses are based on the participant’s account balance by investment type.
5
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting, except for benefit payments to participants,
which are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the
reporting period. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
As described in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
962,
Plan Accounting- Defined Contribution Pension Plans
, investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of
the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under
the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts (interest in common trusts) as well as the adjustment of the fully benefit-responsive investment
contracts from fair value to contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
The Plan’s investments in mutual funds are stated at fair value as determined by Fidelity’s investment managers based on quoted market prices,
which represent the net asset value of shares held by the Plan at year-end. The common stock is recorded at fair value, based on the closing market price of the stock on the last business day of the Plan year. Participant loans are stated at cost,
which approximate fair value.
The accompanying Statements of Changes in Net Assets Available for Benefits present the net appreciation
(depreciation) in the fair value of investments, which represents the change in market value from the beginning to the end of the Plan year for investments retained in the Plan, and realized gains and losses, which represent the difference
between historical cost and proceeds received for investments sold during the year.
Purchases and sales of investments and realized gains and
losses are accounted for on the trade date. Interest income is recorded as earned and dividend income is recorded on the ex-dividend date.
6
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
Administrative Expenses
Certain administrative expenses, in excess of forfeitures, are paid by the Company.
Adoption of New Accounting Standard
In September 2006, the FASB issued authoritative guidance which establishes a framework for measuring fair value. That framework provides a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The Plan adopted FASB ASC 820,
Fair Value Measurements and Disclosures,
effective April 1, 2008. ASC 820 defines fair value as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction value hierarchy which requires an entity to maximize the use
of observable inputs when measuring fair value. Adoption of ASC 820 did not have a material impact on the Plan’s financial statements. The related disclosures are included in Note 5.
3. Risks and Uncertainties
The Plan
provides for investment in various mutual funds and other investment securities that, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Further, due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the statements of net assets available for benefits.
4. Investments
Participants
may direct their contributions and employer matching contributions into one or any combination of thirty investment options offered by the plan.
Investments that represent 5% or more of the Plan’s net assets at March 31 are presented in the following table:
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2010
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2009
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Fidelity Advisor Dividend Growth Fund
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$
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4,528,797
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$
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3,112,907
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Fidelity Advisor Stable Value Fund
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5,393,118
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*
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6,380,042
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*
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Fidelity Advisor Equity Growth Fund
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2,871,494
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2,161,202
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Fidelity Advisor Intermediate Bond Fund
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3,232,329
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3,495,168
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Fidelity Advisor Mid Cap Fund
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2,735,758
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Less than 5
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%
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Fidelity Advisor Small Cap Fund
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2,651,281
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2,067,581
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JPMorgan Equity Index Fund
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2,575,158
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1,930,568
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K-V Pharmaceutical Company Common Stock - Class A
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Less than 5
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%
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2,818,774
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*
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This amount represents contract value for this investment.
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7
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
Investments in K-V Pharmaceutical Company common stock (held in a unitized stock fund created by the
Trustee) held by the Plan at March 31 were as follows (in shares):
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2010
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2009
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K-V Pharmaceutical Company Common Stock - Class A
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2,006,505
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2,724,461
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K-V Pharmaceutical Company Common Stock - Class B
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110,555
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134,402
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During 2010 and 2009, the
Plan’s investments (including realized and unrealized gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
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2010
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2009
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Common stock
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$
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472,513
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$
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(11,514,217
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)
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Mutual funds
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12,471,036
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(17,634,980
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)
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$
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12,943,549
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$
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(29,149,197
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)
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The Fidelity Advisor Stable Value Fund (the “Stable Value Fund”), a common collective trust fund, invests in a
variety of investment contracts such as guaranteed investment contracts (“GICs”) issued by insurance companies and other financial institutions and other investment products (synthetic GICs and collective investment trusts) with similar
characteristics. The Stable Value Fund holds investments in fully benefit-responsive investment contracts that provide that the Plan may make withdrawals at contract value for benefit-responsive requirements.
The interest crediting rate is the periodic interest rate accrued to participants and is either set at the beginning of the contract and held constant,
or reset periodically to reflect the performance of the underlying securities. Variables impacting future crediting rates include current yield and duration of the assets backing the contracts, existing differences between the market values of
assets backing the contracts and the contract values of the contracts.
Participants may ordinarily direct the withdrawal or transfer of all
or a portion of their investment in the Stable Value Fund at contract value. Certain events may limit the ability of the Plan to transact at contract value with the issuer. The Plan administrator does not believe that the occurrence of any such
event is probable. For the Plan years ended March 31, 2010 and March 31, 2009, the average yield was approximately 2.9% and 5.3%, respectively and the crediting interest rate was approximately 2.2% and 4.1%, respectively.
8
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
5. Fair Value Measurements
As described in Note 2, “Adoption of New Accounting Standard,” the Plan adopted ASC 820, effective April 1, 2008. That framework provides a
fair value hierarchy which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC 820 establishes
a fair value hierarchy that categorizes the inputs to valuation techniques that are used to measure fair value into three levels:
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•
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Level 1 includes observable inputs which reflect quoted prices for identical assets or liabilities in active markets at the measurement date.
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•
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Level 2 includes observable inputs for assets or liabilities, other than quoted prices included in Level 1, and it includes valuation techniques
which use prices for similar assets and liabilities.
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•
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Level 3 includes observable inputs which reflect the reporting entity’s estimates of the assumptions that market participants would use in pricing
the asset, based on the best information available in the circumstance.
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The assets’ fair value measurements level
within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
9
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
The following tables set forth, by level within the fair value hierarchy, the Plan’s assets at fair
value as of March 31, 2010 and 2009:
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Fair Value Measurements at Reporting
Date Using:
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Description
|
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Balance
3/31/2010
|
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Quoted Prices
in Active
Markets for
Identical Assets
(Level
1)
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Significant
Other
Observable
Inputs
(Level 2)
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Significant
Unobservable
Inputs
(Level 3)
|
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Mutual Funds:
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|
|
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|
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Large cap funds
|
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$
|
13,112,050
|
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$
|
13,112,050
|
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$
|
—
|
|
$
|
—
|
|
Target-date funds
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|
|
4,591,002
|
|
|
4,591,002
|
|
|
—
|
|
|
—
|
|
International funds
|
|
|
4,113,595
|
|
|
4,113,595
|
|
|
—
|
|
|
—
|
|
Specialty funds
|
|
|
3,865,999
|
|
|
3,865,999
|
|
|
—
|
|
|
—
|
|
Bond investments
|
|
|
3,782,617
|
|
|
3,782,617
|
|
|
—
|
|
|
—
|
|
Small cap funds
|
|
|
3,431,462
|
|
|
3,431,462
|
|
|
—
|
|
|
—
|
|
Mid-cap funds
|
|
|
2,735,759
|
|
|
2,735,759
|
|
|
—
|
|
|
—
|
|
Other
|
|
|
407,650
|
|
|
407,650
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,040,134
|
|
|
36,040,134
|
|
|
—
|
|
|
—
|
|
Common Stock
|
|
|
2,256,246
|
|
|
2,256,246
|
|
|
—
|
|
|
—
|
|
Interest in Common Trusts
|
|
|
5,425,984
|
|
|
—
|
|
|
5,425,984
|
|
|
—
|
|
Participant Loans
|
|
|
923,608
|
|
|
—
|
|
|
—
|
|
|
923,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
44,645,972
|
|
$
|
38,296,380
|
|
$
|
5,425,984
|
|
$
|
923,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting
Date Using:
|
|
Description
|
|
Balance
3/31/2009
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level
1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Mutual Funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Large cap funds
|
|
$
|
9,411,959
|
|
$
|
9,411,959
|
|
$
|
—
|
|
$
|
—
|
|
Target-date funds
|
|
|
3,187,580
|
|
|
3,187,580
|
|
|
—
|
|
|
—
|
|
International funds
|
|
|
2,891,171
|
|
|
2,891,171
|
|
|
—
|
|
|
—
|
|
Specialty funds
|
|
|
2,520,556
|
|
|
2,520,556
|
|
|
—
|
|
|
—
|
|
Bond investments
|
|
|
3,663,713
|
|
|
3,663,713
|
|
|
—
|
|
|
—
|
|
Small cap funds
|
|
|
2,453,904
|
|
|
2,453,904
|
|
|
—
|
|
|
—
|
|
Mid-cap funds
|
|
|
1,803,087
|
|
|
1,803,087
|
|
|
—
|
|
|
—
|
|
Other
|
|
|
65,453
|
|
|
65,453
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,997,423
|
|
|
25,997,423
|
|
|
—
|
|
|
—
|
|
Common Stock
|
|
|
3,053,028
|
|
|
3,053,028
|
|
|
—
|
|
|
—
|
|
Interest in Common Trusts
|
|
|
6,238,346
|
|
|
—
|
|
|
6,238,346
|
|
|
—
|
|
Participant Loans
|
|
|
1,735,480
|
|
|
—
|
|
|
—
|
|
|
1,735,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,024,277
|
|
$
|
29,050,451
|
|
$
|
6,238,346
|
|
$
|
1,735,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents assets measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) at March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
Participant
Loans
|
|
|
Total
|
|
|
Beginning Balance
|
|
$
|
1,735,480
|
|
|
$
|
1,735,480
|
|
|
Total gains or losses (realized and unrealized) included in changes in net assets available for benefits
|
|
|
—
|
|
|
|
—
|
|
|
Purchases, sales, issuances and settlements (net)
|
|
|
(811,872
|
)
|
|
|
(811,872
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
923,608
|
|
|
$
|
923,608
|
|
|
|
|
|
|
|
|
|
|
|
11
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
The following table presents assets measured at fair value on a recurring basis using significant
unobservable inputs (Level 3) at March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Participant
Loans
|
|
Total
|
|
Beginning Balance
|
|
$
|
1,706,136
|
|
$
|
1,706,136
|
|
Total gains or losses (realized and unrealized) included in changes in net assets available for benefits
|
|
|
—
|
|
|
—
|
|
Purchases, sales, issuances and settlements (net)
|
|
|
29,344
|
|
|
29,344
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
1,735,480
|
|
$
|
1,735,480
|
|
|
|
|
|
|
|
|
Gains and losses (realized and unrealized) included in changes in net
assets available for benefits for the year ended March 31, 2010 are reported in net appreciation in fair value of investments.
6. Tax
Status
The Plan has obtained a tax determination letter dated October 9, 2003. The Plan has been amended since the receipt of this
letter; however, the Plan administrator and the Plan’s counsel believe that the Plan is currently being operated in compliance with the applicable requirements of the IRC and is tax exempt through the year ended March 31, 2010.
Accordingly, no provision for income taxes has been recorded in the financial statements.
7. Distribution of Assets Upon Termination of
the Plan
The Company reserves the right to terminate the Plan, in whole or in part, at any time. In the event of termination, all amounts
credited to the participant accounts will become 100% vested. If the Plan is terminated at any time or contributions are completely discontinued and the Company determines that the trust shall be terminated, all accounts shall be revalued as if the
termination date was a valuation date and such accounts shall be distributed to participants. If the Plan is terminated or contributions completely discontinued but the Company determines that the trust shall be continued pursuant to the terms of
the trust agreement, participants or the Company shall make no further contributions, but the trust shall be administered as though the Plan were otherwise in effect. No plans have been made to terminate the Plan at this time.
On February 5, 2009, the Company commenced a substantial reduction of its workforce as part of an ongoing realignment of the Company’s cost
structure that was necessitated by product recalls and the requirements under the U.S. Food and Drug Administration (the “FDA”) consent decree. Headcount was reduced by more than 40%, and this action triggered a partial termination of the
Plan in the Plan year ending March 31, 2009. Under the partial termination, all employees terminated as a result of the reduction in workforce as well as all active employees enrolled in the Plan as of February 6, 2009 automatically became
100% vested in the Plan.
12
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
The Plan was liable for the cost to reinstate accounts that had already been paid out, prior to
March 31, 2009 and subsequent to February 6, 2009, at less than 100% of their nonvested account balances. As of March 31, 2009, the reinstatement payable that the Plan recorded was $72,159. This amount was also recorded as an employer
contribution receivable, as the Company was liable to the Plan for the reinstatement cost.
On March 30, 2010, the Company committed to a
plan to further reduce its workforce as part of its efforts to manage its cash and financial resources while it continues working with the FDA to return its approved products to market. On March 31, 2010, the Company implemented such plan.
Headcount was reduced by more than 40%, and this action triggered another partial termination of the Plan in the current year. Under the partial termination, all employees terminated as a result of the reduction in workforce as well as all active
employees enrolled in the Plan as of March 31, 2010 automatically became 100% vested in the Plan. Future contributions for active employees as of this date will also be 100% vested. For those employees hired subsequent to March 31, 2010,
they will be subject to the regular vesting schedule as described in Note 1.
8. Related Party Transactions
Certain Plan investments are shares of mutual funds and separate accounts managed by Fidelity. Fidelity is the trustee as defined by the Plan, and
therefore, these transactions qualify as party-in-interest transactions. Additionally, certain Plan investments are common stock of the Company. The Company is the Plan sponsor as defined by the Plan, and therefore, these transactions qualify as
related party transactions.
9. Reconciliation of Financial Statements with Form 5500
The following is a reconciliation of the 2010 net assets available for benefits and contributions to the related Form 5500:
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
2009
|
|
|
Net assets available for benefits per the financial statements
|
|
$
|
44,813,815
|
|
$
|
37,391,187
|
|
|
Adjustment from fair value to contract value
|
|
|
32,866
|
|
|
(141,696
|
)
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
44,846,681
|
|
$
|
37,249,491
|
|
|
|
|
|
|
|
|
|
|
13
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements – Continued
March 31, 2010
The following is a reconciliation of the changes in net assets available for benefits to the related
Form 5500 at March 31, 2010:
|
|
|
|
|
|
Net increase in net assets available for benefits per the financial statements
|
|
$
|
7,422,628
|
|
Add: Adjustment from fair value to contract value at March 31, 2010
|
|
|
32,866
|
|
Add: Adjustment from fair value to contract value at March 31, 2009
|
|
|
141,696
|
|
|
|
|
|
|
Net increase in net assets available for benefits per the Form 5500
|
|
$
|
7,597,190
|
|
|
|
|
|
10. Subsequent Events
Effective August 30, 2010, the Company temporarily suspended the match of participants’ contributions to the Plan.
The Company has evaluated all subsequent events through September 27, 2010, the date the financial statements were available to be issued.
14
Supplemental Schedule
15
K-V PHARMACEUTICAL COMPANY
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
EIN #
43-0618919 PLAN 002
Schedule of Assets Held For Investment Purposes at End of Year
Form 5500 – Schedule H – Line 4i
March 31, 2010
(See Independent Auditors’ Report)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identity of issuer, borrower, lessor or
similar party
|
|
Description of investment,
including maturity date,
collateral, par or maturity value
|
|
Cost
|
|
|
Current Value
March 31, 2010
|
|
*
|
|
Fidelity Advisor Dividend Growth Fund
|
|
Mutual fund
|
|
*
|
*
|
|
$
|
4,528,797
|
|
*
|
|
KV Pharmaceutical Company Class A Common Stock
|
|
Common stock
|
|
*
|
*
|
|
|
2,102,006
|
|
*
|
|
KV Pharmaceutical Company Class B Common Stock
|
|
Common stock
|
|
*
|
*
|
|
|
154,240
|
|
*
|
|
Fidelity Advisor Stable Value Fund Portfolio II
|
|
Interest in common trusts
|
|
*
|
*
|
|
|
5,425,984
|
|
*
|
|
Fidelity Advisor Intermediate Bond Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
3,232,329
|
|
|
|
JPMorgan Small Cap Value Fund A
|
|
Mutual fund
|
|
*
|
*
|
|
|
780,181
|
|
|
|
JP Morgan Equity Index Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,575,158
|
|
*
|
|
Fidelity Advisor Equity Growth Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,871,494
|
|
|
|
T Rowe Price Growth Stock R
|
|
Mutual fund
|
|
*
|
*
|
|
|
1,258,941
|
|
*
|
|
Fidelity Advisor Technology Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
1,689,594
|
|
*
|
|
Fidelity Advisor Financial Services Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
883,728
|
|
*
|
|
Fidelity Advisor Mid Cap Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,735,759
|
|
*
|
|
Fidelity Advisor Equity Income Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
1,877,661
|
|
*
|
|
Fidelity Advisor Diversified International Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,005,517
|
|
*
|
|
Fidelity Advisor Small Cap Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,651,281
|
|
|
|
Black Rock International Opportunities A
|
|
Mutual fund
|
|
*
|
*
|
|
|
2,108,078
|
|
*
|
|
Fidelity Advisor Health Care Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
1,292,677
|
|
*
|
|
Fidelity Advisor Freedom Income Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
102,263
|
|
*
|
|
Fidelity Advisor Freedom Fund 2010
|
|
Mutual fund
|
|
*
|
*
|
|
|
147,988
|
|
*
|
|
Fidelity Advisor Freedom Fund 2020
|
|
Mutual fund
|
|
*
|
*
|
|
|
1,245,085
|
|
*
|
|
Fidelity Advisor Freedom Fund 2030
|
|
Mutual fund
|
|
*
|
*
|
|
|
852,747
|
|
*
|
|
Fidelity Advisor Freedom Fund 2040
|
|
Mutual fund
|
|
*
|
*
|
|
|
871,124
|
|
*
|
|
Fidelity Advisor Freedom Fund 2005
|
|
Mutual fund
|
|
*
|
*
|
|
|
32,264
|
|
*
|
|
Fidelity Advisor Freedom Fund 2015
|
|
Mutual fund
|
|
*
|
*
|
|
|
137,109
|
|
*
|
|
Fidelity Advisor Freedom Fund 2025
|
|
Mutual fund
|
|
*
|
*
|
|
|
672,418
|
|
*
|
|
Fidelity Advisor Freedom Fund 2035
|
|
Mutual fund
|
|
*
|
*
|
|
|
538,457
|
|
*
|
|
Fidelity Advisor Freedom Fund 2045
|
|
Mutual fund
|
|
*
|
*
|
|
|
45,553
|
|
*
|
|
Fidelity Advisor Freedom Fund 2050
|
|
Mutual fund
|
|
*
|
*
|
|
|
48,257
|
|
|
|
PIMCO Pimco Total Return Fund A
|
|
Mutual fund
|
|
*
|
*
|
|
|
550,287
|
|
|
|
Thornburg International Thornburg Intlval R3 Fund
|
|
Mutual fund
|
|
*
|
*
|
|
|
305,387
|
|
|
|
Participant Loans (interest rate of prime plus 0.5% maturing through 2016)
|
|
Participant loans
|
|
*
|
*
|
|
|
923,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,645,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Indicates a party-in-interest as defined by ERISA.
|
|
**
|
Represents participant-directed investments.
|
16
SIGNATURES
The Plan
. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer
the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
K-V PHARMACEUTICAL COMPANY
|
|
|
|
|
|
FIFTH RESTATED PROFIT SHARING PLAN AND TRUST
|
|
|
|
|
|
|
Date: September 27, 2010
|
|
|
|
By:
|
|
/s/ T
HOMAS
S.
M
C
H
UGH
|
|
|
|
|
|
|
|
|
|
Thomas S. McHugh
|
|
|
|
|
|
|
|
|
|
Chief Financial Officer
|
17
EXHIBIT INDEX
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
23.1
|
|
Consent of Brown Smith Wallace, LLC.
|
18
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