EXHIBIT 99.1
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news release | |
CONTACT: | |
Cheryl D. Hodges | |
(859) 392-3331 |
OMNICARE REPORTS SECOND-QUARTER RESULTS
- Adjusted Diluted EPS from Continuing Operations of 64 Cents up 36% fromPrior Year, in Line with Expectations
- Quarterly Operating Cash Flow from Continuing Operations up 65% from PriorYear
- Company Grows Number of Beds Served Sequentially
- Company Commences Divestiture of Certain Non-Core Businesses
COVINGTON, Ky., July 30, 2009 – Omnicare, Inc. (NYSE:OCR), one of the nation's leading providers of pharmaceutical care for the elderly, reported today financial results for its second quarter ended June 30, 2009.
Commenting on the results for the quarter, Joel F. Gemunder, Omnicare’s president and chief executive officer, said, “We are pleased to report quarterly results that were consistent with our expectations and again reflect strong year-over-year earnings growth. Our financial performance continues to benefit from the execution of strategic objectives to enhance Omnicare’s growth and profitability along with certain favorable trends in the pharmaceutical marketplace. We achieved sequential net bed growth during the quarter along with continued strong growth in our specialty pharmacy business. Then, too, ongoing progress was made in our productivity improvement and cost reduction initiatives, both in terms of lowering operating costs and in increasing cash flow. In fact, our operating cash flow from continuing operations for the quarter was up 65% versus the prior-year quarter allowing us to further strengthen our financial position.”
Discontinued Operations
The Company also noted that, upon completion of a strategic review, it has determined that it will divest certain non-core home healthcare and related ancillary businesses, in order to focus on growth opportunities that better utilize Omnicare’s core competencies. As a result of this decision, Omnicare has retained a financial advisor to manage the divestiture of these businesses and, for accounting purposes, has begun to classify
Omnicare, Inc.• 100 East RiverCenter Boulevard• Covington, Kentucky 41011• 859/392-3300• 859/392-3360 Fax
them as discontinued operations in the second quarter of 2009. Consequently, all financial results referenced in this press release are for continuing operations only, unless otherwise stated. The financial impact of such discontinued operations on the results for the three and six months ended June 30, 2009 and 2008 is shown in the Discontinued Operations Section of the attached Financial Information. Additional comparable historical information for the most recent six quarters and the full-year ended December 31, 2008 can be found on the Company’s Web site atwww.omnicare.com.
Second-Quarter Results
Financial results for the quarter ended June 30, 2009 under U.S. Generally Accepted Accounting Principles (“GAAP”), including restructuring and related charges, the effects of newly adopted accounting rules and other special items described below, as compared with the same prior-year period, were as follows:
- Earnings per diluted share from continuing operations were 36 cents versus28 cents
- Income from continuing operations was $42.0 million as compared with $33.5million
- Sales were $1,540.5 million as compared with $1,522.7 million
Results for both the second quarter of 2009 and 2008 include the impact of special items and accounting changes (described below) totaling $45.8 million pretax and $35.0 million pretax, respectively. Adjusting for these special items and accounting changes, results for the quarter ended June 30, 2009 and 2008, respectively, were as follows:
- Adjusted earnings per diluted share from continuing operations were 64 centsversus 47 cents
- Adjusted income from continuing operations was $74.8 million as comparedwith $55.3 million
- Sales were $1,540.5 million as compared with $1,522.7 million
Financial Position
Operating cash flow from continuing operations for the quarter ended June 30, 2009 was $141.5 million versus $85.7 million in the comparable prior-year quarter.
Earnings before interest, income taxes, depreciation and amortization (EBITDA) from continuing operations for the second quarter of 2009, including the special items discussed below, were $137.0 million versus $120.1 million in the second quarter of 2008. Excluding the special items and accounting changes, adjusted EBITDA from continuing operations in the 2009 quarter was $174.4 million versus $148.6 million in the 2008 quarter.
During the second quarter of 2009, the Company repaid $75.0 million of its senior term A loan, had no borrowings outstanding on its revolving credit facility and, at June 30, 2009, had $276.2 million in cash on its balance sheet. The Company’s total debt to
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total capital at June 30, 2009 was 37.2%, down approximately 320 basis points from 40.4% at June 30, 2008 (as restated for the adoption of Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. APB 14-1,Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement)(“FSP APB 14-1”).
To facilitate comparisons and to enhance the understanding of core operating performance, the discussion which follows includes financial measures that are adjusted from the comparable amount under GAAP to exclude the impact of the special items and accounting changes described elsewhere herein, and to present financial results on a continuing operations basis. For a detailed presentation of reconciling items and related definitions and components, please refer to the attached schedules or to reconciliation schedules posted on the Company’s Web site atwww.omnicare.com.
Pharmacy Services Business
Omnicare's pharmacy services business generated sales from continuing operations of $1,499.7 million for the second quarter of 2009 as compared with sales from continuing operations of $1,469.1 million reported in the second quarter of 2008. Adjusted operating profit from continuing operations in this business was $165.9 million in the 2009 second quarter as compared with the $145.4 million earned in the same 2008 quarter.
Revenues in the pharmacy services business for the second quarter of 2009 were higher than in the 2008 second quarter owing largely to drug price inflation and the increased use of certain higher acuity drugs, existing drugs with new therapeutic indications and biologic agents, along with strong growth in specialty pharmacy services. Partially offsetting these factors were the increased availability and utilization of generic drugs, reductions in reimbursement and/or utilization for certain drugs and a lower year-over-year net number of beds served, along with a shift in mix toward assisted living which typically has lower penetration rates. The year-over-year increase in second-quarter operating profit was due largely to higher utilization of generic drugs, drug price inflation, greater savings in the sourcing of pharmaceutical and non-drug items and the benefits of other cost reduction and productivity improvement initiatives, including the Omnicare Full Potential Plan, lower employee benefit costs and continued favorable performance in the specialty pharmacy business.
At June 30, 2009, Omnicare served long-term care facilities as well as chronic care and other settings comprising approximately 1,427,000 beds, including approximately 59,000 patients served under the patient assistance programs of its specialty pharmacy services business and 43,000 beds served as part of its discontinued operations. The total number of beds served from continuing operations at June 30, 2009 was therefore 1,384,000. The comparable numbers at March 31, 2009 were 1,425,000, including approximately 56,000 patients served under the patient assistance programs of the specialty pharmacy services business and 43,000 beds served in discontinued operations, or total beds served from continuing operations of 1,382,000. The comparable numbers at June 30, 2008 were 1,438,000 beds, including approximately 70,000 patients served under the patient assistance programs of the specialty
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pharmacy services business and 46,000 beds served in discontinued operations, or a total of 1,392,000 beds served from continuing operations at June 30, 2008. The Company noted that sequential quarterly growth in beds served in the second quarter was achieved despite approximately 6,800 beds voluntarily foregone owing to pricing or payment issues as well as facility closures or sales. Moreover, excluded from the number of beds served at June 30, 2009 was an acquisition of a 6,000-bed institutional pharmacy that was originally expected to be completed in June but has since closed in July.
CRO Business
The Company's CRO business generated revenues of $40.8 million on a GAAP basis for the second quarter of 2009 as compared with the $53.6 million in revenues generated in the same prior-year quarter. Included in the 2009 and 2008 periods were reimbursable out-of-pocket expenses totaling $5.2 million and $8.8 million, respectively. Excluding these reimbursable out-of-pocket expenses, adjusted revenues were $35.6 million for the 2009 second quarter as compared with $44.8 million for the same prior-year period. Adjusted operating profit for the 2009 second quarter totaled $1.6 million versus $4.4 million in the same prior-year period. Backlog at June 30, 2009 was $259.6 million.
Six Months Results
Financial results for the six months ended June 30, 2009, as compared with the same prior-year period, including the impact of special items and accounting changes described below were as follows:
- Earnings per diluted share from continuing operations were 63 cents versus51 cents
- Income from continuing operations was $74.2 million as compared with $61.0million
- Sales were $3,082.6 million as compared with $3,053.2 million
Results for both the first half of 2009 and 2008 include the impact of special items and accounting changes (which are described later herein) of $105.8 million pretax and $71.2 million pretax, respectively. Adjusting for these special items, results for the six months ended June 30, 2009, as compared with the same prior-year period, were as follows:
- Adjusted earnings per diluted share from continuing operations were $1.29versus $0.88
- Adjusted income from continuing operations was $150.8 million as comparedwith $104.9 million
- Adjusted sales were $3,082.6 million as compared with $3,053.2 million
EBITDA from continuing operations for the first six months of 2009, including the impact of special items and accounting changes, was $263.2 million versus $234.7 million in the comparable prior-year period. Excluding the special items, adjusted EBITDA from continuing operations in the first half of 2009 was $352.1 million as compared with $293.2 million in the first half of 2008.
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Operating cash flow from continuing operations for the first half of 2009 totaled $262.3 million. Operating cash flow from continuing operations over the same period in 2008 was $227.2 million.
Special Items and Accounting Changes
As noted above, the results for the second quarter of 2009 from continuing operations include the impact of special items and accounting changes totaling approximately $45.8 million pretax ($32.8 million aftertax, or approximately 28 cents per diluted share). Operating income for the second quarter of 2009 includes special litigation charges of $28.4 million pretax associated with litigation and other professional fees in connection primarily with the Company’s lawsuit against UnitedHealth Group, Inc. and its affiliates (“United”); certain large customer disputes; and certain government inquiries, including a $23 million pretax addition to the settlement reserve pertaining to a previously-disclosed investigation by the U.S. Attorney’s Office, District of Massachusetts. The second-quarter results also include a pretax charge of $5.9 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, $1.4 million in pretax charges relating primarily to stock option expense under Statement of Financial Accounting Standards (“SFAS”) 123R, and a pretax charge of $1.2 million relating to incremental costs associated with the closure of one of the Company’s repackaging operations.
As a result of the Company’s recent adoption of SFAS No. 141R,Business Combinations, the second quarter of 2009 also includes a pretax charge of $2.0 million, comprised primarily of professional fees associated with 2009 acquisitions. In addition, the Company retrospectively adopted FSP APB 14-1,effective January 1, 2009. This accounting change resulted in incremental, non-cash interest expense of $6.9 million pretax in the second quarter of 2009.
The results for the second quarter of 2008 from continuing operations include the impact of special items and an accounting change totaling $35.0 million pretax ($21.9 million aftertax, or approximately 18 cents per diluted share). Operating income for the second quarter of 2008 includes special litigation charges of $16.0 million pretax associated with litigation and other related professional fees in connection primarily with the Company’s lawsuit against United and certain large customer disputes, as well as previously disclosed government inquiries, a pretax charge of $10.8 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan and a pretax charge of $1.7 million relating to incremental costs associated with the closure of one of the Company’s repackaging operations. The second quarter of 2008 results also include incremental, non-cash interest expense of $6.4 million pretax related to the adoption of FSP APB 14-1.
Results for the first half of 2009 from continuing operations include special items totaling $105.8 million pretax ($76.6 million aftertax, or approximately 65 cents per diluted share), including $12.8 million pretax for restructuring and other related costs
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associated primarily with the implementation of the Omnicare Full Potential Plan, $70.0 million pretax associated with the above-mentioned litigation and related professional fees, pretax charges of $13.7 million pertaining to the adoption of FSP APB 14-1, $3.2 million in pretax charges relating primarily to stock option expense under SFAS 123R, $3.2 million pretax relating to incremental costs associated with the closure of one of the Company’s repackaging operations and $2.9 million pretax relating to the adoption of SFAS No. 141R.
Results for the first half of 2008 from continuing operations include special items totaling $71.2 million pretax ($43.8 million aftertax, or approximately 37 cents per diluted share), including $17.2 million pretax for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, $37.7 million pretax associated with the above-mentioned litigation and related professional fees, pretax charges of $12.7 million pertaining to the adoption of FSP APB 14-1 and $3.6 million pretax relating to incremental costs associated with the closure of one of the Company’s repackaging operations.
Outlook
“We believe that we have the right strategy in place to develop and support growth opportunities and to capitalize on our scale advantages to increase productivity and reduce costs,” said Gemunder. “That said, we have seen additional reimbursement reductions on certain drugs as well as a challenging environment in the contract research business linger on. Looking ahead, we continue to believe that our diluted earnings per share from continuing operations, as adjusted for special items, for the full-year 2009 will be within our original range of guidance, albeit toward the lower end of that range. As such, we are refining our range of earnings guidance for the full-year 2009 to $2.50 to $2.55 per adjusted diluted share.
“Longer term, we believe the fundamentals underpinning our business remain sound. In light of demographics and the importance of pharmaceutical care to the treatment of the chronic diseases of aging, we believe demand for pharmacy services for the senior population should continue to grow. Given our market position and scale advantages, we believe we are well positioned to address both the growing care needs and cost concerns of this aging population.”
Webcast Today
Omnicare will hold a conference call to discuss second-quarter results today, Thursday, July 30, at 11:00 a.m. ET. The conference call will be webcast live at Omnicare's Web site atwww.omnicare.com by clicking on "Investors" and then on "Conference Calls," and will be accessible by telephone at the following numbers:
Calling from the United States or Canada: 888-634-8522
Calling from other countries: 706-634-6522
Reference: Omnicare
An online replay will be available at www.omnicare.com beginning approximately two hours after the completion of the live call and will remain available for 14 days.
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Omnicare, Inc. (NYSE:OCR), a Fortune 500 company based in Covington, Kentucky, is a leading provider of pharmaceutical care for the elderly. Omnicare serves residents in long-term care facilities, chronic care and other settings comprising approximately 1.4 million beds in 47 states, the District of Columbia and Canada. Omnicare is the largest U.S. provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers as well as for hospice patients in homecare and other settings. Omnicare's pharmacy services also include distribution and patient assistance services for specialty pharmaceuticals. Omnicare offers clinical research services for the pharmaceutical and biotechnology industries in 31 countries worldwide. For more information, visit the company's Web site atwww.omnicare.com.
Forward-Looking Statements
In addition to historical information, this press release contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current expectations regarding the matters discussed or incorporated by reference in this document (including statements as to “beliefs,” “expectations,” “anticipations,” “intentions” or similar words) and all statements which are not statements of historical fact. Such forward-looking statements, together with other statements that are not historical, are based on management’s current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: overall economic, financial, political and business conditions; trends in the long-term healthcare, pharmaceutical and contract research industries; the ability to attract new clients and service contracts and retain existing clients and service contracts; the ability to consummate pending acquisitions; trends for the continued growth of the Company’s businesses; trends in drug pricing; delays and reductions in reimbursement by the government and other payors to customers and to the Company; the overall financial condition of the Company’s customers and the ability of the Company to assess and react to such financial condition of its customers; the ability of vendors and business partners to continue to provide products and services to the Company; the continued successful integration of acquired companies; the continued availability of suitable acquisition candidates; the ability to attract and retain needed management; competition for qualified staff in the healthcare industry; the demand for the Company’s products and services; variations in costs or expenses; the ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits; the ability of clinical research projects to produce revenues in future periods; the potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, including its implementing regulations and any subregulatory guidance, reimbursement and drug pricing policies and changes in the interpretation and application of such policies, including changes in the calculation of average wholesale price; government budgetary pressures and shifting priorities; federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of the Company’s contracts with Medicare Part D plan sponsors or to the proportion of the Company’s Part D business covered by specific contracts; the outcome of litigation; potential liability for losses not covered by, or in excess of, insurance; the impact of differences in actuarial assumptions and estimates as compared to eventual outcomes; events or circumstances which result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; the final outcome of divestiture activities; market conditions; the outcome of audit, compliance, administrative, regulatory or investigatory reviews; volatility in the market for the Company’s stock and in the financial markets generally; access to adequate capital and financing; changes in international economic and political conditions and currency fluctuations between the U.S. dollar and other currencies; changes in tax laws and regulations; changes in accounting rules and standards; and costs to comply with the Company’s Corporate Integrity Agreements. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, the Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as otherwise required by law, the Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, GAAP Basis
(000s, except per share amounts)
Unaudited
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| Three months ended | Six months ended | ||||||||||||||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||||||||||||||
Net sales |
| $ |
| 1,540,507 |
| $ |
| 1,522,712 |
| $ |
| 3,082,612 |
| $ |
| 3,053,150 | ||||||||||||
Cost of sales |
| 1,168,778 |
| 1,149,864 |
| 2,320,546 |
| 2,309,445 | ||||||||||||||||||||
Heartland repack matters |
| 815 |
| 1,560 |
| 1,917 |
| 3,134 | ||||||||||||||||||||
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Gross profit |
| 370,914 |
| 371,288 |
| 760,149 |
| 740,571 | ||||||||||||||||||||
Selling, general and administrative |
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expenses |
| 203,491 |
| 226,951 |
| 419,624 |
| 453,178 | ||||||||||||||||||||
Provision for doubtful accounts |
| 22,710 |
| 24,093 |
| 47,981 |
| 52,245 | ||||||||||||||||||||
Restructuring and other related charges |
| 5,883 |
| 10,784 |
| 12,800 |
| 17,232 | ||||||||||||||||||||
Litigation and other related professional fees |
| 28,357 |
| 16,022 |
| 70,022 |
| 37,664 | ||||||||||||||||||||
Heartland repack matters |
| 381 |
| 180 |
| 1,272 |
| 499 | ||||||||||||||||||||
Acquisition and other related costs |
| 2,011 |
| — |
| 2,850 |
| — | ||||||||||||||||||||
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Operating income |
| 108,081 |
| 93,258 |
| 205,600 |
| 179,753 | ||||||||||||||||||||
Investment income |
| 1,032 |
| 1,959 |
| 3,439 |
| 4,570 | ||||||||||||||||||||
Interest expense |
| (29,775 | ) |
|
| (35,693 | ) |
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| (61,062 | ) |
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| (72,506 | ) |
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Amortization of discount on convertible notes |
| (6,927 | ) |
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| (6,421 | ) |
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| (13,724 | ) |
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| (12,721 | ) |
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Income from continuing operations before income taxes |
| 72,411 |
| 53,103 |
| 134,253 |
| 99,096 | ||||||||||||||||||||
Income tax expense |
| 30,417 |
| 19,609 |
| 60,031 |
| 38,065 | ||||||||||||||||||||
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Income from continuing operations |
| 41,994 |
| 33,494 |
| 74,222 |
| 61,031 | ||||||||||||||||||||
Loss from discontinued operations, including |
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impairment charge of $12,065 aftertax during |
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the 2009 periods (a) |
| (13,275 | ) |
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| (559 | ) |
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| (14,609 | ) |
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| (1,946 | ) |
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Net income |
| $ |
| 28,719 |
| $ |
| 32,935 |
| $ |
| 59,613 |
| $ |
| 59,085 | ||||||||||||
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Earnings (loss) per common share - Basic:(d) |
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Continuing operations |
| $ |
| 0.36 | �� |
| $ |
| 0.28 |
| $ |
| 0.64 |
| $ |
| 0.51 | |||||||||||
Discontinued operations (a) |
| (0.11 | ) |
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| (0.00 | ) |
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| (0.13 | ) |
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| (0.02 | ) |
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Net income |
| $ |
| 0.25 |
| $ |
| 0.28 |
| $ |
| 0.51 |
| $ |
| 0.50 | ||||||||||||
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Earnings (loss) per common share - Diluted:(d) |
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Continuing operations |
| $ |
| 0.36 |
| $ |
| 0.28 |
| $ |
| 0.63 |
| $ |
| 0.51 | ||||||||||||
Discontinued operations (a) |
| (0.11 | ) |
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| (0.00 | ) |
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| (0.12 | ) |
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| (0.02 | ) |
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Net income |
| $ |
| 0.24 |
| $ |
| 0.28 |
| $ |
| 0.51 |
| $ |
| 0.50 | ||||||||||||
Weighted average number of common shares outstanding: |
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Basic |
| 116,852 |
| 117,901 |
| 116,652 |
| 118,874 | ||||||||||||||||||||
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Diluted |
| 117,640 |
| 118,672 |
| 117,490 |
| 119,606 | ||||||||||||||||||||
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The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information.
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Omnicare, Inc. and Subsidiary Companies Pharmacy CRO Corporate Consolidating Three months ended June 30, 2009 (a): Adjusted net sales $ 1,499,704 $ 35,647 (h) $ — $ 1,535,351 (h) Adjusted operating income (expense) from continuing operations (i) $ 165,882 $ 1,620 $ (20,535 ) $ 146,967 Depreciation and amortization expense 21,385 469 13,983 35,837 Amortization of discount on convertible notes — — (6,927 ) (6,927 ) Incremental SFAS 123R amortization expense — — (1,439 ) (1,439 ) Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”) from continuing operations (i)(j) $ 187,267 $ 2,089 $ (14,918 ) $ 174,438 Three months ended June 30, 2008 (a)(b): Adjusted net sales $ 1,469,081 $ 44,816 (h) $ — $ 1,513,897 (h) Adjusted operating income (expense) from continuing operations (i) $ 145,399 $ 4,400 $ (27,995 ) $ 121,804 Depreciation and amortization expense 19,344 450 13,427 33,221 Amortization of discount on convertible notes — — (6,421 ) (6,421 ) Adjusted EBITDA from continuing operations (i)(j) $ 164,743 $ 4,850 $ (20,989 ) $ 148,604 Six months ended June 30, 2009 (a): Adjusted net sales $ 2,997,066 $ 74,603 (h) $ — $ 3,071,669 (h) Adjusted operating income (expense) from continuing operations (i) $ 337,559 $ 4,664 $ (44,579 ) $ 297,644 Depreciation and amortization expense 42,227 943 28,183 71,353 Amortization of discount on convertible notes — — (13,724 ) (13,724 ) Incremental SFAS 123R amortization expense — — (3,183 ) (3,183 ) Adjusted EBITDA from continuing operations (i)(j) $ 379,786 $ 5,607 $ (33,303 ) $ 352,090 Six months ended June 30, 2008 (a)(b): Adjusted net sales $ 2,950,346 $ 86,623 (h) $ — $ 3,036,969 (h) Adjusted operating income (expense) from continuing operations (i) $ 285,516 $ 7,842 $ (55,076 ) $ 238,282 Depreciation and amortization expense 38,199 889 28,564 67,652 Amortization of discount on convertible notes — — (12,721 ) (12,721 ) Adjusted EBITDA from continuing operations (i)(j) $ 323,715 $ 8,731 $ (39,233 ) $ 293,213 The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 9 Omnicare, Inc. and Subsidiary Companies June 30, December 31, ASSETS Current assets: Cash and cash equivalents $ 273,766 $ 214,668 Restricted cash 2,484 1,891 Accounts receivable, net 1,270,946 1,337,558 Unbilled receivables, CRO 23,093 22,329 Inventories 338,453 449,023 Deferred income tax benefits 142,042 134,249 Other current assets 181,184 176,989 Current assets of discontinued operations 31,696 34,986 Total current assets 2,263,664 2,371,693 Properties and equipment, net 210,245 208,527 Goodwill 4,235,328 4,211,221 Identifiable intangible assets, net 311,793 329,446 Other noncurrent assets 259,150 272,113 Noncurrent assets of discontinued operations 45,846 57,245 Total noncurrent assets 5,062,362 5,078,552 Total assets $ 7,326,026 $ 7,450,245 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 240,328 $ 333,728 Accrued employee compensation 35,884 50,082 Deferred revenue, CRO 14,798 23,227 Current debt 1,438 1,784 Other current liabilities 246,444 221,632 Current liabilities of discontinued operations 8,830 10,336 Total current liabilities 547,722 640,789 Long-term debt, notes and convertible debentures 2,212,114 2,352,824 Deferred income tax liabilities 553,553 525,426 Other noncurrent liabilities 278,829 276,284 Noncurrent liabilities of discontinued operations 53 53 Total noncurrent liabilities 3,044,549 3,154,587 Total liabilities 3,592,271 3,795,376 Stockholders’ equity 3,733,755 3,654,869 Total liabilities and stockholders’ equity $ 7,326,026 $ 7,450,245 The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 10 Omnicare, Inc. and Subsidiary Companies Three months ended Six months ended Cash flows from operating activities: Net income $ 28,719 $ 59,613 Loss from discontinued operations 13,275 14,609 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 12,927 25,467 Amortization expense 22,910 45,886 Changes in assets and liabilities, net of effects from acquisition of businesses 63,672 116,705 Net cash flows from operating activities of continuing operations 141,503 262,280 Net cash flows from operating activities of discontinued operations 521 662 Net cash flows from operating activities 142,024 262,942 Cash flows from investing activities: Acquisition of businesses, net of cash received (11,390 ) (43,100 ) Capital expenditures (6,718 ) (15,315 ) Transfer of cash to trusts for employee health and severance costs, net of payments out of the trust (605 ) 843 Other 605 (1,789 ) Net cash flows used in investing activities of continuing operations (18,108 ) (59,361 ) Net cash flows used in investing activities of discontinued operations (222 ) (444 ) Net cash flows used in investing activities (18,330 ) (59,805 ) Cash flows from financing activities: Payments on revolving credit facility, term A loan and long-term borrowings and obligations (75,499 ) (150,993 ) Decrease in cash overdraft balance 1,266 (137 ) Payments for stock awards and exercise of stock options, net of stock tendered in payment 11,334 9,464 Excess tax benefits from stock-based compensation 1,928 2,366 Dividends paid (2,679 ) (5,352 ) Net cash flows used in financing activities of continuing operations (63,650 ) (144,652 ) Net cash flows used in financing activities of discontinued operations — — Net cash flows used in investing activities (63,650 ) (144,652 ) Effect of exchange rate changes on cash (727 ) 831 Net decrease in cash and cash equivalents 59,317 59,316 Less increase in cash and cash equivalents of discontinued operations 299 218 Increase in cash and cash equivalents of continuing operations 59,018 59,098 Cash and cash equivalents at beginning of period 214,748 214,668 Cash and cash equivalents at end of period $ 273,766 $ 273,766 The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 11 Omnicare, Inc. and Subsidiary Companies Three months ended Six months ended 2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b) Adjusted net sales: Net sales (c) $ 1,540,507 $ 1,522,712 $ 3,082,612 $ 3,053,150 Reimbursable out-of-pockets (c) (5,156 ) (8,815 ) (10,943 ) (16,181 ) Adjusted net sales, excluding EITF No. 01-14 (h) $ 1,535,351 $ 1,513,897 $ 3,071,669 $ 3,036,969 Adjusted gross profit: Gross profit $ 370,914 $ 371,288 $ 760,149 $ 740,571 Special items (i) 815 1,560 1,917 3,134 Adjusted gross profit (i) $ 371,729 $ 372,848 $ 762,066 $ 743,705 Adjusted operating income (earnings before interest and income taxes, “EBIT”): EBIT $ 108,081 $ 93,258 $ 205,600 $ 179,753 Special items (i) 38,886 28,546 92,044 58,529 Adjusted EBIT (i) $ 146,967 $ 121,804 $ 297,644 $ 238,282 Adjusted income from continuing operations before income taxes: Income from continuing operations before income taxes $ 72,411 $ 53,103 $ 134,253 $ 99,096 Special items (i) 45,813 34,967 105,768 71,250 Adjusted income from continuing operations before income taxes (i) $ 118,224 $ 88,070 $ 240,021 $ 170,346 Adjusted income from continuing operations: Income from continuing operations $ 41,994 $ 33,494 $ 74,222 $ 61,031 Special items, net of taxes (i) 32,789 21,854 76,626 43,823 Adjusted income from continuing operations (i) 74,783 55,348 150,848 104,854 Loss from discontinued operations, including impairment charge of $12,065 aftertax during the 2009 periods (a) (13,275 ) (559 ) (14,609 ) (1,946 ) Adjusted net income $ 61,508 $ 54,789 $ 136,239 $ 102,908 Adjusted earnings per share:(d) Basic earnings per share from continuing operations $ 0.36 $ 0.28 $ 0.64 $ 0.51 Special items, net of taxes (i) 0.28 0.19 0.66 0.37 Adjusted basic earnings per share from continuing operations (i) $ 0.64 $ 0.47 $ 1.29 $ 0.88 Basic earnings per share from discontinued operations (0.11 ) (0.00 ) (0.13 ) (0.02 ) Adjusted basic earnings per share $ 0.53 $ 0.46 $ 1.17 $ 0.87 Diluted earnings per share from continuing operations $ 0.36 $ 0.28 $ 0.63 $ 0.51 Special items, net of taxes (i) 0.28 0.18 0.65 0.37 Adjusted diluted earnings per share from continuing operations (i) $ 0.64 $ 0.47 $ 1.29 $ 0.88 Diluted earnings per share from discontinued operations (0.11 ) (0.00 ) (0.12 ) (0.02 ) Adjusted diluted earnings per share $ 0.52 $ 0.46 $ 1.16 $ 0.86 Adjusted earnings before interest, income taxes, depreciation and amortization (“EBITDA”): (j) EBIT from continuing operations $ 108,081 $ 93,258 $ 205,600 $ 179,753 Depreciation and amortization expense 35,837 33,221 71,353 67,652 Amortization of discount on convertible notes (6,927 ) (6,421 ) (13,724 ) (12,721 ) EBITDA from continuing operations (j) 136,991 120,058 263,229 234,684 Special items (i) 37,447 28,546 88,861 58,529 Adjusted EBITDA from continuing operations (i)(j) $ 174,438 $ 148,604 $ 352,090 $ 293,213 The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 12 Omnicare, Inc. and Subsidiary Companies Three months ended Six months ended 2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b) EBITDA to net cash flows from operating activities: EBITDA (j) $ 136,991 $ 120,058 $ 263,229 $ 234,684 (Subtract)/Add: Interest expense, net of investment income (28,743 ) (33,734 ) (57,623 ) (67,936 ) Income tax provision (30,417 ) (19,609 ) (60,031 ) (38,065 ) Changes in assets and liabilities, net of effects from acquisition of businesses 63,672 18,937 116,705 98,562 Net cash flows from operating activities of continuing operations 141,503 85,652 262,280 227,245 Net cash flows from operating activities of discontinued operations 521 696 662 1,367 Net cash flows from operating activities $ 142,024 $ 86,348 $ 262,942 $ 228,612 Free cash flow: (k) Net cash flows from operating activities $ 141,503 $ 85,652 $ 262,280 $ 227,245 Capital expenditures (6,718 ) (15,523 ) (15,315 ) (27,430 ) Dividends (2,679 ) (2,666 ) (5,352 ) (5,412 ) Free cash flow (k) $ 132,106 $ 67,463 $ 241,613 $ 194,403 Segment Reconciliations - Pharmacy Services: Adjusted EBIT - Pharmacy Services: EBIT from continuing operations $ 129,557 $ 118,415 $ 250,739 $ 229,901 Special items (i) 36,325 26,984 86,820 55,615 Adjusted EBIT from continuing operations- Pharmacy Services (i) $ 165,882 $ 145,399 $ 337,559 $ 285,516 Adjusted EBITDA - Pharmacy Services: (i) EBITDA from continuing operations (j) $ 150,942 $ 137,759 $ 292,966 $ 268,100 Special items (i) 36,325 26,984 86,820 55,615 Adjusted EBITDA - from continuing operations Pharmacy Services (i)(j) $ 187,267 $ 164,743 $ 379,786 $ 323,715 The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 13 Omnicare, Inc. and Subsidiary Companies Three months ended Six months ended 2009 2008 (b) 2009 2008 (b) Segment Reconciliations - Corporate and Consolidating: Adjusted EBIT - Corporate and Consolidating: EBIT $ (22,443 ) $ (28,957 ) $ (49,098 ) $ (56,616 ) Special items (i) 1,908 962 4,519 1,540 Adjusted EBIT - Corporate and Consolidating (i) $ (20,535 ) $ (27,995 ) $ (44,579 ) $ (55,076 ) Adjusted EBITDA - Corporate and Consolidating: (j) EBITDA (j) $ (15,387 ) $ (21,951 ) $ (34,639 ) $ (40,773 ) Special items (i) 469 962 1,336 1,540 Adjusted EBITDA - Corporate and Consolidating (i)(j) $ (14,918 ) $ (20,989 ) $ (33,303 ) $ (39,233 ) Segment Reconciliations - CRO Services: Adjusted net sales - CRO Services: Net sales (c) $ 40,803 $ 53,631 $ 85,546 $ 102,804 Reimbursable out-of-pockets (c) (5,156 ) (8,815 ) (10,943 ) (16,181 ) Adjusted net sales - CRO Services (h) $ 35,647 $ 44,816 $ 74,603 $ 86,623 Adjusted EBIT - CRO Services: EBIT $ 967 $ 3,800 $ 3,959 $ 6,468 Special items (i) 653 600 705 1,374 Adjusted EBIT - CRO Services (i) $ 1,620 $ 4,400 $ 4,664 $ 7,842 Adjusted EBITDA - CRO Services: (j) EBITDA (j) $ 1,436 $ 4,250 $ 4,902 $ 7,357 Special items (i) 653 600 705 1,374 Adjusted EBITDA - CRO Services (i)(j) $ 2,089 $ 4,850 $ 5,607 $ 8,731 DEFINITIONS: GAAP: Amounts that conform with U.S. Generally Accepted Accounting Principles (“GAAP”). Non-GAAP:Amounts that do not conform with U.S. GAAP. The footnotes presented at the separate “Footnotes to Financial Information” pages are an integral part of this financial information. 14 Omnicare, Inc. and Subsidiary Companies Three months ended Six months ended 2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b) Net sales Pharmacy Services - continuing operations $ 1,499,704 $ 1,469,081 $ 2,997,066 $ 2,950,346 Pharmacy Services - discontinued operations 19,818 27,440 41,273 55,981 Total Pharmacy Services 1,519,522 1,496,521 3,038,339 3,006,327 CRO Services(h) 35,647 44,816 74,603 86,623 Total net sales - continuing operations (h) 1,535,351 1,513,897 3,071,669 3,036,969 Total net sales - discontinued operations 19,818 27,440 41,273 55,981 Total net sales (h) $ 1,555,169 $ 1,541,337 $ 3,112,942 $ 3,092,950 Adjusted operating income (loss) (i) Pharmacy Services - continuing operations (i) $ 165,882 $ 145,399 $ 337,559 $ 285,516 Pharmacy Services - discontinued operations including impairment charge of $14,492 pretax during the 2009 periods (a) (16,496 ) (899 ) (18,705 ) (3,150 ) Total Pharmacy Services 149,386 144,500 318,854 282,366 CRO Services (i) 1,620 4,400 4,664 7,842 Corporate (i) (20,535 ) (27,995 ) (44,579 ) (55,076 ) Total adjusted operating income - continuing operations (i) 146,967 121,804 297,644 238,282 Total adjusted operating loss - discontinued operations including impairment charge of $14,492 pretax during the 2009 periods (a) (16,496 ) (899 ) (18,705 ) (3,150 ) Total operating income (i) $ 130,471 $ 120,905 $ 278,939 $ 235,132 Depreciation and amortization (“D&A”) Pharmacy Services - continuing operations $ 21,385 $ 19,344 $ 42,227 $ 38,199 Pharmacy Services - discontinued operations 1,156 1,348 2,381 2,732 Total Pharmacy Services 22,541 20,692 44,608 40,931 CRO Services 469 450 943 889 Corporate (i) 5,617 7,006 11,276 15,843 Total D & A - continuing operations (i) 27,471 26,800 54,446 54,931 Total D & A - discontinued operations 1,156 1,348 2,381 2,732 Total D & A (i) $ 28,627 $ 28,148 $ 56,827 $ 57,663 Loss from discontinued operations (a) Loss from operations of disposal group, pretax $ (2,008 ) $ (912 ) $ (4,222 ) $ (3,172 ) Income tax benefit 798 353 1,678 1,226 Loss from operations of disposal group, aftertax (1,210 ) (559 ) (2,544 ) (1,946 ) Impairment charge, pretax (14,492 ) — (14,492 ) — Income tax benefit on impairment charge 2,427 — 2,427 — Impairment charge, aftertax (12,065 ) — (12,065 ) — Loss from discontinued operations, aftertax $ (13,275 ) $ (559 ) $ (14,609 ) $ (1,946 ) Loss from operations of disposal group per diluted share $ (0.01 ) $ — $ (0.02 ) $ — Loss from impairment charge per diluted share (0.10 ) — (0.10 ) — Loss from discontinued operations per diluted share $ (0.11 ) $ — $ (0.12 ) $ — 15 Omnicare, Inc. and Subsidiary Companies 16 Omnicare, Inc. and Subsidiary Companies 17 Omnicare, Inc. and Subsidiary Companies 18 Omnicare, Inc. and Subsidiary Companies 19 Omnicare, Inc. and Subsidiary Companies 20
Summary Segment Financial Data, Non-GAAP Basis (g)
Excluding EITF No. 01-14 and Special Items
(000s)
Unaudited
Services (a)
Services
and
Consolidated
Totals (a)
Condensed Consolidated Balance Sheets, GAAP Basis
(000s)
Unaudited
2009 (a)
2008 (a)(b)
Condensed Consolidated Statement of Cash Flows, GAAP Basis
(000s)
Unaudited
June 30, 2009 (a)
June 30, 2009 (a)
Reconciliation Statement and Definitions, Non-GAAP Basis (g)
(000s, except per share amounts)
Unaudited
June 30,
June 30,
Reconciliation Statement and Definitions, Non-GAAP Basis (g)
(000s)
Unaudited
June 30,
June 30,
Reconciliation Statement and Definitions, Non-GAAP Basis (g)
(000s)
Unaudited
June 30,
June 30,
Discontinued Operations - Summary Financial Data, Non-GAAP Basis (g)
(000s)
Unaudited
June 30,
June 30,
Footnotes to Financial Information
(000s, except per share amounts and unless otherwise stated)
Unaudited(a) In the second quarter of 2009, the Company commenced activities to divest certain home healthcare and related ancillary businesses (“the disposal group”) that are non- strategic in nature. The disposal group, historically part of Omnicare’s Pharmacy Services segment, primarily represents ancillary businesses which accompanied other more strategic assets obtained by Omnicare in connection with the Company’s institutional pharmacy acquisition program. The results from continuing operations for all periods presented have been revised to reflect the results of the disposal group as discontinued operations, including certain expenses of the Company related to the divestiture. The Company anticipates completing the divestiture within the following twelve months. All amounts disclosed herein relate to the Company’s continuing operations unless otherwise stated. (b) Effective January 1, 2009, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Staff Position (FSP) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). Financial statements for all prior periods presented have been restated for this change in accounting. (c) In accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred” (“EITF No. 01-14”), Omnicare has recorded reimbursements received for “out-of-pocket” expenses on a grossed-up basis in the income statement as net sales and cost of sales. The respective amounts are disclosed at the “Segment Reconciliations – CRO Services” section of the Financial Information. EITF No. 01-14 relates solely to the Company’s contract research services business. (d) EPS (basic EPS; special items, net of taxes; adjusted basic EPS; diluted EPS; and adjusted diluted EPS) is reported independently for each amount presented. Accordingly, the sum of the individual amounts may not necessarily equal the separately calculated amounts for the corresponding period. (e) The three months ended June 30, 2009 and 2008 continuing operations include the following special items and accounting change impacts totaling $45,813 and $34,967 pretax, respectively ($32,789 and $21,854 aftertax, respectively): (i) For the three months ended June 30, 2009 and 2008, operating income includes restructuring and other related charges of $5,883 and $10,784 before taxes ($3,636 and $6,682 after taxes, or $0.03 and $0.06 per diluted share), respectively. This charge relates to the implementation of the “Omnicare Full Potential” Plan, a major initiative primarily designed to re-engineer the pharmacy operating model to increase efficiency and enhance customer growth, as well as other realignment and right-sizing across the entire organization. (ii) The three months ended June 30, 2009 and 2008 also include special litigation and other related professional fees of $28,357 and $16,022 before taxes ($22,000 and $10,067 after taxes, or $0.19 and $0.08 per diluted share), respectively. The $28,357 pretax charge for the three months ended June 30, 2009 includes
Footnotes to Financial Information
(000s, except per share amounts and unless otherwise stated)
Unaudited litigation-related professional expenses in connection with the investigation by the United States Attorney’s Office, District of Massachusetts, the Company’s lawsuit against UnitedHealth Group, Inc. and its affiliates (“United”), the Company’s response to subpoenas related to other legal proceedings to which the Company is not a party, certain other large customer disputes, and the investigation by the federal government and certain states relating to drug substitutions. Also included in the $28,357 is a special litigation charge of $23,000 pretax, representing an addition to the settlement reserve established in connection with the previously disclosed investigation by the United States Attorney’s Office, District of Massachusetts. This special litigation charge relates to the Company’s estimate of potential settlement amounts and associated costs under Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies” (“SFAS No. 5”). The Company cannot predict the ultimate outcome of this matter. The $16,022 pretax charge for the three months ended June 30, 2008 relates primarily to litigation-related professional expenses in connection with the Company’s lawsuit against United, certain other larger customer disputes, the investigation by the United States Attorney’s Office, District of Massachusetts, the purported class and derivative actions, the investigation by the federal government and certain states relating to drug substitutions, and the Company’s response to subpoenas related to other legal proceedings to which the Company is not a party. (iii) For the three months ended June 30, 2009, operating income includes a special charge of $1,196 before taxes ($815 and $381 was recorded in the cost of sales and operating expense sections of the income statement, respectively) ($740 after taxes, or $0.01 per diluted share) for additional costs precipitated by the previously disclosed Heartland Repack Services quality control, product recall and fire issues (“Repack Matters”). For the three months ended June 30, 2008, operating income includes a special charge of $1,740 before taxes ($1,560 and $180 was recorded in the cost of sales and operating expense sections of the income statement, respectively) ($1,089 after taxes, or $0.01 per diluted share) for costs associated with the Repack Matters. (iv) For the three months ended June 30, 2009, operating income included acquisition and other related costs of $2,011 before taxes ($1,242 after taxes, or $0.01 per diluted share) related to the implementation of the SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) accounting change. These expenses were primarily related to professional fees for 2009 acquisitions. (v) For the three months ended June 30, 2009, selling, general and administrative expenses included charges of $1,439 before taxes ($890 after taxes, or $0.01 per diluted share) relating to the prior implementation of the SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”) accounting change, which primarily relates to stock option expense. SFAS 123R requires the Company to record compensation costs relating to share-based payment transactions, including stock options, in its consolidated financial statements, based on estimated fair
Footnotes to Financial Information
(000s, except per share amounts and unless otherwise stated)
Unaudited values. The incremental SFAS 123R costs in the comparable prior period were not considered significant. (vi) For the three months ended June 30, 2009 and 2008, the Company recorded amortization of discount on convertible notes of $6,927 and $6,421 before taxes ($4,281 and $4,016 after taxes, or $0.04 and $0.03 per diluted share), respectively, for a non-cash increase in pretax interest expense related to the implementation of the FSP APB 14-1 accounting change. (f) The six months ended June 30, 2009 and 2008 continuing operations include the following special items and accounting change impacts totaling $105,768 and $71,250 pretax, respectively ($76,626 and $43,823 aftertax, respectively): (i) For the six months ended June 30, 2009 and 2008, operating income includes restructuring and other related charges of $12,800 and $17,232 before taxes ($7,905 and $10,560 after taxes, or $0.07 and $0.09 per diluted share), respectively. This charge relates to the implementation of the aforementioned “Omnicare Full Potential” Plan. (ii) The six months ended June 30, 2009 and 2008 also include special litigation and other related professional fees of $70,022 and $37,664 before taxes ($54,549 and $23,080 after taxes, or $0.46 and $0.19 per diluted share), respectively. The $70,022 pretax charge for the six months ended June 30, 2009 includes litigation- related professional expenses in connection with the investigation by the United States Attorney’s Office, District of Massachusetts, the Company’s lawsuit against United, the Company’s response to subpoenas related to other legal proceedings to which the Company is not a party, certain other large customer disputes, and the investigation by the federal government and certain states relating to drug substitutions. Also included in the $70,022 is a special litigation charge of $58,000 pretax, representing an addition to the settlement reserve established in connection with the previously disclosed investigation by the United States Attorney’s Office, District of Massachusetts. This special litigation charge relates to the Company’s estimate of potential settlement amounts and associated costs under SFAS No. 5. The Company cannot predict the ultimate outcome of this matter. The $37,664 pretax charge for the six months ended June 30, 2008 relates primarily to litigation-related professional expenses in connection with the Company’s lawsuit against United, certain other larger customer disputes, the investigation by the United States Attorney’s Office, District of Massachusetts, the purported class and derivative actions, the investigation by the federal government and certain states relating to drug substitutions, and the Company’s response to subpoenas related to other legal proceedings to which the Company is not a party. (iii) For the six months ended June 30, 2009, operating income includes a special charge of $3,189 before taxes ($1,917 and $1,272 was recorded in the cost of sales and operating expense sections of the income statement, respectively) ($1,970 after taxes, or $0.02 per diluted share) for additional costs precipitated by the previously disclosed Repack Matters. For the six months ended June 30,
Footnotes to Financial Information
(000s, except per share amounts and unless otherwise stated)
Unaudited 2008, operating income includes a special charge of $3,633 before taxes ($3,134 and $499 was recorded in the cost of sales and operating expense sections of the income statement, respectively) ($2,227 after taxes, or $0.02 per diluted share) for costs associated with the Repack Matters. (iv) For the six months ended June 30, 2009, operating income included acquisition and other related costs of $2,850 before taxes ($1,760 after taxes, or $0.01 per diluted share) related to the implementation of the SFAS No. 141 accounting change. These expenses were primarily related to professional fees for 2009 acquisitions. (v) For the six months ended June 30, 2009, selling, general and administrative expenses included charges of $3,183 before taxes ($1,966 after taxes, or $0.02 per diluted share) relating to the prior implementation of the SFAS No. 123R accounting change, which primarily relates to stock option expense. SFAS 123R requires the Company to record compensation costs relating to share-based payment transactions, including stock options, in its consolidated financial statements, based on estimated fair values. The incremental SFAS 123R costs in the comparable prior period were not considered significant. (vi) For the six months ended June 30, 2009 and 2008, the Company recorded amortization of discount on convertible notes of $13,724 and $12,721 before taxes ($8,476 and $7,956 after taxes, or $0.07 and $0.07 per diluted share), respectively, for a non-cash increase in pretax interest expense related to the implementation of the FSP APB 14-1 accounting change. (g) Omnicare believes that investors’ understanding of Omnicare’s performance is enhanced by the Company’s disclosure of certain non-GAAP financial measures as presented in this financial information. Omnicare management believes that the adjusted non-GAAP financial results information is useful to investors by providing added insight into the Company’s performance through focusing on the results generated by the Company’s ongoing core operations and by excluding certain non-cash charges, which is also the primary purpose that Omnicare management uses the adjusted non-GAAP financial results. Omnicare’s method of calculating these measures may differ from those used by other companies and, therefore, comparability may be limited. (h) The noted presentation excludes amounts that Omnicare is required to record in its income statement pursuant to EITF No. 01-14, as previously discussed in footnote (c) above. (i) The noted presentation for the three and six months ended June 30, 2009 and 2008 excludes the special items and accounting change impacts discussed in footnote (e) and (f) above. Management believes these items are not related to Omnicare’s ordinary course of business and/or are non-cash in nature, as previously discussed in footnote (g) above. (j) EBITDA represents earnings before interest expense (net of investment income), income taxes, depreciation and amortization. Omnicare uses EBITDA primarily as an indicator of the Company’s ability to service its debt, and believes that certain investors find EBITDA to be a useful financial measure for the same purpose. However,
Footnotes to Financial Information
(000s, except per share amounts and unless otherwise stated)
Unaudited EBITDA does not represent net cash flows from operating activities, as defined by U.S. GAAP, and should not be considered as a substitute for operating cash flows as a measure of liquidity. Omnicare’s calculation of EBITDA may differ from the calculation of EBITDA by others. (k) Free cash flow represents net cash flows from operating activities less capital expenditures and dividends paid by the Company. Omnicare believes that certain investors find free cash flow to be a helpful measure of cash generated from current operations, net of cash used for its ongoing capital expenditures and dividend payment requirements. Omnicare's calculation of free cash flow may differ from the calculation of free cash flow by others.