COVINGTON, Ky., February 25, 2010 – Omnicare, Inc. (NYSE:OCR), one of the nation's leading providers of pharmaceutical care for the elderly, today reported financial results for its fourth quarter and full year ended December 31, 2009.
Commenting on the fourth-quarter and full-year results, Joel F. Gemunder, Omnicare’s president and chief executive officer, said, “We are pleased to report fourth-quarter results (before tax benefits) that were in line with expectations and complete a year in which we achieved 16% year-over-year growth in adjusted earnings per diluted share from continuing operations (before tax benefits).
“For 2009, our results demonstrated the benefits of scale combined with operational discipline, especially with regard to cost reduction initiatives that met or exceeded established goals. Importantly, we substantially completed the Omnicare Full Potential Plan, with the program reaching its targeted annualized savings run rate by year-end. Moreover, we continued to make further progress in customer development and retention, while also benefitting from growth in our specialty pharmacy business and certain favorable pharmaceutical marketplace trends. These factors more than offset the headwinds associated with drug reimbursement actions and softness in our CRO business. Our operating performance and working capital management contributed to
Omnicare, Inc. · 100 East RiverCenter Boulevard · Covington, Kentucky 41011 · 859/392-3300 · 859/392-3360 Fax
yet another year of significant cash flow generation in 2009, allowing us to further strengthen our financial position.”
Fourth-Quarter Results
Financial results from continuing operations for the quarter ended December 31, 2009 under U.S. Generally Accepted Accounting Principles (“GAAP”), including a favorable income tax benefit, restructuring and related charges, the effects of recently adopted accounting rules and other special items described below, as compared with the same prior-year period, were as follows:
| · | Earnings per diluted share were 69 cents versus 25 cents |
| · | Income from continuing operations was $81.8 million as compared with $29.1 million |
| · | Sales were $1,539.7 million as compared with $1,574.3 million |
Results for both the fourth quarter of 2009 and 2008 include the impact of special items and accounting changes (described below) totaling $17.2 million pretax and $67.3 million pretax, respectively. Adjusting for these special items and accounting changes, but including the impact of the aforementioned favorable income tax adjustment, results from continuing operations for the quarter ended December 31, 2009 and 2008, respectively, were as follows:
| · | Adjusted earnings per diluted share were 74 cents versus 67 cents |
| · | Adjusted income from continuing operations was $87.1 million as compared with $78.4 million |
| · | Sales were $1,539.7 million as compared with $1,574.3 million |
As mentioned above, the fourth-quarter 2009 results include a favorable income tax adjustment of approximately $13 million, or 11 cents per diluted share, primarily attributable to the reversal of certain unrecognized tax benefits for tax positions settled through the expiration of statutes of limitations.
Financial Position
Cash flow from continuing operations for the quarter ended December 31, 2009 was $51.3 million versus $105.9 million in the comparable prior-year quarter. Included in the fourth quarter of 2009 was a partial payment of $63 million on a previously disclosed settlement of $98 million (plus interest) reached in November 2009.
Full-year 2009 cash flow from continuing operations was $482.3 million, which included the aforementioned settlement payment of $63 million. For the comparable prior-year period, cash flow from continuing operations was $436.2 million, which included one extra weekly payment to the Company’s drug wholesaler of approximately $65 million.
Earnings before interest, income taxes, depreciation and amortization (EBITDA) from continuing operations for the fourth quarter of 2009, including the special items and accounting changes discussed below, was $159.9 million versus $121.9 million in the fourth quarter of 2008. Excluding the special items and accounting changes, adjusted
EBITDA from continuing operations in the 2009 fourth quarter was $168.5 million as compared with $182.6 million in the 2008 fourth quarter.
During 2009, the Company repaid $275.0 million of its senior term A loan, and at December 31, 2009 had no borrowings outstanding on its revolving credit facility and $291.0 million in cash on its balance sheet. The Company’s total debt to total capital at December 31, 2009 was 35.2%, down approximately 400 basis points from 39.2% at December 31, 2008 as restated for the retrospective adoption of the authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement).
Full-Year Results
Financial results from continuing operations for the year ended December 31, 2009, as compared with the full year 2008, including the impact of the favorable income tax adjustment and the special items and accounting changes described below were as follows:
| · | Earnings per diluted share were $2.00 versus $1.22 |
| · | Income from continuing operations was $234.8 million as compared with $144.5 million |
| · | Sales were $6,166.2 million as compared with $6,205.7 million |
Results from continuing operations for both the full year 2009 and 2008 include the impact of special items and accounting changes (which are described later herein) of $140.5 million pretax and $167.4 million pretax, respectively. Adjusting for these special items, but including the impact of the favorable income tax adjustment, results for the full year 2009 and 2008, respectively, were as follows:
| · | Adjusted earnings per diluted share were $2.78 versus $2.16 |
| · | Adjusted income from continuing operations was $327.4 million as compared with $255.3 million |
| · | Sales were $6,166.2 million as compared with $6,205.7 million |
As mentioned earlier herein, the 2009 full-year results include favorable income tax adjustments of approximately $32 million, or 27 cents per diluted share, primarily attributable to the reversal of certain unrecognized tax benefits for tax positions settled through the expiration of statutes of limitations.
EBITDA from continuing operations for the full year 2009, including special items and accounting changes, was $582.1 million versus $513.1 million in the comparable prior-year period. Excluding special items and accounting changes, adjusted EBITDA from continuing operations for 2009 was $689.0 million as compared with $654.6 million in 2008.
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 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 at www.omnicare.com.
Pharmacy Services Business
Omnicare's pharmacy services business generated revenues of $1,505.4 million for the fourth quarter of 2009 as compared with sales of $1,525.3 million in the fourth quarter of 2008. Adjusted operating profit in this business was $160.5 million in the 2009 fourth quarter as compared with $180.2 million earned in the same 2008 quarter. For the full year 2009, pharmacy services sales were $6,009.5 million as compared with sales of $6,002.4 million in 2008. Adjusted operating profit for the full year 2009 was $662.5 million versus $640.0 million in 2008.
At December 31, 2009, Omnicare served long-term care facilities as well as chronic care and other settings comprising approximately 1,377,000 beds, including approximately 68,000 patients served under the patient assistance programs of its specialty pharmacy services business. The comparable number at September 30, 2009 was 1,389,000 beds (including approximately 63,000 patients served under the patient assistance programs of the specialty pharmacy services business). The comparable number at December 31, 2008 was 1,390,000 beds (including approximately 68,000 patients served under the patient assistance programs of the specialty pharmacy services business). The Company noted that the number of beds served at December 31, 2009 reflects approximately 10,500 beds voluntarily foregone owing to pricing or payment issues as well as facility closures or sales.
Revenues in the pharmacy services business in the 2009 fourth quarter were modestly lower than in the 2008 fourth quarter owing primarily to the increased availability and utilization of generic drugs, reductions in reimbursement and/or utilization for certain drugs, and a lower net number of beds served, along with a shift in mix toward assisted living which typically has lower penetration rates, partially offset by the benefit of drug price inflation and strong growth in specialty pharmacy services. The year-over-year decrease in fourth-quarter operating profit was due primarily to reductions in reimbursement and/or utilization for certain drugs, partially offset by the increased use of generic drugs as well as reduced costs and increased productivity associated with the Full Potential Plan and strategic sourcing initiatives.
For the full year 2009, pharmacy services sales increased modestly from the previous year, benefitting largely from drug price inflation, strong growth in specialty pharmacy services and the increased use of certain higher acuity drugs. These factors were partially offset primarily by the increased use of generic drugs, reductions in reimbursement and/or utilization for certain drugs and a lower net number of beds served, along with a shift in mix toward assisted living. The year-over-year growth in operating profit for 2009 was due primarily to the greater use of generic drugs, drug price inflation, continued strong growth in specialty pharmacy services and the reduced costs and increased productivity attributable to the Full Potential Plan and strategic sourcing initiatives. Partially offsetting these factors were primarily reductions in reimbursement and/or utilization for certain drugs.
CRO Business
The Company's CRO business generated revenues of $34.3 million on a GAAP basis for the fourth quarter of 2009 as compared with the $49.1 million in revenues generated in the same prior-year quarter. Included in the 2009 and 2008 periods were reimbursable out-of-pocket expenses totaling $4.2 million and $6.8 million, respectively. Excluding these reimbursable out-of-pocket expenses, adjusted revenues were $30.1 million for the 2009 fourth quarter as compared with $42.2 million for the same prior-year period. Adjusted operating profit for the 2009 fourth quarter totaled $0.4 million versus $5.2 million in the same prior-year period.
For the full year 2009, revenues within the Company’s CRO business, on a GAAP basis, were $156.7 million, as compared with the $203.3 million for 2008. Included in the 2009 and 2008 periods were reimbursable out-of-pocket expenses totaling $18.5 million and $31.3 million, respectively. Excluding these reimbursable out-of-pocket expenses, adjusted revenues were $138.2 million for 2009 as compared with $172.0 million for 2008. Adjusted operating profit was $5.8 million in 2009 versus $17.6 million in 2008. Backlog at December 31, 2009 was $205.3 million.
Special Items
As noted above, the results for the fourth quarter of 2009 include the impact of special items and accounting changes totaling approximately $17.2 million pretax ($5.2 million aftertax, or approximately 4 cents per diluted share). Operating income from continuing operations for the fourth quarter of 2009 includes a pretax charge of $10.1 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, special litigation charges of $5.7 million pretax associated with litigation and other related charges in connection primarily with certain government-related inquiries, reviews and certain large customer disputes, and $1.4 million in pretax non-cash charges relating primarily to stock option expense under the prior implementation of the authoritative guidance for share-based payment accounting change. The 2009 fourth-quarter results also include a pretax benefit of $6.4 million relating to a partial insurance settlement related to the closure of one of the Company’s repackaging operations, partially offset by additional charges associated with this matter.
As a result of the Company’s retrospective adoption of the authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), effective January 1, 2009, results for the fourth quarter of 2009 also include an incremental, non-cash interest expense of $7.2 million pretax. In addition, the Company reported a pretax credit in the 2009 fourth quarter of $0.8 million comprised primarily of a reduction in the Company’s original estimate of contingent consideration payable for acquisitions under the recently adopted authoritative guidance for business combinations, partially offset by professional fees for 2009 acquisitions.
The results for the fourth quarter of 2008 include the impact of special items and an accounting change totaling $67.3 million pretax ($49.3 million aftertax, or approximately
42 cents per diluted share). Operating income from continuing operations for the fourth quarter of 2008 includes special litigation charges of $48.1 million pretax associated with litigation and other related professional fees in connection primarily with certain government inquiries, the Company’s lawsuit against UnitedHealth Group, Inc. and its affiliates and certain large customer disputes, a pretax charge of $10.9 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax charges of $6.7 million pertaining to the aforementioned adoption of the new convertible debt authoritative guidance, and a pretax charge of $1.6 million relating to incremental charges associated with the closure of one of the Company’s repackaging operations.
Results for the full year 2009 include special items totaling $140.5 million pretax ($92.6 million aftertax, or approximately 79 cents per diluted share), including $77.5 million pretax associated with the above-mentioned litigation and other related charges, $29.2 million pretax for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax non-cash charges of $28.0 million pertaining to the adoption of the aforementioned new convertible debt authoritative guidance, $5.6 million in pretax non-cash charges relating primarily to stock option expense under share-based payment authoritative guidance, and $1.4 million pretax relating to the adoption of recently issued authoritative guidance for business combinations. The full-year 2009 results also include a benefit of $1.1 million pretax relating to a partial insurance settlement, net of incremental charges associated with the closure of one of the Company’s repackaging operations.
Results for the full year 2008 include special items totaling $167.4 million pretax ($110.8 million aftertax, or approximately 94 cents per diluted share), including $99.3 million pretax associated with the above-mentioned litigation and other related professional fees, $35.8 million pretax for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax non-cash charges of $25.9 million pertaining to the adoption of the aforementioned new convertible debt authoritative guidance, and $6.4 million pretax relating to incremental costs associated with the closure of one of the Company’s repackaging operations.
Outlook
The Company expects full-year 2010 earnings from continuing operations, as adjusted to exclude special items and accounting changes, to be in the range of $2.60-$2.70 per diluted share, which the Company noted is in line with current Street consensus estimates. Additionally, the Company anticipates cash flow from continuing operations (excluding one-time settlement payments) to be in the range of $500-$550 million.
Webcast Today
The Company will hold a conference call to discuss 2009 fourth-quarter and full-year results as well as its outlook for 2010 today, Thursday, February 25, at 11:00 a.m. ET. The conference call will be webcast live at Omnicare's Web site at www.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.
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 at www.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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