As filed with the Securities and Exchange Commission on September 20, 2001
Registration No. 333-62644
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
OMNICARE, INC.
and the Guarantors identified in footnote (1) on the following pages
(Exact name of registrant as specified in its charter)
Delaware 5912 31-1001351
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
100 East RiverCenter Blvd., Suite 1600
Covington, Kentucky 41011
(859) 392-3300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------
Cheryl D. Hodges
Senior Vice President and Secretary
100 East RiverCenter Blvd., Suite 1600
Covington, Kentucky 41011
(859) 392-3300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------
Copies to:
Morton A. Pierce, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
(212) 259-8000
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ]
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective time until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the SEC, acting pursuant to said Section 8(a), may
determine.
================================================================================
(1) The following domestic subsidiaries of Omnicare, Inc. are guarantors of the
exchange notes and are co-registrants:
Primary
Standard
State of or other Industrial
jurisdiction of Classification I.R.S. Employer
incorporation or Code Identification
Exact Name of Registrant as Specified in its Charter organization Number Number
---------------------------------------------------- ------------------- -------------- -----------------
AAHS Acquisition Corp. . . . . . . . . . . . . . . DELAWARE 5912 31-1567104
Accu-Med Services, Inc. . . . . . . . . . . . . . . DELAWARE 7372 31-1482519
ACP Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 7372 31-1568818
AMC--New York, Inc. . . . . . . . . . . . . . . . . DELAWARE 5912 36-4091917
AMC--Tennessee, Inc.. . . . . . . . . . . . . . . . DELAWARE 5912 62-1696813
Bach's Pharmacy Services, LLC . . . . . . . . . . . DELAWARE 5912 61-1346690
Badger Acquisition of Brooksville, LLC. . . . . . . DELAWARE 5912 52-2119870
Badger Acquisition of Kentucky, LLC . . . . . . . . DELAWARE 5912 52-2119911
Badger Acquisition of Minnesota, LLC. . . . . . . . DELAWARE 5912 52-2119871
Badger Acquisition of Ohio, LLC . . . . . . . . . . DELAWARE 5912 52-2119875
Badger Acquisition of Orlando, LLC. . . . . . . . . DELAWARE 5912 52-2119896
Badger Acquisition of Tampa, LLC. . . . . . . . . . DELAWARE 5912 52-2119893
Badger Acquisition of Texas, LLC. . . . . . . . . . DELAWARE 5912 52-2119915
Badger Acquisition, LLC . . . . . . . . . . . . . . DELAWARE 5912 52-2119866
Bio-Pharm International, Inc. . . . . . . . . . . . DELAWARE 8731 23-2794725
BPNY Acquisition Corp.. . . . . . . . . . . . . . . DELAWARE 5912 31-1563804
BPTX Acquisition Corp.. . . . . . . . . . . . . . . DELAWARE 5912 31-1563806
Campo Medical Pharmacy, Inc.. . . . . . . . . . . . LOUISIANA 5912 72-1039948
Care Pharmaceutical Services, Inc.. . . . . . . . . DELAWARE 5912 31-1399042
CHP Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 5912 31-1483612
CIP Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 5912 31-1486402
CompScript--Boca, Inc.. . . . . . . . . . . . . . . FLORIDA 5912 65-0286244
CompScript--Mobile, Inc.. . . . . . . . . . . . . . DELAWARE 5912 59-3248505
CompScript, Inc.. . . . . . . . . . . . . . . . . . FLORIDA 5912 65-0506539
CP Acquisition Corp.. . . . . . . . . . . . . . . . OKLAHOMA 5912 61-1317566
Creekside Managed Care Pharmacy, Inc. . . . . . . . DELAWARE 5912 61-1349188
CTLP Acquisition Corp.. . . . . . . . . . . . . . . DELAWARE 5912 61-1318902
D & R Pharmaceutical Services, Inc. . . . . . . . . KENTUCKY 5912 61-0955886
Electra Acquisition Corp. . . . . . . . . . . . . . DELAWARE 5912 31-1465189
Enloe Drugs, Inc. . . . . . . . . . . . . . . . . . DELAWARE 5912 31-1362346
Euro Bio-Pharm--ATS . . . . . . . . . . . . . . . . DENMARK 8731
Euro Bio-Pharm Clinical Services, Inc.. . . . . . . DELAWARE 8731 23-2770328
Evergreen Pharmaceutical of California, Inc.. . . . CALIFORNIA 5912 61-1321151
Evergreen Pharmaceutical, Inc.. . . . . . . . . . . WASHINGTON 5912 91-0883397
Hardardt Group, Inc., The . . . . . . . . . . . . . DELAWARE 8731 22-3470357
HMIS, Inc.. . . . . . . . . . . . . . . . . . . . . DELAWARE 5912 36-4124072
Home Care Pharmacy, Inc.. . . . . . . . . . . . . . DELAWARE 5912 31-1255845
Home Pharmacy Services, Inc.. . . . . . . . . . . . MISSOURI 5912 37-0978331
Hytree Pharmacy, Inc. . . . . . . . . . . . . . . . OHIO 5912 34-1090853
Interlock Pharmacy Systems, Inc.. . . . . . . . . . MISSOURI 5912 43-0951332
JHC Acquisition, Inc. . . . . . . . . . . . . . . . DELAWARE 5912 31-1494762
Langsam Health Services, Inc. . . . . . . . . . . . DELAWARE 5912 73-1391198
LCPS Acquisition, LLC . . . . . . . . . . . . . . . DELAWARE 5912 61-1347084
Lo-Med Prescription Services, Inc.. . . . . . . . . OHIO 5912 34-1396063
LPI Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 5912 31-1501535
Managed Healthcare, Inc.. . . . . . . . . . . . . . DELAWARE 5912 31-1450845
Med World Acquisition Corp. . . . . . . . . . . . . DELAWARE 5912 61-1322120
Medical Arts Health Care, Inc. . . . . . . . . . . GEORGIA 5912 58-1640672
(table continued on next page)
(table continued from previous page)
Primary
Standard
State of or other Industrial
jurisdiction of Classification I.R.S. Employer
incorporation or Code Identification
Exact Name of Registrant as Specified in its Charter organization Number Number
---------------------------------------------------- ------------------- -------------- -----------------
Medical Services Consortium, Inc. . . . . . . . . . FLORIDA 5912 65-0357177
MOSI Acquisition Corp. . . . . . . . . . . . . . . DELAWARE 5912 31-1528353
Nihan & Martin, Inc. . . . . . . . . . . . . . . . DELAWARE 5912 36-4004491
NIV Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 5912 31-1501415
North Shore Pharmacy Services, Inc. . . . . . . . . DELAWARE 5912 31-1428484
OCR-RA Acquisition Corp.. . . . . . . . . . . . . . DELAWARE 5912 31-1442830
OFL Corp. . . . . . . . . . . . . . . . . . . . . . DELAWARE 5912 61-1357682
Omnibill Services, LLC. . . . . . . . . . . . . . . DELAWARE 5912 61-1365732
Omnicare Clinical Research, Inc.. . . . . . . . . . DELAWARE 8731 52-1670189
Omnicare Clinical Research, LLC . . . . . . . . . . DELAWARE 8731 14-1723594
Omnicare Management Company . . . . . . . . . . . . DELAWARE 5912 31-1256520
Omnicare Pennsylvania Med Supply, LLC . . . . . . . DELAWARE 5912 61-1347895
Omnicare Pharmaceutics, Inc.. . . . . . . . . . . . DELAWARE 8731 23-2745806
Omnicare Pharmacies of PA East, LLC . . . . . . . . DELAWARE 5912 61-1347894
Omnicare Pharmacies of PA West, Inc.. . . . . . . . PENNSYLVANIA 5912 25-1213193
Omnicare Pharmacies of the Great Plains Holding
Company, Inc. . . . . . . . . . . . . . . . . . . DELAWARE 5912 61-1386242
Omnicare Pharmacy and Supply Services, Inc. . . . . SOUTH DAKOTA 5912 41-1730324
Omnicare Pharmacy of Colorado, LLC. . . . . . . . . DELAWARE 5912 61-1347085
Omnicare Pharmacy of Maine Holding Company, Inc.. . DELAWARE 5912 61-1365280
Omnicare Pharmacy of Maine LLC. . . . . . . . . . . DELAWARE 5912 61-1339662
Omnicare Pharmacy of Massachusetts, LLC . . . . . . DELAWARE 5912 61-1347087
Omnicare Pharmacy of Nebraska, LLC. . . . . . . . . DELAWARE 5912 61-1386244
Omnicare Pharmacy of South Dakota, LLC. . . . . . . DELAWARE 5912 61-1386243
Omnicare Pharmacy of Tennessee, LLC . . . . . . . . DELAWARE 5912 61-1347088
Omnicare Pharmacy of the Midwest, Inc.. . . . . . . DELAWARE 5912 31-1374275
PBM Plus. . . . . . . . . . . . . . . . . . . . . . WISCONSIN 5912 39-1789830
Pharmacon Corp. . . . . . . . . . . . . . . . . . . NEW YORK 5912 13-3498399
Pharmacy Associates of Glens Falls, Inc.. . . . . . NEW YORK 5912 14-1554120
Pharmacy Consultants, Inc.. . . . . . . . . . . . . SOUTH CAROLINA 5912 57-0640737
Pharm-Corp of Maine, LLC. . . . . . . . . . . . . . DELAWARE 5912 61-1339663
Pharmed Holdings, Inc.. . . . . . . . . . . . . . . DELAWARE 5912 36-4060882
PRN Pharmaceutical Services, Inc. . . . . . . . . . DELAWARE 5912 35-1855784
Roeschen's Healthcare Corp. . . . . . . . . . . . . WISCONSIN 5912 39-1084787
Royal Care of Michigan LLC. . . . . . . . . . . . . DELAWARE 5912 38-3529444
SHC Acquisition Co., LLC. . . . . . . . . . . . . . DELAWARE 5912 61-1346763
Shore Pharmaceutical Providers, Inc.. . . . . . . . DELAWARE 5912 31-1425144
Southside Apothecary, Inc.. . . . . . . . . . . . . NEW YORK 5912 61-1340804
Specialized Home Infusion of Michigan LLC . . . . . DELAWARE 5912 38-3529442
Specialized Patient Care Services, Inc. . . . . . . ALABAMA 5912 63-1159534
Specialized Pharmacy Services, Inc. . . . . . . . . MISSOURI 5912 38-2143132
Sterling Healthcare Services, Inc.. . . . . . . . . DELAWARE 5912 36-4031863
Superior Care Pharmacy, Inc.. . . . . . . . . . . . DELAWARE 5912 31-1543728
Swish, Inc. . . . . . . . . . . . . . . . . . . . . DELAWARE 8731 52-2005933
TCPI Acquisition Corp.. . . . . . . . . . . . . . . DELAWARE 5912 31-1508476
THG Acquisition Corp. . . . . . . . . . . . . . . . DELAWARE 5912 31-1567102
Three Forks Apothecary, Inc.. . . . . . . . . . . . KENTUCKY 5912 61-0995656
UC Acquisition Corp.. . . . . . . . . . . . . . . . DELAWARE 5912 31-1414594
Value Health Care Services, Inc.. . . . . . . . . . DELAWARE 5912 31-1485530
Value Pharmacy, Inc.. . . . . . . . . . . . . . . . MASSACHUSETTS 5912 04-2894741
(table continued on next page)
(table continued from previous page)
Primary
Standard
State of or other Industrial
jurisdiction of Classification I.R.S. Employer
incorporation or Code Identification
Exact Name of Registrant as Specified in its Charter organization Number Number
---------------------------------------------------- ------------------- -------------- -----------------
Vital Care Infusions, Inc.. . . . . . . . . . . . . NEW YORK 5912 61-1336267
Weber Medical Systems, Inc. . . . . . . . . . . . . DELAWARE 5912 31-1409572
Westhaven Services Co.. . . . . . . . . . . . . . . OHIO 5912 34-1151322
Williamson Drug Company, Incorporated . . . . . . . VIRGINIA 5912 54-0590067
Winslow's Pharmacy. . . . . . . . . . . . . . . . . NEW JERSEY 5912 21-0692005
********************************************************************************
The information in this preliminary prospectus is not complete and may be
changed. We may not exchange these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to exchange these securities and is not soliciting
offers to exchange these securities in any state where the exchange is not
permitted.
********************************************************************************
SUBJECT TO COMPLETION DATED SEPTEMBER 20, 2001
PRELIMINARY PROSPECTUS
$375,000,000
OMNICARE, INC.
Offer to exchange 8 1/8% Series B Senior Subordinated Notes due 2011
registered under the Securities Act of 1933 for outstanding unregistered
8 1/8% Senior Subordinated Notes due 2011
----------
o The exchange offer expires 5:00 p.m., New York City time, on , 2001,
unless we extend the exchange offer.
o We will exchange your properly submitted 8 1/8% Senior Subordinated Notes
due 2011 (the "old notes ") for an equal principal amount of 8 1/8% Series
B Senior Subordinated Notes due 2011 (the "exchange notes ") with
substantially identical terms.
o The exchange notes are registered under the Securities Act and, as a
result, will generally not be subject to the transfer restrictions .
applicable to the old notes.
o You may withdraw your submission of old notes at any time before expiration
of the exchange offer.
o The exchange of notes should not be a taxable exchange for U.S. federal
income tax purposes.
o We will not receive any proceeds from the exchange offer.
o You may submit old notes for exchange notes only in denominations of $1,000
and multiples of $1,000.
o Affiliates of our company may not participate in the exchange offer
-------------
Please refer to "Risk Factors" beginning on page 12 of this document
for certain important information.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes to be issued in the exchange
offer or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
-------------
Prospectus dated , 2001.
PROSPECTUS SUMMARY
This summary highlights selected information appearing elsewhere in this
prospectus and may not contain all of the information that is important to you.
This prospectus includes the specific terms of the exchange notes, as well as
information rega.rding our business and detailed financial data. In this
prospectus, the terms "we," "us," "our," "our company" and "Omnicare" refer to
the business of Omnicare, Inc. and its consolidated subsidiaries, unless
otherwise specified or the context otherwise requires. We encourage you to read
this prospectus in its entirety.
The Company
Omnicare is a leading geriatric pharmaceutical services company. We are the
nation's largest independent provider of pharmaceuticals and related pharmacy
services to long-term health care institutions. Our client facilities include
skilled nursing facilities, assisted living facilities, retirement centers and
other institutional health care facilities. As of December 31, 2000, we provided
our services to approximately 636,500 residents in approximately 8,400 long-term
care facilities in 43 states. We purchase, repackage and dispense
pharmaceuticals, both prescription and non-prescription, and provide
computerized medical record keeping and third-party billing for residents in
those facilities. We also provide consultant pharmacist services, including
evaluating monthly patient drug therapy, monitoring the control, distribution
and administration of drugs within the nursing facility, and assisting in
compliance with state and federal regulations. In addition, we provide ancillary
services, such as administering medications and nutrition intravenously and
furnishing dialysis and medical supplies and clinical care planning and
financial software information systems to our client facilities. We also provide
comprehensive clinical research services for the pharmaceutical and
biotechnology industries. For the year ended December 31, 2000, we generated
total revenue of approximately $2.0 billion and earnings before interest, taxes,
depreciation and amortization of $231.9 million, excluding restructuring and
other related charges.
Our primary line of business is the distribution of pharmaceuticals,
related pharmacy consulting and data management services and medical supplies to
long-term care facilities. We serve this market through our network of
pharmacies. As of December 31, 2000, we had 134 pharmacies. Our pharmacies are
dedicated to serving skilled nursing, assisted living and other institutional
health care facilities and are strategically located throughout the United
States. We typically service long-term care facilities within a 150-mile radius
of our pharmacy locations and maintain a 24-hour, seven-day per week, on-call
pharmacist service for emergency dispensing and delivery and for consultations
with the facility's staff or attending physicians. We utilize a "unit dose"
distribution system. This means that our prescriptions are packaged for
dispensing in individual doses. This differs from prescriptions filled by retail
pharmacies, which typically are dispensed in vials or other bulk packaging
requiring measurement of each dose by or for the patient. Our delivery system is
intended to improve control over pharmaceutical distribution and patient
compliance with drug therapy by increasing the accuracy and timeliness of drug
administration. In conjunction with our delivery system, our record
keeping/documentation system is designed to result in greater efficiency in
nursing time, improved control and reduced waste in client facilities, and lower
error rates in both dispensing and administration. We also furnish intravenous
administration of medication and nutrition therapy and dialysis services. We
believe we distinguish ourselves from many of our competitors by also providing
proprietary clinical programs. For example, we have developed a ranking of drugs
based on their relative clinical effectiveness for the elderly and by cost to
the payor. We use these rankings, which we call the Omnicare Guidelines'r', to
more effectively manage patient care and costs. We also provide health and
outcomes management programs, and integrated electronic database management
services for the large base of elderly patients we serve.
We also provide contract research organization services. Our contract
research organization is a leading international provider of comprehensive
product development and research services to pharmaceutical, biotechnology,
medical device and diagnostics companies. As of December 31, 2000, our contract
research organization had operations in 23 countries. Our contract research
organization provides support for the design of regulatory strategy and clinical
development of pharmaceuticals by offering
2
comprehensive and fully integrated clinical, quality assurance, data management,
medical writing and regulatory support for our clients' drug development
programs.
Our principal executive offices are located at 100 East RiverCenter Blvd.,
Suite 1600, Covington, Kentucky 41011, and our phone number is (859) 392-3300.
Our corporate Website address is http:/www.omnicare.com. Information contained
on our Website is not part of this prospectus.
The Exchange Offer
On March 20, 2001, we issued $375,000,000 aggregate principal amount of our
8 1/8% Senior Subordinated Notes due 2011 in a private offering. These notes are
guaranteed by several of our domestic subsidiaries.
We and the guarantors entered into a registration rights agreement in
connection with the private offering in which we agreed, among other things, to
make an offer to exchange notes that have been registered under the Securities
Act of 1933 for your unregistered old notes. The exchange notes are otherwise
substantially identical to the old notes. You should read the discussion under
the headings "Summary of Terms of the Exchange Notes" and "Description of the
Notes" for further information regarding the exchange notes.
You will be able to freely resell exchange notes issued in the exchange
offer, subject to limited conditions and exceptions. In particular,
broker-dealers participating in the exchange offer will be required to deliver a
prospectus in connection with resales by them of exchange notes received in
exchange for old notes acquired as a result of market-making or other trading
activities. Following the exchange offer, any old notes that are not exchanged
in the exchange offer will continue to be subject to the existing restrictions
on transfer on the old notes. You should read the discussions under the headings
"Summary of the Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and the resale of old notes.
3
SUMMARY OF THE EXCHANGE OFFER
Issuer . . . . . . . . . . . . . . . . . Omnicare, Inc.
The exchange offer . . . . . . . . . . . We previously issued $375 million aggregate
principal amount of our 8 1/8% Senior Subordinated
Notes due 2011 in a private offering. These
securities were not registered under the
Securities Act of 1933. At the time we
issued the old notes, we entered into a
registration rights agreement in which we agreed
to offer to exchange your unregistered old notes for
exchange notes which have been registered under the
Securities Act of 1933. This exchange offer is
intended to satisfy that obligation.
Required representations . . . . . . . . In order to participate in this exchange offer,
you will be required to make representations to
us in a letter of transmittal, including
representations that:
o the person acquiring the new notes is acquiring
them in the ordinary course of its business;
o neither you nor any other person acquiring
exchange notes on your behalf is participating in
a distribution of the exchange notes; and
o neither you nor any other person acquiring
exchange notes on your behalf is an affiliate of
our company.
Resale of exchange notes . . . . . . . . The notes issued in the exchange offer may be freely
traded by you, provided that:
o you are acquiring the exchange notes in the
ordinary course of your business;
o you are not participating in a distribution of
the exchange notes; and
o you are not an "affiliate" of our company.
Each broker-dealer receiving notes in the exchange
offer for its own account in exchange for old notes
which were acquired by it as a result of market-making
or other trading activities, must deliver a
prospectus in connection with any resale of those
exchange notes. A broker-dealer may use this
prospectus for that purpose until .
Expiration date. . . . . . . . . . . . . The exchange offer is scheduled to expire at 5:00 p.m.,
New York City time, on , 2001. If we extend
the exchange offer, the expiration date will be the
latest date and time to which we extend the exchange
offer.
Conditions to the exchange offer . . . . The exchange offer is subject to customary conditions.
These conditions may be waived by us in our discretion.
The exchange offer is not conditioned upon any minimum
principal amount of old notes being submitted for
exchange.
Procedures for tendering old notes . . . To submit your old notes for exchange, you must send to
SunTrust Bank, the exchange agent, on or before the
expiration date:
4
either:
o a completed letter of transmittal, together
with your old notes and any other required
documentation; or
o a transmittal through The Depository Trust
Company's Automated Tender Offer Program system
under which you agree to be bound by the terms
of the letter of transmittal.
If you wish to participate in the exchange offer and
cannot comply with either of these procedures on a
timely basis, then you can comply with the guaranteed
delivery procedures described below. By executing the
letter of transmittal, you will be making the
representations to us described under
"The Exchange Offer--Procedures for Tendering."
Special procedures for
beneficial owners. . . . . . . . . . . If you are a beneficial owner whose old notes are
registered in the name of a broker, dealer, commercial
bank, trust company or other nominee and you wish to
tender your old notes in the exchange offer, you
should contact the registered holder promptly and
instruct the registered holder to tender on your behalf.
If you wish to tender on your own behalf, you must,
prior to completing and executing the letter of
transmittal and delivering your old notes, either make
appropriate arrangements to register ownership of the
old notes in your name or obtain a properly completed
bond power from the registered holder.
The transfer of registered ownership may take
considerable time. You may not be able to complete
this transfer before the expiration date.
Guaranteed delivery procedures . . . . . If you wish to tender your old notes and time will not
permit the documents required by the lette of
transmittal to reach the exchange agent prior to the
expiration date, or the procedure for book-entry
transfer cannot be completed on a timely basis, you
can participate in the exchange offer by following the
guaranteed delivery procedures described under
"The Exchange Offer--Guaranteed Delivery Procedures."
Acceptance of old notes and delivery of
exchange notes . . . . . . . . . . . . Subject to the conditions described under "The Exchange
Offer--Conditions to the Exchange Offer ", we will
accept for exchange all old notes which are properly
tendered in the exchange offer and not withdrawn,
prior to 5:00 p.m., New York City time, on the
expiration date.
Withdrawal rights. . . . . . . . . . . . You may withdraw the tender of your old notes at any
time prior to 5:00 p.m., New York City time, on the
expiration date, by complying with the procedures for
withdrawal described under the heading "The Exchange
Offer-- Withdrawal of Tenders."
Federal income tax considerations. . . . For a discussion of the material federal income tax
considerations relating to the exchange of old notes
for the exchange notes, see "Material Federal Income
Tax Considerations."
5
Exchange agent . . . . . . . . . . . . . SunTrust Bank, the trustee under the indenture
governing the notes, is the exchange agent for the
exchange offer. The address, telephone number and
facsimile number of the exchange agent are listed
under the heading "The Exchange Offer--Exchange Agent."
Consequences of failure to exchange old
notes. . . . . . . . . . . . . . . . . If you do not exchange your old notes in the exchange
offer, your notes will continue to be subject to the
restrictions on transfer relating to the old notes.
In general, the unregistered old notes may not be
offered or sold, unless they are registered under the
Securities Act of 1933 or are offered and sold in a
transaction exempt from registration under the
Securities Act of 1933 and applicable state securities
laws. We do not intend to register the old notes under
the Securities Act of 1933 on behalf of any holder of
old notes that is eligible to participate in the
exchange offer. We expect that the trading market for
the old notes will be significantly less liquid than
the trading market for the new notes.
6
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The exchange notes will be substantially identical to the outstanding old
notes, except that the exchange notes will be registered under the Securities
Act of 1933, and, therefore, generally will not be subject to transfer
restrictions. The exchange notes will evidence the same debt as the outstanding
old notes, which they replace, and both the outstanding old notes and the
exchange notes will be governed by the same indenture. We sometimes refer to the
old notes and the exchange notes collectively in this prospectus as the notes.
Securities Offered . . . . . . . . . . . We are offering $375,000,000 aggregate principal amount
of our 8 1/8% Series B Senior Subordinated Notes due 2011.
Interest . . . . . . . . . . . . . . . . Interest on the exchange notes will accrue from the
last interest payment date on which interest was paid
on the old notes surrendered in the exchange offer
or, if no interest has been paid on the old notes,
from March 20, 2001. Interest on the exchange notes
will be payable semi-annually on March 15 and
September 15 of each year, beginning on
September 15, 2001.
Maturity Date. . . . . . . . . . . . . . March 15, 2011.
Guarantees . . . . . . . . . . . . . . . Current and future domestic subsidiaries representing
at least 90% of the consolidated assets and revenues
of us and our domestic subsidiaries will guarantee the
exchange notes on a senior subordinated basis.
These same subsidiaries guarantee the old notes to the
same extent. See "Description of Notes."
If the notes achieve a rating of Baa3 or higher from
Moody's Investor Service, Inc. and a rating of BBB- or
higher from Standard & Poor's Ratings Group, our
subsidiaries will no longer be required to guarantee
the notes.
Ranking. . . . . . . . . . . . . . . . . The exchange notes will be unsecured senior subordinated
obligations and will be subordinated to all our existing
and future senior debt. The exchange notes will rank
equally with the old notes and all our other existing
and future senior subordinated debt and will rank senior
to all our subordinated debt, including our outstanding
5% Convertible Subordinated Debentures due 2007.
At June 30, 2001, we had approximately $396 million of
outstanding debt on a consolidated basis, other than the
notes. Approximately $395 million of this debt is debt
of Omnicare, Inc. and approximately $1 million of this
debt is debt of our subsidiaries (excluding debt under
our credit facility guaranteed by several of our
subsidiaries). Approximately $51 million of this debt
is senior to the notes. Included in this senior debt is
approximately $50 million outstanding under our
revolving credit facility as of that date, all of which
is also guaranteed by several of our subsidiaries, and
approximately $1 million of other indebtedness of our
subsidiaries to which the notes are effectively
subordinated. As of June 30, 2001, we and our guarantor
subsidiaries had no outstanding debt ranking on a
parity with the notes and the guarantees. The amount of
our outstanding debt as of June 30, 2001, to which the
notes and the guarantees were senior was $345 million,
consisting of our outstanding 5% Convertible Subordinated
Debentures due 2007. As of
7
June 30, 2001, we had no subsidiary debt to which the
notes were senior.
Optional Redemption. . . . . . . . . . . We may redeem the notes, in whole or part, at any time
on or after March 15, 2006 at a redemption price equal
to 100% of the principal amount of the notes redeemed
plus a premium, declining ratably to par, and accrued
interest.
In addition, at any time prior to March 15, 2004, we
may redeem up to 35% of the aggregate principal
amount of the notes with net cash proceeds from equity
offerings at a redemption price equal to 108.125% of the
principal amount of the notes redeemed, plus accrued
interest, provided that:
o at least 65% of the aggregate principal amount of
the notes remain outstanding immediately after the
redemption; and
o the redemption occurs within 60 days of the date
of the closing of the applicable equity offering.
For more information, see "Description of Notes--
Optional Redemption."
Change of Control. . . . . . . . . . . . Upon a change of control of our company, you have a
right to require us to repurchase all or a portion of
your notes at a purchase price equal to 101% of the
principal amount of your notes, plus accrued interest.
Our ability to repurchase the exchange notes upon a
change of control event is limited by the terms of our
credit facility. In addition, we might not
have sufficient financial resources to repurchase the
notes. Our failure to repurchase notes upon a change of
control as required would constitute an event of default
under the indenture relating to the notes, even if the
repurchase were not permitted by other agreements to
which we are a party or if we do not have sufficient
financial resources to permit the repurchase. See
"Description of Notes--Repurchase at the Option of
Holders--Change of Control."
Covenants. . . . . . . . . . . . . . . . The indenture relating to the notes contains covenants
that, among other things, limit our ability and the
ability of our restricted subsidiaries to:
o incur additional indebtedness;
o pay dividends on, or redeem or repurchase, our
capital stock;
o make investments;
o engage in transactions with affiliates;
o create liens; and
o consolidate, merge or transfer all or
substantially all our assets and the assets of
our subsidiaries on a consolidated basis.
These covenants are subject to important exceptions and
qualifications, which are described in the "Description
of Notes" section in this prospectus. In addition, if
the notes achieve a rating of Baa3 or higher from
Moody's Investor Service, Inc. and a rating of BBB- or
higher from Standard
8
& Poor's Ratings Group, most of the covenants contained
in the indenture will terminate.
Form of exchange notes . . . . . . . . . The notes issued in the exchange offer will be issued in
book-entry form. Beneficial interests in the notes will
be shown on, and transfers of the notes will be effected
through, records maintained in book-entry form by The
Depository Trust Company and its participants.
Use of proceeds. . . . . . . . . . . . . We will not receive any proceeds from the exchange offer.
9
FORWARD-LOOKING INFORMATION
This prospectus contains and incorporates by reference certain statements
that constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include all statements regarding the intent, belief or current expectations
regarding the matters discussed or incorporated by reference in this prospectus
(including statements as to "beliefs," "expectations," "anticipations,"
"intentions" or similar words) and all statements which are not statements of
historical fact.
These forward-looking statements involve known and unknown risks,
uncertainties, contingencies and other factors that could cause results,
performance or achievements to differ materially from those stated. These
forward-looking statements and trends include those relating to expectations
concerning our financial performance, internal growth trends, drug utilization,
expansion of clinical programs, drug price inflation, the impact of penetration
of new drugs, the impact of our productivity and consolidation program, the
operating environment in the skilled nursing facility market, the operating
environment in the contract research organization industry, the impact of
integration and streamlining of our contract research organization, purchasing
leverage, the leveraging of costs, the impact of our formulary compliance and
health management programs, the positioning of our contract research
organization, benefits from our state tax planning program, our operating
environment, the impact of the prospective payment system, the impact of
legislation, nursing home admission and occupancy trends, census and length of
stay trends, the impact of demographic trends, the impact of new drug
development, the impact of delayed decision-making and project cancellation by
pharmaceutical manufacturers, the impact of the financial condition of long-term
care facilities on our performance, our capital requirements, improved
management of working capital, and the adequacy and availability of our sources
of liquidity and capital. Such risks, uncertainties, contingencies, assumptions
and other factors, many of which are beyond our control, include without
limitation:
o overall economic, financial and business conditions;
o delays in reimbursement by the government and other payors to us and
our customers;
o the overall financial condition of our customers;
o the ability to assess and react to the financial condition of
customers;
o the impact of consolidation in the pharmaceutical and long-term health
care industries;
o the impact of seasonality on our business;
o the effect of new government regulation, executive orders and/or
legislative initiatives, including those relating to reimbursement and
drug pricing policies and in the interpretation and application of
these policies;
o whether legislation giving further financial relief from the
prospective payment system will be passed;
o our failure to obtain or maintain required regulatory approvals or
licenses;
o the failure of the long-term care facilities we serve to maintain
required regulatory approvals;
o loss or delay of contract research organization contracts for
regulatory or other reasons;
o the ability to attract and retain needed management;
o the ability to implement opportunities for lowering costs and to
realize related anticipated benefits;
o the impact and pace of technological advances;
o the ability to obtain or maintain rights to data, technology and other
intellectual property;
o trends for the continued growth of our business;
o volatility in our stock price;
o access to capital and financing;
o pricing and other competitive factors in our industry;
o variations in costs or expenses;
10
o variations in our operating results;
o the continued availability of suitable acquisition candidates and the
successful integration of acquired companies;
o the demand for our products and services;
o changes in tax law and regulation; and
o other risks and uncertainties described in "Risk Factors" and
elsewhere in this prospectus, including the documents incorporated by
reference.
Should one or more of these risks or uncertainties materialize or should
underlying assumptions prove incorrect, our 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
thereof. Except as otherwise required by law, we do 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.
11
RISK FACTORS
You should carefully consider the following factors in addition to all
other information contained in this prospectus.
If We or Our Client Institutions Fail to Comply With Medicaid and Medicare
Reimbursement Regulations, Our Revenue Could be Reduced, We Could be Subject to
Penalties and We Could Lose Our Eligibility to Participate in these Programs.
Approximately one-half of our pharmacy services billings are directly
reimbursed by government sponsored programs. These programs include Medicaid
and, to a lesser extent, Medicare. The remainder of our billings are paid or
reimbursed by individual residents, long-term care facilities and other third
party payors, including private insurers. A portion of these revenues are also
indirectly dependent on government programs. The table below represents our
approximated payor mix for the last three years:
1998 1999 2000
---- ---- ----
Private pay and long-term care facilities(1) . 48% 48% 46%
Medicaid . . . . . . . . . . . . . . . . . . . 38% 40% 43%
Medicare(2.) . . . . . . . . . . . . . . . . . 3% 3% 3%
Other private sources(3) . . . . . . . . . . . 11% 9% 8%
---- ---- ----
Totals . . . . . . . . . . . . . . . . . . 100% 100% 100%
==== ==== ====
---------
(1) Includes payments from skilled nursing facilities on behalf of their
Medicare-eligible residents.
(2) Includes direct billing for medical supplies.
(3) Includes our contract research organization revenues.
The Medicaid and Medicare programs are highly regulated. The failure, even
if inadvertent, of us and/or our client institutions to comply with applicable
reimbursement regulations could adversely affect our reimbursement under these
programs and our ability to continue to participate in these programs. In
addition, our failure to comply with these regulations could subject us to other
penalties.
Continuing Efforts to Contain Health Care Costs May Reduce our Future Revenue.
Our sales and profitability are affected by the efforts of health care
payors to contain or reduce the cost of health care by lowering reimbursement
rates, limiting the scope of covered services, and negotiating reduced or
capitated pricing arrangements. Any changes which lower reimbursement levels
under Medicare, Medicaid or private pay programs, including managed care
contracts, could reduce our future revenue. Furthermore, other changes in these
reimbursement programs or in related regulations could reduce our future
revenue. These changes may include modifications in the timing or processing of
payments and other changes intended to limit or decrease the growth of Medicaid,
Medicare or third party expenditures.
The Balanced Budget Act of 1997 and Other Health Care-Related Legislation has
Significantly Impacted Our Business, And Future Legislation is Likely to Affect
Us.
In recent years Congress has passed a number of federal laws that have
effected major changes in the health care system. Several of these changes have
had a significant impact on us. The Balanced Budget Act of 1997 sought to
achieve a balanced federal budget by, among other things, changing the
reimbursement policies applicable to various health care providers, including
the introduction in 1998 of the prospective payment system for Medicare-eligible
residents of skilled nursing facilities. Prior to the prospective payment
system, skilled nursing facilities under Medicare were reimbursed for services
based upon actual costs incurred in providing services, subject to limits. Now,
the prospective payment system requires skilled nursing facilities to manage the
cost of care for Medicare beneficiaries. Under the prospective payment system,
Medicare pays skilled nursing facilities a fixed fee per patient per day based
on the resident's medical condition and required level of assistance with
activities of daily living. This
12
fixed fee covers substantially all items and services furnished during a
Medicare-covered stay, including pharmacy services. The prospective payment
system resulted in a reduction in admissions of Medicare residents, particularly
those requiring complex care, leading to a significant reduction of overall
occupancy in the skilled nursing facilities we serve. As a result, we began
experiencing lower utilization of our services and prospective payment system
related pricing pressure from our skilled nursing facility customers in 1999.
The Balanced Budget Act of 1997 also imposed numerous other cost savings
measures affecting Medicare skilled nursing facility services. Because of the
significant reductions in reimbursement which occurred, the impact of the
prospective payment system has been to decrease occupancy for some facilities,
to reduce the number of residents in these facilities requiring higher levels of
medical care, to lower pricing and to produce an unfavorable payor mix for us.
With respect to Medicaid, the Balanced Budget Act of 1997 repealed the
"Boren Amendment" federal payment standard for payments to Medicaid nursing
facilities effective October 1, 1997. This repeal gives states greater latitude
in setting payment rates for nursing facilities. Budget constraints or other
factors may cause states to reduce Medicaid reimbursement to nursing facilities
or delay payments to nursing facilities in the future. The law also grants
states greater flexibility to establish Medicaid managed care programs without
the need to obtain a federal waiver. Although these waiver programs generally
exempt institutional care, including nursing facility and institutional pharmacy
services, these programs could ultimately change the Medicaid reimbursement
system for long-term care. These changes could include changing reimbursement
for pharmacy services from fee-for-service, or payment per procedure or service
rendered, to a fixed amount per person utilizing managed care negotiated or
capitated rates.
In 1999 and again in 2000, Congress enacted legislation intended to reduce
the impact of the Balanced Budget Act of 1997 on skilled nursing facilities.
This legislation includes increases in payment rates for some services and
delays in the implementation of some Balanced Budget Act of 1997 requirements.
Payments at the new rates, however, were initially delayed and this exacerbated
already severe cash flow problems in some of our client facilities before
stabilizing in the latter part of 2000. While this legislation was intended to
restore a portion of the reimbursement which had been significantly reduced
under the Balanced Budget Act of 1997, these changes may not materially improve
the financial condition of skilled nursing facilities or alter their admission
practices such that occupancy levels or the percentage of patients requiring
greater medical care will increase from current levels. Further, in order to
rein in health care costs, we anticipate that federal and state governments will
continue to review and assess alternate health care delivery systems, payment
methodologies and operational requirements for health care providers, including
long-term care facilities and pharmacies. Given the continuous debate regarding
the cost of health care, managed care and other health care issues, we cannot
predict with any degree of certainty what additional health care initiatives, if
any, will be implemented or the effect any future legislation or regulation will
have on our business. Further, Medicare and/or Medicaid payment rates for
pharmaceutical supplies and services may not continue to be based on current
methodologies or remain comparable to present levels. Accordingly, any future
health care legislation or regulation may adversely affect our business. See
"Business--Government Regulation."
If We Fail to Comply With Licensure Requirements, Fraud and Abuse Laws or Other
Applicable Laws, We May Need to Curtail Operations, and Could Be Subject to
Significant Penalties.
Our pharmacy business is subject to extensive and often changing federal,
state and local regulations, and our pharmacies are required to be licensed in
the states in which they are located or do business. While we continuously
monitor the effects of regulatory activity on our operations and we currently
have pharmacy licenses for each pharmacy we operate, the failure to obtain or
renew any required regulatory approvals or licenses could adversely affect the
continued operation of our business. The long-term care facilities that contract
for our services are also subject to federal, state and local regulations and
are required to be licensed in the states in which they are located. The failure
by these long-term care facilities to comply with these or future regulations or
to obtain or renew any required licenses could result in our inability to
provide pharmacy services to these facilities and their residents. We are also
subject to federal and state laws that prohibit some types of direct and
indirect payments between health care providers. These laws, commonly known as
the fraud and abuse laws, prohibit payments intended to induce or encourage the
referral of patients to, or the recommendation of, a particular provider of
items or
13
services. Violation of these laws can result in loss of licensure, civil and
criminal penalties and exclusion from the Medicare, Medicaid and other federal
health care programs.
We expend considerable resources in connection with our compliance efforts.
We believe that we are in compliance in all material respects with state and
federal regulations applicable to our business.
Federal and State Laws That Protect Patient Health Information May Increase Our
Costs and Limit Our Ability to Collect and Use That Information.
Numerous federal and state laws and regulations govern the collection,
dissemination, use and confidentiality of patient-identifiable health
information, including the federal Health Insurance Portability and
Accountability Act of 1996 and related rules. As part of our pharmaceutical
dispensing, medical record keeping, third party billing, contract research and
other services, we collect and maintain patient-identifiable health information.
We are evaluating the effect of the Health Insurance Portability and
Accountability Act of 1996. At this time, we anticipate that we will be able to
fully comply with the law's requirements that have been adopted. However, we
cannot at this time estimate the cost of this compliance, nor can we estimate
the cost of compliance with standards that have not yet been finalized by the
U.S. Department of Health and Human Services or which may be revised. The new
and proposed health information standards may have a significant effect on the
manner in which we handle health care related data and communicate with payors.
If we are unable to comply with existing or new laws or regulations or are
required to incur substantial costs as to the collection, dissemination, use and
confidentiality of patient health information, we may need to modify how we
conduct our business and we could be subject to significant penalties. In
addition, the cost of complying with these laws could be significant.
We Are Subject to Additional Risks Relating to Our Acquisition Strategy.
One component of our strategy contemplates our making selected
acquisitions. Acquisitions involve inherent uncertainties. These uncertainties
include the effect on the acquired businesses of integration into a larger
organization and the availability of management resources to oversee the
operations of these businesses. The successful integration of acquired
businesses will require, among others:
o consolidation of financial and managerial functions and elimination of
operational redundancies;
o achievement of purchasing efficiencies;
o the addition and integration of key personnel; and
o the maintenance of existing business.
Even though an acquired business may have enjoyed strong growth as an
independent company prior to an acquisition, we cannot be sure that the business
will continue to have strong growth after an acquisition.
We also may acquire businesses with unknown or contingent liabilities,
including liabilities for failure to comply with health care laws and
regulations. We have policies and procedures to conduct reviews of potential
acquisition candidates for compliance with health care laws and to conform the
practices of acquired businesses to our standards and applicable laws. We also
generally seek indemnification from sellers covering these matters. We may,
however, incur material liabilities for past activities of acquired businesses.
We cannot be sure of the successful integration of any acquisition or that
an acquisition will not have an adverse impact on our results of operations or
financial condition.
We Operate in Highly Competitive Businesses.
The long-term care pharmacy business is highly regionalized and, within a
given geographic region of operations, highly competitive. Our largest
competitors nationally are Pharmerica, Inc., a subsidiary of Bergen Brunswig
Corporation, Neighborcare, a division of Genesis Healthcare Ventures, Inc. and
NCS Healthcare Inc. In the geographic regions we serve, we also compete with
numerous local retail pharmacies, local and regional institutional pharmacies
and pharmacies owned by long-term care facilities.
14
We compete on the basis of quality, cost-effectiveness and the increasingly
comprehensive and specialized nature of our services, along with the clinical
expertise, pharmaceutical technology and professional support we offer.
Our contract research organization business competes against other
full-service contract research organizations and client internal resources. The
contract research organization industry is highly fragmented with a number of
full-service contract research organizations and many small, limited-service
providers, some of which serve only local markets. Clients choose a contract
research organization based upon, among other reasons, reputation, references
from existing clients, the client's relationship with the organization, the
organization's experience with the particular type of project and/or therapeutic
area of clinical development, the organization's ability to add value to the
client's development plan, the organization's financial stability and the
organization's ability to provide the full range of services required by the
client.
We Are Dependent on Our Senior Management Team and Our Pharmacy Professionals.
We are highly dependent upon the members of our senior management and our
pharmacists and other pharmacy professionals. Our business is managed by a small
number of key management personnel who have been extensively involved in the
success of our business, including Joel F. Gemunder, our President and Chief
Executive Officer. If we were unable to retain these persons, we might be
adversely affected. Our industry is small and there is a limited pool of senior
management personnel with significant experience in our industry. Accordingly,
we believe we could experience significant difficulty in replacing key
management personnel. Although we have employment contracts with our key
management personnel, these contracts generally may be terminated without cause
by either party. We do not maintain any key man insurance on any of our key
personnel.
In addition, our continued success depends on our ability to attract and
retain pharmacists and other pharmacy professionals. Competition for qualified
pharmacists and other pharmacy professionals is strong. The loss of pharmacy
personnel or the inability to attract, retain or motivate sufficient numbers of
qualified pharmacy professionals could adversely affect our business. Although
we generally have been able to meet our staffing requirements for pharmacists
and other pharmacy professionals in the past, our inability to do so in the
future could have a material adverse effect on us.
We have substantial outstanding indebtedness.
At June 30, 2001, we had $771 million of total consolidated long-term debt,
including current maturities. This debt accounted for approximately 41% of our
total capitalization. Of this debt, approximately $50 million is variable-rate
debt and, including the notes, approximately $721 million is fixed rate debt. We
anticipate that approximately $53 million of cash flow from operations will be
required to satisfy annual interest obligations on our currently outstanding
indebtedness.
The degree to which we are leveraged could have important consequences to
you, including:
o a substantial portion of our cash flow from operations will be
required to be dedicated to interest and principal payments and may
not be available for operations, working capital, capital
expenditures, expansion, acquisitions or general corporate or other
purposes;
o our ability to obtain additional financing in the future, if required,
may be impaired;
o we may be more highly leveraged than our competitors, which may place
us at a competitive disadvantage;
o our flexibility in planning for, or reacting to, changes in our
business and industry may be limited; and
o our degree of leverage may make us more vulnerable in the event of a
downturn in our business or in our industry or the economy in general.
Our ability to make payments on and to refinance our debt, including the
notes, will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, business, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
15
We may not generate sufficient cash flow from operations, and future
borrowings may not be available to us under credit facilities, in an amount
sufficient to enable us to pay our debt, including the notes, or to fund our
other liquidity needs. We may need to refinance all or a portion of our debt,
including the notes, on or before maturity. We may not be able to refinance any
of our debt, including our credit facility and the notes, on commercially
reasonable terms or at all.
Despite Current Indebtedness Levels, We and Our Subsidiaries May Still Be Able
to Incur Substantially More Debt Which Could Further Exacerbate the Risks
Associated With Our Leverage.
While we believe that our revolving credit agreement provides us with
sufficient liquidity when taken together with funds provided from operations and
the recent offering of the old notes, circumstances could arise in the future
where we require additional funds. As long as we are in compliance with the
covenants in the indenture governing the notes, we and our subsidiaries may be
able to incur substantial additional debt in the future. The indenture permits
us to incur additional debt without limitation so long as our ratio of cash flow
to fixed charges is at least 2.0 to 1.0, calculated in accordance with the
indenture. In addition, even if this coverage test is not met, the indenture
will permit us to incur a significant amount of debt, including up to $750
million under our credit facility. Other permitted incurrences of indebtedness
under the indenture are described under "Description of Notes--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock." The
covenant in the indenture limiting our ability to incur debt will terminate, as
will most of the other covenants in the indenture and the obligation that our
subsidiaries guarantee the notes, if the notes achieve a rating of Baa3 or
higher from Moody's Investor Service, Inc. and a rating of BBB- or higher from
Standard & Poor's Ratings Group.
As of June 30, 2001, our credit facility would have permitted additional
borrowings of up to $447 million. All of those borrowings would be senior to the
notes. If new debt is added to our and our subsidiaries' current debt levels,
the leverage-related risks that we and they now face could intensify.
The Notes and the Subsidiary Guarantees Are Subordinated to Senior Indebtedness.
The notes are subordinated in right of payment to all of our current and
future senior indebtedness, including borrowings under our credit facility. The
indenture governing the notes does not limit the amount of additional
indebtedness, including senior indebtedness, we or our subsidiaries can create,
incur, assume or guarantee, if we are in compliance with the covenants contained
in the indenture. By reason of the subordination of the notes, in the event of
insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up
of our business, our assets will be available to pay the amounts due on the
notes only after all of our senior indebtedness has been paid in full, including
borrowings under our credit facility. In addition, upon default in payment with
respect to borrowings under our credit facility or an event of default with
respect to this indebtedness permitting the acceleration of repayment, we may be
blocked from making payments on the notes pursuant to the indenture. We conduct
most of our operations through our subsidiaries. The indenture requires that our
current and future domestic subsidiaries representing at least 90% of the
consolidated assets and revenues of us and our domestic subsidiaries guarantee
the notes on a senior subordinated basis. However, the guarantees will be
subordinated to the senior indebtedness of these subsidiaries, including
guarantees of these subsidiaries of borrowings under our credit facility. In the
event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or
winding up of the business of any of these subsidiaries, senior creditors of
these subsidiaries generally will have the right to be paid in full before any
distribution is made in respect of the guarantees. Further, these subsidiaries
will not be required to guarantee the notes if the notes achieve an investment
grade rating from Moody's Investor Service, Inc. and Standard & Poor's Ratings
Group. In addition, the notes will be structurally subordinated to indebtedness
of our subsidiaries that do not guarantee the notes. As of June 30, 2001, we and
our guarantor subsidiaries had approximately $51 million of senior indebtedness
on a consolidated basis, including debt if the notes achieve an investment grade
rating from Moody's Investor Service, Inc. and Standard & Poor's Ratings Group
of subsidiaries to which the notes are structurally subordinated. In addition,
as of that date, our subsidiaries that do not guarantee the notes had no
outstanding debt to which the notes are effectvely subordinated. See
"Description of Notes."
16
Our Ability to Repurchase the Notes Upon a Change of Control or in Connection
With an Asset Sale Repurchase May Be Limited.
In the event of a change of control involving us, as defined in the
indenture relating to the notes, you will have the right, at your option, to
require us to repurchase all or a portion of the notes you hold at a purchase
price equal to 101% of the aggregate principal amount of your notes plus accrued
interest thereon to the repurchase date. A change of control, as defined in the
indenture, would include the sale or other disposition of all or substantially
all of our property or assets, the consummation of any transaction resulting in
any person owning more than 45% of the voting power with respect to our capital
stock, persons constituting the board of directors as of the date of the
indenture or their eligible successors ceasing to constitute a majority of our
board of directors or the adoption of a plan of liquidation or dissolution of
our company is adopted.
In addition to our obligation to repurchase notes upon a change of control,
a change of control of our company, as defined in our credit facility and which
would include a change of control under the notes, would trigger an event of
default under our credit agreement. This would allow our bank lenders to
accelerate repayment of amounts outstanding under the credit facility and
terminate the credit facility. Further, a change of control could constitute a
"fundamental change" with respect to our outstanding convertible subordinated
debentures, which would result in us being required to also make an offer to
repurchase those debentures. As of June 30, 2001, we had $50 million of
outstanding debt under our credit facility and $345 million in aggregate
principal amount of outstanding convertible debentures. Under the indenture
relating to the notes, within 90 days of a change of control and prior to making
an offer to purchase the notes, we are required to repay all outstanding senior
debt or obtain any consents necessary in order to allow us to repurchase notes.
We might not be able to obtain the consent of our bank lenders to repurchase
notes upon a change of control. In addition, we might not have sufficient funds
available to us to repay amounts outstanding under our credit facility and make
any required repurchase of notes and our convertible debentures, and we might
not be able to raise the necessary funds through other means.
In addition, if we sell or dispose of assets and do not use the proceeds
from these asset dispositions to repay senior debt or invest in our business, we
would be required to make an offer to repurchase the notes once these proceeds
exceed $20 million in the aggregate. Events giving rise to our obligation to
make an offer to purchase notes in connection with an asset sale could also
trigger an event of default under our credit facility. As indicated above, an
event of default under our credit agreement would allow our bank lenders to
accelerate repayment of amounts outstanding under the credit facility and
terminate the credit facility. As a result, unless we obtained the consent of
the lenders under our credit agreement, we might not be able to repurchase notes
until we repaid amounts outstanding under the credit facility.
If we are unable to repurchase notes upon a change of control or to make an
asset sale offer for any reason, our failure to do so would constitute an event
of default under the indenture. However, notwithstanding the fact that an event
of default with respect to the notes would occur if we did not repurchase notes
when required, the subordination provisions of the indenture relating to the
notes might preclude us from making payments with respect to the notes until
holders of senior indebtedness are paid in full.
The term "change of control" under the indenture is limited to the
transactions specified and may not include other events that might adversely
affect our financial condition or result in a downgrade of the credit rating (if
any) of the notes, nor would the requirement that we offer to repurchase the
notes upon a change of control necessarily afford holders of the notes
protection in the event of a highly leveraged reorganization.
Your Ability to Enforce the Guarantees of the Notes May Be Limited.
Although the notes are obligations of Omnicare, Inc., they will be
unconditionally guaranteed on an unsecured senior subordinated basis by several
of Omnicare's domestic subsidiaries. The performance by each subsidiary
guarantor of its obligations with respect to its guarantee may be subject to
review under relevant federal and state fraudulent conveyance and similar
statutes in a bankruptcy or reorganization case or lawsuit by or on behalf of
unpaid creditors of the subsidiary guarantor. Under these statutes, if a court
were to find under relevant federal or state fraudulent conveyance statutes that
a subsidiary guarantor did
17
not receive fair consideration or reasonably equivalent value for incurring its
guarantee of the notes, and that, at the time of that incurrence, the subsidiary
guarantor: (i) was insolvent; (ii) was rendered insolvent by reason of that
incurrence or grant; (iii) was engaged in a business or transaction for which
the assets remaining with the subsidiary guarantor constituted unreasonably
small capital; or (iv) intended to incur, or believed that it would incur, debts
beyond its ability to pay these debts as they matured, then the court, subject
to applicable statutes of limitation, could void the subsidiary guarantor's
obligations under its guarantee, recover payments made under the guarantee,
subordinate the guarantee to other indebtedness of the subsidiary guarantor or
take other action detrimental to the holders of the notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured or if a company is not able to pay its debts as they become
due. Moreover, regardless of solvency, a court could avoid an incurrence of
indebtedness, including the guarantees, if it determined that the transaction
was made with the intent to hinder, delay or defraud creditors. In addition, a
court could subordinate the indebtedness, including the guarantees, to the
claims of all existing and future creditors on similar grounds. The guarantees
could also be subject to the claim that, since the guarantees were incurred for
the benefit of Omnicare and only indirectly for the benefit of the subsidiary
guarantors, the obligations of the subsidiary guarantors under the guarantees
were incurred for less than reasonably equivalent value or fair consideration.
We do not know what standard a court would apply in order to determine
whether a subsidiary guarantor was "insolvent" upon the sale of the notes.
Additionally, regardless of the method of valuation, a court may determine that
the subsidiary guarantor was insolvent upon consummation of the sale of the
notes.
We Have Broad Discretion to Use the Proceeds From Borrowings Under Our Credit
Facilities.
We used the proceeds from the private offering of the old notes to repay
outstanding indebtedness under our previous revolving credit facilities, at
which time those revolving credit facilities terminated. However, we will be
able to reborrow in the future under our new credit facility. We have
substantial flexibility and broad discretion with respect to these borrowings
and you will be relying on the judgment of our management regarding the
application of proceeds from these borrowings.
There Is No Existing Public Market for the Notes.
There is no existing public market for the notes. Additionally, the
liquidity of any markets that may develop for the notes, the ability of the
holders to sell their notes and the price at which holders of the notes may be
able to sell their notes is uncertain. Future trading prices of the notes will
depend on many factors, including, among other things, prevailing interest
rates, our operating results and the market for similar securities. The initial
purchasers with respect to the offering of the old notes have informed us that
they intend to make a market in the notes; however, the initial purchasers are
not obligated to do so, and any market making activity may be terminated at any
time without notice to the holders of the notes. See "Description of
Notes--Registration Rights; Liquidated Damages" and "Plan of Distribution." We
do not intend to apply for listing of the notes on any securities exchange.
Following the Exchange Offer, We Expect the Trading Market for Untendered Old
Notes Will Be Highly Illiquid.
If old notes are tendered and accepted in the exchange offer and you do not
exchange your old notes in the exchange offer, your notes will continue to be
subject to the restrictions on transfer relating to the old notes. In general,
the unregistered old notes may not be offered or sold, unless they are
registered under the Securities Act of 1933 or are offered or sold in a
transaction exempt from registration under the Securities Act of 1933 and
applicable state securities laws. We have no obligation to register the old
notes under the Securities Act of 1933, except in very limited circumstances
where holders would be ineligible to receive freely transferrable exchange notes
in the exchange offer. As a result, following the exchange offer, we expect the
trading market for untendered old notes will be highly illiquid.
18
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The old notes were originally sold to UBS Warburg LLC, Lehman Brothers
Inc., Deutsche Banc Alex. Brown Inc., Banc One Capital Markets, Inc. and
SunTrust Equitable Securities Corporation as initial purchasers in a private
offering by Omnicare. In connection with the private offering of the old notes,
we entered into a registration rights agreement in which we agreed to:
(1) file a registration statement no later than June 18, 2001;
(2) use commercially reasonable efforts to cause the registration
statement to become effective no later than September 16, 2001; and
(3) promptly upon the effectiveness of the registration statement,
commence the exchange offer for the exchange notes.
The exchange notes will be issued without a restrictive legend and may be
reoffered and resold by the holder without restrictions or limitations under the
Securities Act of 1933, except as described below. We have agreed in the
registration rights agreement to use commercially reasonable efforts to complete
the exchange offer and issue the exchange notes no later than 45 business days
after the registration statement is declared effective. This exchange offer is
intended to satisfy our exchange offer obligations under the registration rights
agreement.
For each old note surrendered to us pursuant to the exchange offer, the
holder of the old note will receive an exchange note having a principal amount
equal to that of the surrendered old note. The term "holder" with respect to the
exchange offer means any person in whose name old notes are registered on our
books or any other person who has obtained a properly completed bond power from
the registered holder or any person whose old notes are held of record by The
Depository Trust Company and who desires to deliver the old notes by book-entry
transfer through The Depository Trust Company.
Under existing interpretations of the staff of the SEC, contained in
several no-action letters to third parties, the exchange notes, including the
related guarantees, would in general be freely transferable by their holders
after the exchange offer without further registration under the Securities Act
of 1933. However, any purchaser of old notes who is either an "affiliate" of our
company within the meaning of Rule 405 of the Securities Act of 1933 or who
intends to participate in the exchange offer for the purpose of distributing the
exchange notes:
(1) will not be able to tender its old notes in the exchange offer;
(2) will not be able to rely on the interpretations of the staff of the
SEC; and
(3) must comply with the registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with any sale or transfer
of the old notes, unless the sale or transfer qualifies for an
exemption from these requirements.
Each holder that wishes to exchange its old notes for exchange notes will
be required to represent in a letter of transmittal that:
o any exchange notes received by it will be acquired in the ordinary
course of its business;
o it has no arrangement or understanding with any person to participate
in a distribution of the exchange notes in violation of the Securities
Act of 1933;
o it is not an affiliate of our company;
o if the holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in a distribution of the exchange notes; and
o if the holder is a broker-dealer that will receive exchange notes for
its own account in exchange for old notes that are acquired as a
result of market-making or other trading activities, that it will
deliver a prospectus in connection with any resale of those exchange
notes.
The SEC has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to resales of the
exchange notes with the prospectus contained in the registration statement. We
have agreed in the registration rights agreement that we will make available a
prospectus
19
meeting the requirements of the Securities Act of 1933 for use by participating
broker-dealers and other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of exchange notes. We will
make this prospectus available until , or until all restricted securities
covered by the exchange offer registration statement have been sold, whichever
period is shorter, in order to permit resales of exchange notes acquired by
broker-dealers in after-market transactions.
The SEC interpretations referred to above may be subject to change. If
those interpretations are changed prior to completion of this exchange offer,
holders of old notes may not be able to receive exchange notes in the exchange
offer. Rather, as described below, we and the guarantors may be required to
register the old notes under a shelf registration statement in connection with
resales by holders of the old notes. Holders of old notes may be required to
deliver a prospectus to purchasers and may be subject to civil liability
provisions under the Securities Act of 1933 in connection with these resales.
If:
(1) the exchange offer is not permitted by law or policy;
(2) any holder of old notes notifies us on or prior to that:
(a) the holder was prohibited by law or SEC policy from participating
in the exchange offer;
(b) the holder may not resell the exchange notes acquired by it in
the exchange offer to the public without a prospectus, and the
prospectus contained in the exchange offer registration statement
is not appropriate or available for resales by the holder; or
(c) the holder is a broker-dealer and owns old notes acquired
directly from us or an affiliate of our company,
then, in each case, we will, instead of, or in the case of clause (2)
above, in addition to, completing the exchange offer, file and use commercially
reasonable efforts to cause a registration statement under the Securities Act of
1933 relating to a shelf registration of the old notes for resale by holders to
become effective and to remain effective for two years following the effective
date of the shelf registration statement or, if earlier, when all securities
covered by the shelf registration statement have been sold pursuant to the shelf
registration statement or are eligible for resale under Rule 144(k) of the
Securities Act of 1933.
We will, in the event of a shelf registration relating to the old notes:
(1) provide to the holders of the applicable old notes copies of the
prospectus that is a part of the shelf registration statement;
(2) notify each holder when the shelf registration statement for the
applicable old notes has become effective; and
(3) take other actions in order to permit unrestricted resales of the old
notes.
A holder that sells its old notes pursuant to a shelf registration relating
to the old notes:
(1) will be required to be named as a selling security holder in the
related prospectus and to deliver a prospectus to the purchaser;
(2) will be subject to civil liability provisions under the Securities Act
of 1933 in connection with those sales; and
(3) will be bound by the provisions of the registration rights agreement
that are applicable to the holder, including indemnification
obligations.
The registration rights agreement provides, among other things, that if:
(1) we have not filed any of the registration statements required by the
registration rights agreement on or prior to the date specified for
the filing;
(2) any required registration statement is not declared effective on or
prior to the date specified for its effectiveness;
(3) the exchange offer is not consummated within 45 business days after
the effective date of the exchange offer registration statement; or
20
(4) the shelf registration statement or the exchange offer registration
statement is declared effective but ceases to be effective or fails to
be usable,
then liquidated damages will be payable on the applicable old notes.
Liquidated damages will accrue at a rate of .25% per $1,000 principal
amount of notes for the first 90-day period following the occurrence of the
event giving rise to the liquidated damages. Liquidated damages will
subsequently increase by an additional .25% per $1,000 principal amount of notes
at the beginning of each subsequent 90-day period. Liquidated damages will cease
to accrue when the default giving rise to the damages is cured. The liquidated
damages on any affected old notes will not exceed 1.0% per $1,000 principal
amount of notes per year. Liquidated damages will not accrue during any period
when use of a shelf registration statement is permitted to be suspended under
the registration rights agreement.
The above summary highlights the material provisions of the registration
rights agreement, but does not restate the agreement in its entirety. We urge
you to review all of the provisions of the registration rights agreement,
because it, and not this description, defines your rights as holders to exchange
your old notes for registered exchange notes. A copy of the registration rights
agreement has previously been filed with the SEC by us, and is incorporated by
reference to the registration statement of which this prospectus forms a part.
Following the consummation of the exchange offer, holders of old notes who
were eligible to participate in the exchange offer but who did not tender their
old notes will not have any further registration rights, and the old notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for the old notes could be adversely affected. See "Risk
Factors--Following the Exchange Offer, We Expect the Trading Market for
Untendered Old Notes Will Be Highly Illiquid."
Terms of the Exchange Offer
This prospectus and the accompanying letter of transmittal contain the
terms and conditions for the exchange offer. Upon the terms and subject to the
conditions set forth in this prospectus and in the accompanying letter of
transmittal, we will accept for exchange all old notes which are properly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
expiration date. After authentication of the exchange notes by the trustee or an
authentication agent, we will issue and deliver $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of outstanding old
notes accepted in the exchange offer. Holders may tender some or all of their
old notes in the exchange offer in denominations of $1,000 and integral
multiples of $1,000.
The form and terms of the exchange notes are identical in all material
respects to the form and terms of the old notes, except that:
(1) the offering of the exchange notes has been registered under the
Securities Act of 1933; and
(2) the exchange notes generally will not be subject to transfer
restrictions and will not be entitled to registration rights.
The exchange notes will evidence the same debt as the old notes. The
exchange notes will be issued under and entitled to the benefits of the
indenture.
As of the date of this prospectus, $375,000,000 aggregate principal amount
of the old notes is outstanding. In connection with the issuance of the old
notes, arrangements were made for the old notes to be issued and transferable in
book-entry form through the facilities of The Depository Trust Company, acting
as a depositary. The exchange notes will also be issuable and transferable in
book-entry form through The Depository Trust Company.
This prospectus, together with the accompanying letter of transmittal, is
initially being sent to all registered holders of the old notes as of the close
of business on , 2001. The exchange offer is not conditioned upon
any minimum aggregate principal amount of old notes being tendered. However, our
obligation to accept old notes for exchange pursuant to the exchange offer is
subject to the conditions described under "--Conditions to the Exchange Offer"
below.
21
We will accept properly tendered old notes by giving oral or written notice
to the exchange agent. The exchange agent will act as agent for the tendering
holders for the purpose of receiving tenders and delivering exchange notes to
holders.
If any tendered old notes are not accepted for exchange because of an
improper tender or for any other reason, certificates for the unaccepted old
notes will be returned, at our cost, to the tendering holder as promptly as
practicable after the expiration date.
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes
pursuant to the exchange offer. We will pay all charges and expenses, other than
certain applicable taxes, in connection with the exchange offer. See
"--Solicitation of Tenders; Fees and Expenses" for more detailed information
regarding the expenses of the exchange offer.
By executing or otherwise becoming bound by the letter of transmittal, you
will be making the representations described under "--Procedures for Tendering"
below.
Expiration Date; Extensions; Amendments
o The term "expiration date" means 5:00 p.m., New York City time, on,
, 2001, unless we, in our sole discretion, extend the
exchange offer, in which case the term "expiration date" means the
latest date to which the exchange offer is extended. We may extend the
exchange offer at any time and from time to time by giving oral or
written notice to the exchange agent and by timely public
announcement.
o We expressly reserve the right, at any time, to extend the period of
time during which the exchange offer is open, which would delay
acceptance of old notes, by giving oral or written notice of the
extension to the exchange agent and notice of the extension to the
holders as described below. During any extension, all old notes
previously tendered will remain subject to the exchange offer and may
be accepted for exchange by us. Any old notes not accepted for
exchange for any reason will be returned without expense to the
tendering holder as promptly as practicable after the expiration or
termination of the exchange offer.
o We expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes that we have not
yet accepted for exchange, if any of the conditions set forth under
"Conditions to the Exchange Offer" have occurred and have not been
waived by us, if those conditions are permitted to be waived by us.
o We will give oral or written notice of any extension, amendment,
termination or non-acceptance described above to holders of the old
notes as promptly as practicable. If the exchange offer is amended in
a manner determined by us to constitute a material change, we will
promptly disclose the amendment in a manner reasonably calculated to
inform the holders of the amendment and we will extend the exchange
offer to the extent required by law.
o Without limiting the manner in which we may choose to make public
announcements of any extension, amendment, termination or
non-acceptance of the exchange offer, and subject to applicable law,
we will have no obligation to publish, advertise or otherwise
communicate any public announcement relating to the exchange offer
other than by issuing a timely release to the Dow Jones News Service.
Interest on the Exchange Notes
Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the old notes surrendered in the exchange
offer or, if no interest has been paid on the old notes, from the issue date of
the old notes. Interest on the notes is payable semi-annually on March 15 and
September 15 of each year, commencing September 15, 2001.
22
Procedures for Tendering
What to submit and how
Each holder of old notes wishing to accept the exchange offer must
complete, sign and date the letter of transmittal, or a facsimile of the letter
of transmittal, in accordance with the instructions specified in this prospectus
and the letter of transmittal. Each holder should then mail or otherwise deliver
the letter of transmittal, or facsimile, together with the old notes to be
exchanged and any other required documentation, to SunTrust Bank, as exchange
agent, at the address set forth below under "--Exchange Agent" on or prior to
the expiration date. A holder may also tender old notes using the procedures for
book-entry transfer described in this prospectus and in the letter of
transmittal. By executing the letter of transmittal, a holder will be
representing to us that, among other things:
(1) the exchange notes acquired in the exchange offer are being acquired
in the ordinary course of business of the person receiving the
exchange notes, whether or not that person is the holder;
(2) that neither the holder nor any such other person has any arrangement
or understanding with any person to participate in the distribution of
such exchange notes; and
(3) that neither the holder nor any such other person is an "affiliate,"
as defined in Rule 405 under the Securities Act of 1933, of our
company.
Any financial institution that is a participant in The Depository Trust
Company's Book-Entry Transfer Facility system may make book-entry delivery of
old notes by causing The Depository Trust Company to transfer those old notes
into the exchange agent's account in accordance with The Depository Trust
Company's procedure for transfer. Although delivery of old notes may be effected
through book-entry transfer into the exchange agent's account at The Depository
Trust Company, the letter of transmittal, or a facsimile of the letter of
transmittal, with any required signature guarantees and any other required
documents, must, in any case, be transmitted to and received by the exchange
agent at its address specified in this prospectus under "Exchange Agent" prior
to 5:00 p.m., New York City time, on the expiration date. Delivery of documents
to The Depository Trust Company in accordance with its procedures does not
constitute delivery to the exchange agent.
Only a holder may tender its old notes in the exchange offer. To tender in
the exchange offer, a holder must:
(1) complete, sign and date the letter of transmittal or a facsimile of
the letter of transmittal;
(2) have the signatures on the letter of transmittal guaranteed if
required by the letter of transmittal; and
(3) unless the tender is being effected by book-entry transfer, mail or
otherwise deliver the letter of transmittal or facsimile, together
with the old notes and other required documents, to the exchange
agent, prior to 5:00 p.m., New York City time, on the expiration date.
The tender by a holder will constitute an agreement among the holder, our
company and the exchange agent in accordance with the terms and subject to the
conditions set forth in this prospectus and the letter of transmittal. If less
than all of the old notes are tendered, a tendering holder should fill in the
amount of old notes being tendered in the appropriate box on the letter of
transmittal. The entire amount of old notes delivered to the exchange agent will
be deemed to have been tendered unless otherwise indicated.
The method of delivery of old notes and the letter of transmittal and all
other required documents to the exchange agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to ensure delivery to the exchange agent prior to the expiration date.
No letter of transmittal or old notes should be sent to Omnicare. Holders may
also request that their respective brokers, dealers, commercial banks, trust
companies or nominees effect the tender for them, in each case as set forth in
this prospectus and in the letter of transmittal.
Any beneficial owner whose old notes are registered in the name of his
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his behalf. If the beneficial owner wishes to
23
tender on his own behalf, the beneficial owner must, prior to completing and
executing the letter of transmittal and delivering his old notes, either make
appropriate arrangements to register ownership of the old notes in such owner's
name or obtain a properly completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Required representations in letter of transmittal
The letter of transmittal will include representations to us that, among
other things:
(1) the exchange notes acquired in the exchange offer are being acquired
in the ordinary course of business of the person receiving the
exchange notes, whether or not the person is the holder;
(2) neither the holder nor any such other person is engaged in, intends to
engage in or has any arrangement or understanding with any person to
participate in the distribution of such exchange notes;
(3) neither the holder nor any such other person is an "affiliate," as
defined in Rule 405 under the Securities Act of 1933, of our company;
and
(4) if the tendering holder is a broker or dealer as defined in the
Exchange Act, then
(a) it acquired the old notes for its own account as a result of
market-making activities or other trading activities; and
(b) it has not entered into any arrangement or understanding with our
company or any "affiliate" of our company within the meaning of
Rule 405 under the Securities Act of 1933 to distribute the
exchange notes to be received in the exchange offer.
In the case of a broker-dealer that receives exchange notes for its own
account in exchange for old notes which were acquired by it as a result of
market-making or other trading activities, the letter of transmittal will also
include an acknowledgement that the broker-dealer will deliver a copy of this
prospectus in connection with the resale by it of exchange notes received
pursuant to the exchange offer; however, by so acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act of 1933. See "Plan of Distribution."
How to sign your letter of transmittal and other documents
Except as provided in the next paragraph, signatures on a letter of
transmittal or a notice of withdrawal, as the case may be, must be guaranteed by
one of the following entities:
(1) a member firm of a registered national securities exchange or the
National Association of Securities Dealers, Inc.;
(2) a commercial bank or trust company having an office or correspondent
in the United States; or
(3) an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act.
Signatures on the letter of transmittal do not need to be guaranteed,
however, if old notes are tendered:
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instruction" of the
letter of transmittal; or
(2) for the account of:
(a) a member firm of a registered national securities exchange or the
National Association of Securities Dealers, Inc.;
(b) a commercial bank or trust company having an office or
correspondent in the United States; or
(c) an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act.
If the letter of transmittal is signed by a person other than the
registered holder of old notes, the old notes must be endorsed or accompanied by
appropriate bond powers which authorize that person to tender the old notes on
behalf of the registered holder, in either case signed as the name of the
registered holder
24
or holders appears on the old notes. If the letter of transmittal or any old
notes or bond powers are signed or endorsed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, those persons should so
indicate when signing, and unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the letter of transmittal.
Important rules concerning the exchange offer
You should note that:
o All questions as to the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of the tendered old notes will be
determined by us in our sole discretion, which determination will be
final and binding;
o We reserve the absolute right to reject any and all old notes not
properly tendered or any old notes the acceptance of which would, in
our judgment or the judgment of our counsel, be unlawful;
o We also reserve the absolute right to waive any irregularities or
conditions of tender as to particular old notes. Our company's
interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final
and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes must be cured
within such time as we shall determine;
o Although we intend to notify holders of defects or irregularities with
respect to any tender of old notes, neither our company, the exchange
agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to tenders of
old notes, nor shall any of them incur any liability for failure to
give such notification; and
o Tenders of old notes will not be deemed to have been made until such
irregularities have been cured or waived. Any old notes received by
the exchange agent that we determine are not properly tendered or the
tender of which is otherwise rejected by us and as to which the
defects or irregularities have not been cured or waived by us will be
returned by the exchange agent to the tendering holder unless
otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.
Book-Entry Transfer
The exchange agent will make a request promptly after the date of this
prospectus to establish accounts with respect to the old notes at The Depository
Trust Company for the purpose of facilitating the exchange offer. Any financial
institution that is a participant in The Depository Trust Company's system may
make book-entry delivery of old notes by causing The Depository Trust Company to
transfer such old notes into the exchange agent's account with respect to the
old notes in accordance with The Depository Trust Company's Automated Tender
Offer Program procedures for such transfer. However, the exchange for the old
notes so tendered will only be made after timely confirmation of such book-entry
transfer of old notes into the exchange agent's account, and timely receipt by
the exchange agent of an agent's message and any other documents required by the
letter of transmittal. The term "agent's message" means a message, transmitted
by The Depository Trust Company and received by the exchange agent and forming a
part of the confirmation of a book-entry transfer, which states that The
Depository Trust Company has received an express acknowledgment from a
participant that is tendering old notes that such participant has received the
letter of transmittal and agrees to be bound by the terms of the letter of
transmittal, and that we may enforce such agreement against the participant.
Although delivery of old notes may be effected through book-entry transfer
into the exchange agent's account at The Depository Trust Company, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or you must comply with the
guaranteed delivery procedures described below. Delivery of documents to The
Depository Trust Company does not constitute delivery to the exchange agent.
25
Guaranteed Delivery Procedures
If you are a registered holder of old notes and you wish to tender such old
notes but your initial notes are not immediately available, or time will not
permit your old notes or other required documents to reach the exchange agent
before the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, you may effect a tender if:
(1) the tender is made through:
(a) a member firm of a registered national securities exchange or the
National Association of Securities Dealers, Inc.;
(b) a commercial bank or trust company having an office or
correspondent in the United States; or
(c) an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act;
(2) prior to the expiration date, the exchange agent receives from:
(a) a member firm of a registered national securities exchange or the
National Association of Securities Dealers, Inc.;
(b) a commercial bank or trust company having an office or
correspondent in the United States; or
(c) an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act;
a properly completed and duly executed notice of guaranteed delivery,
by facsimile transmittal, mail or hand delivery
(a) stating the name and address of the holder, the certificate
number or numbers of the holder's old notes and the principal
amount of old notes tendered;
(b) stating that the tender is being made in accordance with the
guaranteed delivery procedures; and
(c) guaranteeing that, within three New York Stock Exchange trading
days after the expiration date, the letter of transmittal, or a
facsimile of the letter of transmittal, together with the
certificate(s) representing the old notes to be tendered in
proper form for transfer, or confirmation of a book-entry
transfer into the exchange agent's account at The Depository
Trust Company of old notes delivered electronically, and any
other documents required by the letter of transmittal, will be
deposited by the Eligible Institution with the exchange agent;
and
(3) the properly completed and executed letter of transmittal, or a
facsimile of the letter of transmittal, together with the
certificate(s) representing all tendered old notes in proper form for
transfer, or confirmation of a book-entry transfer into the exchange
agent's account at The Depository Trust Company of old notes delivered
electronically and all other documents required by the letter of
transmittal are received by the exchange agent within three NYSE
trading days after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their old notes according to the guaranteed
delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of old notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be received by the exchange agent at its address set
forth in this prospectus prior to 5:00 p.m., New York City time, on the
expiration date. A facsimile transmission notice of withdrawal that is received
prior to
26
receipt of a tender of old notes sent by mail and postmarked prior to the date
of the facsimile transmission of withdrawal will be treated as a withdrawn
tender. Any notice of withdrawal must:
o specify the name of the person who deposited the old notes to be
withdrawn,
o identify the old notes to be withdrawn, including the certificate
number or number and principal amount of those old notes or, in the
case of old notes transferred by book-entry transfer, the name and
number of the account at The Depository Trust Company to be credited,
o be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which those old notes were
tendered, including any required signature guarantee, or be
accompanied by documents of transfer sufficient to permit the trustee
with respect to the old notes to register the transfer of those old
notes into the name of the depositor withdrawing the tender, and
o specify the name in which the old notes are to be registered, if
different from that of the depositor.
Please note that all questions as to the validity, form and eligibility,
including time of receipt, of withdrawal notices will be determined by us, and
our determination shall be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer, and no exchange notes will be issued with respect thereto unless
the old notes so withdrawn are validly retendered. Properly withdrawn old notes
may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the expiration date.
Conditions to the Exchange Offer
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or to issue exchange notes in exchange for, any
old notes, and may terminate or amend the exchange offer before the acceptance
of old notes if, in our judgment, any of the following conditions has occurred
or exists or has not been satisfied:
(1) the exchange offer, or the making of any exchange by a holder,
violates applicable interpretations of the staff of the SEC;
(2) any action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect
to the exchange offer; or
(3) there has been proposed, adopted or enacted any law, statute, rule or
regulation that, in our sole judgment, might materially impair our
ability to proceed with the exchange offer.
If we decide to terminate the exchange offer for any of the reasons
described above, we may:
(1) refuse to accept any old notes and return any old notes that have been
tendered to their original holders;
(2) extend the exchange offer and retain all old notes tendered prior to
the expiration date of the exchange offer, subject to the rights of
holders of tendered old notes to withdraw their tendered old notes; or
(3) waive the termination event with respect to the exchange offer and
accept all properly tendered old notes that have not been withdrawn.
If a waiver would constitute a material change in the exchange offer, we
will disclose this change by means of a supplement to this prospectus that will
be distributed to each registered holder, and we will extend the exchange offer
for a period of five to ten business days, depending upon the significance of
the waiver and the manner of disclosure to the registered holders, if the
exchange offer would otherwise expire during this period.
The above conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to the condition. Our failure at any
time to exercise any of the foregoing rights will not be deemed to be a waiver
by us of that right and each right will be deemed an ongoing right which may be
asserted by us at any time and from time to time.
27
Exchange Agent
SunTrust Bank, the trustee under the indenture, is the exchange agent for
the exchange offer. All executed letters of transmittal should be delivered to
the exchange agent at one of the addresses set forth below. In its capacity as
exchange agent, SunTrust Bank has no fiduciary duties and will be acting solely
on the basis of our directions. Questions, requests for assistance and requests
for additional copies of this prospectus or of the letter of transmittal should
be directed to the exchange agent as follows:
By Courier: SunTrust Bank
424 Church Street, 6th Fl.
Nashville, TN 37219
By Mail: SunTrust Bank
424 Church Street, 6th Fl.
Nashville, TN 37219
By Hand Delivery: SunTrust Bank
424 Church Street, 6th Fl.
Nashville, TN 37219
Facsimile for Eligible Institutions: (615) 748-5331
To Confirm by Telephone: (615) 748-5324
Delivery to an address or facsimile number other than those listed above
will not constitute a valid delivery.
Solicitation of Tenders; Fees and Expenses
We will pay all expenses of soliciting tenders pursuant to the exchange
offer. The principal solicitation pursuant to the exchange offer is being made
by mail. Additional solicitations may be made by officers and regular employees
of our company and our affiliates in person, by telegraph, telephone or
telecopier.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer. We will, however, pay the exchange
agent reasonable and customary fees for its services and will reimburse the
exchange agent for its reasonable out-of-pocket costs and expenses in connection
therewith and will indemnify the exchange agent for all losses and claims
incurred by it as a result of the exchange offer.
We may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this prospectus, letters of transmittal and related documents to the
beneficial owners of the old notes and in handling or forwarding tenders for
exchange.
The expenses to be incurred by us in connection with the exchange offer,
including fees and expenses of the exchange agent and trustee and our accounting
and legal fees and printing costs, will be paid by us.
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, certificates representing
exchange notes or old notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the old notes tendered, or if
tendered old notes are registered in the name of any person other than the
person signing the letter of transmittal, or if a transfer tax is imposed for
any reason other than the exchange of old notes pursuant to the exchange offer,
then the amount of any of these transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering holder.
If satisfactory evidence of payment of these taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of the transfer taxes will
be billed by us directly to the tendering holder.
28
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the old
notes, as reflected in our accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us as
a result of the consummation of the exchange offer. The expenses of the exchange
offer will be amortized by us over the term of the exchange notes.
Consequences of Failure to Exchange
As a result of the making of, and upon acceptance for exchange of all
validly tendered old notes pursuant to the terms of, this exchange offer, we
will have fulfilled our obligation to make the exchange offer as contemplated by
the registration rights agreement. Holders of the old notes who do not tender
their old notes in the exchange offer will continue to hold their old notes,
which will remain outstanding and entitled to the benefits of the indenture. All
untendered old notes will continue to be subject to the restrictions on transfer
set forth in the old notes. Accordingly, these old notes may be resold only:
(1) to Omnicare;
(2) pursuant to a registration statement which has been declared effective
under the Securities Act of 1933;
(3) in the United States to qualified institutional buyers within the
meaning of Rule 144A in reliance upon the exemption from the
registration requirements of the Securities Act of 1933 provided by
Rule 144A;
(4) in the United States to institutional "accredited investors", as
defined in Rule 501(a)(1), (2), (3) or (7) promulgated under the
Securities Act of 1933, in transactions exempt from the registration
requirements of the Securities Act of 1933;
(5) outside the United States in transactions complying with the
provisions of Regulation S under the Securities Act of 1933; or
(6) pursuant to any other available exemption from the registration
requirements under the Securities Act of 1933.
To the extent that old notes are tendered and accepted in the exchange
offer, the liquidity of the trading market for untendered old notes will likely
be adversely affected. See "Risk Factors--Following the Exchange Offer, We
Expect the Trading Market for Untendered Old Notes Will Be Highly Illiquid."
29
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
exchange offer.
CAPITALIZATION
The table below sets forth our consolidated capitalization at June 30, 2001
on an historical basis, which reflects the completion in March 2001 of the
private offering of the old notes and the refinancing of our credit facilities
that occurred concurrently with the offering of the old notes.
The table should be read in conjunction with the "Selected Historical
Consolidated Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
Unaudited
-----------
June 30, 2001
Actual
----------------
(In thousands,
except share data)
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . $ 333
--------------
Long-term obligations, net of current portion:
Long-term bank debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,705
5% Convertible Subordinated Debentures due 2007 . . . . . . . . . . . . . 345,000
8 1/8% Senior Subordinated Notes due 2011 . . . . . . . . . . . . . . . . 375,000
--------------
Total long-term obligations . . . . . . . . . . . . . . . . . . . . . 771,038
--------------
Stockholders' equity:
Preferred Stock, no par value, 1,000,000 shares authorized, none issued and
outstanding as of June 30, 2001. . . . . . . . . . . . . . . . . . . . . --
Common stock, $1 par value, 200,000,000 shares authorized, 94,056,200 shares
issued as of June 30, 2001. . . . . . . . . . . . . . . . . . . . . . . 94,056
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,456
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,897
Treasury stock--at cost (821,000 shares at June 30, 2001) . . . . . . . . (16,256)
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . (27,438)
Accumulated other comprehensive income. . . . . . . . . . . . . . . . . . (3,681)
--------------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . 1,109,034
--------------
Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . $1,880,072
==============
30
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table summarizes our selected financial data, which should be
read in conjunction with our historical consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus.
We derived the income statement data for the years ended December 31, 1998,
1999 and 2000 from our audited financial statements, which are included
elsewhere in this prospectus. We derived the income statement data for the years
ended December 31, 1996 and 1997 from audited financial statements not included
in this prospectus. We derived the income statement data for the six months
ended June 30, 2000 and 2001 and the balance sheet data as of June 30, 2001 from
our unaudited financial statements, which are included elsewhere in this
prospectus. The balance sheet data as of June 30, 2000 was derived from our
unaudited financial statements not included in this prospectus. In the opinion
of management, the unaudited financial statements from which the data below is
derived contain all adjustments, which consist only of normal recurring
adjustments, necessary to present fairly our financial position and results of
operations as of the applicable dates and for the applicable periods. Historical
results are not necessarily indicative of the results to be expected in the
future.
Audited
--------------------------------------------------------------
Years Ended
December 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
--------- ---------- ---------- ---------- ----------
(In thousands, except ratios and per share data)
Income Statement Data: (a)(b)
Sales. . . . . . . . . . . . . . . . $ 641,440 $1,034,384 $1,517,370 $1,861,921 $1,971,348
========= ========== ========== ========== ==========
Income from continuing operations. . $ 43,663 $ 54,105 $ 80,379 $ 57,721 $ 48,817
Loss from discontinued operations. . (389)(c) (2,154)(c) -- -- --
--------- ---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . $ 43,274 $ 51,951 (c)$ 80,379 $ 57,721 $ 48,817
========= ========== ========== ========== ==========
Earnings Per Share Data:
Basic:
Income from continuing operations. . $ 0.62 $ 0.63 $ 0.90 $ 0.63 $ 0.53
Loss from discontinued operations. . -- (c) (0.02)(c) -- -- --
--------- ---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . $ 0.62 (c)$ 0.61 (c)$ 0.90 $ 0.63 $ 0.53
========= ========== ========== ========== ==========
Diluted:
Income from continuing operations. . $ 0.57 $ 0.62 $ 0.90 $ 0.63 $ 0.53
Loss from discontinued operations. . -- (c) (0.02)(c) -- -- --
--------- ---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . $ 0.57 (c)$ 0.60 (c)$ 0.90 $ 0.63 $ 0.53
========= ========== ========== ========== ==========
Dividends per share . . . . . . . . . $ 0.06 $ 0.07 $ 0.08 $ 0.09 $ 0.09
========= ========== ========== ========== ==========
Weighted average number of common
shares outstanding:
Basic. . . . . . . . . . . . . . . . 69,884 85,692 89,081 90,999 92,012
========= ========== ========== ========== ==========
Diluted. . . . . . . . . . . . . . . 81,089 86,710 89,786 91,238 92,012
========= ========== ========== ========== ==========
Ratios and Other Financial Data
(unaudited):
Ratio of earnings to fixed
charges (d). . . . . . . . . . . . 10.0x 9.1x 5.3x 2.6x 2.2x
EBITDA (e) . . . . . . . . . . . . . $ 95,542 $ 133,594 $ 207,113 $ 207,201 $ 206,570
Ratio of EBITDA to interest (e). . . 22.1x 20.4x 8.8x 4.5x 3.8x
Ratio of total debt to EBITDA (e). . 0.1x 2.8x 3.2x 3.9x 3.8x
Total debt to total capitalization . 1.5% 31.0% 40.4% 44.2% 42.3%
Capital expenditures (f) . . . . . . $ 30,234 $ 41,278 $ 53,179 $ 58,749 $ 32,423
Net cash flows from operating
activities . . . . . . . . . . . . 30,959 10,235 89,507 101,114 132,701
Net cash flows from investing
activities . . . . . . . . . . . . (143,399) (450,787) (449,718) (203,517) (76,116)
Net cash flows from financing
activities . . . . . . . . . . . . 297,150 345,653 276,652 145,502 (41,777)
Unaudited
------------------------
Six Months
Ended June 30,
------------------------
2000 2001
---------- ----------
Income Statement Data: (a)(b)
Sales. . . . . . . . . . . . . . . . $ 973,536 $1,053,710
========= ==========
Income from continuing operations. . $ 25,069 $ 37,440
Loss from discontinued operations. . -- --
--------- ----------
Net income . . . . . . . . . . . . . . $ 25,069 $ 37,440
========= ==========
Earnings Per Share Data:
Basic:
Income from continuing operations. . $ 0.27 $ 0.40
Loss from discontinued operations. . -- --
--------- ----------
Net income . . . . . . . . . . . . . $ 0.27 $ 0.40
========= ==========
Diluted:
Income from continuing operations. . $ 0.27 $ 0.40
Loss from discontinued operations. . -- --
--------- ----------
Net income . . . . . . . . . . . . . $ 0.27 $ 0.40
========= ==========
Dividends per share . . . . . . . . . $ 0.045 $ 0.045
========= ==========
Weighted average number of common
shares outstanding:
Basic. . . . . . . . . . . . . . . . 91,877 92,812
========= ==========
Diluted. . . . . . . . . . . . . . . 91,877 93,692
========= ==========
Ratios and Other Financial Data
(unaudited):
Ratio of earnings to fixed
charges (e). . . . . . . . . . . . 2.3x 2.9x
EBITDA (d) . . . . . . . . . . . . . $ 105,447 $ 125,140
Ratio of EBITDA to interest (d). . . 3.9x 4.4x
Ratio of total debt to EBITDA (d). . 3.9x(g) 3.4x(g)
Total debt to total capitalization . 43.4% 41.0%
Capital expenditures (f) . . . . . . $ 16,224 $ 11,402
Net cash flows from operating
activities . . . . . . . . . . . . 59,705 54,056
Net cash flows from investing
activities . . . . . . . . . . . . (46,419) (21,119)
Net cash flows from financing
activities . . . . . . . . . . . . (16,431) (26,441)
Audited
--------------------------------------------------------------
December 31,
--------------------------------------------------------------
1996 1997 1998 1999 2000
--------- ---------- ---------- ---------- ----------
Balance Sheet Data: (a)
Cash and cash equivalents
(including restricted cash). . . . $ 232,961 $ 138,062 $ 54,312 $ 97,267 $ 113,907
Working capital. . . . . . . . . . . 342,401 354,825 369,749 430,102 560,729
Total assets . . . . . . . . . . . . 828,309 1,412,146 1,903,829 2,167,973 2,210,218
Long-term debt (excluding current
portion) (h) . . . . . . . . . . . 5,755 359,148 651,556 736,944 780,706
Stockholders' equity (i) . . . . . . 689,219 829,753 963,471 1,028,380 1,068,423
Unaudited
------------------------
June 30,
------------------------
2000 2001
---------- ----------
Balance Sheet Data: (a)
Cash and cash equivalents
(including restricted cash). . . . $ 98,653 $ 124,020
Working capital. . . . . . . . . . . 464,366 615,882
Total assets . . . . . . . . . . . . 2,177,797 2,219,560
Long-term debt (excluding current
portion) (h) . . . . . . . . . . . 735,830 770,705
Stockholders' equity (i) . . . . . . 1,048,135 1,109,034
(footnotes on next page)
31
(footnotes from previous page)
(a) We have had an active acquisition program in effect since 1989. See Note 2
of the Notes to the 2000 Consolidated Financial Statements for information
concerning these acquisitions.
(b) Included in the full year 1996 and 1997 income from continuing operations
amounts, and the full-year 1998, 1999 and 2000, as well as the six months
ended June 30, 2000 and 2001, net income amounts, are the following
aftertax charges (credits) (in thousands):
Audited Unaudited
-------------------------------------------------------------- ------------------------
Years Ended Six Months
December 31, Ended June 30,
-------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
--------- ---------- ---------- --------- --------- ---------- ----------
Acquisition expenses,
pooling-of-interests...... $ 1,468 $ 3,935 $ 13,869(1) $ (376)(1) $ -- (1) $ -- $ --
Restructuring and other
related charges.......... -- 1,208 2,689(2) 22,698 (2) 17,135(2) 6,569(3) --
Other expenses.............. 510(5) 6,457(4) -- -- -- -- 2,987(6)
--------- ---------- --------- -------- ---------- ---------- ----------
Total..................... $ 1,978 $ 11,600 $ 16,558 $22,322 $ 17,135 $ 6,569 $ 2,987
========= ========== ========= ======== ========== ========== ==========
-------------
(1) See Note 2 of the Notes to the 2000 Consolidated Financial Statements.
(2) See Note 12 of the Notes to the 2000 Consolidated Financial
Statements.
(3) See Note 3 of the second quarter 2001 Consolidated Financial
Statements.
(4) We settled with the U.S. Attorney's office in the Southern District of
Illinois regarding the government's investigation of our Belleville,
Illinois subsidiary, Home Pharmacy Services, Inc. In accordance with
the terms of the settlement, in 1997 we recorded an unusual charge of
$6.3 million ($6.0 million after taxes) for the estimated costs, and
legal and other expenses, associated with resolving the investigation.
In 1997, CompScript, Inc. recorded a $0.8 million charge ($0.5 million
after taxes) relating to the write-down of a note receivable from a
former affiliate of CompScript.
(5) Represents the write-off (based on an independent appraisal) of
acquired research and development costs associated with IBAH, Inc.'s
acquisition of Research Biometrics, Inc. ("RBI").
(6) See Note 5 of the second quarter 2001 Consolidated Financial
Statements.
(c) Represents the closure of the software commercialization unit of RBI. All
operating results of this business have been reclassified from continuing
operations to discontinued operations.
(d) The ratio of earnings to fixed charges is computed by dividing fixed
charges into earnings from continuing operations before income taxes plus
fixed charges. Fixed charges include interest (expensed or capitalized),
amortization of debt issuance costs and the estimated interest component of
rent expense. If extraordinary/special items (see footnote b) are excluded
from income before income taxes and interest expense, net of interest
income, is used, then the ratio of earnings to fixed charges would be
(16.9x), 19.0x, 6.5x, 3.3x and 2.7x for the years ended December 31, 1996,
1997, 1998 1999 and 2000, respectively, and, 2.7x and 3.1x for the six
months ended June 30, 2000 and 2001, respectively. Giving effect to the
offering of the old notes and the refinancing of our existing credit
facilities and application of the net proceeds from the offering of the old
notes and borrowings under our new credit facility to repay indebtedness,
as if these transactions occurred on the first day of the relevant period,
our pro forma ratios of earnings to fixed charges for the year ended
December 31, 2000 and the six months ended June 30, 2001 would have been
2.1x and 2.7x respectively. If special items are excluded from income
before taxes and interest expense, net of interest income, is used, then
the pro forma ratios of earnings to fixed charges for the year ended
December 31, 2000 and the six months ended June 30, 2001 would have been
2.5x and 2.9x, respectively.
(e) EBITDA represents earnings before interest, income taxes and depreciation
and amortization, including special items. Special items include
pooling-of-interests expenses, restructuring and other related charges,
other expenses, and losses from discontinued operations, and represent
charges or expenses which management believes are either one-time
occurrences or otherwise not related to ongoing operations. We believe that
certain investors find EBITDA to be a useful tool for measuring a company's
ability to service its debt; however, EBITDA does not represent cash flow
from operations,
(footnotes continued on next page)
32
(footnotes continued from previous page)
as defined by generally accepted accounting principles, and should
not be considered as a substitute for net earnings as an indicator
of our operating performance or cash flow as a measure of liquidity.
We also believe that the ratio of EBITDA to interest is an accepted
measure of debt service ability; however, such ratio should not be
considered a substitute for the ratio of earnings to fixed charges as a
measure of debt service ability. Our calculation of EBITDA may differ from
the calculation of EBITDA by others. If the aforementioned special items
(see footnote b) are excluded from EBITDA and interest expense, net of
interest income, is used, then EBITDA, the ratio of EBITDA to interest
and the ratio of total debt to EBITDA would be (unaudited):
Years Ended Six Months
December 31, Ended June 30,
-------------------------------------------------------------- ------------------------
1996 1997 1998 1999 2000 2000 2001
--------- ---------- ---------- --------- --------- ---------- ----------
EBITDA (adjusted) . . . . . . $ 85,537 $ 140,516 $ 222,825 $ 241,008 $ 231,859 $ 115,059 $ 128,735
Ratio of EBITDA (adjusted)
to interest . . . . . . . . (11.0)x 168.1x 11.0x 5.4x 4.4x 4.4x 4.8x
Ratio of total debt to EBITDA
(adjusted). . . . . . . . . 0.1x 2.7x 2.9x 3.4x 3.4x 3.6x(g) 3.1x(g)
(f) Primarily represents the purchase of computer hardware/software, machinery
and equipment, and furniture, fixtures and leasehold improvements.
(g) The adjusted EBITDA amounts in this calculation are for the twelve month
periods ended June 30, 2000 and 2001.
(h) In 1997, we issued $345.0 million of Convertible Subordinated Debentures
due 2007 (See Note 6 of the Notes to the 2000 Consolidated Financial
Statements).
(i) In 1996, we and IBAH, Inc. sold approximately 6.2 million (pre-1996
Omnicare stock split) shares of Common Stock in public offerings, resulting
in net proceeds of $297.2 million.
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements, related notes and other financial information
appearing elsewhere in this prospectus. In addition, see "Forward-Looking
Information."
Results of Operations
The following table presents our sales and results of operations, excluding
special items such as pooling-of-interests expenses, restructuring and other
related charges and other expenses (in thousands, except per share amounts).
Special items represent charges/expenses or credits which management believes
are either one-time occurrences or otherwise not related to ongoing operations.
Such items are described further below and in the notes to our consolidated
financial statements, and have been shown separately in order to facilitate
analysis of our operating trends.
Audited Unaudited
------------------------------------------ ---------------------
For the Six Months
For the Years Ended December 31, Ended June 30,
------------------------------------------ ---------------------
1998 1999 2000 2000 2001
---------- ---------- ---------- -------- ----------
Sales .. . . . . . . . . . . . . . . . . . . . . . . $1,517,370 $1,861,921 $1,971,348 $973,536 $1,053,710
========== ========== ========== ======== ==========
Net income, as reported . .. . . . . . . . . . . . . $ 80,379 $ 57,721 $ 48,817 $ 25,069 $ 37,440
Special items:
Acquisition expenses, pooling-of-interests
(net of taxes)(1) . . .. . . . . . . . . . . . . 13,869 (376) -- -- --
Restructuring and other related
charges (net of taxes)(1) . . . . . . . . . . . 2,689 22,698 17,135 6,569 --
Other expense (net of taxes)(1) .. . . . . . . . . -- -- -- -- 2,987
---------- ---------- ---------- -------- ----------
Net income (excluding special items) .. . . . . . . $ 96,937 $ 80,043 $ 65,952 $ 31,638 $ 40,427
========== ========== ========== ======== ==========
Earnings per share:
Basic, as reported . . . . . . . . . .. . . . . . . $ 0.90 $ 0.63 $ 0.53 $ 0.27 $ 0.40
========== ========== ========== ======== ==========
Diluted, as reported . . . . . . . . .. . . . . . . $ 0.90 $ 0.63 $ 0.53 $ 0.27 $ 0.40
========== ========== ========== ======== ==========
Special items:
Acquisition expenses, pooling-of-interests
(net of taxes)(1) . . . . . . . . . . . . . . . 0.16 -- -- -- --
Restructuring and other related
charges (net of taxes)(1) . . . . . . . . . . . 0.03 0.25 0.19 0.07 --
Other expense (net of taxes)(1) . . . . . .. . . . -- -- -- -- 0.03
Basic (excluding special items)(2) . . . . . . . . . $ 1.09 $ 0.88 $ 0.72 $ 0.34 $ 0.44
========== ========== ========== ======== ==========
Diluted (excluding special items)(2) . . . . . . . . $ 1.08 $ 0.88 $ 0.72 $ 0.34 $ 0.43
========== ========== ========== ======== ==========
-----------
(1) The pretax impact of the special items is as follows:
Audited Unaudited
------------------------------------------ ---------------------
For the Six Months
For the Years Ended December 31, Ended June 30,
------------------------------------------ ---------------------
1998 1999 2000 2000 2001
---------- ---------- ---------- -------- ----------
Acquisition expenses, pooling-of-interests. . . . $ 15,441 $ (55) $ -- $ -- $ --
Restructuring and other related charges . . . . . 3,627 35,394 27,199 10,428 --
Other expense . . . . . . . . . . . . . . . . . . -- -- -- -- 4,817
(2) Earnings per share (as reported, and excluding special items) is calculated
independently for each amount presented. Accordingly, the sum of the
individual earnings per share, as reported, and special items disclosures
may not necessarily equal the earnings per share (excluding special items)
amount for the corresponding period.
34
Six Months Ended June 2001 Compared to June 2000
Diluted earnings per share for the six months ended June 30, 2001 were
$0.40, including the impact of one-time items classified as other expense
discussed below, as compared with $0.27 earned in the prior year period,
including restructuring and other related charges associated with the
productivity and consolidation initiative completed in 2000. Net income for the
2001 period was $37.4 million versus the $25.1 million earned in the comparable
2000 period. EBITDA totaled $123.9 million for the six months ended June 30,
2001 as compared with EBITDA of $104.6 million in the same period of 2000. Sales
for the year-to-date June 30, 2001 period rose to $1,053.7 million from the
$973.5 million recorded during the comparable prior year period.
Included in the year-to-date June 2001 results were other expense items
totaling $4.8 million pretax, $3.0 million aftertax, or 3 cents per share. In
the first quarter of 2001, we recorded a $1.8 million pretax, $1.1 million
aftertax, or 1 cent per diluted share, one-time charge representing a repayment
to the Medicare Part B program of overpayments made to one of our pharmacy units
during the period from January 1997 through April 1998. As part of our corporate
compliance program, we learned of the overpayments, which related to Medicare
Part B claims that contained documentation errors, and notified the Health Care
Financing Administration for review and determination of the amount of
overpayment. Further, we recorded a $3.0 million pretax, $1.9 million aftertax,
or 2 cents per diluted share, one-time charge in the second quarter of 2001,
representing a settlement in June 2001 of certain contractual issues with a
customer, which issues and amount relate to prior year periods. Included in the
2000 six month period was an aggregate charge of $10.4 million pretax, $6.6
million aftertax, or 7 cents per diluted share, relating to the productivity and
consolidation program. Excluding these special items in both six month periods,
earnings per diluted share were 43 cents in 2001 versus 34 cents in 2000;
net income, on that basis, was $40.4 million versus $31.6 million, respectively;
and EBITDA, on the same basis, was $128.7 million versus $115.1 million,
respectively.
Pharmacy Services Segment
Our pharmacy services segment recorded sales of $993.6 million for the six
months ended June 30, 2001, ahead of the comparable prior year period amount of
$913.9 million, by $79.7 million. Operating profit in this segment reached
$101.5 million, excluding the previously mentioned one-time charges, also ahead
of the same prior year period amount of $86.3 million, excluding restructuring
and other related charges, by $15.2 million. The favorable year-to-year results
largely relate to solid new account growth, including additional business under
our contract with Marriott Senior Living Communities, net of the elimination of
certain high credit risk or uneconomic accounts, coupled with the efforts of our
National Sales & Marketing Group and pharmacy staff in developing new contracts.
Additionally, higher drug utilization, the expansion of clinical programs and
drug price inflation contributed to increased sales. Moreover, the increasing
market penetration of newer drugs, which often carry higher prices but are
significantly more effective in reducing overall healthcare costs than those
they replace, served to increase pharmacy sales. The increase in sales, in
addition to a lower operating cost structure brought about by the completion of
the productivity and consolidation program in 2000, served to produce increased
operating margins. Collectively, these factors along with a gradually improving
operating environment in the skilled nursing facility market brought about by
the implementation of the Balanced Budget Refinement Act of 1999 and the
Benefits Improvement and Protection Act of 2000, favorably impacted the
performance of the pharmacy services segment during the six-month period.
CRO Services Segment
Our contract research services segment recorded revenues of $60.1 million
during the six months ended June 30, 2001, which were relatively consistent with
the $59.7 million recorded in the same prior year period. Operating profit in
this segment for the six months ended June 30, 2001 was $4.8 million, an
increase of $1.0 million in comparison to the same prior year period operating
profit of $3.8 million, excluding restructuring and other related charges. The
year-to-date June 2001 improvement in operating profit is the result of several
favorable trends experienced in the second quarter of 2001. These trends
included improvements in revenue, owing to strong business gains in prior
quarters and the returning
35
health of the industry, coupled with the efforts made over the past year to
integrate and streamline the organization, producing substantial increases in
profitability in the second quarter of 2001.
Consolidated
Our consolidated gross profit as a percentage of sales of 26.8% in the six
months ended June 30, 2001 improved as compared with the rate of 26.6%
experienced during the year-to-date June 30, 2000 period, and represented a
year-to-year increase in gross profit of $22.9 million to $282.3 million.
Positively impacting overall gross profit was our purchasing leverage associated
with the procurement of pharmaceuticals and benefits realized from our formulary
compliance program, as well as the leveraging of fixed and variable overhead
costs at our pharmacies and the reduced cost structure brought about by the
productivity and consolidation program completed in 2000. These favorable
factors were offset in part by the previously mentioned shift in mix towards
newer, branded drugs which typically produce higher gross profit, but lower
gross profit margins.
Our operating expenses for the six months ended June 30, 2001 of $190.0
million were higher than the comparable prior year amount of $183.2 million, by
$6.8 million, due to the overall growth of the business. Operating expenses as a
percentage of sales, however, totaled 18.0% in the 2001 six month period,
representing a decline from the 18.8% experienced in the comparable prior year
period. This decline is primarily due to the favorable impact of the
productivity and consolidation program, which was successfully completed in late
2000, and the leveraging of fixed and variable overhead costs over a larger
sales base in 2001 than was the case in the comparable 2000 period.
In 2000, we completed our previously disclosed productivity and
consolidation program. As part of the program, the roster of pharmacies and
other operating locations was reconfigured through the consolidation,
relocation, closure and opening of sites, resulting in a net reduction of 59
locations. The program also resulted in the reduction of our work force by 16%,
or approximately 1,800 full and part-time employees, and annualized pretax
savings in excess of $46 million upon completion.
Details of the year-to-date June 30, 2001 and December 31, 2000 activity
relating to the program follow (in thousands):
Balance at Utilized Balance at
December 31, during June 30,
2000 2001 2001
------------ ---------- ------------
Restructuring charges:
Employee severance . . . . . . . . . . . . . . . . . . . . . $3,390 $(2,602) $ 788
Employment agreement buy-outs. . . . . . . . . . . . . . . . 676 (676) --
Lease terminations . . . . . . . . . . . . . . . . . . . . . 2,593 (1,292) 1,301
Other assets and facility exit costs . . . . . . . . . . . . 2,538 (1,881) 657
---------- --------- ----------
Total restructuring charges. . . . . . . . . . . . . . . . $9,197 $(6,451) $2,746
========== ========= ==========
Balance at Utilized Balance at
December 31, 2000 during December 31,
1999 Provision 2000 2000
------------- ---------- ---------- -------------
Restructuring charges:
Employee severance . . . . . . . . . . . . . . $ 8,461 $ 3,296 $ (8,367) $3,390
Employment agreement buy-outs . . . . . . . . 3,363 1,048 (3,735) 676
Lease terminations . . . . . . . . . . . . . . 4,523 1,881 (3,811) 2,593
Other assets and facility exit costs . . . . . 1,648 10,627 (9,737) 2,538
---------- ---------- --------- ---------
Total restructuring charges . . . . . . . . $17,995 16,852 $(25,650) $9,197
========== ========= =========
Other related charges . . . . . . . . . . . . . 10,347
----------
Total restructuring and other related
charges. . . . . . . . . . . . . . . . . . $27,199
==========
In connection with the program, we expensed a total of $10.4 million
pretax, $6.6 million after taxes, or 7 cents per diluted share, in the six
months ended June 30, 2000. Additionally, $62.6 million pretax, $39.8 million
after taxes, was incurred for restructuring and other related charges over the
duration of the
36
entire program, including 1999 activity. The restructuring charges included
severance pay, the buy-out of employment agreements, the buy-out of lease
obligations, the write-off of other assets, representing approximately $11.0
million of pretax non-cash items over the life of the program, and facility exit
costs. The other related charges were primarily comprised of consulting fees and
duplicate costs associated with the program, as well as the write-off of certain
non-core healthcare investments. As of June 30, 2001, we paid approximately
$22.5 million of severance and other employee-related costs relating to the
employee reductions. The remaining liabilities at June 30, 2001 represent
amounts not yet paid relating to actions taken in connection with the program,
primarily severance payments and lease payments, and will be adjusted as these
matters are settled.
Investment income for the six months ended June 30, 2001 was $1.2 million,
an improvement of $0.4 million over the same period of 2000. Larger average cash
balances coupled with an increase in assets invested for settlement of our
pension obligations, during 2001 as compared to the same 2000 period, were the
primary drivers of the year-to-year increase in investment income.
Interest expense during the six months ended June 30, 2001 was $28.3
million, an increase of $1.5 million versus the comparable prior year period.
This increase was largely due to the impact of an increase in debt issuance cost
amortization, classified as interest expense, relating to the first quarter 2001
debt transactions discussed at the "Liquidity and Capital Resources" section
below. Also unfavorably impacting 2001 interest expense, on a year-to-year
basis, was a marginal increase in the weighted-average interest rates paid on
outstanding debt brought about by the aforementioned debt transactions, which
converted a majority of the related outstanding debt from current to long-term
in nature.
The increase in the effective tax rate to 38.0% in the year-to-date June
2001 period from 37.0% in the comparable prior year period is primarily
attributable to the full utilization in 2000 of certain benefits derived from
our state tax planning program. While other state tax planning benefits will
continue, they will be realized at a different magnitude than was the case in
2000. The effective tax rates in the 2001 and 2000 six months periods are higher
than the federal statutory rate primarily due to state and local income taxes.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Consolidated
As presented in the table above, excluding the impact of special items such
as restructuring and other related charges from both periods and
acquisition-related items in 1999, net income for the year ended December 31,
2000 decreased 18% in comparison to net income earned in 1999. Basic and diluted
earnings per share in 2000, on this basis, decreased 18% in comparison to 1999.
EBITDA for the year ended December 31, 2000 of $231.9 million, on the same
basis, decreased 4% in comparison to $241.0 million earned in the 1999
comparable period. Net income, and basic and diluted earnings per share,
declined 15% and 16%, respectively, in 2000 compared to 1999. Sales increased 6%
in 2000 compared to 1999.
Pharmacy Services Segment
Our Pharmacy Services segment recorded sales of $1,858.7 million for the
year ended December 31, 2000, an increase of $130.6 million, or 8%, over the
comparable prior year period. The increase in this segment's sales represents
the continued internal growth of the pharmacy services business and the
cumulative effect of prior year acquisitions of long-term care pharmacy
providers. We estimate that internal growth contributed approximately $105
million of this segment's increased sales in 2000 as compared to 1999. We
increased our revenues internally through the efforts of our national sales and
marketing group and pharmacy staff in developing new pharmacy contracts with
long-term care facilities. Additionally, when pharmaceutical prices are
increased, we generally are able to obtain price increases to cover this drug
price inflation; therefore, this inflation increases sales. We estimate that
drug price inflation for our highest dollar volume products in 2000 was
approximately 5%. The factors favorably impacting sales were offset in part by a
decrease of $3.1 million in infusion therapy sales during the year, resulting
primarily from the reduction in servicing of higher acuity patients, utilization
and pricing, as further discussed below. In addition to internal growth, we
estimate that approximately $26 million of our
37
pharmacy services sales growth in 2000 was attributable to the full-year impact
of acquisitions made in the prior year. The number of nursing facility residents
served at December 31, 2000 was 636,500 as compared to 631,200 served one year
earlier.
The operating results of the pharmacy services segment were unfavorably
impacted by the reduction in earnings brought about by the ongoing difficulty of
the operating environment in the long-term care industry throughout 2000,
resulting in operating profit, excluding restructuring and other related charges
and acquisition expenses, of $178.2 million for the year ended December 31,
2000, as compared to $181.1 million for the same prior year period. In
particular, the impact of the implementation of the federal government's
prospective payment system for Medicare residents of skilled nursing facilities,
as further discussed below under the caption "Outlook", including lower
reimbursement which led to lower occupancy and acuity levels, continued to
weaken the financial condition of many skilled nursing facilities during 2000.
Congress attempted to remedy this situation by enacting the Balanced Budget
Reform Act of 1999, which act was intended to provide a temporary increase in
reimbursement rates, particularly for higher acuity residents, effective April
1, 2000. However, many customers reported that payments at the new rates were
delayed and not received until the third quarter of 2000, exacerbating already
severe cash flow problems in some facilities. It was therefore necessary for us
to apply more stringent standards in accepting new business, and to continue
aggressively withdrawing from uneconomic accounts and those with an unstable
financial condition, which served to partially offset the addition of new
accounts, and had a dampening effect on earnings. Although these trends appeared
to be stabilizing in the latter part of 2000 due to the salutary impact of
higher reimbursement rates going into effect in the latter portion of 2000 under
the 1999 Balanced Budget Refinement Act, they had an unfavorable impact on
year-to-year profitability.
Contract Research Organization Services Segment
Our contract research organization services segment recorded sales of
$112.7 million for the year ended December 31, 2000 as compared to $133.9
million in the comparable prior year period. This decline of approximately $21
million is primarily the result of delays in decision making by pharmaceutical
manufacturers, as well as the cancellation of planned projects prior to
commencement, owing in part to merger activities in that industry. Operating
profit, excluding restructuring and other related charges and acquisition
expenses, for the full year 2000 was $7.2 million, a decrease of $9.3 million
when compared to the same period of 1999, owing primarily to the volatility in
sales arising from the aforementioned factors.
Consolidated
Our consolidated gross profit as a percentage of sales decreased to 26.7%
in 2000 from 28.1% in 1999. The positive impact on gross profit relating to
several factors, including our purchasing leverage associated with purchases of
pharmaceuticals, the leveraging of fixed and variable overhead costs at our
pharmacies, benefits realized from our formulary compliance program and cost
reductions associated with the productivity and consolidation initiative, were
more than offset by several negative factors. Among the factors negatively
affecting gross profit were the aforementioned unfavorable impact of the
prospective payment system on the pharmacy services segment, in particular such
factors as prospective payment system-related pricing pressure, a reduction in
patients at some skilled nursing facilities, a decline in the average length of
stay for Medicare residents and a shift in the mix of patients served to lower
acuity patients. These factors, coupled with the less favorable performance of
the contract research organization services segment, contributed to reduced
gross profit margin for us in 2000.
Our sales mix also impacts gross profit and includes primarily sales of
pharmaceuticals and, to a lesser extent, contract research services, infusion
therapy products and services, medical supplies and other miscellaneous
products/services. Sales of pharmaceuticals account for the majority of our
sales and gross profit. Contract research services, infusion therapy and medical
supplies gross profits are typically higher than gross profits associated with
sales of pharmaceuticals.
Increased leverage in purchasing favorably impacts gross profit and is
primarily derived through discounts from suppliers. Leveraging of fixed and
variable overhead costs primarily relates to generating
38
higher sales volumes from pharmacy facilities with no increase in fixed costs,
such as rent, and minimal increases in variable costs, such as utilities, as
well as the elimination of pharmacies through our productivity and consolidation
initiative, further discussed below. We believe we will be able to continue to
leverage fixed and variable overhead costs through internal growth.
As noted earlier, we are generally able to obtain price increases to cover
drug price inflation. In order to enhance our gross profit margins, we
strategically allocate our resources to those activities that will increase
internal sales growth and favorably impact sales mix or will lower costs. In
addition, through the ongoing development of our pharmaceutical purchasing
programs, we are able to obtain discounts and thereby manage our pharmaceutical
costs.
Operating expenses for the year ended December 31, 2000 totaled $367.5
million, an increase of 4.5% compared to 1999, due primarily to our overall
growth. Operating expenses as a percentage of sales of 18.6% in 2000 were less
than the 18.9% experienced in the comparable prior year period. Favorably
impacting the year-to-year comparison was the impact of initiatives implemented
through our productivity and consolidation program. This favorable impact,
however, was offset, in part, by an increase in our provision for doubtful
accounts, approximately 0.2 percentage points of sales, brought about by a
deterioration in the financial condition of a number of skilled nursing facility
clients throughout 2000, partially as a result of the impact of the prospective
payment system on their business.
In the second quarter of 1999, we announced a comprehensive restructuring
plan to streamline company-wide operations through the implementation of a
productivity and consolidation program. This program, which was finalized in
2000, was in response to changes in the healthcare industry and complemented our
ability to gain maximum benefits from our acquisition program. The productivity
and consolidation initiatives have eliminated redundant efforts, simplified work
processes and applied technology to maximize employee productivity, and
standardize operations around best practices. Facilities in overlapping
geographic territories were consolidated to better align pharmacies around
customers to improve efficiency and enhance our ability to deliver innovative
services and programs to our customers. Productivity initiatives were also
introduced at the majority of our pharmacy and other operating locations, which
totaled approximately 220 sites at the commencement of the program. As part of
the initiative, the roster of pharmacies and other operating locations was
reconfigured through the consolidation, relocation, closure and opening of
sites, resulting in a net reduction of 59 locations. The plan resulted in the
reduction of our work force by 16%, or approximately 1,800 full- and part-time
employees, and annualized pretax savings in excess of $46 million upon
completion.
In connection with this program, we recorded a total of $62.6 million
($39.8 million after taxes) for restructuring and other related charges, of
which $27.2 million ($17.1 million after taxes) and $35.4 million ($22.7 million
after taxes) were recorded during the years ended December 31, 2000 and 1999,
respectively. The restructuring charges include severance pay, the buy-out of
current employment agreements, the buy-out of lease obligations, the write-off
of other assets (representing a project-to-date cumulative amount of $11.0
million of pretax non-cash items, through December 31, 2000) and facility exit
costs. The other related charges are primarily comprised of consulting fees and
duplicate costs associated with the program, as well as the write-off of some
non-core healthcare investments. Details of
39
the restructuring and other related charges relating to the productivity and
consolidation program follow (in thousands):
Utilized Balance at Utilized Balance at
1999 during December 31, 2000 during December 31,
Provision 1999 1999 Provision 2000 2000
--------- --------- ----------- --------- -------- -----------
Restructuring charges:
Employee severance . . . . . . . . . $ 12,178 $ (3,717) $ 8,461 $ 3,296 $ (8,367) $3,390
Employment agreement
buy-outs . . . . . . . . . . . . . 6,740 (3,377) 3,363 1,048 (3,735) 676
Lease terminations . . . . . . . . . 5,612 (1,089) 4,523 1,881 (3,811) 2,593
Other assets and facility exit
costs . . . . . . . . . . . . . . 8,310 (6,662) 1,648 10,627 (9,737) 2,538
--------- -------- --------- -------- -------- -----------
Total restructuring charges 32,840 $(14,845) $17,995 16,852 $(25,650) $9,197
======== ========= ======== ===========
Other related charges . . . . . . . . 2,554 10,347
-------- --------
Total restructuring and
other related charges . . . . . $ 35,394 $27,199
======== ========
As of December 31, 2000, we had incurred approximately $19.2 million of
severance and other employee-related costs relating to the reduction of
approximately 1,800 employees. The remaining liabilities at December 31, 2000
represent amounts not yet paid relating to actions taken in connection with the
program (primarily severance payments, lease payments and professional fees),
and will be adjusted as these matters are settled.
Investment income for the year ended December 31, 2000 was $1.9 million, an
increase of $0.4 million in comparison to the same period of 1999 due to a
higher average invested cash balance during 2000 as compared to 1999, as well as
an increase in interest rates during 2000 versus 1999.
Interest expense during 2000 was $55.1 million, an increase of $8.9 million
versus the comparable prior year period. The increase is primarily attributable
to the full-year impact of interest expense associated with a $170 million
increase in borrowings under our line of credit facilities during the first half
of 1999, offset in part by subsequent repayments aggregating $40 million through
year end 2000, as well as an increase in interest rates throughout 2000 as
compared to the prior year. The increase in our line of credit borrowings in
1999 was primarily attributable to our acquisition program.
The effective tax rate of 37% during 2000 is consistent with that in 1999.
We realized benefits from our state tax planning programs in 2000 and 1999.
While state tax planning programs are ongoing, benefits may not be realized
at the same level in 2001 and beyond as has been the case in 2000 and 1999. The
effective tax rates in 2000 and 1999 are higher than the federal statutory rate
largely as a result of the combined impact of various nondeductible expenses,
primarily intangible asset amortization and acquisition costs, state and local
income taxes and tax-accrual adjustments.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
As presented in the table above, excluding the impact of restructuring and
other related charges and acquisition-related items for pooling-of-interests
transactions from both periods, net income for the year ended December 31, 1999
decreased 17% in comparison to net income earned in 1998. Basic and diluted
earnings per share in 1999, on this basis, decreased 19% in comparison to 1998.
EBITDA for the year ended December 31, 1999 of $241.0 million, on this basis,
increased 8% as compared to the $222.8 million in the same prior year period.
Net income, and basic and diluted earnings per share, declined 28% and 30%,
respectively, in 1999 compared to 1998.
The reduction in earnings primarily reflected the difficult operating
environment in the long-term care industry. As discussed in greater detail
above, the implementation of the prospective payment system for Medicare
residents of skilled nursing facilities created an unsettled operating
environment during 1999. We experienced prospective payment system-related
pricing pressure along with lower occupancy and acuity levels in client skilled
nursing facilities.
40
Despite the difficult operating environment, sales increased 23% in 1999
versus 1998. The sales increase represents the cumulative effect of the
acquisition of long-term care pharmacy providers and the continued internal
growth of the pharmacy services and contract research organization businesses.
During 1999, we completed five institutional pharmacy acquisitions (excluding
insignificant purchases of other assets). Also increasing sales was the
full-year impact of 1998 acquisitions. We also increased our revenues internally
through the efforts of our national sales and marketing group and pharmacy staff
in developing new pharmacy contracts with long-term care facilities.
Additionally, we were able to increase internal growth through the efforts of
our contract research organization sales personnel by obtaining contracts from
pharmaceutical, biotechnology and medical device manufacturers for new contract
research business.
Our consolidated sales increased by approximately $345 million in 1999
versus 1998. We estimate that approximately $200 million of our consolidated
sales growth in 1999 was attributable to acquisitions, of which $193 million and
$7 million related to the pharmacy services segment and contract research
organization services segment, respectively. We estimate that internal growth
contributed approximately $145 million of our increased sales in 1999 compared
to 1998, of which $141 million and $4 million related to the pharmacy services
segment and the contract research organization services segment, respectively.
Internally generated sales growth in the pharmacy services segment resulted
primarily from new contracts with long-term care facilities, obtained by the
national sales and marketing group and by the pharmacy staff, and in the
contract research organization services segment largely through the efforts of
sales personnel in obtaining new contracts from pharmaceutical, biotechnology
and medical device manufacturers. These combined sales increases were offset, in
part, by a decrease of approximately $11 million in infusion therapy sales
during the year, resulting primarily from a reduction in the servicing of higher
acuity patients, pricing and utilization, as a result of the impact of the
prospective payment system.
On June 2, 1999, we announced the completion of the acquisition of the
institutional pharmacy operations of Life Care Pharmacy Services, Inc., an
affiliate of Life Care Centers of America, for $63 million in cash and 0.3
million warrants to purchase our common stock at $29.70 per share. The warrants
have a seven-year term and are first exercisable in June 2002. Life Care
Pharmacy Services, Inc. had, at the time of the acquisition, contracts to
provide dispensing services to approximately 17,000 residents in twelve states.
Acquisitions and internal growth brought the total number of nursing
facility residents served at December 31, 1999 to 631,200 as compared to 578,700
at December 31, 1998.
Gross profit as a percentage of sales decreased to 28.1% in 1999 from 30.2%
in 1998. Our purchasing leverage associated with purchases of pharmaceuticals,
the leveraging of fixed and variable overhead costs at our pharmacies, benefits
realized from our formulary compliance program, cost reductions associated with
the productivity and consolidation initiative, and changes in sales mix
including increased sales from contract research positively impacted gross
margins. However, these favorable factors were more than offset by the
aforementioned unfavorable impact of the prospective payment system on the
pharmacy services segment, in particular such factors as the prospective payment
system-related pricing pressure, a reduction in Medicare census at some skilled
nursing facilities, a decline in the average length of stay for Medicare
residents and a shift in the mix of patients served to lower acuity patients,
all of which contributed to reduced gross profit margin for us in 1999.
Operating expenses for the year ended December 31, 1999 increased 24% to
$351.6 million as compared to 1998 due primarily to our overall growth.
Operating expenses as a percentage of sales of 18.9% in 1999 were modestly
higher than the 18.7% experienced in the prior year. Unfavorably impacting the
year-to-year comparison was an increase in our provision for doubtful accounts
brought about by a deterioration in the financial condition of a number of
skilled nursing facility clients as a result, in part, of the impact of the
prospective payment system on their business, causing an increase of
approximately 0.4 percentage points of sales.
Acquisition expenses for 1999 of $0.8 million represent expenses related to
a pooling-of-interests transaction. Furthermore, during 1999, we recorded income
of $0.9 million relating to the net reversal of estimated CompScript, Inc. and
IBAH, Inc. acquisition-related expenses resulting from the finalization of those
costs during the year. Acquisition expenses for 1998 of $15.4 million represent
expenses primarily related to our pooling-of-interests transactions with
CompScript, Inc. and IBAH, Inc. Acquisition expenses
41
primarily include costs associated with fees charged by investment bankers,
brokerage firms, attorneys and accountants, and severance costs.
In connection with the previously discussed productivity and consolidation
initiative, we recorded restructuring and other related expenses of $35.4
million in 1999. Restructuring and other related charges of $3.6 million for
1998 represent costs related to the restructuring of the CompScript, Inc. mail
order business and the consolidation and restructuring of some IBAH, Inc.
operations.
Investment income for 1999 was $1.5 million, a decrease of $1.8 million in
comparison with 1998 resulting primarily from a lower average invested cash
balance during 1999. This use of cash was largely attributable to our
acquisition program and, to a lesser extent, capital expenditures.
Interest expense during 1999 was $46.2 million, an increase of $22.6
million versus the prior year, largely reflecting the impact of increased net
borrowings of $85 million and $75 million in 1999 under our five-year, $400
million agreement and the 364-day, $400 million line of credit facility,
respectively. These increased borrowings were utilized primarily to fund our
acquisition program. Also impacting the comparison is the full-year effect in
1999 of interest expense associated with a $250 million draw on our five-year,
$400 million line of credit agreement late in the third quarter of 1998 in
connection with our acquisition of the pharmacy business of Extendicare, Inc.
The effective tax rate decreased to 37% in 1999 from 41% in 1998, primarily
due to a reduction from 1998 in nondeductible acquisition expenses relating to
pooling-of-interests transactions and a decrease in state and local income taxes
in 1999 due to our state tax planning programs. The effective tax rates in 1999
and 1998 are higher than the statutory rate primarily due to state and local
income taxes and various nondeductible expenses (e.g., acquisition costs, etc.).
Impact of Inflation
Inflation has not materially affected our profitability inasmuch as price
increases have generally been obtained to cover inflationary drug cost
increases.
Liquidity and Capital Resources
Cash and cash equivalents, including restricted cash, at June 30, 2001 were
$124.0 million compared to $113.9 million at December 31, 2000. We generated
positive net cash flows from operating activities of $54.1 million during the
six months ended June 30, 2001, including the impact of purchasing
pharmaceuticals in advance of price increases, or "prebuys," of $34.2 million.
Further, we generated positive cash flows from operating activities of $132.7
million during the year ended December 31, 2000, compared to cash flows from
operating activities of $101.1 million and $89.5 million during the years ended
December 31, 1999 and December 31, 1998, respectively. These positive cash flows
were used primarily for acquisition-related payments, including amounts payable
pursuant to acquisition agreements relating to prior-years acquisitions, capital
expenditures, debt repayment, debt issuance costs and dividends. Improved
management of working capital contributed to the favorable operating cash flow
results experienced in 2001 and 2000 as compared to prior years.
Acquisitions of businesses required cash payments of $6.0 million,
including amounts payable pursuant to acquisition agreements relating to
prior-year acquisitions, in the first six months of 2001, which were funded by
operating cash flows. Acquisitions of businesses during 2000, 1999 and 1998
required $41.7 million, $144.1 million and $398.7 million, respectively, of cash
payments, including amounts payable pursuant to acquisition agreements relating
to pre-2000, pre-1999 and pre-1998 acquisitions, respectively, which were
primarily funded by a combination of operating cash flows and borrowings under
our revolving credit facilities. Acquisitions in 1999 and 1998 were also funded,
in part, with shares of our common stock having a market value of approximately
$11 million, 0.5 million shares, and $262 million, 7.2 million shares,
respectively. Additional amounts contingently payable, totaling approximately
$15 million at June 30, 2001, may become payable through 2001 pursuant to the
terms of various acquisition agreements (primarily earnout payments).
On March 20, 2001, we completed the offering of $375.0 million of 8.125%
senior subordinated notes due 2011, issued at par through a private placement.
Concurrent with the issuance of the notes, we
42
entered into a new three-year syndicated $495.0 million revolving credit
facility, including a $25.0 million letter of credit subfacility, with various
lenders. Net proceeds from the offering of the notes of approximately $365.0
million and borrowings under the new credit facility of $70.0 million were used
to repay outstanding indebtedness under our then existing credit facilities,
which totaled $435.0 million at December 31, 2000, and those existing facilities
were terminated. Subsequent to the closing of the new credit facility, we
received commitments from additional banks that allowed it to increase the size
of the credit facility to $500.0 million. As of June 30, 2001, the credit
facility bears an interest rate of LIBOR plus 1.375%, and incurs commitment fees
on the unused portion at a rate of 0.375%.
Our capital requirements are primarily comprised of capital expenditures,
including those related to investments in our information technology systems,
and ongoing payments originating from our acquisition program. There are no
material commitments and contingencies outstanding at June 30, 2001, other than
some estimated acquisition-related payments potentially due in the future,
including deferred payments, indemnification payments, and payments originating
from earnout provisions.
Our current ratio of 3.8 to 1.0 at June 30, 2001 increased as compared to
the 3.2 to 1.0 in existence at December 31, 2000. This improvement is due
primarily to the combined effect of higher cash balances and inventory levels
(due to prebuys), as well as a reduction in aggregate current liabilities,
largely made possible as a result of the aforementioned favorable operating cash
flows generated during the six months ended June 30, 2001.
On May 21, 2001, our Board of Directors declared a quarterly cash dividend
of 2.25 cents per share for an indicated annual rate of 9 cents per share in
2001. Dividends of $4.2 million paid during the six months ended June 30, 2001
were consistent with those paid in the comparable prior year period. Dividends
of $8.3 million paid during the year ended December 31, 2000 were comparable
with the $8.2 million paid for the year ended December 31, 1999, and $1.5
million greater than the $6.8 million paid during the comparable 1998 period. We
believe our sources of liquidity and capital are adequate for our ongoing
operating needs. We may in the future, incur additional indebtedness or issue
additional equity. We believe that, if needed, external sources of financing are
readily available.
Outlook
We derive approximately one-half of our revenues directly from government
sources, principally Medicaid and to a lesser extent Medicare, and one-half from
the private sector, including individual residents, third-party insurers and
skilled nursing facilities.
In recent years, Congress has passed a number of federal laws that have
effected major changes in the health care system. The Balanced Budget Act of
1997 sought to achieve a balanced federal budget by, among other things,
changing the reimbursement policies applicable to various health care providers
through the introduction in 1998 of the prospective payment system for
Medicare-eligible residents of skilled nursing facilities. Prior to the
prospective payment system, skilled nursing facilities under Medicare received
cost-based reimbursement. Under the prospective payment system, Medicare pays
skilled nursing facilities a fixed fee per patient per day based upon the acuity
level of the resident, covering substantially all items and services furnished
during a Medicare-covered stay, including pharmacy services. The prospective
payment system resulted in a significant reduction of reimbursement to skilled
nursing facilities. Admissions of Medicare residents, particularly those
requiring complex care, declined in many skilled nursing facilities due to
concerns relating to the adequacy of reimbursement under the prospective payment
system. This caused a weakness in Medicare census leading to a significant
reduction of overall occupancy in the skilled nursing facilities we serve. This
decline in occupancy and acuity levels adversely impacted our results beginning
in 1999, as we experienced lower utilization of our services, coupled with the
prospective payment system-related pricing pressure from our skilled nursing
facility customers. In 1999, Congress enacted the 1999 Balanced Budget
Refinement Act which gave skilled nursing facilities a 20% rate increase for
high-acuity patients, and an overall 4% across the board increase in payments
otherwise determined under the Balanced Budget Act of 1997 for all patients.
These rate increases went into effect in April 2000 and have partially restored
the reduction of reimbursement caused by the prospective payment system. In
December 2000, the Medicare, Medicaid and SCHIP Benefits Improvement and
Protection Act of 2000 was signed into law. The Medicare, Medicaid and SCHIP
Benefits Improvement and Protection Act of 2000, effective April 2001, will
further increase reimbursement by
43
means of a 6.7% rate increase for certain high-acuity rehabilitation patients, a
16.66% across the board increase in the nursing component of the federal rate
for all patients, and for fiscal year 2001, a 3.16% rate increase for all
patients. While we expect that the impact of the prospective payment system on
the long-term care industry will continue to affect Omnicare and its clients in
2001, it appears that the unfavorable operating trends attributable to the
prospective payment system have begun to stabilize. Moreover, it is anticipated
that both the 1999 Balanced Budget Refinement Act and Medicare, Medicaid and
SCHIP Benefits Improvement and Protection Act of 2000 will help to improve the
financial condition of skilled nursing facilities and motivate them to increase
admissions, particularly of higher acuity residents.
Demographic trends indicate that demand for long-term care will increase
well into the middle of this century as the elderly population grows
significantly. Moreover, those over 65 consume a disproportionately high level
of health care services when compared with the under 65 population. There is
widespread consensus that appropriate pharmaceutical care is generally
considered the most costeffective form of treatment for the chronic ailments
afflicting the elderly and also one which is able to improve the quality of
life. Further, the pace and quality of new drug development is yielding many
promising new drugs targeted at the diseases of the elderly. These new drugs may
be more expensive than older, less effective drug therapies due to rising
research costs. However, they are significantly more effective in curing or
ameliorating illness and in lowering overall health care costs by reducing among
other things, hospitalizations, physician visits, nursing time and lab tests.
These trends not only support long-term growth for the geriatric pharmaceutical
industry but also containment of health care costs and the well being of the
nation's growing elderly population.
In order to fund this growing demand, we anticipate that the government and
the private sector will continue to review, assess and possibly alter health
care delivery systems and payment methodologies. While the effect of any further
initiatives on our business may be adverse, our management believes that our
expertise in geriatric pharmaceutical care and pharmaceutical cost management
position us to help meet the challenges of today's health care environment.
Further, the rate of new drug discovery continues to accelerate fueled, in part,
by the recently completed mapping of the human genome and the science and
discoveries that will likely emanate from this project. Pharmaceutical
manufacturers, in order to keep pace, will continue to turn to contract research
organizations to assist them in accelerating drug research development and
commercialization, providing a foundation for growth in our contract research
organization business.
Quantitative and Qualitative Disclosures about Market Risk
We do not have any financial instruments held for trading purposes and do
not hedge any of our market risks with derivative instruments.
Our primary market risk exposure relates to interest rate risk exposure
through our borrowings. Our debt obligations at June 30, 2001 include $50.0
million outstanding under our three-year, $500.0 million variable-rate revolving
credit facility at an interest rate of LIBOR plus 1.375%, or 5.3% at June 30,
2001, a one-hundred basis point change in the interest rate would impact pretax
interest expense by approximately $0.1 million per quarter; $375.0 million
outstanding under our 8.125% Senior Notes due 2011; and $345.0 million
outstanding under our convertible subordinated debentures due in 2007, which
accrue interest at a fixed rate of 5.0%. At June 30, 2001, the fair value of our
revolving credit facility approximates its carrying value, and the fair value of
the notes and convertible debentures is $380.6 million and $304.5 million,
respectively.
44
BUSINESS
Background
We are the nation's largest independent provider of pharmaceuticals and
related pharmacy services to long-term care institutions such as skilled nursing
facilities, assisted living facilities, retirement centers and other
institutional health care facilities. We also provide comprehensive clinical
research for the pharmaceutical and biotechnology industries.
Our pharmacy services segment provides distribution of pharmaceuticals,
related pharmacy consulting, data management services and medical supplies to
long-term care facilities. Pharmacy services purchases, repackages and dispenses
pharmaceuticals, both prescription and non-prescription, and provides
computerized medical record-keeping and third-party billing for residents in
these facilities. We also provide consultant pharmacist services, including
evaluating residents' drug therapy, monitoring the control, distribution and
administration of drugs within the nursing facility and assisting in compliance
with state and federal regulations. In addition, our pharmacy services segment
provides ancillary services, such as infusion therapy and dialysis, distribute
medical supplies and offer clinical and financial software information systems
to our client long-term care facilities. At December 31, 2000, we provided
pharmacy services to approximately 636,500 residents in approximately 8,400
long-term care facilities in 43 states. The pharmacy services segment provides
no services outside of the United States. Our other business segment is contract
research organization services. Our contract research organization services
business is a leading international provider of comprehensive product
development and research services to client companies in the pharmaceutical,
biotechnology, medical device and diagnostics industries. Our contract research
organization services segment provides support for the design of regulatory
strategy and clinical development of pharmaceuticals by offering comprehensive
and fully integrated clinical, quality assurance, data management, medical
writing and regulatory support for our clients' drug development programs. As of
December 31, 2000, our contract research organization operated in 23 countries
around the world. Sales of the pharmacy services and contract research
organization services segments for the year ended December 31, 2000 were
$1,858.7 million and $112.7 million, respectively. Additional financial
information regarding our business segments is presented in the notes to our
consolidated financial statements.
Pharmacy Services
We purchase, repackage and dispense prescription and non-prescription
medication in accordance with physician orders and deliver these prescriptions
to the nursing facility for administration to individual residents by the
facility's nursing staff. We typically service nursing homes within a 150-mile
radius of our pharmacy locations. We maintain a 24-hour, seven-day per week,
on-call pharmacist service for emergency dispensing and delivery or for
consultation with the facility's staff or the resident's attending physician.
Upon receipt of a prescription, the relevant resident information is
entered into our computerized dispensing and billing systems. At that time, the
dispensing system checks the prescription for any potentially adverse drug
interactions or resident sensitivity. When required and/or specifically
requested by the physician or patient, branded drugs are dispensed; generic
drugs are substituted in accordance with applicable state and federal laws and
as requested by the physician or resident. Subject to physician approval and in
accordance with our pharmaceutical care guidelines, we also provide for the
substitution of more efficacious and/or safer drugs for those presently being
prescribed. See "The Omnicare Guidelines'r'" below for further discussion.
We utilize a "unit dose" distribution system. This means that our
prescriptions are packaged for dispensing in individual doses. This differs from
prescriptions filled by retail pharmacies, which typically are dispensed in
vials or other bulk packaging requiring measurement of each dose by or for the
patient. We believe the unit dose system improves control over drugs in the
nursing facility and improves resident compliance with drug therapy by
increasing the accuracy and timeliness of drug administration.
Integral to our drug distribution system is our computerized medical
records and documentation system. We provide to the facility computerized
medication administration records and physician's order
45
sheets and treatment records for each resident. Data extracted from these
computerized records is also formulated into monthly management reports on
resident care and quality assurance. We believe the computerized documentation
system, in combination with the unit dose drug delivery system, results in
greater efficiency in nursing time, improved control, reduced drug waste in the
facility and lower error rates in both dispensing and administration. We believe
these benefits improve drug efficacy and result in fewer drug-related
hospitalizations.
Consultant Pharmacist Services
Federal and state regulations mandate that long-term care facilities, in
addition to providing a source of pharmaceuticals, retain consultant pharmacist
services to monitor and report on prescription drug therapy in order to maintain
and improve the quality of resident care. The Omnibus Budget Reconciliation Act
implemented in 1990 seeks to further upgrade and standardize care by setting
forth more stringent standards relating to planning, monitoring and reporting on
the progress of prescription drug therapy as well as facility-wide drug usage.
We provide consultant pharmacist services which help clients comply with the
federal and state regulations applicable to nursing homes. The services offered
by our consultant pharmacists include:
o comprehensive, monthly drug regimen reviews for each resident in the
facility to assess the appropriateness and efficacy of drug therapies,
including a review of the resident's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and
recommending alternate therapies or discontinuing unnecessary drugs;
o participation on the pharmacy and therapeutics, quality assurance and
other committees of client facilities as well as periodic involvement
in staff meetings;
o monitoring and monthly reporting on facility-wide drug usage;
o development and maintenance of pharmaceutical policy and procedures
manuals; and
o assistance to the nursing facility in complying with state and federal
regulations as they pertain to patient care.
We have also developed a proprietary software system for the use of our
consultant pharmacists. The system, called OSC2OR'r', or Omnicare System of
Clinical and Cost Outcomes Retrieval, enables our pharmacists not only to
perform their above described functions efficiently but also provides the
platform for consistent data retrieval for outcomes research and management.
Additionally, we offer a specialized line of consulting services which help
long-term care facilities to enhance care and reduce and contain costs as well
as to comply with state and federal regulations. Under this service line, we
provide:
o data required for the Omnibus Budget Reconciliation Act and other
regulatory purposes, including reports on usage of chemical restraints
known as psychotropic drugs, antibiotic usage relating to infection
control and other drug usage;
o plan of care programs which assess each patient's state of health upon
admission and monitor progress and outcomes using data on drug usage
as well as dietary, physical therapy and social service inputs;
o counseling related to appropriate drug usage and implementation of
drug protocols;
o on-site educational seminars for the nursing facility staff on topics
such as drug information relating to clinical indications, adverse
drug reactions, drug protocols and special geriatric considerations in
drug therapy, and information and training on intravenous drug therapy
and updates on the Omnibus Budget Reconciliation Act and other
regulatory compliance issues;
o mock regulatory reviews for nursing staffs; and
o nurse consultant services and consulting for dietary, social services
and medical records.
46
The Omnicare Guidelines'r'
In June 1994, to enhance the pharmaceutical care management services that
we offer, we introduced to our client facilities and their attending physicians
the Omnicare Guidelines'r'. We believe the Omnicare Guidelines'r' is the first
drug formulary ranking drugs according to their clinical effectiveness as well
as cost and which is specifically designed for the elderly residing in long-term
care institutions. The Omnicare Guidelines'r' ranks specific drugs in
therapeutic classes as preferred, acceptable or unacceptable based solely on
their disease-specific clinical effectiveness in treating the elderly in
long-term care facilities. The formulary takes into account such factors as
pharmacology, safety and toxicity, efficacy, drug administration, quality of
life and other considerations specific to the frail elderly population residing
in facilities. The clinical evaluations and rankings were developed exclusively
for us by the Philadelphia College of Pharmacy, an academic institution
recognized for its expertise in geriatric long-term care. In addition, the
Omnicare Guidelines'r' provides relative cost information comparing the prices
of the drugs to patients, their insurers or other payors of the pharmacy bill.
As the Omnicare Guidelines'r' focuses on health benefits, rather than
solely on cost, in assigning rankings, we believe that use of the Omnicare
Guidelines'r' assists physicians in making the best clinical choices of drug
therapy for the patient at the lowest cost to the payor of the pharmacy bill.
Accordingly, we believe that the development of and compliance with the Omnicare
Guidelines'r' is important in lowering costs for skilled nursing facilities
operating under the federal government's prospective payment system.
Health and Outcomes Management
We have expanded upon the data in the Omnicare Guidelines'r' to develop
health and outcomes management programs targeted at major categories of disease
commonly found in the elderly, such as congestive heart failure, osteoporosis
and atrial fibrillation. These programs seek to identify patients who may be
candidates for more clinically efficacious drug therapy and to work with
physicians to optimize pharmaceutical care for these geriatric patients. We
believe these programs can enhance the quality of care of elderly patients while
reducing costs to the health care system which arise from the adverse outcomes
of sub-optimal or inappropriate drug therapy.
Outcomes-based Algorithm Technology
Combining data provided by our proprietary systems, the Omnicare
Guidelines'r' and health management programs, our pharmacists seek to determine
the best clinical and most cost-effective drug therapies and make
recommendations for the most appropriate pharmaceutical treatment. Since late
1997, we have augmented their efforts with the development of proprietary
computerized, data-base driven technology that electronically screens and
identifies patients at risk for particular diseases and assists in determining
treatment protocols. This system combines pharmaceutical, clinical, care
planning and research data, and screens the data utilizing approximately 3,000
diseased-based formulas, known as algorithms, derived from medical best practice
standards allowing our pharmacists to make recommendations to improve the
effectiveness of drug therapy in seniors, including identifying potentially
underdiagnosed and undertreated conditions.
Ancillary Services
We provide the following ancillary products and services to long-term care
facilities:
Infusion Therapy Products and Services. With cost containment pressures in
health care, skilled nursing facilities and nursing facilities are increasingly
called upon to treat patients requiring a high degree of medical care and who
would otherwise be treated in the more costly hospital environment. We provide
intravenous, or infusion, therapy products and services for these client
facilities and, to a lesser extent, hospice and home care patients. Infusion
therapy consists of the product, a nutrient, antibiotic, chemotherapy or other
drugs in solution and the intravenous administration of the product
We prepare the product to be adminstered using proper equipment in a
sterile environment and then deliver the product to the nursing home for
adminstration by the nursing staff. Proper administration of
47
intravenous drug therapy requires a highly trained nursing staff. Our consultant
pharmacists and nurse consultants operate an education and certification program
on intravenous therapy to assure proper staff training and compliance with
regulatory requirements in client facilities offering an intravenous program.
By providing an infusion therapy program, we enable our client skilled
nursing facilities and nursing facilities to admit and retain patients who
otherwise would need to be cared for in a hospital or another type of acute-care
facility. The most common infusion therapies we provide are total parenteral
nutrition, which provides nutrients intravenously to patients with chronic
digestive or gastro-intestinal problems, antibiotic therapy, chemotherapy, pain
management and hydration.
Dialysis Services. We offer comprehensive dialysis services onsite in
client long-term care facilities for those residents with kidney failure or end
stage renal disease. We offer both hemodialysis, in which certain functions of
the kidney are replaced by a dialysis machine and artificial kidney, and
peritoneal dialysis for residents who would otherwise be required to be
transported to an off-site clinic for dialysis treatment multiple times per
week. Our onsite service eliminates travel for the resident which can often be a
disruptive and traumatic activity. For our facility clients our dialysis
services significantly reduce transportation and staffing costs while providing
added capability so that the available populations of patients it can serve
increases.
Wholesale Medical Supplies/Medicare Part B Billing. We distribute
disposable medical supplies, including urological, ostomy, nutritional support
and wound care products and other disposables needed in the nursing home
environment. In addition, we provide direct Medicare billing services for
several of these product lines for patients eligible under the Medicare Part B
program. As part of this service, we determine patient eligibility, obtain
certifications, order products and maintain inventory on behalf of the nursing
facility. We also contract to act as billing agent for nursing homes that supply
these products directly to the patient.
Other Services. We also provide clinical care plan and financial
information systems to our client facilities to assist them in determining
appropriate care as well as in predicting and tracking costs. We also offer
respiratory therapy products and durable medical equipment. We continue to
review the expansion of these as well as other products and services that may
further enhance the ability of our client skilled nursing facilities and nursing
facilities to care for their patients in a cost-effective manner.
Contract Research Organization Services
Our contract research organization services segment provides comprehensive
product development services globally to client companies in the pharmaceutical,
biotechnology, medical devices and diagnostics industries. Our contract research
organization services provides support for the design of regulatory strategy and
clinical development of pharmaceuticals by offering comprehensive and fully
integrated clinical, quality assurance, data management, medical writing and
regulatory support for our clients' drug development programs. Our contract
research organization services also provides pharmaceutics services, in parallel
with the stages described above. This process involves product dose form
development, including the formulation of placebo and active drug, clinical
manufacturing and process development for commercial manufacturing, the
development of analytical methodology, execution of a high number of analytical
tests, as well as stability testing and clinical packaging. As of December 31,
2000, including the conduct of business in the United States, contract research
organization services operated in 23 countries.
We believe that our involvement in the contract research organization
business is a logical adjunct to our core institutional pharmacy business and
will serve to leverage our assets and strengths, including our access to a large
geriatric population and our ability to collect data for health and outcomes
management. We believe these assets and strengths will be of significant value
in developing new drugs targeted at diseases of the elderly and in meeting the
Food and Drug Administration's geriatric dosing and labeling requirements for
all prescription drugs provided to the elderly, as well as in documenting health
outcomes to payors and plan sponsors in a managed care environment.
Product and Market Development
Our pharmacy services and contract research organization services
businesses engage in a continuing program for the development of new services
and for marketing these services. While new service and
48
new market development are important factors for the growth of these businesses,
we do not expect that any new service or marketing efforts, including those in
the developmental stage, will require the investment of a significant portion of
our assets.
Materials/Supply
We purchase pharmaceuticals through a wholesale distributor with whom we
have a prime vendor contract, at prices based primarily upon contracts
negotiated by us directly with pharmaceutical manufacturers. We also are a
member of industry buying groups which contract with manufacturers for
discounted prices based on volume which are passed through to us by our
wholesale distributor. We have numerous sources of supply available to us and
have not experienced any difficulty in obtaining pharmaceuticals or other
products and supplies used in the conduct of our business.
Patents, Trademarks, and Licenses
Our business operations are not dependent upon any material patents,
trademarks or licenses.
Seasonality
Our business operations are not significantly impacted by seasonality.
Inventories
We seek to maintain adequate on-site inventories of pharmaceuticals and
supplies to ensure prompt delivery service to our customers. Our primary
wholesale distributor also maintains local warehousing in most major geographic
markets in which we operate.
Competition
By its nature, the long-term care pharmacy business is highly regionalized
and, within a given geographic region of operations, highly competitive. We are
the nation's largest independent provider of pharmaceuticals and related
pharmacy services to long-term care institutions such as skilled nursing
facilities, assisted living facilities, retirement centers and other
institutional health facilities. Our largest competitors are Pharmerica, Inc., a
subsidiary of Bergen Brunswig Corporation, Neighborcare, a division of Genesis
Healthcare Ventures, Inc. and NCS Healthcare Inc. In the geographic regions we
serve, we also compete with numerous local retail pharmacies, local and regional
institutional pharmacies and pharmacies owned by long-term care facilities. We
compete in these markets on the basis of quality, cost-effectiveness and the
increasingly comprehensive and specialized nature of our services, along with
the clinical expertise, pharmaceutical technology and professional support we
offer. Our contract research organization business competes against other
full-service contract research organizations and client internal resources. The
contract research organization industry is highly fragmented with a number of
full-service contract research organizations and many small, limited-service
providers, some of which serve only local markets. Clients choose a contract
research organization based on, among other reasons, reputation, references from
existing clients, the client's relationship with the contract research
organization, the contract research organization's experience with the
particular type of project and/or therapeutic area of clinical development, the
contract research organization's ability to add value to the client's
development plan, the contract research organization's financial stability and
the contract research organization's ability to provide the full range of
services required by the client. We believe that we compete favorably in these
respects.
Backlog
Our contract research organization services segment reports backlog based
on anticipated net revenue from uncompleted projects that have been authorized
by the customer, through signed contracts, letter agreements and verbal
commitments. Once work begins on a project, net revenue is recognized over the
duration of the project. Using this method of reporting backlog, at December 31,
2000, backlog was approximately $187.7 million, as compared to approximately
$146.5 million at December 31, 1999.
49
We believe that backlog may not be a consistent indicator of future results
because it can be affected by a number of factors, including the variable size
and duration of projects, many of which are performed over several years.
Additionally, projects may be terminated by the customer or delayed by
regulatory authorities. Moreover, the scope of work can change during the course
of a project.
Customers
At December 31, 2000, our pharmacy services segment served 636,500
residents in approximately 8,400 long-term care facilities and other
institutional health care settings.
Our contract research organization services segment serves a broad range of
clients, including most of the major multinational pharmaceutical and many of
the major biotechnology companies as well as smaller companies in the
pharmaceutical and biotechnology industries.
No single client comprised more than 10% of consolidated revenues during
1999 or 2000. Our business would not be materially or adversely affected by the
loss of any one customer or small group of customers.
Government Regulation
Institutional pharmacies, as well as the long-term care facilities they
serve, are subject to extensive federal, state and local regulation. These
regulations cover required qualifications, day-to-day operations, reimbursement
and the documentation of activities. In addition, our contract research
organization services are subject to substantial regulation, both domestically
and abroad. We continuously monitor the effects of regulatory activity on our
operations.
Licensure, Certification and Regulation. States generally require that
companies operating a pharmacy within the state be licensed by the state board
of pharmacy. We currently have pharmacy licenses for each pharmacy we operate.
In addition, we currently deliver prescription products from our licensed
pharmacies to four states in which we do not operate a pharmacy. These states
regulate out-of-state pharmacies, however, as a condition to the delivery of
prescription products to patients in these states. Our pharmacies hold the
requisite licenses applicable in these states. In addition, our pharmacies are
registered with the appropriate state and federal authorities pursuant to
statutes governing the regulation of controlled substances.
Client long-term care facilities are also separately required to be
licensed in the states in which they operate and, if serving Medicare or
Medicaid patients, must be certified to be in compliance with applicable program
participation requirements. Client facilities are also subject to the nursing
home reforms of the Omnibus Budget Reconciliation Act of 1987, which imposed
strict compliance standards relating to quality of care for nursing home
operations, including vastly increased documentation and reporting requirements.
In addition, pharmacists, nurses and other health care professionals who provide
services on our behalf are in most cases required to obtain and maintain
professional licenses and are subject to state regulation regarding professional
standards of conduct.
Federal and State Laws Affecting the Repackaging, Labeling, and Interstate
Shipping of Drugs. Federal and state laws impose repackaging, labeling, and
package insert requirements on pharmacies that repackage drugs for distribution
beyond the regular practice of dispensing or selling drugs directly to patients
at retail outlets. A drug repackager must register with the Food and Drug
Administration as a manufacturing establishment, and is subject to Food and Drug
Administration inspection for compliance with relevant good manufacturing
practices. We hold all required registrations and licenses, and we believe our
repackaging operations are in compliance with applicable state and federal good
manufacturing practices requirements. In addition, we believe we comply with all
relevant requirements of the Prescription Drug Marketing Act for the transfer
and shipment of pharmaceuticals.
State Laws Affecting Access to Services. Some states have enacted "freedom
of choice" or "any willing provider" requirements as part of their state
Medicaid programs or in separate legislation. These laws and regulations may
prohibit a third-party payor from restricting the pharmacies from which their
participants may purchase pharmaceuticals. Similarly, these laws may preclude a
nursing facility from requiring their patients to purchase pharmacy or other
ancillary medical services or supplies from
50
particular providers that deal with the nursing home. Limitations such as these
may increase the competition which we face in providing services to nursing
facility residents.
Medicare and Medicaid. The nursing home pharmacy business has long operated
under regulatory and cost containment pressures from state and federal
legislation primarily affecting Medicaid and, to a lesser extent, Medicare.
As is the case for nursing home services generally, we receive
reimbursement from the Medicaid and Medicare programs, directly from individual
residents, private pay, and from other payors such as third party insurers. We
believe that our reimbursement mix is in line with nursing home expenditures
nationally. For the year ended December 31, 2000, our payor mix was
approximately as follows: 46% private pay and long-term care facilities,
including payments from skilled nursing facilities on behalf of their
Medicare-eligible residents, 43% Medicaid, 3% Medicare, including direct billing
for medical supplies and 8% other private sources, including the contract
research organization business.
For those patients who are not covered by government-sponsored programs or
private insurance, we generally directly bill the patient or the patient's
responsible party on a monthly basis. Depending upon local market practices, we
may alternatively bill private patients through the nursing facility. Pricing
for private pay patients is based on prevailing regional market rates or "usual
and customary" charges.
The Medicaid program is a cooperative federal-state program designed to
enable states to provide medical assistance to aged, blind, or disabled
individuals, or members of families with dependent children whose income and
resources are insufficient to meet the costs of necessary medical services.
State participation in the Medicaid program is voluntary. To become eligible to
receive federal funds, a state must submit a Medicaid "state plan" to the
Secretary of the Department of Health and Human Services for approval. The
federal Medicaid statute specifies a variety of requirements which the state
plan must meet, including requirements relating to eligibility, coverage of
services, payment and administration.
Federal law and regulations contain a variety of requirements relating to
the furnishing of prescription drugs under Medicaid. First, states are given
authority, subject to standards, to limit or specify conditions for the coverage
of particular drugs. Second, federal Medicaid law establishes standards
affecting pharmacy practice. These standards include general requirements
relating to patient counseling and drug utilization review and more specific
standards for skilled nursing facilities and nursing facilities relating to drug
regimen reviews for Medicaid patients in these facilities. Recent regulations
clarify that, under federal law, a pharmacy is not required to meet the general
requirements for drugs dispensed to nursing facility residents if the nursing
facility complies with the drug regimen review standards. However, the
regulations indicate that states may nevertheless require pharmacies to comply
with the general requirements, regardless of whether the nursing facility
satisfies the drug regimen review requirement, and the states in which we
operate currently do require our pharmacies to comply with these general
standards. Third, federal regulations impose requirements relating to
reimbursement for prescription drugs furnished to Medicaid patients. Among other
things, regulations establish "upper limits" on payment levels. In addition to
requirements imposed by federal law, states have substantial discretion to
determine administrative, coverage, eligibility and payment policies under their
state Medicaid programs that may affect our operations. For example, some states
have enacted "freedom of choice" requirements that may prohibit a nursing
facility from requiring residents to purchase pharmacy or other ancillary
medical services or supplies from particular providers that deal with the
nursing home. Limitations such as these may increase the competition that we
face in providing services to nursing facility patients.
The Medicare program is a federally funded and administered health
insurance program for individuals age 65 and over or who are disabled. The
Medicare program consists of three parts: Part A, which covers, among other
things, inpatient hospital, skilled nursing facility, home health care and other
types of health care services; Medicare Part B, which covers physicians'
services, outpatient services, items and services provided by medical suppliers,
and a limited number of specifically designated prescription drugs; and Medicare
Part C, established by the Balanced Budget Act of 1997, which generally allows
beneficiaries to enroll in additional types of Managed Care programs beyond the
traditional Medicare fee for service program. Part C is generally referred to as
"Medicare+ Choice." Many Medicare beneficiaries are being served through
Medicare+ Choice organizations. In addition to the limited Medicare coverage for
specified products described above, some Medicare+ Choice organizations
providing health care benefits to Medicare beneficiaries offer expanded drug
coverage. The Medicare program establishes
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requirements for participation of providers and suppliers in the
Medicare program. Pharmacies are not subject to these certification
requirements. Skilled nursing facilities and suppliers of medical equipment and
supplies, however, are subject to specified standards. Failure to comply with
these requirements and standards may adversely affect an entity's ability to
participate in the Medicare program and receive reimbursement for services
provided to Medicare beneficiaries.
Medicare and Medicaid providers and suppliers are subject to inquiries or
audits to evaluate their compliance with requirements and standards set forth
under these government-sponsored programs. These audits and inquiries, as well
as our own internal compliance programs, from time to time have identified
overpayment and other billing errors resulting in repayment or self-reporting.
We believe that our billing practices materially comply with applicable state
and federal requirements. However, the requirements may be interpreted in the
future in a manner inconsistent with our interpretation and application.
The Medicare and Medicaid programs are subject to statutory and regulatory
changes, retroactive and prospective rate adjustments, administrative rulings,
executive orders and freezes and funding reductions, all of which may adversely
affect our business. Payments for pharmaceutical supplies and services under the
Medicare and Medicaid programs may not continue to be based on current
methodologies or remain comparable to present levels. In this regard, we may be
subject to rate reductions as a result of federal budgetary or other legislation
related to the Medicare and Medicaid programs. In addition, various state
Medicaid programs periodically experience budgetary shortfalls which may result
in Medicaid payment reductions and delays in payment to us.
In addition, the failure, even if inadvertent, of our and/or our client
institutions to comply with applicable reimbursement regulations could adversely
affect our business. Additionally, changes in reimbursement programs or in
regulations related thereto, such as reductions in the allowable reimbursement
levels, modifications in the timing or processing of payments and other changes
intended to limit or decrease the growth of Medicaid and Medicare expenditures,
could adversely affect our business.
Referral Restrictions. We are subject to federal and state laws which
govern financial and other arrangements between health care providers. These
laws include the federal anti-kickback statute, which prohibits, among other
things, knowingly and willfully soliciting, receiving, offering or paying any
remuneration directly or indirectly in return for or to induce the referral of
an individual to a person for the furnishing of any item or service for which
payment may be made in whole or in part under federal health care programs. Many
states have enacted similar statutes which are not necessarily limited to items
and services for which payment is made by federal health care programs.
Violations of these laws may result in fines, imprisonment, and exclusion from
the federal programs or other state-funded programs. Federal and state court
decisions interpreting these statutes are limited, but have generally construed
the statutes to apply if "one purpose" of remuneration is to induce referrals or
other conduct within the statute.
Federal regulations establish "safe harbors," which give immunity from
criminal or civil penalties under the federal anti-kickback statute to parties
meeting all of the safe harbor requirements. While the failure to satisfy all
criteria for a safe harbor does not mean that an arrangement violates the
statute, it may subject the arrangement to review by the Health and Human
Resources Office of Inspector General, which is charged with enforcing the
federal anti-kickback statute. In response to requests the Office of Inspector
General issues written advisory opinions regarding the applicability of
particular aspects of the anti-kickback statute to specific arrangements or
proposed arrangements. Advisory opinions are binding as to the Secretary and the
party requesting the opinion.
The Office of Inspector General issues "Fraud Alerts" identifying
questionable arrangements and practices which it believes may implicate the
federal anti-kickback statute. The Office of Inspector General has issued a
Fraud Alert providing its views on joint venture and contractual arrangements
between health care providers. The Office of Inspector General also issued a
Fraud Alert concerning prescription drug marketing practices that could
potentially violate the federal statute. Pharmaceutical marketing activities may
implicate the federal anti-kickback statute because drugs are often reimbursed
under the Medicaid program and, to a lesser extent, under the Medicare program.
According to the Fraud Alert, examples of practices that may implicate the
statute include arrangements under which remuneration is made to pharmacists to
recommend the use of a particular pharmaceutical product.
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The Ethics in Patient Referrals Act or Stark I, effective January 1, 1992,
generally prohibits physicians from referring Medicare patients to clinical
laboratories for testing if the referring physician or a member of the
physician's immediate family has a "financial relationship," through ownership
or compensation with the laboratory. The Omnibus Budget Reconciliation Act of
1993 contains provisions commonly known as Stark II expanding the Ethics in
Patient Referrals Act by prohibiting physicians from referring Medicare and
Medicaid patients to an entity with which a physician has a "financial
relationship" for the furnishing of items set forth in a list of "designated
health services," including outpatient prescription drugs, durable medical
equipment, enteral supplies and equipment and other services. Subject to some
exceptions, if such a financial relationship exists, the entity is generally
prohibited from claiming payment for the services under the Medicare or Medicaid
programs, and civil monetary penalties may be assessed for each prohibited claim
submitted.
On January 4, 2001, the Health Care Financing Administration released the
first part of the final rule relating to the Omnibus Budget Reconciliation Act
of 1993's provisions known as Stark II. This final rule is divided into two
phases. Phase I focuses on the provisions related to prohibited referrals, the
general exceptions to ownership and compensation arrangement prohibitions and
the related definitions. Most of Phase I of the rulemaking will become effective
January 4, 2002. Phase II will cover the remaining portions of the statute,
including those pertaining to Medicaid. Phase I of the final rule eases some of
the restrictions in the proposed rule. The final rule also, among other things:
recognizes an exception for referrals for residents covered under a Part A
skilled nursing facility stay; conforms certain physician supervision
requirements to the Health Care Financing Administration coverage and payment
policies for the specific services; clarifies the definitions of designated
health services and indirect financial relationships; and creates new exceptions
for indirect compensation arrangements and fair market value transactions.
Other provisions in the Social Security Act and in other federal and state
laws authorize the imposition of penalties, including criminal and civil fines
and exclusions from participation in Medicare and Medicaid, for false claims,
improper billing and other offenses.
In addition, a number of states have undertaken enforcement actions against
pharmaceutical manufacturers involving pharmaceutical marketing programs,
including programs containing incentives to pharmacists to dispense one
particular product rather than another. These enforcement actions arose under
state consumer protection laws which generally prohibit false advertising,
deceptive trade practices, and the like.
We believe our contract arrangements with other health care providers, our
pharmaceutical suppliers and our pharmacy practices are in compliance with
applicable federal and state laws. These laws may, however, be interpreted in
the future in a manner inconsistent with our interpretation and application.
Health Care Reform and Federal Budget Legislation. In recent years, federal
legislation has resulted in major changes in the health care system, and
included other provisions which could significantly affect healthcare providers,
either nationally or at the state level. The Balanced Budget Act of 1997 signed
into law on August 5, 1997, sought to achieve a balanced federal budget by,
among other things, reducing federal spending on the Medicare and Medicaid
programs. With respect to Medicare, the law mandates establishment of the
prospective payment system for skilled nursing facilities under which facilities
are paid a federal per diem rate for virtually all covered skilled nursing
facility services, including ancillary services such as pharmacy. Payment is
determined by one of 44 resource utilization group categories. The prospective
payment system was implemented for cost reporting periods beginning on or after
July 1, 1998. Prior to the prospective payment system, skilled nursing
facilities under Medicare received costbased reimbursement. In the Conference
Report accompanying the Balanced Budget Act of 1997, the conferees specifically
noted that, to ensure that the frail elderly residing in skilled nursing
facilities receive needed and appropriate medication therapy, the Secretary of
the Department of Health and Human Services is to consider, as part of the
prospective payment system for skilled nursing facilities, the results of
studies conducted by independent organizations, including those which examine
appropriate payment mechanism and payment rates for medications therapy, and
develop case mix adjustments that reflect the needs of these patients.
With respect to Medicare suppliers, the Balanced Budget Act of 1997 also
imposes limits on annual updates in payments to Medicare skilled nursing
facilities for routine services, and institutes consolidated
53
billing for items and services furnished to skilled nursing facility residents
in a Medicare Part A covered stay and services for all non-physician Part B
items and services for skilled nursing facility residents no longer eligible for
Part A skilled nursing facility care. While this provision was to become
effective July 1, 1998, it was delayed indefinitely and administratively. Later,
this provision was repealed except for services furnished to residents in a Part
A skilled nursing facility stay and to therapy services covered under Part B
below.
The Balanced Budget Act of 1997 also imposed numerous other cost savings
measures affecting Medicare skilled nursing facility services. On November 29,
1999, Congress enacted the 1999 Balanced Budget Refinement Act which was
designed to mitigate the effects of the Balanced Budget Act of 1997. The 1999
Balanced Budget Refinement Act allows skilled nursing facilities to choose to
receive the full federal prospective payment system rates on or after December
15, 1999, based upon the fiscal year-end of the skilled nursing facility, rather
than participating in the three-year transition period. Also, effective April 1,
2000, the 1999 Balanced Budget Refinement Act temporarily increased the
prospective payment system per diem rates by 20% for 15 patient acuity
categories, including medically complex patients with generally higher pharmacy
costs, pending appropriate revisions to the prospective payment system. The
increases will continue until the Health Care Financing Administration
implements a refined Resource Utilization Group system that better accounts for
medically-complex patients. The revised rates may be more or less than the
temporary 20% increase under the 1999 Balanced Budget Refinement Act. The 1999
Balanced Budget Refinement Act also provides for a 4% increase in payments
otherwise determined under the Balanced Budget Act of 1997 for all patient
categories, regardless of the level of sickness and degree of medical attention
required, for fiscal years 2001 and 2002. This is in addition to the 20%
increase in the 15 categories relating to patients having higher levels of
sickness and degrees of required medical attention. We believe these changes
should improve the financial condition of skilled nursing facilities and provide
incentives to increase occupancy and Medicare admissions, particularly among the
more acutely ill.
The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of
2000, signed into law December 21, 2000, includes provisions designed to further
mitigate the effects of reimbursement cuts contained in the Balanced Budget Act
of 1997. Among other things, the Medicare, Medicaid and SCHIP Benefits
Improvement and Protection Act of 2000 eliminates the scheduled reduction in the
skilled nursing facility market basket update in fiscal year 2001, implemented
in two phases. Specifically, the update rate for October 1, 2000 through March
31, 2001 is the market basket index increase minus 1 percentage point; the
update for the period April 1, 2001 through September 30, 2001 is the market
basket index increase plus 1 percentage point. This increase will not be
included when determining payment rates for the subsequent period. In fiscal
years 2002 and 2003, payment updates will equal the market basket index increase
minus 0.5 percentage point. Temporary increases in the federal per diem rates
under the 1999 Balanced Budget Refinement Act will be in addition to these
payment increases. The Medicare, Medicaid and SCHIP Benefits Improvement and
Protection Act of 2000 also increases payment for the nursing component of each
Resource Utilization Group category by 16.66% for services furnished after April
1, 2001 and before October 1, 2002. Moreover, the Medicare, Medicaid and SCHIP
Benefits Improvement and Protection Act of 2000 further refines the consolidated
billing requirements. Specifically, effective January 1, 2001, the law limits
consolidated billing requirements to items and services furnished to skilled
nursing facility residents in a Medicare Part A covered stay and to therapy
services covered under Part B. In other words, for residents not covered under a
Part A stay, skilled nursing facilities may choose to bill for non-therapy Part
B services and supplies, or they may elect to have suppliers continue to bill
Medicare directly for these services. The Medicare, Medicaid and SCHIP Benefits
Improvement and Protection Act of 2000 also modifies the treatment of the
rehabilitation patient categories to ensure that Medicare payments for skilled
nursing facility residents with "ultra high" and "high" rehabilitation therapy
needs are appropriate in relation to payments for residents needing "medium" or
"low" levels of therapy. Specifically, effective for services furnished on or
after April 1, 2001 and before implementation of the refined Resource
Utilization Group system, discussed above, the law increases by 6.7% the federal
per diem payments for 14 rehabilitation categories, effective April 1, 2001. The
20% additional payment under the 1999 Balanced Budget Refinement Act for three
rehabilitation categories is removed to make this provision budget neutral. The
Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000
also permits the Secretary of the Department of Health and Human Services to
establish a process
54
for geographic reclassification of skilled nursing facilities based upon the
method used for inpatient hospitals.
The Balanced Budget Act of 1997 also mandates that suppliers obtain a
surety bond as a condition of issuance or renewal of a Medicare Part B supplier
number. In January 1998, new rules were proposed to establish additional
supplier standards, including the requirement to obtain a surety bond. Under the
proposal, a supplier would be required to obtain a surety bond for each tax
identification number for which it has a Medicare supplier number.
In October 2000, the Health Care Financing Administration issued final
supplier standards which, effective December 2000, expanded several operational
requirements for suppliers. In the final rule, the Health Care Financing
Administration decided to delay the surety bond rule pending "extensive changes"
to this requirement. The Health Care Financing Administration states that it
will consider public comments received on the surety bond, primarily relating to
costs, along with its experience with surety bonds for home health agencies and
the General Accounting Office study of Medicare surety bonds, when it issues a
proposed rule on surety bonds in the future. Until the Health Care Financing
Administration issues a final rule on this provision, there is no surety bond
requirement for suppliers.
With respect to Medicaid, the Balanced Budget Act of 1997 repealed the
"Boren Amendment" federal payment standard for Medicaid payments to Medicaid
nursing facilities effective October 1, 1997, giving states greater latitude in
setting payment rates for these facilities. There can be no assurance that
budget constraints or other factors will not cause states to reduce Medicaid
reimbursement to nursing facilities or that payments to nursing facilities will
be made on a timely basis. The law also grants states greater flexibility to
establish Medicaid managed care programs without the need to obtain a federal
waiver. Although these waiver projects generally exempt institutional care,
including Medicaid nursing facilities and institutional pharmacy services, these
programs ultimately may change the reimbursement system for long-term care,
including pharmacy services, from fee-for-service to managed care negotiated or
capitated rates. Our operations have not been adversely affected in states with
managed care programs in effect but future Medicaid managed care systems might
have an adverse effect on our operations.
On January 12, 2001, the Secretary of the Department of Health and Human
Services issued final regulations to implement changes to the Medicaid "upper
payment limit" requirements. The purpose of the rule is to stop states from
using particular accounting techniques to inappropriately obtain extra federal
Medicaid matching funds that are not necessarily spent on health care services
for Medicaid beneficiaries. Although the rule will be phased in over eight years
to reduce the adverse impact on certain states, the rule eventually could result
in decreased federal funding to state Medicaid programs, which, in turn, could
prompt certain states to reduce Medicaid reimbursements to providers, such as
our client nursing facilities and us.
Although it is unclear what the long-term impact of the prospective payment
system will be, since implementation the impact of the prospective payment
system has been evidenced by an erosion of census for some facilities, lower
acuity levels of residents in some nursing homes, lower pricing and an
unfavorable payor mix for us. While we expect that the impact of the prospective
payment system on the long-term care industry will continue to affect us and our
clients, it appears that the unfavorable operating trends experienced to date
have begun to stabilize. We anticipate that federal and state governments will
continue to review and assess alternate health care delivery systems, payment
methodologies and operational requirements for health care providers including
protection of confidential patient information. Elements of potential
legislation or regulation, or the interpretation or administration of
legislation or regulation, including the adequacy and timeliness of payment to
or costs required to be incurred by client facilities, may have an adverse
effect on our business. As a result, any future health care legislation or
regulations may adversely affect our business.
The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of
2000 also clarifies the Health Care Financing Administration policy with regard
to coverage of drugs and biologicals, and addresses payment issues. Among other
things, the Act specifies that payment for drugs under Part B must be made on
the basis of assignment. In other words, the provider must accept the Medicare
fee schedule amount as payment in full; beneficiaries are not liable for any
out-of-pocket costs other than standard deductible and coinsurance payments. The
Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000
also mandates a study by the General Accounting Office on payment for
55
drugs and biologicals under Medicare Part B, and requires the General Accounting
Office to report to Congress and the Secretary of the Department of Health and
Human Services within nine months of enactment on specific recommendations for
revised payment methodologies.
The Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of
2000 also addresses the Health Care Financing Administration's attempts to
modify the calculation of average wholesale prices of drugs, upon which Medicare
and Medicaid reimbursement is based. The federal government has been actively
investigating whether pharmaceutical manufacturers have been manipulating
average wholesale prices. In May 2000, the Health Care Financing Administration
proposed using new Department of Justice pricing data for updating Medicare
payment allowances for drugs and biologicals, although the Health Care Financing
Administration withdrew this proposal in November 2000, citing the likelihood of
Congressional action in this area. The Act establishes a temporary moratorium on
direct or indirect reductions, but not increases, in payment rates in effect on
January 1, 2001, until the Secretary reviews the General Accounting Office
report.
It is uncertain at this time what additional health care reform
initiatives, including a Medicare prescription drug benefit, if any, will be
implemented, or whether there will be other changes in the administration of
governmental health care programs or interpretations of governmental policies or
other changes affecting the health care system. Future health care or budget
legislation or other changes may have an adverse effect on our business.
Contract Research Organization Service. The preclinical, clinical,
manufacturing, analytical and clinical trial supply services performed by our
contract research organization services are subject to various regulatory
requirements designed to ensure the quality and integrity of the data or
products of these services.
The industry standard for conducting preclinical and laboratory testing is
embodied in the good laboratory practice and Investigational New Drugs
regulations administered by the Food & Drug Administration. Research conducted
at institutions supported by funds from the National Institutes of Health must
also comply with multiple project assurance agreements and guidelines
administered by the National Institute of Health and the Health and Human
Services Office of Research Protection. The requirements for facilities engaging
in pharmaceutical, analytical, manufacturing, clinical trial, supply
preparation, labeling and distribution are set forth in the good manufacturing
practice regulations and in good clinical practice regulations and guidelines.
Good clinical practice, Investigational New Drugs and good manufacturing
practice regulations have been mandated by the Food & Drug Administration and
the European Medicines Evaluation Agency and have been adopted by similar
regulatory authorities in other countries. Good clinical practice,
Investigational New Drugs and good manufacturing practice regulations stipulate
requirements for facilities, equipment, supplies and personnel engaged in the
conduct of studies to which these regulations apply. The regulations require
that written, standard operating procedures are followed during the conduct of
studies and for the recording, reporting and retention of study data and
records. To help assure compliance, our contract research organization services
has a worldwide staff of experienced quality assurance professionals which
monitor ongoing compliance with good clinical practice, Investigational New
Drugs and good manufacturing practice regulations by auditing study data and
conducting regular inspections of testing procedures and facilities. The Food &
Drug Administration and many other regulatory authorities require that study
results and data submitted to them are based on studies conducted in accordance
with good clinical practice and Investigational New Drugs provisions. These
provisions include:
o complying with specific regulations governing the selection of
qualified investigators;
o obtaining specific written commitments from the investigators;
o disclosure of conflicts of interest;
o verifying that patient informed consent is obtained;
o instructing investigators to maintain records and reports;
o verifying drug or device accountability; and
o permitting appropriate governmental authorities access to data for
their review.
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Records for clinical studies must be maintained for specific periods for
inspection by the Food & Drug Administration, European Union or other
authorities during audits. Non-compliance with good clinical practice or
Investigational New Drugs requirements can result in the disqualification of
data collected during the clinical trial and may lead to debarment of an
investigator or contract research organization if fraud is detected.
Contract research organization services' standard operating procedures
related to clinical studies are written in accordance with regulations and
guidelines appropriate to a global standard with regional variations in the
regions where they will be used, thus helping to ensure compliance with good
clinical practice. Contract research organization services also complies with
International Congress of Harmonization, European Union good clinical practice
regulations and U.S. good clinical practice regulations for North America.
Our United States manufacturing, analytical and other laboratories are
subject to licensing and regulation under federal, state and local laws relating
to maintenance of appropriate processes and procedures under the Clinical
Laboratories Improvement Act, hazard communication and employee right-toknow
regulations, the handling and disposal of medical specimens and hazardous waste
and radioactive materials, as well as the safety and health of laboratory
employees. All of our laboratories are operated in material compliance with
applicable federal and state laws and regulations relating to maintenance of
trained personnel, proper equipment processes and procedures required by
Clinical Laboratories Improvement Act regulations of Health and Human Services,
and the storage and disposal of all laboratory specimens including the
regulations of the Environmental Protection Agency and the Occupational Safety
and Health Administration. Several of our facilities are engaged in drug
development activities involving controlled substances. The use of, and
accountability for, controlled substances are regulated by the United States
Drug Enforcement Administration. Our relevant employees receive initial and
periodic training to ensure compliance with applicable hazardous material
regulations and health and safety guidelines.
Although we believe that we are currently in compliance in all material
respects with federal, state and local laws, failure to comply could subject us
to denial of the right to conduct business, fines, criminal penalties and other
enforcement actions.
Finally, new final rules have been adopted by Health and Human Services
related to the responsibilities of contract research organizations, other
healthcare entities and their business associates to maintain the privacy of
patient identifiable medical information. These rules are discussed in more
detail in the following section. We intend to comply with these rules when they
become effective and when compliance is required on February 28, 2003, and to
obtain all required patient authorizations.
Health Information Practices. The federal Health Insurance Portability Act
of 1996 authorized the Secretary of the federal Department of Health and Human
Services to issue standards for the privacy and security of medical records and
other individually identifiable patient data. Health Insurance Portability Act
of 1996 requirements apply to health plans, healthcare providers and healthcare
clearinghouses that transmit health information electronically. Regulations
adopted to implement Health Insurance Portability Act of 1996 also require that
business associates acting for or on behalf of these Health Insurance
Portability Act of 1996-covered entities be contractually obligated to meet
Health Insurance Portability Act of 1996 standards. Regulations setting
standards for the format of electronic transactions became effective in October
2000.
Although Health Insurance Portability Act of 1996 was intended ultimately
to reduce administrative expenses and burdens faced within the healthcare
industry, we believe the law will initially bring about significant and, in some
cases, costly changes. Health and Human Services has released two rules to date
mandating the use of new standards with respect to particular healthcare
transactions and health information. The first rule requires the use of uniform
standards for common healthcare transactions, such as healthcare claims
information, including pharmacy claims, plan eligibility, referral certification
and authorization, claims status, plan enrollment and disenrollment, payment and
remittance advice, plan premium payments and coordination of benefits, and it
establishes standards for the use of electronic signatures. Health and Human
Services finalized the new transaction standards on August 17, 2000, and we, as
well as our nursing facility clients, will be required to comply with them by
October 16, 2002.
Second, Health and Human Services developed new standards relating to the
privacy of individually identifiable health information. In general, these
regulations restrict the use and disclosure of medical
57
records and other individually identifiable health information held or disclosed
by health care providers and other affected entities in any form, whether
communicated electronically, on paper, or orally, subject only to limited
exceptions. In addition, the regulations provide patients with significant new
rights to understand and control how their health information is used. These
regulations do not preempt more stringent state laws and regulations that may
apply to us. The privacy standards were issued on December 28, 2000, with an
effective date of April 14, 2001, and a compliance date of April 14, 2003. In
addition, Health and Human Services amended the final rule to allow additional
public comment on the rule prior to the April 14, 2001 effective date. Congress
and the Bush Administration are taking a careful look at the regulations, but we
do not know whether they will change the privacy standards or their compliance
date.
Rules governing the security of health information have been proposed but
have not yet been issued in final form. Once issued in final form, affected
parties will have approximately two years to be fully compliant. Sanctions for
failing to comply with Health Insurance Portability Act of 1996 include criminal
penalties and civil sanctions.
We are evaluating the effect of Health Insurance Portability Act of 1996.
At this time, we anticipate that we will be able to fully comply with those
Health Insurance Portability Act of 1996 requirements that have been adopted.
However, we cannot at this time estimate the cost of this compliance, nor can we
estimate the cost of compliance with standards that have not yet been finalized
by Health and Human Services or which may be revised. The new and proposed
health information standards are likely to have a significant effect on the
manner in which we handle health data and communicate with payors. Any inability
to comply with existing or future standards, or the cost of our compliance with
these standards, may have a material adverse effect on our business, financial
condition or results of operations.
Compliance Program and Corporate Integrity Agreement. The Office of
Inspector General has issued guidance to various sectors of the healthcare
industry to help providers design effective voluntary compliance programs to
prevent fraud, waste and abuse in healthcare programs, including Medicare and
Medicaid. In 1998, Omnicare voluntarily adopted a compliance program to assist
us in complying with applicable government regulations. In addition, in April
1998, Home Pharmacy Services, Inc., one of our wholly-owned subsidiaries,
entered into a settlement agreement with the U.S. Department of Justice and the
State of Illinois regarding practices involving refunds for returned drugs.
Under the Settlement Agreement, Home Pharmacy Services, Inc. paid $5.3 million
in fines and restitution to the United States and Illinois, and Omnicare and
Home Pharmacy Services, Inc. agreed to a corporate integrity program for four
years, which includes annual reporting obligations. If Omnicare fails to meet a
material obligation under the agreement, the Office of Inspector General may
initiate proceedings to suspend or exclude Omnicare from participation in
federal health programs, including Medicare and Medicaid. The terms of the
corporate integrity agreement expire in April 2002. Neither Omnicare nor any of
its other operating units were implicated in the government investigation.
Environmental Matters
In operating our facilities, historically we have not encountered any major
difficulties in effecting compliance with applicable pollution control laws. No
material capital expenditures for environmental control facilities are expected.
While future legislation, regulations, or interpretations could adversely effect
us, we do not currently anticipate any changes that we believe would have a
material adverse effect on us.
Employees
At December 31, 2000, we employed approximately 9,300 persons, including
3,700 part-time employees, approximately 8,900 and 400 of whom were located
within and outside the United States, respectively.
Legal Proceedings
There are no pending legal or governmental proceedings to which we are a
party or to which any of our property is subject that we believe would have a
material adverse effect on us.
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On July 26, 1999, Neighborcare Pharmacy Services, Inc., a subsidiary of
Genesis Health Ventures, Inc., filed suit in the Circuit Court for Baltimore
County, Maryland, against us and Heartland Health Services, a joint venture in
which one of our subsidiaries is a partner. The suit relates to certain master
service agreements between Neighborcare and HCR-Manorcare, on the one hand, and
us or Heartland Health Services and HCR-Manorcare, on the other, under which
pharmacy services are provided to nursing homes and other long-term care
facilities operated by HCR-Manorcare. Neighborcare alleges that we and Heartland
Health Services tortiously interfered with Neighborcare's purported rights under
its master service agreements, and seeks compensatory damages allegedly of not
less than $100 million annually, injunctive relief canceling our and Heartland
Health Services' contracts with HCR-Manorcare and punitive damages. Neighborcare
and HCR-Manorcare are involved in an arbitration to determine the validity and
enforceability of Neighborcare's master service agreements and the extent to
which either of those parties has breached the master service agreements. We are
advised by Manorcare that during the pendency of the arbitration, Neighborcare
is continuing to provide and be paid for pharmacy services under the master
service agreements, and that the arbitration hearing is currently scheduled for
the summer of 2001. On November 4, 1999, we and Heartland Health Services moved
to dismiss or, in the alternative, to stay the suit in its entirety on the
grounds that the arbitration between Neighborcare and HCR-Manorcare should
resolve many, if not all, of the issues raised in the suit. On November 12,
1999, the Baltimore County Circuit Court stayed the suit pending conclusion of
the arbitration, and we withdrew our motion to dismiss. Although the outcome of
the suit cannot be ascertained at this time, we believe, based on our knowledge
and understanding of the facts and the advice of our counsel, that there is no
reasonable basis in law or in fact for concluding that we have any liability in
the suit. Consequently, we believe that the resolution of the suit is not likely
to have a material adverse effect on our financial condition or results of
operations.
Properties
We have offices, distribution centers and other key operating facilities in
various locations in and outside the United States. As of December 31, 2000, we
operated a total of 128 facilities, five of which we owned. A list of the 61
more significant facilities, defined as having at least 10,000 square feet, we
operated as of December 31, 2000 follows. The owned properties are held in fee
and are not subject to any material encumbrance. We consider all of these
facilities to be in good operating condition and generally to be adequate for
present and anticipated needs.
Leased Area
Owned Area ----------------------------
Location Type (sq. ft.) (sq. ft.) Expiration Date
-------- ---- --------- --------- ---------------
King of Prussia,
Pennsylvania . . . . . . . . Offices -- 150,000 June 30, 2010
Fort Washington,
Pennsylvania . . . . . . . . Offices and Laboratories -- 120,000 January 14, 2012
Des Plaines, Illinois . . . . . Offices and Distribution Center -- 47,971 May 31, 2008
Kirkland, Washington . . . . . . Offices and Distribution Center -- 44,744 April 14, 2003
Covington, Kentucky . . . . . . Offices -- 42,400 December 31, 2012
Milwaukee, Wisconsin . . . . . . Offices and Distribution Center -- 41,440 March 31, 2009
Perrysburg, Ohio . . . . . . . . Offices and Distribution Center 40,500 -- --
Cheshire, Connecticut . . . . . Offices and Distribution Center -- 38,400 June 30, 2010
Florissant, Missouri . . . . . . Offices and Distribution Center 38,014 -- --
Louisville, Kentucky . . . . . . Offices and Distribution Center -- 37,400 September 30, 2001
Livonia, Michigan . . . . . . . Offices and Distribution Center -- 32,824 May 31, 2007
Hunt Valley, Maryland . . . . . Offices and Distribution Center -- 31,600 October 31, 2001
St. Louis, Missouri. . . . . . . Offices and Distribution Center -- 30,400 June 30, 2002
Kansas City, Missouri . . . . . Offices and Distribution Center -- 29,948 October 21, 2009
Decatur, Illinois . . . . . . . Offices and Distribution Center 20,000 9,000 Month-to-Month
Salt Lake City, Utah . . . . . . Offices and Distribution Center -- 28,400 January 31, 2009
Portland, Oregon . . . . . . . . Offices and Distribution Center -- 28,150 April 30, 2008
Troy, New York . . . . . . . . . Offices -- 25,124 March 31, 2002
(table continued on next page)
59
(table continued from previous page)
Leased Area
Owned Area ----------------------------
Location Type (sq. ft.) (sq. ft.) Expiration Date
-------- ---- --------- --------- ---------------
Cincinnati, Ohio . . . . . . . Offices and Distribution Center -- 24,375 September 30, 2009
Chestnut Ridge,
New York . . . . . . . . . . Offices and Distribution Center -- 24,000 April 30, 2010
Oklahoma City, Oklahoma . . . . Offices and Distribution Center -- 24,000 Month-to-Month
Crystal, Minnesota . . . . . . Offices and Distribution Center -- 23,752 January 31, 2008
Wadsworth, Ohio . . . . . . . . Offices and Distribution Center -- 22,960 June 30, 2006
Henderson, Kentucky . . . . . . Offices and Distribution Center -- 20,000 January 31, 2002
Mentor, Ohio . . . . . . . . . Offices and Distribution Center -- 20,000 Month-to-Month
Fort Washington,
Pennsylvania . . . . . . . . Offices and Laboratories -- 20,000 December 31, 2002
Greensburg, Pennsylvania . . . Offices and Distribution Center -- 20,000 February 3, 2002
Spartanburg,
South Carolina . . . . . . . Offices and Distribution Center 9,500 10,000 Month-to-Month
Indianapolis, Indiana . . . . . Offices and Distribution Center -- 18,740 January 1, 2011
Pittsburgh, Pennsylvania . . . Offices and Distribution Center -- 18,334 January 31, 2009
Springfield, Ohio . . . . . . . Offices and Distribution Center -- 18,000 December 12, 2003
Rockford, Illinois . . . . . . Offices and Distribution Center -- 18,000 November 30, 2009
Milford, Ohio . . . . . . . . . Offices and Distribution Center -- 18,000 December 12, 2008
Peabody, Massachusetts. . . . . Offices and Distribution Center -- 17,500 April 30, 2002
Plainview, New York . . . . . . Offices and Distribution Center -- 17,500 June 30, 2005
Malta, New York . . . . . . . . Offices and Distribution Center -- 17,400 December 31, 2005
Griffith, Indiana . . . . . . . Offices and Distribution Center -- 17,100 May 31, 2002
Springfield, Missouri . . . . . Offices and Distribution Center -- 17,000 September 30, 2003
Miami, Florida. . . . . . . . . Offices and Distribution Center -- 16,665 May 1, 2004
Des Plaines, Illinois . . . . . Offices and Distribution Center -- 16,173 May 31, 2008
Pompton Plains,
New Jersey . . . . . . . . . Offices and Distribution Center -- 16,041 August 1, 2002
Englewood, Ohio . . . . . . . . Offices and Distribution Center -- 15,000 January 31, 2004
West Seneca, New York . . . . . Offices and Distribution Center -- 15,000 November 30, 2001
West Boylston,
Massachusetts . . . . . . . Offices and Distribution Center -- 14,800 May 3, 2003
Fort Wright, Kentucky . . . . Offices -- 14,237 March 31, 2008
Spokane, Washington . . . . . . Offices and Distribution Center -- 14,025 October 31, 2006
Ashland, Kentucky . . . . . . . Offices and Distribution Center -- 14,000 October 31, 2003
Boca Raton, Florida . . . . . . Offices and Distribution Center -- 13,950 December 31, 2002
St. Petersburg, Florida . . . . Offices and Distribution Center -- 13,245 August 31, 2001
Rochester, New York . . . . . . Offices and Distribution Center -- 13,000 December 31, 2003
Hallowell, Maine . . . . . . . Offices and Distribution Center -- 13,000 September 30, 2002
Wessex, United Kingdom . . . Offices -- 12,000 June 30, 2016
Alexandria, Louisiana . . . . . Offices and Distribution Center -- 12,000 May 7, 2004
Omaha, Nebraska . . . . . . . . Offices and Distribution Center -- 11,450 November 30, 2001
Thomasville,
North Carolina . . . . . . . Offices and Distribution Center -- 11,325 January 15, 2004
South Elgin, Illinois . . . . . Offices and Distribution Center -- 11,175 August 1, 2002
Rockford, Illinois . . . . . . Offices and Retail Outlet -- 11,100 February 28, 2004
Peoria, Illinois . . . . . . . Offices and Distribution Center -- 11,022 July 31, 2004
Van Nuys, California . . . . . Offices and Distribution Center -- 10,400 February 28, 2003
Cherry Hill, New Jersey . . . . Offices and Distribution Center -- 10,000 November 1, 2009
60
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers and their respective ages and
positions are as follows:
Name Age Position with Omnicare
---- --- ----------------------
Edward L. Hutton . . . . . . . 82 Chairman, Director
Joel F. Gemunder . . . . . . . 62 President and Chief Executive Officer, Director
Patrick E. Keefe . . . . . . . 55 Executive Vice President--Operations, Director
Timothy E. Bien . . . . . . . . 50 Senior Vice President--Professional Services and
Purchasing, Director
David W. Froesel, Jr. . . . . . 49 Senior Vice President and Chief Financial Officer, Director
Cheryl D. Hodges. . . . . . . . 49 Senior Vice President and Secretary, Director
Peter Laterza . . . . . . . . . 43 Vice President and General Counsel
Charles H. Erhart, Jr . . . . . 75 Director
Sandra E. Laney . . . . . . . . 57 Director
Andrea R. Lindell, DNSc, RN . . 57 Director
Sheldon Margen, M.D . . . . . . 81 Director
Kevin J. McNamara . . . . . . . 47 Director
John H. Timoney . . . . . . . . 67 Director
Mr. E. L. Hutton is Chairman of Omnicare and has held this position since
May 1981. Additionally, he is Chairman and Chief Executive Officer and a
director of Chemed Corporation, Cincinnati, Ohio (a diversified public
corporation with interests in plumbing and drain cleaning services, janitorial
supplies and health care services) and has held these positions since November
1993 and April 1970, respectively. Previously, he was President and Chief
Executive Officer of Chemed, positions he had held from April 1970 to November
1993.
Mr. Gemunder is President and Chief Executive Officer of Omnicare and has
held these positions since May 1981 and May 2001, respectively. From January
1981 until July 1981, he served as Chief Executive Officer of the partnership
organized as a predecessor to Omnicare for the purpose of owning and operating
certain health care businesses of Chemed and Daylin, Inc., each then a
subsidiary of W.R. Grace & Co. Mr. Gemunder was an Executive Vice President of
Chemed and Group Executive of its Health Care Group from May 1981 through July
1981 and a Vice President of Chemed from 1977 until May 1981. Mr. Gemunder is a
director of Chemed and Ultratech Stepper, Inc. (a manufacturer of
photolithography equipment for the computer industry).
Mr. Keefe is Executive Vice President--Operations of Omnicare and has held
this position since February 1997. Previously he was Senior Vice
President--Operations since February 1994. From April 1993 to February 1994, he
was Vice President--Operations of Omnicare. From April 1992 to April 1993, he
served as Vice President--Pharmacy Management Programs of Diagnostek, Inc.,
Albuquerque, New Mexico (mail-service pharmacy and health care services). From
September 1990 to April 1992, Mr. Keefe served as President of HPI Health Care
Services, Inc., a subsidiary of Diagnostek, which was acquired from Omnicare in
August 1989. From August 1984 to September 1990, he served as Executive Vice
President of HPI.
Mr. Bien is Senior Vice President--Professional Services and Purchasing of
Omnicare, a position he has held since May 1996. From May 1992 until May 1996,
he served as Vice President of Professional Services and Purchasing of Omnicare.
Prior to that, he was Vice President and a former owner of Home Pharmacy
Services, Inc. Care Pharmacy, a wholly-owned subsidiary that Omnicare acquired
in December 1988.
Mr. Froesel is Senior Vice President and Chief Financial Officer of
Omnicare. He has held that position since joining Omnicare in March 1996. Mr.
Froesel was Vice President of Finance and Administration at Mallinckrodt
Veterinary, Inc. from May 1993 to February 1996. From July 1989 to April 1993,
he was worldwide Corporate Controller of Mallinckrodt Medical Inc.
61
Ms. Hodges is Senior Vice President and Secretary of Omnicare and has held
these positions since February 1994. From August 1986 to February 1994, she was
Vice President and Secretary of Omnicare. From August 1982 to August 1986, she
served as Vice President--Corporate and Investor Relations.
Mr. Laterza is Vice President and General Counsel of Omnicare. He has held
that position since joining Omnicare in July 1998. Mr. Laterza was Assistant
General Counsel of The Pittston Company from October 1993 to June 1998. From
January 1992 until September 1993 he was associated with the law firm of Gibson,
Dunn & Crutcher, and from October 1985 until December 1991 he was associated
with the law firm of Cravath, Swaine & Moore.
Mr. Erhart retired as President of W.R. Grace & Co., Columbia, Maryland
(international specialty chemicals, construction and packaging) in August 1990.
He had held this position since July 1989. From November 1986 to July 1989, he
was Chairman of the Executive Committee of Grace. From May 1981 to November
1986, he served as Vice Chairman and Chief Administrative Officer of Grace. Mr.
Erhart is a director of Chemed.
Ms. Laney is Senior Vice President and Chief Administrative Officer of
Chemed and has held these positions since November 1993 and May 1991,
respectively. From May 1984 to November 1993, she was a Vice President of
Chemed. Ms. Laney is a director of Chemed.
Dr. Lindell is Dean and Professor in the College of Nursing at the
University of Cincinnati, a position she has held since December 1990. Dr.
Lindell is also Associate Senior Vice President for Interdisciplinary Education
Programs for the Medical Center at the University of Cincinnati, since July
1998. She also serves as Interim Dean of the College of Allied Health Sciences
at the University of Cincinnati. From August 1981 to August 1990, Dr. Lindell
served as Dean and a Professor in the School of Nursing at Oakland University,
Rochester, Michigan.
Dr. Margen is a Professor Emeritus in the School of Public Health,
University of California, Berkeley, a position he has held since May 1989. He
had served as a Professor of Public Health at the University of California,
Berkeley, since 1979.
Mr. McNamara is President of Chemed and has held this position since August
1994. From November 1993 to August 1994, Mr. McNamara was Executive Vice
President, Secretary and General Counsel of Chemed. Previously, from May 1992 to
November 1993, he held the positions of Vice Chairman, Secretary and General
Counsel of Chemed. From August 1986 to May 1992, he served as Vice President,
Secretary and General Counsel of Chemed. From November 1990 to December 1992,
Mr. McNamara served as an Executive Vice President and Chief Operating Officer
of Omnicare. He is a director of Chemed.
Mr. Timoney is a retired executive of Applied Bioscience International Inc.
(research organization serving the pharmaceutical and biotechnology industries)
("Applied Bioscience "), at which he held a number of positions from 1986
through 1996. From December 1995 through September 1996, he was Chief Executive
Officer of Clinix International, Inc., a wholly owned subsidiary of Applied
Bioscience. From June 1992 to September 1996, Mr. Timoney was Senior Vice
Present of Applied Bioscience. From September 1986 through June 1992, he was
Vice President, Chief Financial Officer, Secretary and Treasurer of Applied
Bioscience. In addition, from September 1986 through June 1995 he was a director
of Applied Bioscience. Mr. Timoney has also held financial and executive
positions with IMS Health Incorporated (market research firm serving the
pharmaceutical and healthcare industries), Chemed and Grace.
62
DESCRIPTION OF NOTES
You can find the definitions of many of the terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Omnicare" refers only to Omnicare, Inc. and not to any of its subsidiaries.
The old notes were issued, and the exchange notes will be issued, under an
indenture dated as of March 20, 2001 between Omnicare, its subsidiary guarantors
and SunTrust Bank, as trustee. The following summary highlights the material
provisions of the indenture. Because this is a summary, it does not contain all
of the information that is included in the indenture. You should read the entire
indenture, including the definitions of the terms used below, because the
indenture, and not this summary, defines your rights as holders of notes. The
indenture is subject to and governed by the Trust Indenture Act of 1939, as
amended. Omnicare has previously filed a copy of the indenture with the SEC, and
the indenture is incorporated by reference as an exhibit to the registration
statement of which this prospectus forms a part.
Copies of the indenture and the registration rights agreement are available
as set forth below under "--Additional Information." Defined terms used in this
description but not defined below under "--Certain Definitions" have the
meanings assigned to them in the indenture. The registered Holder of a note will
be treated as the owner of it for all purposes. Only registered Holders will
have rights under the indenture.
Brief Description of the Exchange Notes and the Guarantees
The Exchange Notes
The exchange notes:
o are general unsecured obligations of Omnicare;
o are subordinated in right of payment to all existing and future Senior
Debt of Omnicare;
o are pari passu in right of payment with any future senior subordinated
Indebtedness of Omnicare;
o are unconditionally guaranteed by the Guarantors;
o are senior to Omnicare's outstanding 5% Convertible Subordinated
Debentures due 2007; and
o have terms that are substantially identical to the old notes, except
that the exchange notes will be registered under the Securities Act of
1933.
The Guarantees
The exchange notes, like the old notes, are guaranteed by all of Omnicare's
Domestic Subsidiaries except the Excluded Subsidiaries.
Each guarantee of the exchange notes:
o is a general unsecured obligation of the Guarantor;
o is subordinated in right of payment to all existing and future Senior
Debt of that Guarantor; and
o is pari passu in right of payment with any future senior subordinated
Indebtedness of that Guarantor.
As of June 30, 2001, Omnicare and the Guarantors had total Senior Debt of
approximately $51 million on a consolidated basis. An additional $447 million
was available to Omnicare for borrowing under the Credit Agreement as of that
date. Payments on the notes and under the guarantees will be subordinated to the
payment of Senior Debt. The indenture will permit us and the Guarantors to incur
additional Senior Debt.
All our Subsidiaries are Restricted Subsidiaries, except for Subsidiaries
designated as Unrestricted Subsidiaries. Unrestricted Subsidiaries held
approximately 3.4% of our total consolidated assets as of December 31, 2000 and
accounted for less than 1.4% of our total consolidated revenues for the twelve
months ended December 31, 2000. In addition, under the circumstances described
below under the subheading "--Certain Covenants--Designation of Restricted and
Unrestricted Subsidiaries," we will be able to designate other subsidiaries as
Unrestricted Subsidiaries. Our Unrestricted Subsidiaries will not be
63
subject to many of the restrictive covenants in the indenture. Our Unrestricted
Subsidiaries will not guarantee the notes.
Principal, Maturity and Interest
Omnicare may issue notes under the indenture having a maximum aggregate
principal amount of $500.0 million, of which $375.0 million were issued in the
private offering of the old notes. Omnicare may issue additional notes from time
to time. Any offering of additional notes is subject to the covenant described
below under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." The notes and any additional notes subsequently
issued under the indenture will be treated as a single class for all purposes
under the indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. Omnicare will issue notes in denominations
of $1,000 and integral multiples of $1,000. The notes will mature on March 15,
2011.
Interest on the notes accrues at the rate of 818% per annum and is payable
semi-annually in arrears on March 15 and September 15, commencing on September
15, 2001. Omnicare will make each interest payment to the Holders of record on
the immediately preceding March 1 and September 1.
Interest on the exchange notes will accrue from the last interest payment
date on which interest was paid on the old notes surrendered in the exchange
offer or, if no interest has been paid on the old notes, from March 20, 2001.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to Omnicare and the
trustee, all principal, interest and premium and Liquidated Damages, if any, on
that Holder's notes will be paid in accordance with those instructions. All
other payments on notes will be made at the office or agency of the paying agent
and registrar unless Omnicare elects to make interest payments by check mailed
to the Holders at their address set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The trustee is paying agent and registrar. Omnicare may change the paying
agent or registrar without prior notice to the Holders of the notes, and
Omnicare or any of its Subsidiaries may act as paying agent or registrar.
Transfer and Exchange
A Holder may transfer notes in accordance with the indenture. The registrar
and the trustee may require a Holder to furnish appropriate endorsements and
transfer documents in connection with a transfer of notes. Holders will be
required to pay all taxes due on transfer. Omnicare is not required to transfer
or exchange any note selected for redemption. Also, Omnicare is not required to
transfer or exchange any note for a period of 15 days before a selection of
notes to be redeemed.
Subsidiary Guarantees
The notes are guaranteed by each of Omnicare's current and future Domestic
Subsidiaries except the Excluded Subsidiaries. These Subsidiary Guarantees are
joint and several obligations of the Guarantors. Each Subsidiary Guarantee is
subordinated to the prior payment in full of all Senior Debt of that Guarantor.
The obligations of each Guarantor under its Subsidiary Guarantee are limited as
necessary to prevent that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law. See "Risk Factors--Your Ability to Enforce the
Guarantees of the Notes May Be Limited."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into, whether or not the
Guarantor is the surviving Person, another Person, other than Omnicare or
another Guarantor, unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
64
(2) subject to the provisions of the following paragraph, the Person
acquiring the property in any such sale or disposition or the Person
formed by or surviving any such consolidation or merger assumes all
the obligations of that Guarantor under the indenture, its Subsidiary
Guarantee and the registration rights agreement pursuant to a
supplemental indenture satisfactory to the trustee.
The Subsidiary Guarantee of a Guarantor will be released, and any Person
acquiring assets, including by way of merger or consolidation, or Capital Stock
of a Guarantor shall not be required to assume the obligations of that
Guarantor:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor to a Person that is
not, either before or after giving effect to the transaction, a
Restricted Subsidiary, if the sale or other disposition complies with
the "Asset Sale" provisions of the indenture;
(2) in connection with any sale of all of the Capital Stock of a Guarantor
to a Person that is not, either before or after giving effect to the
transaction, a Restricted Subsidiary, if the sale complies with the
"Asset Sale" provisions of the indenture;
(3) if Omnicare designates any Restricted Subsidiary that is a Guarantor
to be an Unrestricted Subsidiary or an Excluded Subsidiary in
accordance with the requirements of the indenture; or
(4) if any Guarantor is otherwise no longer obligated to provide a
Subsidiary Guarantee pursuant to the indenture.
Subordination
The payment of principal, interest and premium and Liquidated Damages, if
any, on the notes is subordinated to the prior payment in full of all Senior
Debt of Omnicare, including Senior Debt incurred after the date of the
indenture.
The holders of Senior Debt will be entitled to receive payment in full of
all Obligations due in respect of Senior Debt, including interest accruing after
the commencement of any bankruptcy proceeding at the rate specified in the
applicable Senior Debt, whether or not allowable as a claim in such proceeding,
before the Holders of notes will be entitled to receive any payment with respect
to the notes in the event of any distribution to creditors of Omnicare:
(1) in a liquidation or dissolution of Omnicare;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Omnicare or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of Omnicare's assets and liabilities.
Notwithstanding the foregoing, Holders of notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"--Legal Defeasance and Covenant Defeasance."
Omnicare also may not make any payment in respect of the notes, except in
Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance," if:
(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of that Designated Senior Debt to accelerate its
maturity and the trustee receives a payment blockage notice from
Omnicare or the holders of Designated Senior Debt.
Payments on the notes may and will be resumed:
(1) in the case of a payment default, upon the date on which the default
is cured or waived or the applicable Designated Senior Debt is
discharged or paid in full; and
(2) in the case of a nonpayment default, upon the earlier of the date on
which the nonpayment default is cured or waived or the applicable
Designated Senior Debt is discharged or paid in full
65
or 179 days after the date on which the applicable payment blockage
notice is received, unless the maturity of any Designated Senior Debt
has been accelerated.
No new payment blockage notice may be delivered unless and until:
(1) 360 days have elapsed since the delivery of the immediately prior
payment blockage notice; and
(2) all scheduled payments of principal, interest and premium and
Liquidated Damages, if any, on the notes that have come due have been
paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any payment blockage notice to the trustee will be, or be made, the
basis for a subsequent payment blockage notice unless that default has been
cured or waived for a period of not less than 90 days.
If the trustee or any Holder of the notes receives a payment in respect of
the notes when the payment is prohibited by these subordination provisions, the
trustee or the Holder, as the case may be, will hold the payment in trust for
the benefit of the holders of Senior Debt. Upon the proper written request of
the holders of Senior Debt, the trustee or the Holder, as the case may be, will
deliver the amounts in trust to the holders of Senior Debt or their proper
representative.
Omnicare must promptly notify holders of Senior Debt if payment of the
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of Omnicare, Holders of notes may
recover less ratably than creditors of Omnicare who are holders of Senior Debt.
See "Risk Factors--The Notes and the Subsidiary Guarantees Are Subordinated to
Senior Indebtedness."
Failure by Omnicare to make any required payment in respect of the notes
when due or within any applicable grace period, whether or not occurring during
a payment blockage period, will result in an Event of Default under the
indenture and, thereafter, Holders of the notes will have the right to
accelerate the maturity thereof.
Optional Redemption
At any time prior to March 15, 2004, Omnicare may on any one or more
occasions redeem up to 35% of the aggregate principal amount of notes issued
under the indenture at a redemption price of 108.125% of the principal amount,
plus accrued interest and Liquidated Damages, if any, to the redemption date,
with the net cash proceeds of one or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of notes issued under
the indenture remains outstanding immediately after the occurrence of
the redemption; and
(2) the redemption occurs within 60 days of the date of the closing of the
applicable Equity Offering.
Except as described in the preceding paragraph, the notes will not be
redeemable at Omnicare's option prior to March 15, 2006.
On or after March 15, 2006, Omnicare may redeem all or a part of the notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of principal amount, set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, on the notes redeemed, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on March 15 of the years indicated below:
Year Percentage
---- ----------
2006 . . . . . . . . . . . . . . . . 104.063%
2007 . . . . . . . . . . . . . . . . 102.708%
2008 . . . . . . . . . . . . . . . . 101.354%
2009 and thereafter . . . . . . . . 100.000%
66
Mandatory Redemption
Except as described below under "Repurchase at the Option of Holders,"
Omnicare is not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of notes will have the right to
require Omnicare to repurchase all or any part, equal to $1,000 or an integral
multiple of $1,000, of that Holder's notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer,
Omnicare will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of notes repurchased plus accrued and unpaid interest
and Liquidated Damages, if any, on the notes repurchased, to the date of
purchase. Within 30 days following any Change of Control, Omnicare will mail a
notice to each Holder describing the transaction or transactions that constitute
the Change of Control and offering to repurchase notes on the Change of Control
Payment Date specified in the notice, which date will be no earlier than 30 days
and no later than 60 days from the date the notice is mailed, pursuant to the
procedures required by the indenture and described in the notice. Omnicare will
comply with the requirements of Rule 14e-1 under the Securities Exchange Act of
1934, as amended, the "Exchange Act," and any other securities laws and
regulations thereunder to the extent those laws and regulations are applicable
in connection with the repurchase of the notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with the Change of Control provisions of the indenture, Omnicare will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Change of Control provisions
of the indenture by virtue of the conflict.
On the Change of Control Payment Date, Omnicare will, to the extent lawful:
(1) accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all notes or portions of notes properly
tendered; and
(3) deliver or cause to be delivered to the trustee the notes properly
accepted together with an officers' certificate stating the aggregate
principal amount of notes or portions of notes being purchased by
Omnicare.
The paying agent will promptly mail to each Holder of notes properly
tendered the Change of Control Payment for their notes, and the trustee will
promptly authenticate and mail, or cause to be transferred by book entry, to
each Holder a new note equal in principal amount to any unpurchased portion of
the notes surrendered, if any; provided that each new note will be in a
principal amount of $1,000 or an integral multiple of $1,000.
Omnicare will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require Omnicare to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the indenture are applicable. Except as described above
with respect to a Change of Control, the indenture does not contain provisions
that permit the Holders of the notes to require that Omnicare repurchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.
Omnicare will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indenture applicable to a Change of Control Offer made by Omnicare and
purchases all notes properly tendered and not withdrawn under the Change of
Control Offer.
In addition to our obligation to repurchase notes upon a Change of Control,
a Change of Control of our company, as defined in our credit facility and which
would include a Change of Control under the
67
notes, would trigger an event of default under our credit agreement. This would
allow our bank lenders to accelerate repayment of amounts outstanding under the
credit facility and terminate the credit facility. Further, a Change of Control
could constitute a "fundamental change" with respect to our outstanding
convertible subordinated debentures, which would result in us being required to
also make an offer to repurchase those debentures. As of June 30, 2001, we had
$50 million of outstanding debt under our credit facility and $345 million in
aggregate principal amount of outstanding convertible debentures. Under the
indenture relating to the notes, within 90 days of a Change of Control and prior
to making an offer to purchase the notes, we are required to repay all
outstanding senior debt or obtain any consents necessary in order to allow us to
repurchase notes. We might not be able to obtain the consent of our bank lenders
to repurchase notes upon a Change of Control. In addition, we might not have
sufficient funds available to us to repay amounts outstanding under our credit
facility and make any required repurchase of notes and our convertible
debentures, and we might not be able to raise the necessary funds through other
means.
If we are unable to repurchase notes upon a change of control for any
reason, our failure to do so would constitute and event of default under the
indenture. However, notwithstanding the fact that an event of default with
respect to the notes would occur if we did not repurchase notes when required,
the subordination provisons of the indenture relating to the notes might
preclude us from making payments with respect to the notes until holders of
senior indebtedness are paid in full.
The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of Omnicare and its
Restricted Subsidiaries taken as a whole. Although there is a limited body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of notes to require Omnicare to repurchase its notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of Omnicare and its Restricted Subsidiaries taken as a whole
to another Person or group may be uncertain.
Asset Sales
Omnicare will not, and will not permit any of the Restricted Subsidiaries
to, consummate an Asset Sale unless:
(1) Omnicare, or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) the fair market value is determined by Omnicare's Board of Directors
and evidenced by a resolution of the Board of Directors; and
(3) at least 75% of the consideration received in the Asset Sale by
Omnicare or the Restricted Subsidiary is in the form of cash, Cash
Equivalents and/or Replacement Assets. For purposes of this provision,
each of the following will be deemed to be cash:
(a) any liabilities, as shown on Omnicare's or the Restricted
Subsidiary's most recent balance sheet, of Omnicare or any
Restricted Subsidiary, other than contingent liabilities and
liabilities that are by their terms subordinated to the notes or
any Subsidiary Guarantee, that are assumed by the transferee of
any such assets and from which Omnicare or the Restricted
Subsidiary is released from further liability; and
(b) any securities, notes or other obligations received by Omnicare
or any Restricted Subsidiary from such transferee that are
converted by Omnicare or the Restricted Subsidiary into cash
within 60 days of receipt, to the extent of the cash received in
that conversion.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
Omnicare may apply those Net Proceeds at its option:
(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a majority of
the Voting Stock of, another Permitted Business;
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(3) to make a capital expenditure;
(4) to acquire Replacement Assets; or
(5) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any Net Proceeds, Omnicare may temporarily
invest the Net Proceeds in any manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $20.0 million, Omnicare will make an
Asset Sale Offer to all Holders of notes and all holders of other Indebtedness
that is pari passu with the notes containing provisions similar to those set
forth in the indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets to purchase the maximum principal amount of notes
and the other pari passu Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase, and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, Omnicare may use
those Excess Proceeds for any purpose not otherwise prohibited by the indenture.
If the aggregate principal amount of notes and other pari passu Indebtedness
tendered into the Asset Sale Offer exceeds the amount of Excess Proceeds, the
trustee will select the notes and other pari passu Indebtedness to be purchased
on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of
Excess Proceeds will be reset at zero.
Omnicare will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent those
laws and regulations are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sale provisions of the
indenture, Omnicare will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Asset Sale provisions of the indenture by virtue of that conflict.
Events giving rise to our obligation to make an offer to purchase notes in
connection with an asset sale could trigger an event of default under our credit
facility. As indicated above, an event of default under our credit agreement
would allow our bank lenders to accelerate repayment of amounts outstanding
under the credit facility and terminate the credit facility. As a result, unless
we obtained the consent of the lenders under our credit agreement, we might not
be able to repurchase notes until we repaid amounts outstanding under the credit
facility.
If we are unable to make any required offer to repurchase notes in
connection with an asset sale for any reason, our failure to do so would
constitute an event of default under the indenture. However, notwithstanding the
fact that an event of default with respect to the notes would occur if we did
not repurchase the notes when required, the subordination provisions of the
indenture relating to the notes might preclude us from making payments with
respect to the notes until holders of senior indebtedness are paid in full.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed on any national securities exchange, in
compliance with the requirements of the principal national securities
exchange on which the notes are listed; or
(2) if the notes are not listed on any national securities exchange, on a
pro rata basis, by lot or by a method as the trustee deems fair and
appropriate.
No notes of $1,000 or less can be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address, except that redemption notices may be mailed more than 60 days prior to
a redemption date if the notice is issued in connection with a defeasance of the
notes or a satisfaction and discharge of the indenture. Notices of redemption
may not be conditional.
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If any note is to be redeemed in part only, the notice of redemption that
relates to that note will state the portion of the principal amount of that note
that is to be redeemed. A new note in principal amount equal to the unredeemed
portion of the original note will be issued in the name of the Holder of notes
upon cancellation of the original note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on notes or portions of them called for redemption.
Certain Covenants
Covenant Removal
From and after the first date on which both (a) the notes are rated
Investment Grade by each of Moody's Investor Service, Inc. and Standard & Poor's
Ratings Group and (b) there shall not exist a Default or Event of Default under
the indenture, a "Rating Event," Omnicare and the Restricted Subsidiaries will
no longer be subject to the covenants described under "Restricted Payments,"
"Incurrence of Indebtedness and Issuance of Preferred Stock," "Dividend and
Other Payment Restrictions Affecting Subsidiaries," "Transactions with
Affiliates," "Additional Subsidiary Guarantees," clause (4) of the first
paragraph under "Merger, Consolidation and Sale of Assets" and "Repurchase at
the Option of Holders--Asset Sales." Upon the occurrence of a Rating Event, the
Subsidiary Guarantees of each of the Guarantors will be automatically released.
A Rating Event may not occur or, if one occurs, the notes may not continue
to maintain an Investment Grade rating. In addition, at no time after a Rating
Event will the provisions and covenants contained in the indenture at the time
of issuance of the notes that cease to be applicable after the Rating Event be
reinstated.
In the event Moody's Investor Service, Inc. or Standard & Poor's Ratings
Group is no longer in existence or issuing ratings, the applicable organization
may be replaced by a nationally recognized statistical rating organization, as
defined in Rule 436 under the Securities Act of 1933, designated by Omnicare
with notice to the trustee and the foregoing provisions will apply to the rating
issued by the replacement rating agency.
Restricted Payments
Omnicare will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or distribution:
(a) on account of Omnicare's or any Restricted Subsidiary's Equity
Interests, including, without limitation, any payment in
connection with any merger or consolidation involving Omnicare or
any of its Restricted Subsidiaries, or
(b) to the direct or indirect holders of Omnicare's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as
such,
except that dividends and distributions payable in Equity Interests
that do not constitute Disqualified Stock of Omnicare or a Restricted
Subsidiary may be declared and paid;
(2) purchase, redeem or otherwise acquire or retire for value, including,
without limitation, in connection with any merger or consolidation
involving Omnicare, any Equity Interests of Omnicare or any direct or
indirect parent of Omnicare;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Subsidiary Guarantees, except a
payment of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment.
The payments and other actions set forth in the above clauses (1) through
(4) above constitute "Restricted Payments."
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The foregoing notwithstanding, Omnicare and its Restricted Subsidiaries may
make a Restricted Payment if at the time of and after giving effect to that
Restricted Payment:
(1) no Default or Event of Default has occurred and is continuing or would
occur as a consequence of the Restricted Payment; and
(2) Omnicare would, at the time of the Restricted Payment and after giving
pro forma effect thereto as if the Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(3) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Omnicare and its Restricted
Subsidiaries after the date of the indenture, excluding Restricted
Payments permitted by clauses (2), (3), (4), (6), (7), (8), (9) and
(10) of the next succeeding paragraph, is less than the sum, without
duplication, of:
(a) for the period, taken as one accounting period, from January 1,
2001 to the end of Omnicare's most recently ended fiscal quarter
for which internal financial statements are available at the time
of the Restricted Payment:
(i) 50% of the Consolidated Net Income of Omnicare; or
(ii) if Consolidated Net Income for that period is a deficit,
less 100% of the deficit, plus
(b) 100% of the aggregate net cash proceeds received by Omnicare
since the date of the indenture (i) as a contribution to its
common equity capital, (ii) from the issue or sale of Equity
Interests of Omnicare, other than Disqualified Stock and (iii)
the issue or sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities of Omnicare
that have been converted into or exchanged for Equity Interests,
except, in the case of clauses (ii) and (iii), for proceeds
relating to securities sold to a Restricted Subsidiary, plus
(c) 100% of the aggregate net increase to Omnicare's stockholders
equity as a result of the conversion of Omnicare's 5% Convertible
Subordinated Debentures due 2007 into common stock of Omnicare,
plus
(d) to the extent that any Restricted Investment that was made after
the date of the indenture is sold for cash or Cash Equivalents,
or a combination thereof, or otherwise liquidated or repaid for
cash or Cash Equivalents, or a combination thereof, the lesser of
(i) the return of capital with respect to such Restricted
Investment, less the cost of disposition, if any, and (ii) the
initial amount of such Restricted Investment, plus
(e) an amount equal to the sum of (x) the net reduction in
Investments in Unrestricted Subsidiaries resulting from cash
dividends, repayments of loans or advances or other transfers of
assets, in each case to Omnicare or any Restricted Subsidiary
from Unrestricted Subsidiaries, plus (y) the portion,
proportionate to Omnicare's equity interest in such Subsidiary,
of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated
a Restricted Subsidiary, in each case since the date of the
indenture; provided, however, that the foregoing sum shall not
exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments made since the date of the indenture by Omnicare or
any Restricted Subsidiary that were treated as Restricted
Payments, and provided, further, that no amount will be included
under this clause (e) to the extent it is already included in
clauses (a), (b), (c) or (d) above.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the
dividend payment would have complied with the provisions of the
indenture;
71
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Omnicare or any
Restricted Subsidiary or of any Equity Interests of Omnicare in
exchange for, or out of the net cash proceeds of the substantially
concurrent sale, other than to a Restricted Subsidiary, of, Equity
Interests of Omnicare, other than Disqualified Stock; provided that
the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
acquisition will be excluded from clause(3)(b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Omnicare or any Restricted Subsidiary
with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary to the holders
of its Equity Interests on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Omnicare or any Restricted Subsidiary
held by any officer, director or employee of Omnicare or any
Subsidiary of Omnicare in connection with any management equity
subscription agreement, any compensation, retirement, disability,
severance or benefit plan or agreement, any stock option or incentive
plan or agreement, any employment agreement or any other similar plans
or agreements; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may not
exceed $10.0 million in any twelve-month period;
(6) the payment of dividends by Omnicare on its common stock in an
aggregate annual amount of up to $20.0 million;
(7) the repurchase of any class of Capital Stock of a Restricted
Subsidiary, other than Disqualified Stock, if the repurchase is made
pro rata among all holders of the class of Capital Stock;
(8) the payment of any scheduled dividend or similar distribution, and any
scheduled repayment of the stated amount, liquidation preference or
any similar amount at final maturity or on any scheduled redemption or
repurchase date, in respect of any series of preferred stock or
similar securities of Omnicare or any Restricted Subsidiary, including
Disqualified Stock, provided that (a) the series of preferred stock or
similar securities was issued in compliance with the "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant and (b) the
payments were scheduled to be paid in the original documentation
governing the series of preferred stock or other securities; provided,
however, that the foregoing provisions of this clause (8) shall not be
deemed to permit the payment of any dividend or similar distribution,
or the payment of the stated amount, liquidation preference or any
similar amount, prior to the date originally scheduled for the payment
thereof;
(9) payments in lieu of fractional shares; and
(10) additional Restricted Payments, with each additional Restricted
Payment being valued as of the date made and without regard to
subsequent changes in value, pursuant to this clause (10) in an
aggregate amount, taken together with all other Restricted Payments
made pursuant to this clause (10), not to exceed 2.5% of Consolidated
Assets of Omnicare as of the end of Omnicare's most recently completed
fiscal quarter for which internal financial statements are available
at the time of the additional Restricted Payment.
The amount of all Restricted Payments, other than cash, will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Omnicare or the Restricted Subsidiary,
as the case may be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this covenant will be
determined by the Board of Directors in good faith, whose determination with
respect thereto will be conclusive.
Incurrence of Indebtedness and Issuance of Preferred Stock
Omnicare will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to, collectively, "incur," any Indebtedness, including Acquired Debt, and
Omnicare
72
will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that Omnicare and any Restricted Subsidiary may incur Indebtedness,
including Acquired Debt, and Omnicare may issue Disqualified Stock and any
Restricted Subsidiary may issue preferred stock, including Disqualified Stock,
if the Fixed Charge Coverage Ratio for Omnicare's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which the additional Indebtedness is incurred
or the Disqualified Stock or preferred stock is issued would have been at least
2.0 to 1, determined on a pro forma basis, including pro forma application of
the net proceeds therefrom, as if the additional Indebtedness had been incurred
or the Disqualified Stock or preferred stock had been issued, as the case may
be, at the beginning of the four-quarter period.
The first paragraph of this covenant will not prohibit the following
Permitted Debt:
(1) the incurrence by Omnicare and its Restricted Subsidiaries of
additional Indebtedness and letters of credit under Credit Facilities,
with letters of credit being deemed to have a principal amount equal
to the maximum potential liability of Omnicare and its Restricted
Subsidiaries thereunder, in an aggregate principal amount at any one
time outstanding under this clause (1) not to exceed $750.0 million;
(2) Existing Indebtedness;
(3) the incurrence by Omnicare and the Guarantors of Indebtedness
represented by the notes and the related Subsidiary Guarantees to be
issued on the date of the indenture and the exchange notes and the
related Subsidiary Guarantees to be issued pursuant to the
registration rights agreement;
(4) the incurrence by Omnicare or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in
the business of Omnicare or the Subsidiary, in an aggregate principal
amount, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to
this clause (4), not to exceed $25.0 million at any time outstanding;
(5) the incurrence by Omnicare or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace
Indebtedness, other than intercompany Indebtedness, that was permitted
by the indenture to be incurred under the first paragraph of this
covenant or clauses (2), (3), (4), (10), (13), (14) or this clause (5)
of this paragraph;
(6) the incurrence by Omnicare or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among Omnicare and any of its
Restricted Subsidiaries; provided, however, that (i) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than Omnicare or a
Restricted Subsidiary and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either Omnicare or a Restricted
Subsidiary, will be deemed, in each case, to constitute an incurrence
of such Indebtedness by Omnicare or the Restricted Subsidiary, as the
case may be, that was not permitted by this clause (6);
(7) the incurrence by Omnicare or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging (a) interest rate risk with respect to any Indebtedness that
is permitted by the terms of the indenture to be outstanding or (b)
exchange rate risk with respect to obligations under any agreement or
Indebtedness, or with respect to any asset, of the Person that is
payable or denominated in a currency other than U.S. Dollars;
(8) the guarantee by Omnicare or any of the Restricted Subsidiaries of
Indebtedness of Omnicare or a Restricted Subsidiary that was permitted
to be incurred by another provision of this covenant;
(9) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the
form of additional Indebtedness with the same terms, and the payment
of dividends on preferred stock, including Disqualified Stock, in the
form of additional shares of the same class of preferred stock,
including Disqualified Stock, will not be deemed to
73
be an incurrence of Indebtedness or an issuance of preferred stock,
including Disqualified Stock, for purposes of this covenant; provided,
in each of these cases, that the amount thereof is included in Fixed
Charges of Omnicare as accrued;
(10) The issuance of Convertible Subordinated Indebtedness and/or the
issuance of Convertible Preferred Stock in an aggregate principal
amount, with the liquidation value of the Convertible Preferred Stock
being treated as its principal amount for this purpose, not to exceed
$375.0 million at any one time outstanding pursuant to this clause
(10), plus the issuance of any related securities issued by a
subsidiary trust or similar financing vehicle in connection therewith;
(11) Indebtedness of Omnicare or any Restricted Subsidiary consisting of
guarantees, indemnities, hold backs or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of
Capital Stock of Restricted Subsidiaries, or contingent payment
obligations incurred in connection with the acquisition or disposition
of assets which are contingent on the performance of the assets
acquired or disposed of;
(12) Indebtedness represented by (a) letters of credit for the account of
Omnicare or any Restricted Subsidiary or (b) other obligations to
reimburse third parties pursuant to any surety bond or other similar
arrangements, to the extent that the letters of credit and other
obligations, as the case may be, are intended to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance, in connection with participation in government
reimbursement or other programs or other similar requirements in the
ordinary course of business;
(13) the incurrence by Omnicare or any Restricted Subsidiary of
Indebtedness to the extent the proceeds thereof are used to purchase
notes pursuant to a Change of Control offer; and
(14) the incurrence by Omnicare or any of its Restricted Subsidiaries of
additional Indebtedness, which may include, but is not limited to,
Indebtedness of the types referred to in the foregoing clauses (1)
through (13), in an aggregate principal amount, or accreted value, as
applicable, at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (14), not to exceed
$50.0 million.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (14) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Omnicare will be permitted to classify and reclassify each item of Indebtedness
in any manner that complies with this covenant. Indebtedness under Credit
Facilities outstanding on the date on which notes are first issued and
authenticated under the indenture will be deemed to have been incurred on that
date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt.
No Senior Subordinated Debt
Omnicare will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of Omnicare and senior in any respect in right of
payment to the notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Debt of that Guarantor and senior in any respect
in right of payment to that Guarantor's Subsidiary Guarantee.
Liens
Omnicare will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing pari passu or subordinated Indebtedness, or trade payables on
any asset now owned or hereafter acquired, except Permitted Liens, unless (i) in
the case of any Lien securing pari passu Indebtedness, the notes are secured by
a Lien that
74
is senior in priority to or pari passu with that Lien and (ii) in the case of
any Lien securing subordinated Indebtedness, the notes are secured by a Lien
that is senior in priority to that Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
Omnicare will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
Omnicare or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or
pay any indebtedness owed to Omnicare or any of its Restricted
Subsidiaries;
(2) make loans or advances to Omnicare or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to Omnicare or any of its
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness and Credit Facilities as in
effect on the date of the indenture or, if not in effect on the date
of the indenture, the Credit Agreement, provided, that the terms of
the Credit Agreement are not materially less favorable to the
noteholders than the Existing Credit Facilities, and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of those agreements; provided
that the amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are not
materially more restrictive, taken as a whole, with respect to those
dividend and other payment restrictions than those contained in those
agreements on the date of the indenture or in the Credit Agreement;
(2) the indenture, the notes and the Subsidiary Guarantees, or the notes
and the related guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Omnicare or any of its Restricted Subsidiaries as in
effect at the time of the acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets
of the Person, so acquired, provided that, in the case of
Indebtedness, the Indebtedness was permitted by the terms of the
indenture to be incurred and, provided, further, that the Indebtedness
or Capital Stock was not incurred in connection with or in
contemplation of that acquisition;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on that property of the
nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary or any assets thereof that restricts distributions by that
Restricted Subsidiary pending the sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing the Permitted Refinancing
Indebtedness are not materially more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness
being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred under
the provisions of the covenant described above under the caption
"--Liens" that limit the right of the debtor to dispose of the assets
subject to those Liens;
(10) provisions with respect to the disposition or distribution of assets
or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements entered into in the
ordinary course of business;
(11) restrictions imposed in connection with a financing transaction
involving a sale or other disposition of accounts receivable and
related assets, including, without limitation, in connection with a
securitization or similar financing, or in connection with a financing
involving a
75
subsidiary trust or similar financing vehicle that is permitted by
the "Incurrence of Indebtedness and Issuance of Preferred Stock"
covenant, provided, that these restrictions do not materially
adversely affect Omnicare's ability to pay interest and principal on
the notes when due; and
(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business or imposed by governmental agencies or authorities.
Merger, Consolidation or Sale of Assets
Omnicare may not, directly or indirectly: (1) consolidate or merge with or
into another Person, whether or not Omnicare is the surviving corporation; or
(2) sell, assign, transfer, convey or otherwise dispose of all or substantially
all of the properties or assets of Omnicare and its Restricted Subsidiaries
taken as a whole, in one or more related transactions, to another Person;
unless:
(1) either: (a) Omnicare is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger, if other than
Omnicare, or to which the sale, assignment, transfer, conveyance or
other disposition has been made is a corporation organized or existing
under the laws of the United States, any state of the United States or
the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger, if
other than Omnicare, or the Person to which the sale, assignment,
transfer, conveyance or other disposition has been made assumes all
the obligations of Omnicare under the notes, the indenture and the
registration rights agreement pursuant to agreements reasonably
satisfactory to the trustee;
(3) immediately after the transaction, on a pro forma basis giving effect
to the transaction or series of transactions, and treating any
obligation of Omnicare or any Restricted Subsidiary incurred in
connection with or as a result of the transaction or series of
transactions as having been incurred at the time of the transaction,
no Default or Event of Default exists; and
(4) Omnicare or the Person formed by or surviving the consolidation or
merger, if other than Omnicare, or to which the sale, assignment,
transfer, conveyance or other disposition has been made:
(a) will, on a pro forma basis giving effect to the transaction or
series of transactions, have Consolidated Net Worth immediately
after the transaction equal to or greater than the Consolidated
Net Worth of Omnicare immediately preceding the transaction; and
(b) will, on the date of the transaction after giving pro forma
effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable fourquarter
period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
In addition, Omnicare may not, directly or indirectly, lease all or
substantially all of the properties or assets of Omnicare and its Restricted
Subsidiaries, taken as a whole, in one or more related transactions, to any
other Person. This "Merger, Consolidation or Sale of Assets" covenant will not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among Omnicare and any of the Guarantors.
Upon any consolidation or merger, or any sale, assignment, transfer,
conveyance, transfer or other disposition of all or substantially all of the
properties or assets of Omnicare and its Restricted Subsidiaries, taken as a
whole, in accordance with the foregoing provisions, the successor Person formed
by such consolidation or into which Omnicare is merged or to which the sale,
assignment, transfer, conveyance or other disposition is made, shall succeed to,
and be substituted for, and may exercise every right and power of, Omnicare
under the indenture with the same effect as if the successor had been named as
Omnicare therein. When a successor assumes all the obligations of its
predecessor under the indenture and the notes following a consolidation or
merger, or any sale, assignment, transfer, conveyance, transfer or other
disposition of 90% or more of the assets of the predecessor in accordance with
the foregoing provisions, the predecessor shall be released from those
obligations.
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Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by Omnicare and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of the designation and will reduce the amount
available for Restricted Payments under the first paragraph of the covenant
described above under the caption "--Restricted Payments" or Permitted
Investments, as determined by Omnicare. That designation will only be permitted
if the Investment would be permitted at that time and if the Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may re-designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if the redesignation would not cause a Default.
Transactions with Affiliates
Omnicare will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate, each, an
"Affiliate Transaction," unless:
(1) the Affiliate Transaction is on terms that are no less favorable to
Omnicare or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Omnicare or the
Restricted Subsidiary with an unrelated Person; and
(2) Omnicare delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, a resolution of the Board of Directors
set forth in an officers' certificate certifying that the
Affiliate Transaction complies with this covenant and that the
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $10.0 million, an opinion as to the fairness to the
Holders of the Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking
firm of national standing in the United States.
The following items will not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) directors' fees, indemnification and similar arrangements, consulting
fees, employee salaries, bonuses or employment agreements,
compensation, retirement, disability, severance or employee benefit
arrangements and incentive arrangements with, and loans and advances
to, any officer, director or employee in the ordinary course of
business,
(2) performance of all agreements in existence on the date of the
indenture and any modification thereto or any transaction contemplated
thereby in any replacement agreement therefor so long as the
modification or replacement is not materially more disadvantageous to
Omnicare or any of its Restricted Subsidiaries than the original
agreement in effect on the date of the indenture;
(3) transactions in connection with a financing transaction involving a
sale or other disposition of accounts receivable and related assets,
including, without limitation, in connection with a securitization or
similar financing, or in connection with a financing involving a
subsidiary trust or similar financing vehicle that is permitted by the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(4) transactions in the ordinary course of business with any joint venture
that is otherwise permitted by the indenture; provided, that the joint
venture is between or among Omnicare and/or any of its Subsidiaries on
the one hand and third parties that are not otherwise Affiliates of
Omnicare on the other hand;
(5) transactions between or among Omnicare and/or its Restricted
Subsidiaries;
77
(6) transactions with a Person, other than an Unrestricted Subsidiary,
that is an Affiliate of Omnicare solely because Omnicare or a
Restricted Subsidiary owns an Equity Interest in, or controls, that
Person;
(7) sales of Equity Interests, other than Disqualified Stock, to
Affiliates of Omnicare; and
(8) Restricted Payments that are permitted by the provisions of the
indenture described above under the caption "--Restricted Payments."
Additional Subsidiary Guarantees
If Omnicare or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary after the date of the indenture, then that newly
acquired or created Domestic Subsidiary, other than an Excluded Subsidiary, will
become a Guarantor and execute a supplemental indenture and deliver an opinion
of counsel satisfactory to the trustee within 10 business days after the end of
the fiscal quarter in which it was acquired or created.
Business Activities
Omnicare will not, and will not permit any Restricted Subsidiary to, engage
in any business other than Permitted Businesses, except to the extent it would
not be material to Omnicare and its Restricted Subsidiaries taken as a whole.
Reports
Whether or not required by the SEC, so long as any notes are outstanding,
Omnicare will furnish to the Holders of notes, within the time periods specified
in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if
Omnicare were required to file those Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report
on the annual financial statements by Omnicare's certified independent
accountants; and
(2) all current reports that would be required to be filed with the SEC on
Form 8-K if Omnicare were required to file those reports.
In addition, whether or not required by the SEC, Omnicare will file a copy of
all of the information and reports referred to in clauses (1) and (2) above with
the SEC for public availability within the time periods specified in the SEC's
rules and regulations, unless the SEC will not accept that filing, and make that
information available to securities analysts and prospective investors upon
request. In addition, Omnicare and the Subsidiary Guarantors have agreed that,
for so long as any notes remain outstanding, they will furnish to the Holders
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act of 1933.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by Omnicare or any of its Restricted Subsidiaries to comply
with the provisions described under the captions "--Repurchase at the
Option of Holders--Change of Control," "--Repurchase at the Option of
Holders--Asset Sales," or "--Certain Covenants--Merger, Consolidation
or Sale of Assets;"
(4) failure by Omnicare or any of its Restricted Subsidiaries for 60 days
after notice to comply with any of the other agreements in the
indenture;
78
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Omnicare or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by Omnicare or any
of its Restricted Subsidiaries, whether that Indebtedness or guarantee
now exists, or is created after the date of the indenture, if that
default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on that Indebtedness prior to the expiration of
the grace period provided in that Indebtedness on the date of the
default, a "Payment Default;" or
(b) results in the acceleration of that Indebtedness prior to its
express maturity, and, in each case, the principal amount of that
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $25.0
million or more;
(6) failure by Omnicare or any of its Restricted Subsidiaries to pay
final, non-appealable judgments aggregating in excess of $25.0 million
that are not covered by insurance or as to which an insurer has not
acknowledged coverage in writing, which judgments are not paid,
discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any Subsidiary Guarantee shall
be held in any final, nonappealable judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting on behalf of
any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee, unless that Guarantor could be designated as an
Excluded Subsidiary; and
(8) certain events of bankruptcy or insolvency described in the indenture
with respect to Omnicare or any of its Restricted Subsidiaries that is
a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency with respect to Omnicare, all outstanding notes will
become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or the Holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from Holders of the
notes notice of any continuing Default or Event of Default if it determines that
withholding notice is in their interest, except a Default or Event of Default
relating to the payment of principal or interest or Liquidated Damages.
The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest or premium or Liquidated Damages on, or the principal of, the notes.
Omnicare is required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default or
Event of Default, Omnicare is required to deliver to the trustee a statement
specifying that Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Omnicare or
any Guarantor will have any liability for any obligations of Omnicare or the
Guarantors under the notes, the indenture, the Subsidiary Guarantees, or for any
claim based on, in respect of, or by reason of, those obligations or their
creation. Each Holder of notes by accepting a note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
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Legal Defeasance and Covenant Defeasance
Omnicare may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees, "Legal
Defeasance," except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated
Damages, if any, on the notes when the payments are due from the trust
referred to below;
(2) Omnicare's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment
and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee, and
Omnicare's and the Guarantor's obligations in connection therewith;
and
(4) the Legal Defeasance provisions of the indenture.
In addition, Omnicare may, at its option and at any time, elect to have the
obligations of Omnicare and the Guarantors released with respect to certain
covenants that are described in the indenture, "Covenant Defeasance," and
thereafter any omission to comply with those covenants will not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events, not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events, described under "--Events of
Default and Remedies" will no longer constitute an Event of Default with respect
to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Omnicare must irrevocably deposit with the trustee, in trust, for the
benefit of the Holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination of cash in U.S.
dollars and non-callable Government Securities, in amounts as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or interest
and premium and Liquidated Damages, if any, on the outstanding notes
on the stated maturity or on the applicable redemption date, as the
case may be, and Omnicare must specify whether the notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, Omnicare has delivered to the trustee
an opinion of counsel reasonably acceptable to the trustee confirming
that (a) Omnicare has received from, or there has been published by,
the Internal Revenue Service a ruling or (b) since the date of the
indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon the
opinion of counsel will confirm that, the Holders of the outstanding
notes will not recognize income, gain or loss for federal income tax
purposes as a result of the Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, Omnicare has delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if the Covenant Defeasance had not
occurred;
(4) no Default or Event of Default has occurred and is continuing on the
date of the deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to the deposit);
(5) the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the indenture, to which Omnicare
or any of its Subsidiaries is a party or by which Omnicare or any of
its Subsidiaries is bound;
(6) Omnicare must deliver to the trustee an officers' certificate stating
that the deposit was not made by Omnicare with the intent of
preferring the Holders of notes over the other creditors of
80
Omnicare with the intent of defeating, hindering, delaying or
defrauding creditors of Omnicare or others; and
(7) Omnicare must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with or waived.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the notes then outstanding,
including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes. Additionally, except as
provided in the next three succeeding paragraphs, any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes, including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes.
Without the consent of each Holder affected, an amendment or waiver may
not, with respect to any notes held by a non-consenting Holder:
(1) reduce the principal amount of notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes,
other than provisions relating to the covenants described above under
the caption "--Repurchase at the Option of Holders;"
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a Default or Event of Default in the payment of principal of, or
interest or premium, or Liquidated Damages, if any, on the notes,
except a rescission of acceleration of the notes by the Holders of at
least a majority in aggregate principal amount of the notes and a
waiver of the payment default that resulted from that acceleration;
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to waivers
of past Defaults or the rights of Holders of notes to receive payments
of principal of, or interest or premium or Liquidated Damages, if any,
on the notes;
(7) waive a redemption payment with respect to any note, other than a
payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders;"
(8) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or the indenture, except in accordance with the terms of the
indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture relating to subordination that adversely affects the rights of the
Holders of the notes will require the consent of the Holders of at least 66 2/3%
in aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of notes,
Omnicare, the Guarantors and the trustee may amend or supplement the indenture
or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Omnicare's or a Guarantor's
obligations to Holders of notes in the case of a merger or
consolidation or sale of all or substantially all of Omnicare's or a
Guarantor's assets;
(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
legal rights under the indenture of Holders;
81
(5) to comply with requirements of the SEC in order to effect or maintain
the qualification of the indenture under the Trust Indenture Act; or
(6) to allow any Guarantor to execute a supplemental indenture and/or a
Subsidiary Guarantee with respect to the notes.
Satisfaction and Discharge
The indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost, stolen or
destroyed notes that have been replaced or paid and notes for
whose payment money has been deposited in trust and thereafter
repaid to Omnicare, have been delivered to the trustee for
cancellation; or
(b) all notes that have not been delivered to the trustee for
cancellation have become due and payable by reason of the mailing
of a notice of redemption or otherwise or will become due and
payable within one year and Omnicare or any Guarantor has
irrevocably deposited or caused to be deposited with the trustee
as trust funds in trust solely for the benefit of the Holders,
cash in U.S. dollars, non-callable Government Securities, or a
combination of cash in U.S. dollars and non-callable Government
Securities, in amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the notes not delivered to
the trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default has occurred and is continuing on the
date of the deposit or will occur as a result of the deposit and the
deposit will not result in a breach or violation of, or constitute a
default under, any other instrument to which Omnicare or any Guarantor
is a party or by which Omnicare or any Guarantor is bound;
(3) Omnicare or any Guarantor has paid or caused to be paid all sums
payable by it under the indenture; and
(4) Omnicare has delivered irrevocable instructions to the trustee under
the indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.
In addition, Omnicare must deliver an officers' certificate and an opinion
of counsel to the trustee stating that all conditions precedent to satisfaction
and discharge have been satisfied or waived.
Concerning the Trustee
If the trustee becomes a creditor of Omnicare or any Guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of those claims as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate the conflict
within 90 days, apply to the SEC for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
occurs and is continuing, the trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to those provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of notes, unless the Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or expense.
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Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to Omnicare, Inc. 100
East River Center Boulevard, Covington, KY, 41011, Attention: General Counsel.
Book-Entry, Delivery and Form
General
Except as set forth below, exchange notes will be issued in registered,
global form (each, a "Global Note") in minimum denominations of $1,000 and
integral multiples of $1,000 in excess of $1,000.
Except as set forth below, Global Notes may be transferred, in whole and
not in part, only to another nominee of The Depository Trust Company or to a
successor of The Depository Trust Company or its nominee. Beneficial interests
in Global Notes may not be exchanged for notes in certificated form except in
the limited circumstances described below. See "--Exchange of Global Notes for
Certificated Notes." Except in the limited circumstances described below, owners
of beneficial interests in the Global Notes will not be entitled to receive
physical delivery of exchange notes in certificated form. In addition, transfers
of beneficial interests in the Global Notes will be subject to the applicable
rules and procedures of The Depository Trust Company and its direct or indirect
participants, which may change from time to time.
Depository Procedures
The following description of the operations and procedures of The
Depository Trust Company is provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. Omnicare takes no
responsibility for these operations and procedures and urges investors to
contact The Depository Trust Company or its participants directly to discuss
these matters.
The Depository Trust Company has advised Omnicare that The Depository Trust
Company is a limited-purpose trust company created to hold securities for its
participating organizations, collectively, the "Participants," and to facilitate
the clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers, including
the Initial Purchasers, banks, trust companies, clearing corporations and
certain other organizations. Access to The Depository Trust Company's system is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly, collectively, the "Indirect
Participants." Persons who are not Participants may beneficially own securities
held by or on behalf of The Depository Trust Company only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of The
Depository Trust Company are recorded on the records of the Participants and
Indirect Participants.
The Depository Trust Company has also advised Omnicare that, pursuant to
procedures established by it:
(1) upon deposit of the Global Notes, The Depository Trust Company will
credit the accounts of Participants designated by the Initial
Purchaser with portions of the principal amount of the Global Notes;
and
(2) ownership of these interests in the Global Notes will be shown on, and
the transfer of ownership of these interests will be effected only
through, with respect to the Participants, records maintained by The
Depository Trust Company or, with respect to other owners of
beneficial interest in the Global Notes, by the Participants and the
Indirect Participants.
All interests in a Global Note, may be subject to the procedures and
requirements of The Depository Trust Company. The laws of some states require
that certain Persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a
Global Note to those Persons will be limited to that extent. Because The
Depository Trust Company can act only on
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behalf of Participants, which in turn act on behalf of Indirect Participants,
the ability of a Person having beneficial interests in a Global Note to pledge
those interests to Persons that do not participate in the The Depository Trust
Company system, or otherwise take actions in respect of those interests, may be
affected by the lack of a physical certificate evidencing those interests.
Except as described below, owners of interest in the Global Notes will not
have exchange notes registered in their names, will not receive physical
delivery of exchange notes in certificated form and will not be considered the
registered owners or "Holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium, if any,
on a Global Note registered in the name of The Depository Trust Company or its
nominee will be payable to The Depository Trust Company in its capacity as the
registered Holder under the indenture. Under the terms of the indenture,
Omnicare and the trustee will treat the Persons in whose names the notes,
including Global Notes, are registered as the owners of the notes for the
purpose of receiving payments and for all other purposes. Consequently, neither
Omnicare, the trustee nor any agent of Omnicare or the trustee has or will have
any responsibility or liability for:
(1) any aspect of The Depository Trust Company's records or any
Participant's or Indirect Participant's records relating to or
payments made on account of beneficial ownership interest in the
Global Notes or for maintaining, supervising or reviewing any of The
Depository Trust Company's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests
in the Global Notes; or
(2) any other matter relating to the actions and practices of The
Depository Trust Company or any of its Participants or Indirect
Participants.
The Depository Trust Company has advised Omnicare that its current
practice, upon receipt of any payment in respect of securities such as the
exchange notes, including principal and interest, is to credit the accounts of
the relevant Participants with the payment on the payment date unless The
Depository Trust Company has reason to believe it will not receive payment on
the payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount
of the relevant security as shown on the records of The Depository Trust
Company. Payments by the Participants and the Indirect Participants to the
beneficial owners of exchange notes will be governed by standing instructions
and customary practices and will be the responsibility of the Participants or
the Indirect Participants and will not be the responsibility of The Depository
Trust Company, the trustee or Omnicare. Neither Omnicare nor the trustee will be
liable for any delay by The Depository Trust Company or any of its Participants
in identifying the beneficial owners of the notes, and Omnicare and the trustee
may conclusively rely on and will be protected in relying on instructions from
The Depository Trust Company or its nominee for all purposes.
Transfers between Participants in The Depository Trust Company will be
effected in accordance with The Depository Trust Company's procedures, and will
be settled in same-day funds.
The Depository Trust Company has advised Omnicare that it will take any
action permitted to be taken by a Holder of exchange notes only at the direction
of one or more Participants to whose account The Depository Trust Company has
credited the interests in the Global Notes and only in respect of that portion
of the aggregate principal amount of the exchange notes as to which the
Participant or Participants has or have given that direction. However, if there
is an Event of Default under the notes, The Depository Trust Company reserves
the right to exchange Global Notes for notes in certificated form, and to
distribute those notes to its Participants.
Although The Depository Trust Company has agreed to the foregoing
procedures to facilitate transfers of interests in the exchange notes among
participants in The Depository Trust Company, they are under no obligation to
perform or to continue to perform those procedures, and may discontinue those
procedures at any time. Neither Omnicare nor the trustee nor any of their
respective agents will have any responsibility for the performance by The
Depository Trust Company, or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
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Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive exchange notes in registered
certificated form, "Certificated Notes," if:
(1) The Depository Trust Company (a) notifies Omnicare that it is
unwilling or unable to continue as depositary for the Global Notes and
Omnicare fails to appoint a successor depositary or (b) has ceased to
be a clearing agency registered under the Exchange Act;
(2) Omnicare, at its option, notifies the trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing Event of Default with respect to
the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of The Depository Trust Company in accordance with the indenture. In all
cases, Certificated Notes delivered in exchange for any Global Note or
beneficial interests in Global Notes will be registered in the names, and issued
in any approved denominations, requested by or on behalf of the depositary, in
accordance with its customary procedures.
Same Day Settlement and Payment
Omnicare will make payments in respect of the notes represented by the
Global Notes, including principal, premium, if any, and interest, by wire
transfer of immediately available funds to the accounts specified by the Global
Note Holder. Omnicare will make all payments of principal, interest and premium,
if any, with respect to Certificated Notes by wire transfer of immediately
available funds to the accounts specified by the Holders of the Certificated
Notes or, if none of those accounts is specified, by mailing a check to those
Holder's registered addresses. The notes represented by Global Notes are
expected to be eligible to trade in The Depository Trust Company's Same-Day
Funds Settlement System, and any permitted secondary market trading activity in
the exchange notes will, therefore, be required by The Depository Trust Company
to be settled in immediately available funds. Omnicare expects that secondary
trading in any Certificated Notes will also be settled in immediately available
funds.
Registration Rights; Liquidated Damages
The following description is a summary of the material provisions of the
registration rights agreement. It does not restate that agreement in its
entirety. We urge you to read the proposed form of registration rights agreement
in its entirety because it, and not this description, defines your registration
rights as Holders of the notes. See "--Additional Information."
Omnicare, the Guarantors and the Initial Purchaser entered into the
registration rights agreement in connection with the private offering of the old
notes. Pursuant to the registration rights agreement, Omnicare and the
Guarantors agreed to file with the SEC the Exchange Offer Registration Statement
on the appropriate form under the Securities Act of 1933 with respect to the
Exchange Notes. Pursuant to the Registration Rights Agreement, Omnicare and the
Guarantors are offering to Holders of Transfer Restricted Securities who are
able to make certain representations the opportunity to exchange their Transfer
Restricted Securities for exchange notes.
If:
(1) Omnicare and the Guarantors are not permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by
applicable law or SEC policy; or
(2) any Holder of Transfer Restricted Securities notifies Omnicare prior
to the 20th day following consummation of the Exchange Offer that:
(a) it is prohibited by law or SEC policy from participating in the
Exchange Offer; or
(b) that it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for those resales; or
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(c) that it is a broker-dealer and owns old notes acquired directly
from Omnicare or an affiliate of Omnicare,
Omnicare and the Guarantors will file with the SEC a Shelf Registration
Statement to cover resales of the old notes by the Holders of the old notes who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement.
For purposes of the preceding, "Transfer Restricted Securities" means each
note until:
(1) the date on which that note has been exchanged by a Person other than
a broker-dealer for an Exchange Note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange Offer of a
note for an Exchange Note, the date on which that Exchange Note is
sold to a purchaser who receives from that broker-dealer on or prior
to the date of that sale a copy of the prospectus contained in the
Exchange Offer Registration Statement;
(3) the date on which that note has been effectively registered under the
Securities Act of 1933 and disposed of in accordance with the Shelf
Registration Statement; or
(4) the date on which that note may be distributed to the public pursuant
to Rule 144(k) under the Securities Act of 1933.
The registration rights agreement provides that:
(1) unless the Exchange Offer would not be permitted by applicable law or
SEC policy, Omnicare and the Guarantors will
(a) commence the Exchange Offer; and
(b) use commercially reasonable efforts to issue on or prior to 45
business days, or longer, if required by the federal securities
laws, after the date on which the Exchange Offer Registration
Statement was declared effective by the SEC, Exchange Notes in
exchange for all old notes tendered prior thereto in the Exchange
Offer; and
(2) if obligated to file the Shelf Registration Statement, Omnicare and
the Guarantors will use commercially reasonable efforts to file the
Shelf Registration Statement with the SEC on or prior to 45 days after
that filing obligation arises and use commercially reasonable efforts
to cause the Shelf Registration to be declared effective by the SEC on
or prior to 90 days after that obligation arises.
If:
(1) Omnicare and the Guarantors fail to file any of the registration
statements required by the registration rights agreement on or before
the date specified for that filing; or
(2) any of those registration statements is not declared effective by the
Commission on or prior to the date specified for its effectiveness,
the "Effectiveness Target Date;" or
(3) Omnicare and the Guarantors fail to consummate the Exchange Offer
within 45 business days of the Effectiveness Target Date with respect
to the Exchange Offer Registration Statement; or
(4) any required Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to
be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the registration
rights agreement; each of those events referred to in clauses (1)
through (4) above, a "Registration Default",
then Omnicare and the Guarantors will pay Liquidated Damages to each
Holder of old notes, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default
in an amount equal to 0.25% per $1,000 principal amount of notes per
annum. The amount of the Liquidated Damages will increase by an
additional 0.25% per $1,000 principal amount of notes per annum for
each subsequent 90-day period until the Registration Default is cured,
up to a maximum aggregate amount of liquidated damages of 1.00% per
annum with respect to all Registration Defaults. The Liquidated
Damages will cease accruing on those old notes when the Registration
Default has been cured.
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All accrued Liquidated Damages will be paid by Omnicare and the Guarantors
on each Damages Payment Date in the same manner as interest is paid on the old
notes.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
As described elsewhere in this prospectus, holders of old notes are
required to make certain representations to Omnicare in order to participate in
the Exchange Offer and will be required to deliver certain information to be
used in connection with any Shelf Registration Statement and to provide comments
on any Shelf Registration Statement within the time periods set forth in the
registration rights agreement in order to have their old notes included in any
Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above. By acquiring Transfer Restricted Securities,
a Holder will be deemed to have agreed to indemnify Omnicare and the Guarantors
against certain losses arising out of information furnished by that Holder in
writing for inclusion in any Shelf Registration Statement. Holders of old notes
will also be required to suspend their use of the prospectus included in the
Shelf Registration Statement under certain circumstances upon receipt of written
notice to that effect from Omnicare.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"5% Convertible Subordinated Debentures due 2007" means the $345.0 million
in aggregate principal amount of 5% Convertible Subordinated Debentures due 2007
issued by Omnicare on December 10, 1997.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Restricted Subsidiary of
such specified Person, whether or not such Indebtedness is incurred in
connection with, or in contemplation of, such other Person merging
with or into, or becoming a Restricted Subsidiary of, such specified
Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person (limited to the maximum amount of liability of the
specified Person with respect to such Lien).
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person will be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition by Omnicare or any of
its Restricted Subsidiaries of any assets, other than sales of
products and services in the ordinary course of business consistent
with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of Omnicare and
its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the caption
"--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any Restricted Subsidiary or the
sale of Equity Interests in any Restricted Subsidiary.
Notwithstanding the preceding, the following items will not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that involves
assets having a fair market value of less than $7.5 million;
(2) a transfer of assets between or among Omnicare and one or more
Restricted Subsidiaries,
87
(3) an issuance of Equity Interests by a Restricted Subsidiary to Omnicare
or to another Restricted Subsidiary;
(4) the sale, lease or other disposition of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents;
(6) a Restricted Payment or Permitted Investment that is permitted by the
covenant described above under the caption "--Certain
Covenants--Restricted Payments";
(7) the sale and leaseback of any assets within 90 days of the acquisition
of such assets;
(8) a sale or other disposition of accounts receivable and related assets
in connection with a financing transaction involving such assets
(including, without limitation, in connection with a securitization or
similar financing);
(9) any disposition of property in the ordinary course of business by
Omnicare or any Restricted Subsidiary that, in the good faith judgment
of management of Omnicare, has become obsolete, worn out, damaged or
no longer useful in the conduct of the business of Omnicare or the
Restricted Subsidiaries;
(10) any Asset Swap;
(11) any sale of securities constituting Equity Interests that are issued
by a subsidiary trust or similar financing vehicle in a transaction
permitted under the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant;
(12) any loans or other transfers of equipment to customers of Omnicare or
any Restricted Subsidiary in the ordinary course of business for use
with the products or services of Omnicare or any Restricted
Subsidiary; and
(13) the sale or issuance of a minimal number of Equity Interests in a
Restricted Subsidiary that is a foreign entity to a foreign national
to the extent required by local law or in a jurisdiction outside of
the United States.
"Asset Swap" means an exchange by Omnicare or any Restricted Subsidiary of
property or assets for property or assets of another Person; provided that (i)
Omnicare or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such exchange at least equal to the fair market
value of the assets or other property sold, issued or otherwise disposed of (as
evidenced by a resolution of Omnicare's Board of Directors), and (ii) at least
75% of the consideration received in such exchange constitutes assets or other
property of a kind usable by Omnicare and its Restricted Subsidiaries in a
Permitted Business; provided, further, that any cash and Cash Equivalents
received by Omnicare or any of its Restricted Subsidiaries in connection with
such an exchange shall constitute Net Proceeds subject to the provisions under
"--Asset Sales."
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" will be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation (or any duly authorized committee thereof);
(2) with respect to a partnership, the Board of Directors (or any duly
authorized committee thereof) of the general partner of the
partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
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"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities constituting direct obligations of the United States or any
agency or instrumentality of the United States, the payment or
guarantee of which constitutes a full faith and credit obligation of
the United States, maturing in three years or less from the date of
acquisition thereof;
(3) securities constituting direct obligations of any State or
municipality within the United States maturing in three years or less
from the date of acquisition thereof which, in any such case, at the
time of acquisition by Omnicare or any Restricted Subsidiary, is
accorded one of the two highest long-term or short-term, as
applicable, debt ratings by S&P or Moody's or any other United States
nationally recognized credit rating agency of similar standing;
(4) certificates of deposit with a maturity of one year or less or
bankers' acceptances issued by a bank or trust company having capital,
surplus and undivided profits aggregating at least $500.0 million and
having a short-term unsecured debt rating of at least "P-1" by Moody's
or "A-1" by S&P;
(5) eurodollar time deposits with matHurities of one year or less and
overnight bank deposits with any bank or trust company having capital,
surplus and undivided profits aggregating at least $500.0 million and
having a short-term unsecured debt rating of at least "P-1" by Moody's
or "A-1" by S&P;
(6) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2), (3), (4)
and (5) above entered into with any financial institution meeting the
qualifications specified in such clauses above;
(7) commercial paper maturing in 270 days or less from the date of
issuance which, at the time of acquisition by Omnicare or any
Restricted Subsidiary, is accorded a rating of "A2" or better by S&P
or "P2" or better by Moody's or any other United States nationally
recognized credit rating agency of similar standing; and
(8) any fund or other pooling arrangement at least 95% of the assets of
which constitute Investments described in clauses (1) through (7) of
this definition.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the properties or
assets of Omnicare and its Restricted Subsidiaries taken as a whole to
any "person" (as that term is used in Section 13(d)(3) of the Exchange
Act);
(2) the adoption of a plan relating to the liquidation or dissolution of
Omnicare;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any "person"
(as defined above), other than one or more Principals and their
Related Parties, becomes the Beneficial Owner, directly or indirectly,
of more than 45% of the Voting Stock of Omnicare, measured by voting
power rather than number of shares; or
89
(4) the first day on which a majority of the members of the Board of
Directors of Omnicare are not Continuing Directors.
"Consolidated Assets" of any Person as of any date means the total assets
of such Person and its Restricted Subsidiaries on a consolidated basis at such
date, as determined in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary, unusual or non-recurring loss
plus any net loss realized by such Person or any of its Restricted
Subsidiaries in connection with an Asset Sale, to the extent such
losses were deducted in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received
pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Restricted Subsidiaries for such period
to the extent that such depreciation, amortization and other non-cash
expenses were deducted in computing such Consolidated Net Income;
minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary will be added to Consolidated Net Income to compute
Consolidated Cash Flow of Omnicare only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to
Omnicare by such Restricted Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
will be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
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(3) for purposes of the "Restricted Payments" covenant above, the Net
Income of any Person acquired in a pooling of interests transaction
for any period prior to the date of such acquisition will be excluded;
and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"Consolidated Net Worth" of any Person as of any date means the
stockholders' equity (including any preferred stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries (excluding any equity adjustment for foreign currency translation
for any period subsequent to the date of the indenture) on a consolidated basis
at such date, as determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of Omnicare who:
(1) was a member of such Board of Directors on the date of the indenture;
or
(2) was nominated for election or elected to such Board of Directors with
the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.
"Convertible Preferred Stock" means any convertible preferred stock or
similar securities of Omnicare or any subsidiary trust (or similar financing
vehicle) that are convertible at the option of the holder thereof into common
stock of Omnicare.
"Convertible Subordinated Indebtedness" means any Indebtedness of Omnicare
that is subordinated to the notes and that is convertible at the option of the
holder thereof into common stock of Omnicare (including, without limitation, any
Indebtedness incurred in connection with a transaction involving the sale by
Omnicare of purchase contracts to acquire Omnicare common stock at a future
date), and, if applicable, any related securities issued by a subsidiary trust
or similar financing vehicle in connection therewith.
"Credit Agreement" means that certain proposed Credit Agreement, as
contemplated by the related commitment letter dated as of March 5, 2001, by and
among Omnicare and Bank One, NA (having its principal office in Chicago,
Illinois), as administrative agent, Banc One Capital Markets, Inc., as joint
lead arranger and sole book runner, UBS Warburg LLC, as joint lead arranger and
syndication agent, Lehman Commercial Paper Inc., as syndication agent, SunTrust
Bank, as documentation agent, and Deutsche Bank AG, New York branch, as
documentation agent, providing for up to $500 million of revolving credit
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended (including, without limitation, as to principal amount), modified,
renewed, refunded, replaced or refinanced from time to time (whether or not with
the original agents or lenders and whether or not contemplated under the
original agreement relating thereto).
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement (and, if they are not refinanced, the Existing
Credit Facilities)) or commercial paper facilities, in each case with banks or
other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended (including, without
limitation, as to principal amount), restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time (whether or not
with the original agents or lenders and whether or not contemplated under the
original agreement relating thereto).
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Agreement (and, if they
are not refinanced, under the Existing Credit Facilities); and
(2) after payment in full of all Obligations under the Credit Agreement
(and, if they are not refinanced, under the Existing Credit
Facilities), any other Senior Debt permitted under the
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indenture the principal amount of which is $35.0 million or more and
that has been designated by Omnicare as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder of the Capital Stock, in whole or in part, on or prior to the date that
is 91 days after the date on which the exchange notes mature. Notwithstanding
the preceding sentence, any Capital Stock that would constitute Disqualified
Stock solely because the holders of the Capital Stock have the right to require
Omnicare to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale will not constitute Disqualified Stock if the terms of
such Capital Stock provide that Omnicare may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary organized under the
laws of the United States or any state of the United States or the District of
Columbia.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any public or private sale by Omnicare for cash (in
an amount resulting in gross proceeds of not less than $25.0 million) of its
common stock or preferred stock (excluding Disqualified Stock).
"Excluded Subsidiaries" means those Domestic Subsidiaries that are
designated by Omnicare as Domestic Subsidiaries that will not be Guarantors;
provided, however, that in no event will the Excluded Subsidiaries, either
individually or collectively, hold more than 10% of the consolidated assets of
Omnicare and its Domestic Subsidiaries as of the end of any fiscal quarter or
account for more than 10% of the consolidated revenue of Omnicare and its
Domestic Subsidiaries during the most recent four-quarter period (in each case
determined as of the most recent fiscal quarter for which Omnicare has internal
financial statements available); provided, further, that any Domestic Subsidiary
that guarantees other Indebtedness of Omnicare may not be designated as or
continue to be an Excluded Subsidiary. In the event any Domestic Subsidiaries
previously designated as Excluded Subsidiaries cease to meet the requirements of
the previous sentence, Omnicare will promptly cause one or more of such Domestic
Subsidiaries to become Guarantors so that the requirements of the previous
sentence are complied with. "Existing Credit Facilities" means that certain (i)
$400 million revolving credit facility, dated October 1996, by and among
Omnicare, Bank One, NA and the lenders thereto and (ii) $400 million 364-day
credit facility, dated December 1998, by and among Bank One, NA and the lenders
thereto, as amended in September 2000 to extend such credit facility through
August 31, 2001 and reduce the commitment to $300 million.
"Existing Indebtedness" means Indebtedness of Omnicare and its Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
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(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, to the extent such Guarantee or Lien is called upon;
plus
(4) the product of (a) all dividends, whether paid or accrued and whether
or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividends on Equity
Interests payable solely in Equity Interests of Omnicare (other than
Disqualified Stock) or to Omnicare or a Restricted Subsidiary, times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees, repays, repurchases or redeems any Indebtedness (other than ordinary
working capital borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated and on or prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated
giving pro forma effect to such incurrence, assumption, Guarantee, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or
redemption of preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio
pro forma effect will be given to:
(1) acquisitions of any operations or businesses or assets (other than
assets acquired in the ordinary course of business) that have been
made by the specified Person or any of its Restricted Subsidiaries,
including through purchases or through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or
prior to the Calculation Date, as if they had occurred on the first
day of the four-quarter reference period; and
(2) the discontinuance of operations or businesses and dispositions of
operations or businesses or assets (other than assets disposed of in
the ordinary course of business) during the four quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date, as if they had occurred on the first day of the four
quarter reference period.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of determination.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of:
(1) the Domestic Subsidiaries of Omnicare as of the indenture date other
than Excluded Subsidiaries; and
(2) any other Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
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(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or foreign exchange rates.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) representing the balance deferred and unpaid of the purchase price of
any property; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any indebtedness of any other Person, in each case
limited to the maximum amount of liability of the specified Person with respect
to such Lien or Guarantee on the date in question. Notwithstanding anything in
the foregoing to the contrary, Indebtedness shall not include trade payables or
accrued expenses for property or services incurred in the ordinary course of
business.
The amount of any Indebtedness issued with original issue discount will be
the accreted value of such Indebtedness.
"Investment Grade" means (1) with respect to S&P, any of the rating
categories from and including AAA to and including BBB- and (2) with respect to
Moody's, any of the rating categories from and including Aaa to and including
Baa3.
"Investments" means, respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to directors,
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If Omnicare or
any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted Subsidiary,
Omnicare will be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Certain Covenants--Restricted Payments"; provided that Omnicare shall
not have been deemed to have made an Investment pursuant to the foregoing if
Omnicare shall have previously or concurrently therewith been deemed to have
made an Investment in connection with such Equity Interests. The acquisition by
Omnicare or any Restricted Subsidiary of a Person that holds an Investment in a
third Person will be deemed to be an Investment by Omnicare or such Restricted
Subsidiary in such third Person in an amount equal to the fair market value of
the Investment held by the acquired Person in such third Person in an amount
determined as provided in the final paragraph of the covenant described above
under the caption "--Certain Covenants--Restricted Payments"; provided, Omnicare
or such Restricted Subsidiary shall not have been deemed to have made an
Investment pursuant to the foregoing if Omnicare or any Restricted Subsidiary
shall have previously or concurrently therewith been deemed to have made an
Investment in connection with such acquisition. "Investments" shall exclude
extensions of trade credit.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the
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nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the registration rights agreement.
"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary, unusual or non-recurring gain, charge, expense or
loss, together with any related provision for taxes on such
extraordinary, unusual or non-recurring gain, charge, expense or loss.
"Net Proceeds" means the aggregate cash proceeds and Cash Equivalents
received by Omnicare or its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, sales commissions, any relocation
expenses incurred as a result of the Asset Sale, any taxes paid or payable as a
result of the Asset Sale, in each case, after taking into account any available
tax credits or deductions and any tax sharing arrangements, amounts required to
be applied to the repayment of Indebtedness, all distributions and other
payments required to be made to non-majority interest holders in subsidiaries or
joint ventures as a result of such Asset Sale and appropriate amounts to be
provided by Omnicare or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by Omnicare or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the definition assigned to the term "Health Care
Company" in the Credit Agreement (or, if not refinanced, the Existing Credit
Facilities), plus any business that Omnicare or any Restricted Subsidiary is
engaged in on the date of the indenture.
"Permitted Investments" means:
(1) any Investment in Omnicare or in a Restricted Subsidiary;
(2) any Investment in Cash Equivalents;
(3) any Investment by Omnicare or any Restricted Subsidiary in a Person,
if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Omnicare or a Restricted Subsidiary;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales";
(5) any Investment received to the extent the consideration therefor was
the issuance of Equity Interests (other than Disqualified Stock) of
Omnicare;
(6) Hedging Obligations;
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(7) intercompany Indebtedness to the extent permitted under the
"Incurrence of Indebtedness and Issuance of Preferred Stock" covenant;
(8) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and workers' compensation, performance
and other similar deposits made in the ordinary course of business and
Investments to secure participation in government reimbursement
programs;
(9) loans and advances to officers, directors and employees made in the
ordinary course of business;
(10) Investments represented by accounts and notes receivable created or
acquired in the ordinary course of business;
(11) Investments existing on the date on which the notes were originally
issued and any renewal or replacement thereof on terms and conditions
not materially less favorable than that being renewed or replaced;
(12) Investments by any qualified or nonqualified benefit plan established
by Omnicare or its Restricted Subsidiaries made in accordance with the
terms of such plan, or any Investments made by Omnicare or any
Restricted Subsidiary in connection with the funding thereof;
(13) Investments received in settlement of debts owed to Omnicare or any
Restricted Subsidiary, including, without limitation, as a result of
foreclosure, perfection or enforcement of any Lien or indebtedness or
in connection with any bankruptcy, liquidation, receivership or
insolvency proceeding;
(14) Investments as of the date of the indenture in Unrestricted
Subsidiaries so designated as of the date of the indenture;
(15) Investments in any Subsidiary that constitutes a special purpose
entity formed for the primary purpose of financing receivables or for
the primary purpose of issuing trust preferred or similar securities
in a transaction permitted by the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant; and
(16) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all
other outstanding Investments made pursuant to this clause (16), not
to exceed 15.0% of Consolidated Assets in the aggregate at any one
time outstanding.
"Permitted Junior Securities" means:
(1) Equity Interests in Omnicare or any Guarantor; or
(2) debt securities that are subordinated to all Senior Debt and any debt
securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the exchange and the
Subsidiary Guarantees are subordinated to Senior Debt under the
indenture.
"Permitted Liens" means:
(1) Liens securing Senior Debt;
(2) Liens in favor of Omnicare or its Restricted Subsidiaries;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Omnicare or any Restricted
Subsidiary; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
Omnicare or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition of the property
by Omnicare or any Restricted Subsidiary, provided that such Liens
were in existence prior to the contemplation of such acquisition;
(5) Liens to secure Indebtedness (including, without limitation, Capital
Lease Obligations) permitted by clause (4) of the second paragraph of
the covenant entitled "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness;
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(6) Liens existing on the date of the indenture;
(7) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as is
required in conformity with GAAP has been made therefor;
(8) Liens securing any Hedging Obligations of Omnicare or any Restricted
Subsidiary,
(9) Liens securing any Indebtedness otherwise permitted to be incurred
under the indenture, the proceeds of which are used to refinance
Indebtedness of Omnicare or any Restricted Subsidiary, provided that
such Liens extend to or cover only the assets secured by the
Indebtedness being refinanced;
(10) Liens on property of a Person existing at the time such Person becomes
a Restricted Subsidiary; provided that such Liens were not incurred in
connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary;
(11) statutory Liens and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being
contested in good faith, if Omnicare or any applicable Restricted
Subsidiaries shall have made any reserves or other appropriate
provision required by GAAP;
(12) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance, return-of-money bonds,
participation in government reimbursement programs and other similar
obligations;
(13) judgment Liens not giving rise to an Event of Default, so long as any
appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or
the period within which such proceedings may be initiated shall not
have expired;
(14) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the conduct of the business of Omnicare or
any of its Restricted Subsidiaries;
(15) any interest or title of a lessor in assets or property subject to
Capitalized Lease Obligations or an operating lease of Omnicare or any
Restricted Subsidiary;
(16) Liens incurred in connection with a financing involving the sale or
other disposition of accounts receivable and related assets
(including, without limitation, in connection with a securitization or
similar financing);
(17) leases or subleases granted to others not interfering with the
ordinary conduct of the business of Omnicare or any of the Restricted
Subsidiaries;
(18) bankers' liens with respect to the right of set-off arising in the
ordinary course of business against amounts maintained in bank
accounts or certificates of deposit in the name of Omnicare or any
Restricted Subsidiary;
(19) the interest of any issuer of a letter of credit in any cash or Cash
Equivalents deposited with or for the benefit of such issuer as
collateral for such letter of credit; provided that the Indebtedness
so collateralized is permitted to be incurred by the terms of the
indenture;
(20) any Lien consisting of a right of first refusal or option to purchase
an ownership interest in any Restricted Subsidiary or to purchase
assets of Omnicare or any Restricted Subsidiary, which right of first
refusal or option is entered into in the ordinary course of business
or is otherwise permitted under the indenture;
(21) any Lien granted to the Trustee pursuant to the terms of the indenture
and any substantially equivalent Lien granted to the respective
trustees under the indentures for other debt securities of Omnicare;
and
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(22) Liens incurred in the ordinary course of business of Omnicare or any
Restricted Subsidiary with respect to obligations that do not exceed
$10.0 million at any one time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of Omnicare or
any Restricted Subsidiary issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of Omnicare or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness extended,
refinanced, renewed, replaced, defeased or refunded (plus all accrued
interest on the Indebtedness and the amount of all fees, expenses and
premiums incurred in connection therewith);
(2) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is other than Senior Debt, such Permitted
Refinancing Indebtedness has a final maturity date not earlier than
the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than, the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the notes on terms not materially less favorable to the
Holders of notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded; and
(4) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded was incurred by Omnicare, the obligor on the
Permitted Refinancing Indebtedness may not be a Restricted Subsidiary.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"Principal" means Joel Gemunder, an entity controlled by Joel Gemunder
and/or a trust for his benefit or any employee benefit plan of Omnicare
(including plans for the benefit of employees of its Restricted Subsidiaries).
"Related Party" means:
(1) any controlling stockholder, 80% (or more) owned Subsidiary, or
immediate family member (in the case of an individual) of any
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of any
one or more Principals and/or such other Persons referred to in the
immediately preceding clause (1).
"Replacement Assets" mean properties or assets substantially similar to the
assets disposed of in a particular Asset Sale and acquired to replace the
properties or assets that were the subject of such Asset Sale or that are
otherwise useful in a Permitted Business.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any direct or indirect Subsidiary of Omnicare
other than an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all obligations of Omnicare or any Guarantor related to the Credit
Agreement (and, if they are not refinanced, the Existing Credit
Facilities), whether for principal, premium, if any, interest,
including interest accruing after the filing of, or which would have
accrued but for the filing of, a petition by or against Omnicare or
such Guarantor under applicable bankruptcy laws, whether or not such
interest is lawfully allowed as a claim after such filing, and all
other amounts payable in connection therewith, including, without
limitation, any fees, premiums, penalties, expenses, reimbursements,
indemnities, damages and other liabilities; and
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(2) the principal of, premium, if any, and interest on all other
Indebtedness of Omnicare or any Guarantor, other than the notes, and
all Hedging Obligations, in each case whether outstanding on the date
of the indenture or thereafter created, incurred or assumed, unless,
in the case of any particular Indebtedness or Hedging Obligation, the
instrument creating or evidencing the Indebtedness or Hedging
Obligation expressly provides that such Indebtedness or Hedging
Obligation shall not be senior in right of payment to the notes.
Notwithstanding the foregoing, "Senior Debt" does not include:
(a) Indebtedness evidenced by the notes and the Subsidiary
Guarantees;
(b) Indebtedness of Omnicare or any Guarantor that is expressly
subordinated in right of payment to any Senior Debt of Omnicare
or such Guarantor or the notes or the applicable Subsidiary
Guarantee;
(c) Indebtedness of Omnicare or any Guarantor that by operation of
law is subordinate to any general unsecured obligations of
Omnicare or such Guarantor;
(d) Indebtedness of Omnicare or any Guarantor to the extent incurred
in violation of any covenant prohibiting the incurrence of
Indebtedness under the indenture;
(e) any liability for federal, state or local taxes or other taxes,
owed or owing by Omnicare or any Guarantor;
(f) accounts payable or other liabilities owed or owing by Omnicare
or any Guarantor to trade creditors, including guarantees thereof
or instruments evidencing such liabilities;
(g) amounts owed by Omnicare or any Guarantor for compensation to
employees or for services rendered to Omnicare or such Guarantor;
(h) Indebtedness of Omnicare or any Guarantor to any Restricted
Subsidiary or any other Affiliate of Omnicare or such Guarantor;
(i) Capital Stock of Omnicare or any Guarantor;
(j) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11 of the U.S. Code is
without recourse to Omnicare or any Restricted Subsidiary; and
(k) the 5% Convertible Subordinated Debentures due 2007.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act of 1933, as such Regulation is in effect on the
date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person, (a) any
corporation more than 50% of the outstanding securities having ordinary voting
power of which shall at the time be owned or controlled, directly or indirectly,
by such Person or by one or more of its Restricted Subsidiaries or by such
Person and one or more of its Restricted Subsidiaries, or (b) any partnership,
limited liability company, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
"Unrestricted Subsidiary" means any Subsidiary of Omnicare that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Indebtedness that is without recourse
to Omnicare or its Restricted Subsidiaries;
(2) is not party to any agreement, contract, arrangement or understanding
with Omnicare or any Restricted Subsidiary unless the terms of any
such agreement, contract, arrangement or
99
understanding are not materially less favorable to Omnicare or such
Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of Omnicare;
(3) is a Person with respect to which neither Omnicare nor any of its
Restricted Subsidiaries has any (a) continuing direct or indirect
obligation to subscribe for additional Equity Interests or (b) direct
or indirect obligation to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of
operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of Omnicare or any of its Restricted
Subsidiaries.
In addition, any Subsidiary that constitutes a special purpose entity
formed for the primary purpose of financing receivables or for the primary
purpose of issuing trust preferred or similar securities in connection with a
transaction permitted by the "Incurrence of Indebtedness and Issuance of
Preferred Stock" covenant, shall be an Unrestricted Subsidiary.
Any designation of a Subsidiary of Omnicare as an Unrestricted Subsidiary
after the date of the indenture will be evidenced to the Trustee by filing with
the Trustee a certified copy of the Board Resolution giving effect to such
designation and an officers' certificate certifying that such designation
complied with the preceding conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it will thereafter cease to be an
Unrestricted Subsidiary for purposes of the indenture and any Indebtedness of
such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of
Omnicare as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," Omnicare will be in default of such covenant. The Board of Directors of
Omnicare may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four quarter reference period; and (2) no
Default or Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity,
in respect of the Indebtedness, by (b) the number of years (calculated
to the nearest one-twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
100
DESCRIPTION OF CERTAIN INDEBTEDNESS
New Credit Facility
Concurrently with the closing of the private offering of the old notes, we
entered into a new $495 million revolving credit facility, including a $25
million letter of credit subfacility, with Bank One, NA, having its principal
office in Chicago, Illinois, "Bank One", as administrative agent, Banc One
Capital Markets, Inc., as joint lead arranger and sole book runner, UBS Warburg
LLC, as joint lead arranger and syndication agent, Lehman Commercial Paper Inc.,
as syndication agent, SunTrust Bank, as documentation agent, and Deutsche Bank
AG, New York Branch, as documentation agent, the "New Credit Facility".
Subsequent to the closing of the New Credit Facility, we closed on an additional
$5 million of commitments that has brought the total commitment to $500 million.
The New Credit Facility consists of a $500 million revolving loan commitment
that has a three-year final maturity and allows us to reduce the commitment in
increments of $5 million. The $25 million letter of credit subcommitment allows
for the issuance of letters of credit that have a maximum duration not to exceed
the maturity of the facility. The New Credit Facility is guaranteed by
subsidiaries that, together with Omnicare, Inc., in the aggregate account for at
least 90% of our consolidated assets and revenues. Loans under the New Credit
Facility bear interest, at our option, at a rate equal to either (i) the higher
of (a) Bank One's prime rate or (b) the federal funds rate plus 0.50% or (ii)
(a) the quotient of (A) the interest rate in the London interbank market for
loans of the same general interest period duration, divided by (B) one minus the
maximum aggregate reserves imposed on Eurocurrency liabilities, plus (b) between
one and one-quarter percent and two and one-half percent, depending on certain
senior long-term debt ratings.
The New Credit Facility limits, among other things, our ability to incur
contingent obligations, to make investments, to make additional acquisitions or
merge with another entity, to sell or to create or incur liens on assets, to
repay other indebtedness prior to its stated maturity (including the notes) and
to amend the indenture relating to the notes. In addition, the New Credit
Facility requires us to meet certain financial tests. We can reborrow amounts
repaid under the New Credit Facility prior to maturity.
The New Credit Facility replaced our two previous credit facilities that
existed prior to the closing of the private offering of the old notes.
Convertible Notes
We have outstanding $345 million aggregate principal amount of our 5%
Convertible Subordinated Debentures due 2007. The convertible debentures bear
interest at a rate of 5% per annum. Interest on the convertible debentures is
payable semi-annually on June 1 and December 1. Principal on the convertible
debentures is payable on December 1, 2007. The convertible debentures are
redeemable in whole or in part at a price, expressed as a percentage of the
principal amount, ranging from 103.5% during the period beginning December 6,
2000 and ending on November 30, 2001 to 100.5% for the period beginning December
1, 2006 and ending on November 30, 2007, in each case plus accrued interest. The
convertible debentures are convertible at the option of the holder, unless
previously redeemed, into our common stock at a conversion price of $39.60 per
share, subject to adjustment in certain events. In the event of a Fundamental
Change (as defined below), each holder of convertible debentures has the right,
at the holder's option, to require us to redeem all or any part of the holder's
convertible debentures at a price, expressed as a percentage of the principal
amount, ranging from 103.5% during the period beginning December 6, 2000 and
ending on November 30, 2001 to 100.5% for the period beginning December 1, 2006
and ending on November 30, 2007, in each case plus accrued interest. Our ability
to repurchase the convertible debentures following a Fundamental Change is
dependent upon our having sufficient funds and may be limited by the terms of
our other indebtedness or the subordination provisions of the indenture relating
to the convertible debentures.
As defined in the indenture relating to the convertible debentures,
"Fundamental Change" means the occurrence of any transaction or event in
connection with which all of our common stock is exchanged for, converted into,
is acquired for, or constitutes in all material respects solely the right to
receive, consideration which is not all or substantially all common stock
listed, or upon consummation of or immediately following that transaction or
event which will be listed, on a United States national securities exchange or
approved for quotation on the Nasdaq National Market or any similar United
States system of
101
automated dissemination of quotations of securities prices, whether by means of
an exchange offer, liquidation, tender offer, consolidation, merger,
combination, reclassification, recapitalization or otherwise.
The old notes and the exchange notes offered by this prospectus are senior
to the convertible debentures.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal income tax
considerations relevant to the exchange of notes for the exchange notes pursuant
to the exchange offer. This discussion is based upon currently existing
provisions of the Internal Revenue code of 1986, as amended, Treasury
regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect on the date of this prospectus and all
of which are subject to change, possibly on a retroactive basis. The Internal
Revenue Service may take positions contrary to those taken in this discussion,
and no ruling from the Internal Revenue Service has been or will be sought. This
discussion does not address all of the U.S. federal income tax considerations
that may be relevant to particular holders of exchange notes in light of their
individual circumstances, not does it address the U.S. federal income tax
considerations that may be relevant to holders subject to special rules,
including, for example, banks and other financial institutions, insurance
companies, tax-exempt entities, dealers in securities, and persons holding
exchange notes as part of a hedging or conversion transaction or a straddle.
Holders are urged to consult their own tax advisors as to the particular
U.S. federal income tax consequences to them of exchanging old notes for
exchange notes, as well as the tax consequences under state, local, foreign and
other tax laws, and the possible effects of changes in tax laws.
We believe that the exchange of old notes for the exchange notes pursuant
to the exchange offer will not be treated as an "exchange" for U.S. federal
income tax purposes. Consequently, we believe that a holder that exchanges old
notes for exchange notes pursuant to the exchange offer will not recognize
taxable gain or loss on such exchange, such holder's adjusted tax basis in the
exchange notes will be the same as its adjusted tax basis in the old notes
exchanged therefor immediately before such exchange, and such holder's holding
period for the exchange notes will include the holding period for the old notes
exchanged therefor.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer in exchange for old notes acquired as a result of
market making or other trading activities must acknowledge that it will deliver
a prospectus in connection with any resale of those exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of those exchange notes. We have
agreed that, until , or until all restricted securities covered by the
exchange offer registration statement have been sold, whichever period is
shorter, we will make this prospectus, as it may be amended or supplemented,
available to any broker-dealer for use in connection with those resales.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers.
Exchange notes received by broker-dealers for their own account pursuant to
the exchange offer may be sold from time to time in one or more transactions
o in the over-the-counter market,
o in negotiated transactions,
o through the writing of options on the exchange notes or
o a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices.
Resales by broker-dealers may be made
o directly to purchasers or
102
o to or through brokers or dealers who may receive compensation in the
form of commissions or concessions from the broker-dealer or the
purchasers of those exchange notes.
Any broker-dealer that resells exchange notes that were received by it for
its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of those exchange notes may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933 and any profit on
the resale of the exchange notes and any commission or concessions received by
those persons may be deemed to be underwriting compensation under the Securities
Act of 1933. The letter of transmittal states that, by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act of
1933.
Up until , we will promptly send additional copies of this
prospectus and any amendment or supplement to this prospectus to any
broker-dealer that requests those documents in the letter of transmittal. We
have agreed to pay all expenses incident to our obligations in connection with
the exchange offer, other than commissions and concessions of any broker-dealer
and will indemnify the holders of the old notes, including any broker-dealers,
against certain liabilities, including liabilities under the Securities Act of
1933.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Dewey
Ballantine LLP, New York, New York.
EXPERTS
The financial statements as of December 31, 2000 and 1999 and for each of
the three years in the period ended December 31, 2000 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information required by the Securities Exchange Act of 1934 with the SEC. You
may read and copy any document we file at the following SEC public reference
rooms:
450 5th Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms.
Our SEC filings are also available from the SEC's web site at:
http://www.sec.gov.
Copies of these reports, proxy statements and other information also can be
inspected at the following address:
New York Stock Exchange
20 Broad Street
New York, New York 10005
103
DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS
We are incorporating the following documents by reference into this
prospectus. The information in these documents is considered a part of this
prospectus, and documents filed later with the SEC will update and supercede
this information.
Report Period
------ ------
Annual Report on Form 10-K . . . . . . . . . Fiscal year ended December 31, 2000 (including those portions
of our Definitive Proxy Statement dated April 10, 2001
incorporated by reference therein), filed March 30, 2001.
Quarterly Reports on Form 10-Q . . . . . . . Quarterly period ended March 31, 2001, filed May 15, 2001,
and quarterly period ended June 30, 2001, filed August 13,
2001.
Current Reports on Form 8-K . . . . . . . . Current Reports dated March 6, 2001 (exclusive of portions
thereof, including exhibits, filed pursuant to Item 9 of
Form 8-K) and March 15, 2001, filed on March 6, 2001 and
March 23, 2001, respectively.
Any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until the exchange offer expires
will also be incorporated by reference in this prospectus.
You may request a copy of our filings by writing or telephoning us at the
following address:
Omnicare, Inc.
Attention: Peter Laterza--Vice President and General Counsel
100 East RiverCenter Blvd., Suite 1600
Covington, Kentucky 41011
(859) 392-3300
Descriptions in this prospectus, including those contained in the documents
incorporated by reference, of contracts and other documents are not necessarily
complete and, in each instance, reference is made to the copies of these
contracts and documents filed as exhibits to the documents incorporated by
reference in this prospectus.
104
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
------------------------------------------------------------------------------------------------------------
Audited Financial Statements as of and for the three years ended December 31, 2000
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statement of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Unaudited Financial Statements as of and for the three and six months ended June 30, 2000 and 2001
Consolidated Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-26
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
[PRICEWATERHOUSECOOPERS LOGO]
To the Stockholders and
Board of Directors of Omnicare, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Omnicare, Inc. and its subsidiaries at December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cincinnati, Ohio
February 2, 2001, except for the
first paragraph of Note 6, as to which
the date is March 28, 2001
F-2
CONSOLIDATED STATEMENT OF INCOME
Omnicare, Inc. and Subsidiary Companies
(In thousands, except per share data)
For the years ended December 31,
2000 1999 1998
-----------------------------------------------------------------------------------------------------------------
Sales $1,971,348 $1,861,921 $1,517,370
Cost of sales 1,445,955 1,338,638 1,058,743
-----------------------------------------------------------------------------------------------------------------
Gross profit 525,393 523,283 458,627
Selling, general and administrative expenses 367,507 351,639 283,438
Acquisition expenses, pooling-of-interests (Note 2) -- (55) 15,441
Restructuring and other related charges (Note 12) 27,199 35,394 3,627
-----------------------------------------------------------------------------------------------------------------
Operating income 130,687 136,305 156,121
Investment income 1,910 1,532 3,356
Interest expense (55,074) (46,166) (23,611)
-----------------------------------------------------------------------------------------------------------------
Income before income taxes 77,523 91,671 135,866
Income taxes 28,706 33,950 55,487
-----------------------------------------------------------------------------------------------------------------
Net income $ 48,817 $ 57,721 $ 80,379
=================================================================================================================
Earnings per share:
Basic $ 0.53 $ 0.63 $ 0.90
=================================================================================================================
Diluted $ 0.53 $ 0.63 $ 0.90
=================================================================================================================
Weighted average number of common shares outstanding:
Basic 92,012 90,999 89,081
=================================================================================================================
Diluted 92,012 91,238 89,786
=================================================================================================================
Comprehensive income $ 47,616 $ 56,673 $ 80,431
=================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-3
CONSOLIDATED BALANCE SHEET
Omnicare, Inc. and Subsidiary Companies
(In thousands, except share data)
December 31,
2000 1999
------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 111,607 $ 97,267
Restricted cash 2,300 --
Accounts receivable, less allowances of $40,497 (1999-$36,883) 440,785 422,283
Unbilled receivables 18,933 18,450
Inventories 129,404 120,280
Deferred income tax benefits 26,338 17,336
Other current assets 88,371 76,729
------------------------------------------------------------------------------------------------------------------------------
Total current assets 817,738 752,345
Properties and equipment, at cost less accumulated depreciation of $132,308 (1999-$106,022) 158,535 162,133
Goodwill, less accumulated amortization of $115,832 (1999-$83,243) 1,168,151 1,188,941
Other noncurrent assets 65,794 64,554
------------------------------------------------------------------------------------------------------------------------------
Total assets $2,210,218 $2,167,973
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 118,941 $ 108,189
Amounts payable pursuant to acquisition agreements 4,372 9,053
Current portion of long-term debt 1,619 77,413
Accrued employee compensation 30,113 50,498
Deferred revenue 28,333 24,321
Income taxes payable 14,238 --
Other current liabilities 59,393 52,769
------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 257,009 322,243
Long-term debt 435,706 391,944
5% convertible subordinated debentures, due 2007 345,000 345,000
Deferred income taxes 63,579 37,360
Amounts payable pursuant to acquisition agreements 12,675 13,878
Other noncurrent liabilities 27,826 29,168
------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,141,795 1,139,593
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none issued and outstanding -- --
Common stock, $1 par value, 200,000,000 shares authorized, 92,730,600 shares issued
and outstanding (1999-91,611,800 shares issued and outstanding) 92,731 91,612
Paid-in capital 692,695 684,419
Retained earnings 315,638 275,114
------------------------------------------------------------------------------------------------------------------------------
1,101,064 1,051,145
Treasury stock, at cost-574,200 shares (1999-325,500 shares) (10,808) (6,950)
Deferred compensation (18,915) (14,098)
Accumulated other comprehensive income (2,918) (1,717)
------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,068,423 1,028,380
------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,210,218 $2,167,973
==============================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-4
CONSOLIDATED STATEMENT OF CASH FLOWS
Omnicare, Inc. and Subsidiary Companies
(In thousands)
For the years ended December 31,
2000 1999 1998
-----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 48,817 $ 57,721 $ 80,379
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 32,211 32,682 22,977
Amortization 41,762 36,682 24,659
Provision for doubtful accounts 26,729 22,056 12,405
Deferred tax provision 19,767 23,073 7,579
Non-cash portion of restructuring charges 6,804 4,198 1,948
Unrealized appreciation in fair value of investments 493 -- --
Changes in assets and liabilities, net of effects
from acquisition of businesses:
Accounts receivable and unbilled receivables (44,314) (83,959) (84,276)
Inventories (8,988) 1,146 (18,786)
Current and noncurrent assets (11,203) (43,837) (15,466)
Accounts payable 11,115 29,072 27,413
Accrued employee compensation (14,436) 15,202 3,999
Deferred revenue 4,012 5,278 (3,190)
Current and noncurrent liabilities 19,932 1,800 29,866
-----------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 132,701 101,114 89,507
-----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses (41,664) (144,079) (398,686)
Capital expenditures (32,423) (58,749) (53,179)
Transfer of cash to trusts for employee health and severance costs,
net of payments out of the trust (2,300) -- --
Marketable securities -- -- 2,084
Other 271 (689) 63
-----------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (76,116) (203,517) (449,718)
-----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings on line of credit facilities -- 170,000 305,000
Payments on line of credit facilities (30,000) (10,000) --
Principal payments on long-term obligations (1,838) (3,502) (22,796)
Fees paid for financing arrangements (635) (641) (1,761)
(Payments) for and proceeds from exercise of stock options
and warrants, net of stock tendered in payment (1,011) (2,152) 3,050
Dividends paid (8,293) (8,203) (6,841)
-----------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (41,777) 145,502 276,652
-----------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (468) (144) (191)
-----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 14,340 42,955 (83,750)
Cash and cash equivalents at beginning of period 97,267 54,312 138,062
-----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $111,607 $ 97,267 $ 54,312
=================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-5
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Omnicare, Inc. and Subsidiary Companies
(In thousands, except per share data)
Common Paid-in Retained Treasury
Stock Capital Earnings Stock
-------------------------------------------------------------------------------
Balance at December 31, 1997 $88,261 $609,117 $151,153 $ (2,926)
Pooling-of-interests (Note 2) 549 803 1,245 --
Net income -- -- 80,379 --
Dividends paid ($0.08 per share) -- -- (6,841) --
Stock and warrants issued in
connection with acquisitions 868 39,312 -- (4,107)
Exercise of warrants 175 1,965 -- 518
Exercise of stock options 232 894 -- 3,669
Stock awards, net of
amortization 375 12,134 -- (1,320)
Decrease in unallocated stock -- -- -- --
Cumulative translation
adjustment -- -- -- --
Other -- -- 1 --
-------------------------------------------------------------------------------
Balance at December 31, 1998 90,460 664,225 225,937 (4,166)
Pooling-of-interests (Note 2) 333 326 (297) --
Net income -- -- 57,721 --
Dividends paid ($0.09 per share) -- -- (8,203) --
Stock and warrants issued in
connection with acquisitions 151 3,799 -- (3)
Stock acquired for benefit plans -- -- -- (1,092)
Exercise of warrants 52 697 -- --
Exercise of stock options 14 (437) -- 806
Stock awards, net of
amortization 602 15,809 -- (2,495)
Cumulative translation
adjustment -- -- -- --
Other -- -- (44) --
-------------------------------------------------------------------------------
Balance at December 31, 1999 91,612 684,419 275,114 (6,950)
Net income -- -- 48,817 --
Dividends paid ($0.09 per share) -- -- (8,293) --
Stock acquired for benefit plans -- -- -- (88)
Exercise of stock options 173 1,559 -- (1,882)
Stock awards, net of
amortization 946 7,161 -- (1,840)
Cumulative translation
adjustment -- -- -- --
Unrealized appreciation in fair
value of investments -- -- -- --
Other -- (444) -- (48)
-------------------------------------------------------------------------------
Balance at December 31, 2000 $92,731 $692,695 $315,638 $(10,808)
===============================================================================
Accumulated
Unallocated Other Total
Deferred Stock of Comprehensive Stockholders'
Compensation ESOP Income Equity
-------------------------------------------------------------------------------------
Balance at December 31, 1997 $(14,807) $ (940) $ (105) $ 829,753
Pooling-of-interests (Note 2) -- -- -- 2,597
Net income -- -- -- 80,379
Dividends paid ($0.08 per share) -- -- -- (6,841)
Stock and warrants issued in
connection with acquisitions -- -- -- 36,073
Exercise of warrants -- -- -- 2,658
Exercise of stock options -- -- -- 4,795
Stock awards, net of
amortization 1,875 -- -- 13,064
Decrease in unallocated stock -- 940 -- 940
Cumulative translation
adjustment -- -- 52 52
Other -- -- -- 1
-------------------------------------------------------------------------------------
Balance at December 31, 1998 (12,932) -- (53) 963,471
Pooling-of-interests (Note 2) -- -- -- 362
Net income -- -- -- 57,721
Dividends paid ($0.09 per share) -- -- -- (8,203)
Stock and warrants issued in
connection with acquisitions -- -- -- 3,947
Stock acquired for benefit plans -- -- -- (1,092)
Exercise of warrants -- -- -- 749
Exercise of stock options -- -- -- 383
Stock awards, net of
amortization (1,166) -- -- 12,750
Cumulative translation
adjustment -- -- (1,664) (1,664)
Other -- -- -- (44)
-------------------------------------------------------------------------------------
Balance at December 31, 1999 (14,098) -- (1,717) 1,028,380
Net income -- -- -- 48,817
Dividends paid ($0.09 per share) -- -- -- (8,293)
Stock acquired for benefit plans -- -- -- (88)
Exercise of stock options -- -- -- (150)
Stock awards, net of
amortization (4,817) -- -- 1,450
Cumulative translation
adjustment -- -- (1,694) (1,694)
Unrealized appreciation in fair
value of investments -- -- 493 493
Other -- -- -- (492)
-------------------------------------------------------------------------------------
Balance at December 31, 2000 $(18,915) $ -- $(2,918) $1,068,423
=====================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of Omnicare, Inc. ("Omnicare" or the
"Company") include the accounts of all wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Translation of Foreign Financial Statements
Assets and liabilities of the Company's foreign operations are translated
at the year-end rate of exchange, and the income statements are translated at
the average rate of exchange for the year. Gains or losses from translating
foreign currency financial statements are accumulated in a separate component of
stockholders' equity.
Cash Equivalents
Cash equivalents include all investments in highly liquid instruments with
original maturities of three months or less.
Inventories
Inventories consist primarily of purchased pharmaceuticals and medical
supplies held for sale to customers and are stated at the lower of cost or
market. Cost is determined using the first-in, first-out ("FIFO") method.
Properties and Equipment
Properties and equipment are stated at cost. Expenditures for maintenance,
repairs, renewals and betterments that do not materially prolong the useful
lives of the assets are charged to expense as incurred. Depreciation of
properties and equipment is computed using the straight-line method over the
estimated useful lives of the assets, ranging from three to forty years.
Leasehold improvements are amortized over the lesser of the lease terms,
including renewal options, or their useful lives.
Leases
Leases that substantially transfer all of the benefits and risks of
ownership of property to Omnicare or otherwise meet the criteria for
capitalizing a lease under generally accepted accounting principles are
accounted for as capital leases. An asset is recorded at the time a capital
lease is entered into together with its related long-term obligation to reflect
its purchase and financing. Property and equipment recorded under capital leases
are depreciated on the same basis as previously described. Rental payments under
operating leases are expensed as incurred.
Goodwill, Intangibles and Other Assets
Intangible assets, comprised primarily of goodwill arising from business
combinations accounted for as purchase transactions, are amortized using the
straight-line method over forty years.
At each balance sheet date, the Company reviews the recoverability of
goodwill. The measurement of possible impairment is based primarily on the
ability to recover the balance of the goodwill from expected future operating
cash flows on an undiscounted basis. In management's opinion, no such impairment
exists as of December 31, 2000 or 1999.
Debt issuance costs as of December 31, 2000 and 1999 are included in other
assets and are amortized using the straight-line method (which approximates the
effective interest method) over the life of the related debt.
Fair Value of Financial Instruments
The fair value of the Company's line of credit facilities approximates
their carrying value, and the fair value of the convertible subordinated
debentures was $277.7 million at December 31, 2000.
Revenue Recognition
Revenue is recognized when products or services are delivered or provided
to the customer. Asignificant portion of the Company's revenues from sales of
pharmaceutical and medical products is reimbursable from Medicaid and Medicare
programs. The Company monitors its receivables from these reimbursement sources
under policies established by management and reports such revenues at the net
realizable amount expected to be received from these third-party payors.
Additionally, a portion of the Company's revenues are earned by performing
services under contracts with various pharmaceutical, biotechnology, medical
device and diagnostics companies, based on contract terms. Most of the contracts
provide for services to be performed on a units of service basis. These
contracts specifically identify the units of service and unit pricing. Under
these contracts, revenue is generally recognized upon completion of the units of
service, unless the units of service are performed over an extended period of
time. For extended units of service, revenue is recognized based on labor hours
expended as a percentage of total labor hours expected to be expended. For
time-and-materials contracts, revenue is recognized at contractual hourly rates,
and for fixed-price contracts revenue is recognized using a method similar to
that used for extended units of service. The Company's contracts provide for
price renegotiations upon scope of work changes. The Company recognizes revenue
related to these scope changes when underlying services are performed and
realization is assured. In a number of cases, clients are required to make
termination payments in addition to payments for services already rendered. Any
anticipated losses resulting from contract performance are charged to earnings
in the period identified. Billings and payments are specified in each contract.
Revenue recognized in excess of billings is classified as unbilled receivables,
while billings in excess of revenue are classified as deferred revenue on the
accompanying balance sheets.
Income Taxes
The Company accounts for income taxes using the asset and liability method
under which deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates to differences
between the tax bases of assets and liabilities and their reported amounts in
the consolidated financial statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings Per Share Data
Basic earnings per share are computed based on the weighted average number
of shares of common stock outstanding during the period. Diluted earnings per
share include the dilutive effect of stock options and warrants. The $345.0
million of 5.0% Convertible Subordinated Debentures due 2007 were not included
in the diluted earnings per share calculations during the three years ended
December 31, 2000 since the impact was antidilutive.
Comprehensive Income
Comprehensive income of the Company differs from net income due to foreign
currency translation adjustments and unrealized appreciation in the fair value
of investments.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended, establishes
accounting and reporting standards for derivative instruments and hedging
activities and requires recognition of all derivatives as either assets or
liabilities measured at fair value. The accounting for changes in the fair value
of a derivative depends on the intended use of the derivative and the resulting
designation. SFAS No. 133, as amended, is effective for fiscal years beginning
after June 15, 2000 and its adoption on January 1, 2001 did not have a material
effect on the Company's consolidated financial statements.
Use of Estimates in the
Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, the reported amounts of revenues and expenses
during the reporting periods, and amounts reported in the accompanying notes.
Actual results could differ from those estimates.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
Note 2 - Acquisitions
Since 1989, the Company has been involved in a program to acquire providers
of pharmaceutical products and related pharmacy management services and medical
supplies to long-term care facilities and their residents. The Company's
strategy has included the acquisition of freestanding institutional pharmacy
businesses as well as other assets, generally insignificant in size, which have
been combined with existing pharmacy operations to augment their internal
growth. From time to time, the Company may acquire other businesses such as
long-term care software companies, contract research organizations, pharmacy
consulting companies and medical supply companies, which complement the
Company's core business. No acquisitions of businesses were completed during the
year ended December 31, 2000.
During the year ended December 31, 1999, the Company completed five
acquisitions (excluding insignificant acquisitions), all of which were
institutional pharmacy businesses. Four of the acquisitions were accounted for
as purchases and one as a pooling-of-interests. The impact of the
pooling-of-interests transaction on the Company's historical consolidated
financial statements was not material. Consequently, prior period and current
year financial statements were not restated for this transaction.
During the year ended December 31, 1998, the Company completed 15
acquisitions (excluding insignificant acquisitions), including 12 institutional
pharmacy businesses, a long-term care software company and two contract research
organizations. Eleven of the acquisitions were accounted for as purchases and
four as poolings-of-interests. The impact of the CompScript, Inc. ("CompScript")
and IBAH, Inc. ("IBAH") pooling-of-interests transactions, discussed below in
the "Pooling-of-Interests" section, on the Company's historical consolidated
financial statements was material. Consequently, Omnicare's financial statements
were restated to include the accounts and results of operations of CompScript
and IBAH for all periods presented. The impact of the other two
pooling-of-interests transactions completed by Omnicare on the Company's
historical consolidated financial statements was not material. Consequently,
prior period and current year financial statements were not restated for these
transactions.
Purchases
For all acquisitions accounted for as purchases, including insignificant
acquisitions, the purchase price paid for each has been allocated to the fair
value of the assets acquired and liabilities assumed. Purchase price allocations
are subject to final determination within one year after the acquisition date.
On June 2, 1999, Omnicare announced the completion of the acquisition of
the institutional pharmacy operations of Life Care Pharmacy Services, Inc.
("Life Care"), an affiliate of Life Care Centers of America, for approximately
$63 million in cash and 300,000 warrants to purchase Omnicare common stock at
$29.70 per share. The warrants have a seven-year term and are first exercisable
in June 2002. Life Care had, at the time of the acquisition, contracts to
provide comprehensive pharmacy and related consulting services to approximately
17,000 residents in twelve states.
On September 17, 1998, Omnicare announced the completion of the acquisition
of the institutional pharmacy operations of Extendicare Health Services, Inc.
("EHSI"), a wholly owned subsidiary of Extendicare Inc., for approximately $250
million in cash, 125,000 shares of Omnicare common stock and 1.5 million
warrants to purchase Omnicare common stock at $48.00 per share. The warrants
have a seven-year term and are first exercisable in September 2001. Based in
Milwaukee, Wisconsin, the
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pharmacy business of EHSI, operating under the name United Professional
Companies, Inc., had, at the time of the acquisition, contracts to provide
comprehensive pharmacy, related consulting and infusion therapy services to
approximately 55,000 residents in more than 550 facilities in 12 states.
The following table summarizes the aggregate purchase price for all
businesses acquired which have been accounted for as purchases (in thousands):
Businesses acquired in
1999 1998
--------------------------------------------------------------------------------
Cash $ 95,058 $342,460
Amounts payable in the future 8,805 13,749
Common stock 2,482 22,314
Warrants 1,644 10,509
--------------------------------------------------------------------------------
$107,989 $389,032
================================================================================
Cash in the above table represents payments made in the year of
acquisition, including retirement of indebtedness. This amount differs from cash
paid for acquisition of businesses in the Consolidated Statement of Cash Flows
due primarily to purchase price payments made during the year pursuant to
acquisition agreements entered into in prior years.
Warrants outstanding as of December 31, 2000, issued in prior years in
connection with acquisitions, represent the right to purchase 2.0 million shares
of Omnicare common stock. These warrants can be exercised at any time through
2006 at prices ranging from $14.25 to $48.00 per share. There were no warrants
to purchase shares of common stock exercised in 2000.
The purchase agreements for acquisitions generally include clauses whereby
the seller will or may be paid additional consideration at a future date
depending on the passage of time and/or whether certain future events occur. The
agreements also include provisions containing a number of representations and
covenants by the seller and provide that if those representations or covenants
are violated or found not to have been true, Omnicare may offset any payments
required to be made at a future date against any claims it may have under
indemnity provisions in the agreement. There are no significant anticipated
future offsets against acquisition related payables and/or contingencies under
indemnity provisions as of December 31, 2000 and 1999. Amounts contingently
payable (primarily earnout payments) through 2001 total approximately $15
million as of December 31, 2000 and, if paid, will be recorded as additional
purchase price, serving to increase goodwill in the period in which the
contingencies are resolved and payment is made.
The results of operations of the companies acquired in purchase
transactions have been included in the consolidated results of operations of the
Company from the dates of acquisition.
Unaudited pro forma combined results of operations of the Company for the
year ended December 31, 1999 are presented below. Such pro forma presentation
has been prepared assuming that the acquisitions had been made as of January 1,
1999 and includes pooling-of-interests expenses and restructuring and other
related charges (in thousands, except per share data).
For the year ended December 31,
1999
--------------------------------------------------------------------------------
Pro Forma
Sales $1,883,987
Net income 57,522
Earnings per share:
Basic $ 0.63
Diluted $ 0.63
--------------------------------------------------------------------------------
The pro forma information does not purport to be indicative of operating
results which would have occurred had the acquisitions been made at the
beginning of the period or of results which may occur in the future. The primary
pro forma adjustments reflect amortization of goodwill acquired on a
straight-line basis over 40 years and interest costs. The pro forma information
does not give effect to any synergies anticipated by the Company's management as
a result of the acquisitions, in particular improvements in gross margin
attributable to the Company's purchasing leverage associated with purchases of
pharmaceuticals and the elimination of duplicate payroll and other operating
expenses.
Pooling-of-Interests
On June 26, 1998, the Company completed the acquisition of CompScript in a
pooling-of-interests transaction. Pursuant to the terms of the merger agreement,
CompScript stockholders received .12947 of a share of Omnicare common stock for
each share owned of CompScript common stock. Omnicare issued approximately 1.8
million shares of its common stock with a value of approximately $67 million in
this transaction.
CompScript is a Boca Raton, Florida-based provider of comprehensive
pharmacy management, infusion therapy and related consulting services to the
long-term care, alternate care and managed care markets. At the time of the
acquisition, CompScript served approximately 20,000 residents in 137 long-term
care facilities in five states.
On June 29, 1998, the Company completed the acquisition of IBAH in a
pooling-of-interests transaction. Pursuant to the terms of the merger agreement,
IBAH stockholders received .1638 of a share of Omnicare common stock for each
share owned of IBAH common stock. Omnicare issued approximately 4.3 million
shares of its common stock with a value of approximately $159 million in this
transaction.
IBAH, then headquartered in Blue Bell, Pennsylvania, is an international
provider of comprehensive product development services to client companies in
the
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
pharmaceutical, biotechnology, medical device and diagnostics industries. IBAH
offers services for all stages of drug development that are intended to help
client companies to accelerate products from discovery through development and
commercialization more cost effectively.
Net sales and net income (including pooling-of-interests expenses and
restructuring and other related charges) for Omnicare, CompScript and IBAH for
the period prior to the transactions are as follows (in thousands):
Omnicare CompScript IBAH Total
--------------------------------------------------------------------------------
Six months ended
June 30, 1998
Sales $616,453 $28,237 $53,762 $ 698,452
Net income (loss) 35,085 (2,147) (4,426) 28,512
In connection with the CompScript and IBAH mergers, in the second quarter
of 1998, Omnicare recorded a charge to operating expenses of $17.7 million
($15.4 million after taxes) for direct and other merger-related costs pertaining
to the merger transactions and certain related restructuring actions.
Merger transaction costs consisted primarily of fees for investment
bankers, attorneys, accountants, financial printing and other related charges.
Restructuring costs include severance and exit costs. Details of these costs
follow (in thousands):
Balance at Balance at
Initial 1998 December 31, 1999 December 31,
Provision Activity 1998 Activity 1999
--------------------------------------------------------------------------------
Merger
transaction
costs $14,096 $(7,536) $6,560 $(6,560) $ --
Restructuring
costs:
Employee
severance 1,413 (395) 1,018 (1,018) --
Exit costs 2,214 (1,502) 712 (712) --
--------------------------------------------------------------------------------
Total $17,723 $(9,433) $8,290 $(8,290) $ --
================================================================================
Restructuring costs include the costs of restructuring the CompScript mail
order pharmacy business and the cancellation of agreements with certain
CompScript vendors, as well as severance and exit costs associated with the
consolidation of certain IBAH facilities and the restructuring of IBAH's
pharmaceutics business. Collectively, these actions resulted in the reduction of
approximately 20 employees. Included in the exit costs were $1.9 million of
non-cash items. All actions relating to these restructuring activities have been
completed.
In accordance with accounting rules for pooling-of-interests transactions,
charges to operating income for acquisition-related expenses were recorded upon
completion of the pooling acquisitions. There were no acquisition-related
expenses in 2000. Acquisition-related expenses totaled $0.8 million ($0.6
million aftertax) for the 1999 transactions and $15.4 million ($13.9 million
aftertax) for the 1998 transactions. During 1999, the Company recorded income of
$0.9 million ($1.0 million aftertax) relating to the net reversal of estimated
CompScript and IBAH acquisition-related expenses resulting from the finalization
of those costs.
Note 3 - Cash and Cash Equivalents
A summary of cash and cash equivalents follows (in thousands):
December 31,
2000 1999
--------------------------------------------------------------------------------
Cash (including restricted cash) $ 64,899 $37,115
Money market funds 6,668 8,658
U.S. government-backed
repurchase agreements 42,340 51,494
--------------------------------------------------------------------------------
$113,907 $97,267
================================================================================
Repurchase agreements represent investments in U.S. government-backed
securities (government agency and treasury issues at December 31, 2000 and 1999,
respectively), under agreements to resell the securities to the counterparty.
The term of the agreement usually spans overnight, but in no case is longer than
30 days. The Company has a collateralized interest in the underlying securities
of repurchase agreements, which are segregated in the accounts of the bank
counterparty.
Note 4 - Properties and Equipment
A summary of properties and equipment follows (in thousands):
December 31,
2000 1999
-------------------------------------------------------------------------------
Land $ 1,553 $ 1,553
Buildings and building improvements 6,347 6,246
Computer hardware and software 119,829 103,164
Machinery and equipment 95,621 92,925
Furniture, fixtures and
leasehold improvements 67,493 64,267
-------------------------------------------------------------------------------
290,843 268,155
Accumulated depreciation (132,308) (106,022)
-------------------------------------------------------------------------------
$ 158,535 $ 162,133
================================================================================
Note 5 - Leasing Arrangements
The Company has operating leases that cover various real and personal
property. In most cases, the Company expects that these leases will be renewed
or replaced by other leases in the normal course of business. There are no
significant contingent rentals in the Company's operating leases.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a schedule of future minimum rental payments required
under operating leases that have initial or remaining noncancellable terms in
excess of one year as of December 31, 2000 (in thousands):
2001 $19,406
2002 17,697
2003 15,109
2004 12,452
2005 9,799
Later years 36,059
--------------------------------------------------------------------------------
Total minimum payments required $110,522
================================================================================
Total rent expense under operating leases for the years ended December 31,
2000, 1999 and 1998 were $27.9 million, $25.3 million and $20.5 million,
respectively.
Note 6 - Long-Term Debt
On March 20, 2001, the Company completed the issuance of $375.0 million of
8.125% senior subordinated notes due 2011 (the "Senior Notes"). Concurrent with
the issuance of the Senior Notes, the Company entered into a new three-year
syndicated $495.0 million revolving credit facility (the "Revolving Credit
Facility"), including a $25.0 million letter of credit subfacility, with various
lenders. Net proceeds from the Senior Notes of approximately $365 million and
borrowings under the new credit facility of approximately $70 million were used
to repay outstanding indebtedness under the Company's existing credit
facilities, which totaled $435.0 million at December 31, 2000, and such existing
facilities were terminated. Subsequent to the closing of the Revolving Credit
Facility, the Company received commitments from additional banks that will allow
it to increase the size of the Revolving Credit Facility to $500.0 million. The
Company has classified the $435.0 million as long-term debt at December 31, 2000
based on the transactions described above. The discussion which follows relates
to the long-term debt facilities in existence at December 31, 2000.
A summary of long-term debt follows (in thousands):
December 31,
2000 1999
--------------------------------------------------------------------------------
Revolving line-of-credit facilities $435,000 $465,000
5% Convertible Subordinated
Debentures due 2007 345,000 345,000
Capitalized lease obligations 2,325 4,357
--------------------------------------------------------------------------------
782,325 814,357
Less current portion (1,619) (77,413)
--------------------------------------------------------------------------------
$780,706 $736,944
================================================================================
The following is a schedule of required long-term debt payments due during
each of the next five years and thereafter, as of December 31, 2000 (in
thousands):
2001 $ 1,619
2002 502
2003 80
2004 60,026
2005 98
Later years 720,000
--------------------------------------------------------------------------------
$782,325
================================================================================
Total interest payments made for the years ended December 31, 2000, 1999
and 1998 were $54.0 million, $46.2 million and $22.1 million, respectively.
Revolving Credit Facilities
In 1996, the Company negotiated a five-year, $400.0 million line of credit
agreement with a consortium of sixteen banks. Borrowings under this agreement
bear interest based upon LIBOR plus a spread of 90 to 125 basis points,
depending on the Company's fixed charge coverage ratio, or other rates
negotiated with the banks. Additionally, a commitment fee on the unused portion
of the agreement ranges from 20 to 35 basis points, and is also based on the
Company's fixed charge coverage ratio. Autilization fee also applies to this
agreement and requires an additional spread of 10 to 25 basis points whenever
borrowings exceed 50% of the $400.0 million line of credit. The agreement
contains covenants which include a fixed charge coverage ratio and minimum
consolidated net worth levels. The Company is in compliance with these
covenants. The total amount outstanding under the five-year agreement as of
December 31, 2000 was $390.0 million.
In 1998, the Company amended its five-year, $400.0 million line of credit
agreement to, among other modifications, permit an additional 364-day, $400.0
million line of credit facility, which is convertible at maturity into a
one-year term loan. During 2000, Omnicare renewed this 364-day, line of credit
facility until the third quarter of 2001, at a $300.0 million level. Borrowings
under this facility bear interest at a rate based on LIBOR plus a spread of 100
to 200 basis points, dependent on the Company's debt ratings from Moody's
Investors Service, Inc. ("Moody's") and Standard & Poors Ratings Group ("S&P").
Acommitment fee on the unused portion of the facility ranges from 20 to 50 basis
points, and is also based on the Company's debt ratings from Moody's and S&P.
The facility contains covenants which include a fixed charge coverage ratio and
minimum consolidated net worth levels. The Company is in compliance with these
covenants. The total amount outstanding under the 364-day credit facility at
December 31, 2000 was $45.0 million.
In connection with the amended five-year, $400.0 million credit agreement
and the renewed 364-day, $300.0 million line of credit facility, the Company has
deferred $3.4 million in debt issuance costs which is being amortized over the
life
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the agreements. The Company amortized approximately $1.2 million and $0.9
million of deferred debt issuance costs relating to the revolving credit
facilities in 2000 and 1999, respectively, and none in 1998.
Convertible Subordinated Debentures
On December 10, 1997, the Company issued $345.0 million principal amount of
5.0% Convertible Subordinated Debentures ("Debentures") due 2007. The Debentures
are convertible into common stock at any time after March 4, 1998 at the option
of the holder at a price of $39.60 per share. In connection with the issuance of
the Debentures in 1997, the Company deferred $8.5 million in debt issuance
costs. The Company amortized $0.9 million of this deferred debt issuance costs
relating to the Debentures in each of the three years ended December 31, 2000.
ESOP Loan Guarantee
In 1988, the Company established an Employee Stock Ownership Plan ("ESOP")
which covers certain acquired entities' employees and corporate headquarter's
employees. The ESOP used proceeds from a $4 million bank loan to purchase
approximately 2.0 million shares of the Company's common stock on the open
market at prices ranging from $1.94 to $2.13 per share. The Company guaranteed
the repayment of this obligation. Accordingly, the ESOP bank debt was recorded
as long-term debt with a corresponding reduction of stockholders' equity in the
consolidated balance sheet. The final installment payment on the ESOP debt was
made in 1998.
The ESOP serviced its debt with Company contributions made on behalf of its
employees, which were previously made to the Company's Employee Savings and
Investment Plan, and dividends received on shares held by the ESOP trust.
Principal and interest payments on the ESOP debt were made in increasing
quarterly installments over a ten-year period. The ESOP debt bore interest at a
rate of 7% per annum and was secured by the unallocated shares of common stock
held by the ESOP trust. There were no unallocated shares at December 31, 2000
and 1999.
The Company funded ESOP expense as accrued. The components of total ESOP
expense for the year ended December 31, 1998 were as follows (in thousands):
Interest expense $ 30
Principal payments 940
Dividends on ESOP stock (102)
--------------------------------------------------------------------------------
$ 868
================================================================================
Note 7 - Stock Incentive Plans
The Company has three stock incentive plans under which it may grant
stock-based incentives to key employees.
Under the 1992 Long-Term Stock Incentive Plan, the Company may grant stock
awards, and stock options may be granted at a price equal to the fair market
value at the date of grant. Under this plan, stock options generally become
exercisable beginning one year following the date of grant and vest in four
equal annual installments. As of December 31, 2000, approximately 0.9 million
shares were available for grant under this plan.
During 1995, the Company's Board of Directors and stockholders approved the
1995 Premium-Priced Stock Option Plan, providing options to purchase 2.5 million
shares of Company common stock available for grant at an exercise price of 125%
of the stock's fair market value at the date of grant. As of December 31, 2000,
no shares were available for grant under this plan.
During 1998, the Company's Board of Directors approved the 1998 Long-Term
Employee Incentive Plan (the "1998 Plan"), under which the Company was
authorized to grant stock-based incentives to employees (excluding executive
officers and directors of the Company) in an amount initially aggregating up to
1.0 million shares of Company common stock for non-qualified options, stock
awards and stock appreciation rights. In March 2000, the Company's Board of
Directors amended the 1998 Plan to increase the shares available for granting to
3.5 million. As of December 31, 2000, approximately 2.2 million shares were
available for grant under this plan.
In connection with the 1998 pooling-of-interests business combinations
described in Note 2 to the Consolidated Financial Statements, the Company
converted all outstanding options to purchase common stock of CompScript and
IBAH into options to acquire 0.9 million shares of the Company's common stock at
exercise prices of $0.73 to $77.24 per share.
Summary information for stock options is presented below (in thousands,
except exercise price data):
2000
--------------------------------------------------------------------------------
Weighted Average
Shares Exercise Price
--------------------------------------------------------------------------------
Options outstanding,
beginning of year 6,692 $18.42
Options granted 1,675 16.34
Options exercised (172) 6.30
Options forfeited (399) 21.41
--------------------------------------------------------------------------------
Options outstanding, end of year 7,796 $18.06
--------------------------------------------------------------------------------
Options exercisable, end of year 3,035 $19.48
================================================================================
1999
--------------------------------------------------------------------------------
Weighted Average
Shares Exercise Price
--------------------------------------------------------------------------------
Options outstanding,
beginning of year 3,137 $23.03
Options granted 3,793 14.59
Options exercised (114) 11.74
Options forfeited (124) 32.72
--------------------------------------------------------------------------------
Options outstanding, end of year 6,692 $18.42
--------------------------------------------------------------------------------
Options exercisable, end of year 2,721 $17.16
================================================================================
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1998
--------------------------------------------------------------------------------
Weighted Average
Shares Exercise Price
--------------------------------------------------------------------------------
Options outstanding,
beginning of year 3,206 $17.85
Options granted 804 36.10
Options exercised (531) 12.66
Options forfeited (342) 26.19
--------------------------------------------------------------------------------
Options outstanding, end of year 3,137 $23.03
--------------------------------------------------------------------------------
Options exercisable, end of year 1,598 $16.13
================================================================================
The following summarizes information about stock options outstanding and
exercisable as of December 31, 2000 (in thousands, except exercise price data):
OPTIONS OUTSTANDING
--------------------------------------------------------------------------------
Weighted Average
Number Remaining Weighted
Range of Outstanding Contractual Average
Exercise Prices at 12/31/00 Life (in years) Exercise Price
--------------------------------------------------------------------------------
$ 3.00 - $12.34 2,023 5.92 $10.45
13.35 - 15.26 31 4.42 13.48
15.42 - 15.42 2,515 8.50 15.42
16.53 - 18.32 1,573 9.18 16.61
18.41 - 77.24 1,654 6.68 32.85
--------------------------------------------------------------------------------
$ 3.00 - $77.24 7,796 7.57 $18.06
================================================================================
OPTIONS EXERCISABLE
-------------------------------------------------------------------------------
Number Weighted
Range of Exercisable Average
Exercise Prices at 12/31/00 Exercise Price
-------------------------------------------------------------------------------
$ 3.00 - $12.34 1,162 $ 9.23
13.35 - 15.26 31 13.48
15.42 - 15.42 629 15.42
16.53 - 18.32 39 18.12
18.41 - 77.24 1,174 32.01
-------------------------------------------------------------------------------
$ 3.00 - $77.24 3,035 $19.48
===============================================================================
Nonvested stock awards that are granted to key employees at the discretion
of the Compensation and Incentive Committee of the Board of Directors are
restricted as to the transfer of ownership and generally vest over a seven-year
period with a greater proportion vesting in the latter years. Unrestricted stock
awards are granted annually to members of the Board of Directors. The fair value
of a stock award is equal to the fair market value of a share of Company stock
at the grant date.
Summary information relating to stock award grants is presented below:
For the years ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------
Nonvested shares 947,438 596,630 369,651
Unrestricted shares 5,200 5,308 5,600
Weighted-average grant
date fair value $ 9.85 $ 26.63 $ 31.75
--------------------------------------------------------------------------------
When granted, the cost of nonvested stock awards is deferred and amortized
over the vesting period. Unrestricted stock awards are expensed during the year
granted. During 2000, 1999 and 1998, the amount of compensation expense related
to stock awards was $3.9 million, $3.8 million and $2.1 million, respectively.
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company accounts for stock-based incentives granted under these plans
according to Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." As a result, no compensation cost has been recognized for
the stock options granted under the incentive plans. The fair value of each
option at grant date is estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 2000, 1999
and 1998: riskfree interest rate of 5.0% in 2000 (6.75% in 1999 and 5.75% in
1998), volatility of 61% in 2000 (41% in 1999 and 36% in 1998), dividend yield
of 0.4% in 2000 (0.8% in 1999 and 0.2% in 1998) and expected life of 4.0 years
in 2000 (4.0 years in 1999 and 4.2 years in 1998). Based on these assumptions,
the weighted average fair value of employee stock options granted during 2000,
1999 and 1998 was $8.36, $4.06 and $13.38, respectively.
Pro forma data (including pooling-of-interests expenses and restructuring
and other related charges) as though the Company had accounted for stock-based
compensation cost in accordance with SFAS No. 123 are as follows (in thousands,
except per share data):
For the years ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------
Pro Forma
Net income $43,182 $ 53,604 $ 77,707
Earnings per share:
Basic $ 0.47 $ 0.59 $ 0.87
Diluted $ 0.47 $ 0.59 $ 0.87
--------------------------------------------------------------------------------
The above pro forma information includes only stock options granted in 1995
and thereafter, and does not purport to be representative of the effect of SFAS
No. 123 on net income or earnings per share in future years.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Related Party Transactions
The Company subleases offices from Chemed Corporation ("Chemed"), a
stockholder, and is charged for consulting services pertaining to information
systems development, the occasional use of Chemed's corporate aviation
department, rent, and other incidental expenses based on Chemed's cost. The
Company believes that the method by which such charges are determined is
reasonable and that the charges are essentially equal to that which would have
been incurred if the Company had operated as an unaffiliated entity. Charges to
the Company for these services for the years ended December 31, 2000, 1999 and
1998 were $1.4 million, $1.9 million and $2.2 million, respectively. Net amounts
owed by the Company to Chemed as of December 31, 2000 and 1999 were $0.1 million
and $0.4 million, respectively.
Note 9 - Employee Benefit Plans
The Company has various defined contribution savings plans under which
eligible employees can participate by contributing a portion of their salary for
investment, at the direction of each employee, in one or more investment funds.
Several of the plans were adopted in connection with certain of the Company's
acquisitions. The plans are taxdeferred arrangements pursuant to Internal
Revenue Code ("IRC") Section 401(k) and are subject to the provisions of the
Employee Retirement Income Security Act ("ERISA"). The Company matches employee
contributions in varying degrees based on the contribution levels of the
employees.
The Company has a non-contributory, defined benefit pension plan covering
certain corporate headquarters employees and the employees of several companies
sold by the Company in 1992, for which benefits ceased accruing upon the sale
(the "Qualified Plan"). Benefits accruing under this plan to corporate
headquarters employees were fully vested and frozen as of January 1, 1994. The
Company also has an excess benefits plan which provides retirement payments to
participants in amounts consistent with what they would have received under the
Qualified Plan if payments to them under the Qualified Plan were not limited by
the IRC and other restrictions. Retirement benefits are based primarily on an
employee's years of service and compensation near retirement. Plan assets are
invested primarily in a mutual fund holding U.S. Treasury obligations. The
Company's policy is to fund pension costs in accordance with the funding
provisions of ERISA.
In addition, the Company also has a supplemental pension plan ("SPP") in
which certain of its executive officers participate. Retirement benefits under
the SPP are calculated on the basis of a specified percentage of the executive's
covered compensation, years of credited service and a vesting schedule, as
specified in the plan document. The SPP terminated in 2000, resulting in benefit
payments of $2.4 million.
In November 1999, the Company's Board of Directors adopted the Omnicare
StockPlus Program, a non-compensatory employee stock purchase plan (the "ESPP").
Under the ESPP, employees and non-employee directors of the Company who elect to
participate may contribute up to 6% of eligible compensation (or an amount not
to exceed $20,000 for non-employee directors), to purchase shares of the
Company's common stock. For each share of stock purchased, the participant also
receives two options to purchase additional shares of the Company's stock. The
options are subject to a four-year vesting period and are generally subject to
forfeiture in the event the related shares are not held by the participant for a
minimum of two years. The options have a ten-year life from the date of
issuance. Amounts contributed to the ESPP are used by the plan administrator to
purchase the Company's stock on the open market. Options awarded under the ESPP
are issued out of the 1992 Long-Term Stock Incentive Plan and the 1998 Long-Term
Employee Incentive Plan, and are included in the option activity presented in
Note 7 to the Consolidated Financial Statements.
Actuarial assumptions used to calculate the benefit obligations and
expenses include a 7.75% interest rate as of December 31, 2000 (7.75% and 6.75%
at December 31, 1999 and 1998, respectively), an expected long-term rate of
return on assets of 8% and a 6% rate of increase in compensation levels.
The aggregate assets invested for settlement of the Company's pension
obligations ("plan assets") as of December 31, 2000 and 1999 are greater (less)
than the aggregate Accumulated Benefit Obligation by $2.9 million and $(1.1)
million, respectively. The plan assets as of December 31, 2000 and 1999 are
greater (less) than the aggregate Projected Benefit Obligation ("PBO") by $2.2
million and $(6.6) million, respectively. The decrease in the net PBO from the
prior year of $8.8 million primarily relates to an actuarial gain of $5.1
million, a net increase in plan assets of $3.7 million and benefit payments of
$2.4 million, offset in part by interest expense of $1.4 million and service
costs of $1.0 million. Plan assets amounted to $17.0 million and $13.3 million
at December 31, 2000 and 1999, respectively.
Expense relating to the Company's defined benefit plans for the years ended
December 31, 2000, 1999 and 1998 was $4.0 million, $3.4 million and $2.5
million, respectively. Expense relating to the Company's defined contribution
plans (including the ESOP described in Note 6 to the Consolidated Financial
Statements) for the years ended December 31, 2000, 1999 and 1998 was $4.0
million, $2.5 million and $1.6 million, respectively.
Note 10 - Income Taxes
The provision for income taxes is comprised of the following (in
thousands):
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31,
2000 1999 1998
-------------------------------------------------------------------------------
Current Provision:
Federal $ 8,304 $ 8,161 $44,958
State and local 575 2,615 2,940
Foreign 60 101 10
-------------------------------------------------------------------------------
8,939 10,877 47,908
-------------------------------------------------------------------------------
Deferred Provision:
Federal 17,967 23,134 7,131
State 1,800 (61) 448
-------------------------------------------------------------------------------
19,767 23,073 7,579
-------------------------------------------------------------------------------
Total income tax provision $28,706 $33,950 $55,487
===============================================================================
Tax benefits related to the exercise of stock options, stock awards and
stock warrants have been credited to paid-in capital in amounts of $0.9 million
and $6.4 million for 1999 and 1998, respectively. These amounts were not
significant during 2000.
The difference between the Company's reported income tax expense and the
federal income tax expense computed at the statutory rate of 35% is explained in
the following table (in thousands):
For the years ended December 31,
2000 1999 1998
--------------------------------------------------------------------------------
Federal income
tax at the
statutory
rate $27,133 35.0% $32,085 35.0% $47,553 35.0%
State and local
income taxes,
net of federal
income tax
benefit 1,123 1.5 1,660 1.8 3,012 2.2
Amortization of
nondeductible
intangible
assets 3,037 3.9 1,998 2.2 1,894 1.4
Nondeductible
pooling-of-interest/
merger
and acquisition
costs (622) (0.8) (1,197) (1.3) 2,291 1.7
Impact of net
operating
loss (373) (0.5) -- -- -- --
Other, net
(including
tax accrual
adjustments) (1,592) (2.1) (596) (0.7) 737 0.5
--------------------------------------------------------------------------------
Total
income tax
provision $28,706 37.0% $33,950 37.0% $55,487 40.8%
================================================================================
Income tax (refunds) payments, net, amounted to $(6.8) million, $18.6
million and $27.3 million in 2000, 1999 and 1998, respectively.
A summary of deferred tax assets and liabilities follows (in thousands):
December 31,
2000 1999
------------------------------------------------------------------------------
Accounts receivable reserves $ 9,474 $ 5,387
Accrued liabilities 36,997 34,086
Other 424 1,118
------------------------------------------------------------------------------
Gross deferred tax assets $46,895 $40,591
==============================================================================
Fixed assets and depreciation methods $23,203 $17,004
Amortization of intangibles 53,614 38,187
Other current and noncurrent assets 5,863 5,361
Other 1,456 63
------------------------------------------------------------------------------
Gross deferred tax liabilities $84,136 $60,615
==============================================================================
Note 11 - Earnings Per Share Data
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share ("EPS") computations (in thousands, except
per share data):
For the year ended December 31, 2000
Income Shares Per Share
(Numerator) (Denominator) Amounts
-------------------------------------------------------------------------------
Basic EPS
Net income $48,817 92,012 $0.53
======
Effect of Dilutive
Securities
Stock options and
stock warrants -- --
--------------------------------------------------------------------
Diluted EPS
Net income plus
assumed conversions $48,817 92,012 $0.53
==================================================================== ======
For the year ended December 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amounts
------------------------------------------------------------------------------
Basic EPS
Net income $57,721 90,999 $0.63
=====
Effect of Dilutive
Securities
Stock options and
stock warrants -- 239
--------------------------------------------------------------------
Diluted EPS
Net income plus
assumed conversions $57,721 91,238 $0.63
==================================================================== =====
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amounts
--------------------------------------------------------------------------------
Basic EPS
Net income $80,379 89,081 $0.90
=====
Effect of Dilutive
Securities
Stock options and
stock warrants -- 705
---------------------------------------------------------------------
Diluted EPS
Net income plus
assumed conversions $80,379 89,786 $0.90
===================================================================== =====
The $345.0 million of Debentures that are convertible into approximately
8.7 million shares at $39.60 per share were outstanding during 2000, 1999 and
1998, but were not included in the computation of diluted EPS because the impact
during these periods was anti-dilutive.
Note 12 - Restructuring and
Other Related Charges
In the second quarter of 1999, the Company announced a comprehensive
restructuring plan to streamline company-wide operations through the
implementation of a productivity and consolidation program. This program, which
was finalized in the fourth quarter of 2000, was in response to changes in the
healthcare industry and complemented Omnicare's ability to gain maximum benefits
from its acquisition program. The productivity and consolidation initiatives
have eliminated redundant efforts, simplified work processes and applied
technology to maximize employee productivity, and standardize operations around
best practices. Facilities in overlapping geographic territories were
consolidated to better align pharmacies around customers to improve efficiency
and enhance the Company's ability to deliver innovative services and programs to
its customers. Productivity initiatives were also introduced at the majority of
the Company's pharmacy and other operating locations, which totaled
approximately 220 sites at the commencement of the program. As part of the
initiative, the roster of pharmacies and other operating locations was
reconfigured through the consolidation, relocation, closure and opening of
sites, resulting in a net reduction of 59 locations. The plan resulted in the
reduction of the Company's work force by 16%, or approximately 1,800 full- and
part-time employees, and annualized pretax savings in excess of $46 million upon
completion.
In connection with this program, Omnicare recorded a total of $62.6 million
($39.8 million after taxes) for restructuring and other related charges, of
which $27.2 million ($17.1 million after taxes) and $35.4 million ($22.7 million
after taxes) were recorded during the years ended December 31, 2000 and 1999,
respectively. The restructuring charges include severance pay, the buy-out of
current employment agreements, the buy-out of lease obligations, the write-off
of other assets (representing a project-to-date cumulative amount of $11.0
million of pretax non-cash items, through December 31, 2000) and facility exit
costs. The other related charges are primarily comprised of consulting fees and
duplicate costs associated with the program, as well as the write-off of certain
non-core health care investments. Details of the restructuring and other related
charges relating to the productivity and consolidation program follow (in
thousands):
Utilized Balance at
2000 during December 31,
Provision 2000 2000
--------------------------------------------------------------------------------
Restructuring charges:
Employee severance $ 3,296 $ (8,367) $ 3,390
Employment
agreement buy-outs 1,048 (3,735) 676
Lease terminations 1,881 (3,811) 2,593
Other assets and
facility exit costs 10,627 (9,737) 2,538
--------------------------------------------------------------------------------
Total restructuring
charges 16,852 $(25,650) $ 9,197
========================
Other related charges 10,347
----------------------------------------------
Total restructuring
and other related
charges $27,199
==============================================
Utilized Balance at
1999 during December 31,
Provision 1999 1999
--------------------------------------------------------------------------------
Restructuring charges:
Employee severance $12,178 $ (3,717) $ 8,461
Employment
agreement buy-outs 6,740 (3,377) 3,363
Lease terminations 5,612 (1,089) 4,523
Other assets and
facility exit costs 8,310 (6,662) 1,648
--------------------------------------------------------------------------------
Total restructuring
charges 32,840 $(14,845) $17,995
========================
Other related charges 2,554
----------------------------------------------
Total restructuring
and other related
charges $35,394
==============================================
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2000, the Company had incurred approximately $19.2
million of severance and other employee-related costs relating to the reduction
of approximately 1,800 employees. The remaining liabilities at December 31, 2000
represent amounts not yet paid relating to actions taken in connection with the
program (primarily severance payments, lease payments and professional fees),
and will be adjusted as these matters are settled.
In connection with the 1998 pooling-of-interests transactions with
CompScript and IBAH, the Company recorded a restructuring charge of $3.6 million
before taxes ($2.7 million after taxes), as further discussed at Note 2 to the
Consolidated Financial Statements.
Note 13 - Shareholders' Rights Plan
In May 1999, the Company's Board of Directors declared a dividend, payable
on June 2, 1999, of one preferred share purchase right (a "Right") for each
outstanding share of the Company's $1.00 per share par value common stock, that,
when exercisable, entitles the registered holder to purchase from the Company
one ten-thousandth of a share of Series A Junior Participating Preferred Stock
of the Company, without par value (the "Preferred Shares"), at a price of $135
per one ten-thousandth of a share, subject to adjustment. Upon certain events
relating to the acquisition of, commencement or announcement of, or announcement
of an intention to make a tender offer or exchange offer that would result in
the beneficial ownership of 15% or more of the Company's outstanding common
stock by an individual or group of individuals (the "Distribution Date"), the
Rights not owned by the 15% stockholder will entitle its holder to purchase, at
the Right's then current exercise price, common shares having a market value of
twice such exercise price. Additionally, if after any person has become a 15%
stockholder, the Company is involved in a merger or other business combination
with any other person, each Right will entitle its holder (other than the 15%
stockholder) to purchase, at the Right's then current exercise price, common
shares of the acquiring company having a value of twice the Right's then current
exercise price. The Rights will expire on May 17, 2009, unless redeemed earlier
by the Company at $0.01 per Right until the Distribution Date.
Note 14 - Segment Information
Based on the "management approach" as defined by SFAS No. 131, Omnicare has
two business segments. The Company's largest segment is Pharmacy Services.
Pharmacy Services provides distribution of pharmaceuticals, related pharmacy
consulting, data management services and medical supplies to long-term care
facilities in 43 states in the United States of America ("USA"). The Company's
other reportable segment is Contract Research Organization ("CRO") Services,
which provides comprehensive product development services to client companies in
pharmaceutical, biotechnology, medical devices and diagnostics industries in 23
countries around the world, including the USA.
The table below presents information about the reportable segments as of
and for the years ended December 31, 2000, 1999 and 1998 (in thousands):
Corporate
Pharmacy CRO and Consolidated
2000: Services Services Consolidating Totals
--------------------------------------------------------------------------------------------------------------------------------
Sales $1,858,697 $112,651 $ -- $1,971,348
Depreciation and amortization 69,346 3,458 1,169 73,973
Operating income (expense), excluding restructuring
and other related charges 178,204 7,248 (27,566) 157,886
Restructuring and other related charges (21,615) (5,584) - (27,199)
Operating income (expense) 156,589 1,664 (27,566) 130,687
Total assets 1,960,870 117,212 132,136 2,210,218
Expenditures for additions to long-lived assets 26,866 3,119 2,438 32,423
================================================================================================================================
1999:
--------------------------------------------------------------------------------------------------------------------------------
Sales $1,728,055 $133,866 $ -- $1,861,921
Depreciation and amortization 62,589 5,734 1,041 69,364
Operating income (expense), excluding acquisition
expenses and restructuring and other related charges 181,087 16,550 (25,993) 171,644
Acquisition (expenses)/income 352 (297) -- 55
Restructuring and other related charges (32,216) (3,178) -- (35,394)
Operating income (expense) 149,223 13,075 (25,993) 136,305
Total assets 1,889,763 125,122 153,088 2,167,973
Expenditures for additions to long-lived assets 52,560 3,113 3,076 58,749
================================================================================================================================
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Corporate
Pharmacy CRO and Consolidated
1998: Services Services Consolidating Totals
-----------------------------------------------------------------------------------------------------------------------------
Sales $1,394,768 $122,602 $ -- $1,517,370
Depreciation and amortization 41,994 5,091 551 47,636
Operating income (expense), excluding acquisition
expenses and restructuring and other related charges 185,305 12,725 (22,841) 175,189
Acquisition expenses (10,172) (5,269) -- (15,441)
Restructuring and other related charges (1,245) (2,382) -- (3,627)
Operating income (expense) 173,888 5,074 (22,841) 156,121
Total assets 1,686,643 120,693 96,493 1,903,829
Expenditures for additions to long-lived assets 45,789 5,306 2,084 53,179
=============================================================================================================================
The following summarizes sales and long-lived assets by geographic area as
of and for the years ended December 31, 2000, 1999 and 1998 (in thousands):
Sales Long-Lived Assets
-----------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 2000 1999 1998
-----------------------------------------------------------------------------------------------------------------------------
United States $1,941,220 $1,821,083 $1,483,443 $156,610 $159,530 $133,173
Foreign 30,128 40,838 33,927 1,925 2,603 3,198
-----------------------------------------------------------------------------------------------------------------------------
Total $1,971,348 $1,861,921 $1,517,370 $158,535 $162,133 $136,371
=============================================================================================================================
Foreign sales are based on the country in which the sales originate. No
individual foreign country's sales were material to the consolidated sales of
Omnicare.
Note 15 - Summary of Quarterly Results (Unaudited)
The following table presents the Company's quarterly financial information
for 2000 and 1999 (in thousands, except per share data):
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------------------------------------------------------------------
2000(a)
Sales $493,026 $480,510 $491,262 $506,550 $1,971,348
Cost of sales 360,409 353,716 361,141 370,689 1,445,955
-----------------------------------------------------------------------------------------------------------------------------
Gross profit 132,617 126,794 130,121 135,861 525,393
Selling, general and
administrative expenses 92,768 90,424 90,687 93,628 367,507
Restructuring and other related charges 4,278 6,150 4,263 12,508 27,199
-----------------------------------------------------------------------------------------------------------------------------
Operating income 35,571 30,220 35,171 29,725 130,687
Investment income 459 357 472 622 1,910
Interest expense (13,165) (13,634) (14,204) (14,071) (55,074)
-----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 22,865 16,943 21,439 16,276 77,523
Income taxes 8,472 6,267 7,930 6,037 28,706
-----------------------------------------------------------------------------------------------------------------------------
Net income $ 14,393 $ 10,676 $ 13,509 $ 10,239 $ 48,817
=============================================================================================================================
Earnings per share:
Basic $ 0.16 $ 0.12 $ 0.15 $ 0.11 $ 0.53
=============================================================================================================================
Diluted $ 0.16 $ 0.12 $ 0.15 $ 0.11 $ 0.53
=============================================================================================================================
Weighted average number of common
shares outstanding:
Basic 91,599 92,155 92,160 92,132 92,012
============================================================================================================================
Diluted 91,599 92,155 92,160 92,587 92,012
============================================================================================================================
Comprehensive income $ 14,081 $ 10,283 $ 13,040 $ 10,212 $ 47,616
============================================================================================================================
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Summary of Quarterly Results (Unaudited)-Continued
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------------------------------------------------------------------
1999(a)
Sales $445,688 $454,645 $474,007 $487,581 $1,861,921
Cost of sales 309,893 322,607 348,007 358,131 1,338,638
-----------------------------------------------------------------------------------------------------------------------------
Gross profit 135,795 132,038 126,000 129,450 523,283
Selling, general and
administrative expenses 81,983 85,546 90,888 93,222 351,639
Acquisition expenses,
pooling-of-interests -- 822 (877) -- (55)
Restructuring and other related charges -- 26,713 2,144 6,537 35,394
-----------------------------------------------------------------------------------------------------------------------------
Operating income 53,812 18,957 33,845 29,691 136,305
Investment income 282 367 266 617 1,532
Interest expense (9,981) (10,848) (12,629) (12,708) (46,166)
-----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 44,113 8,476 21,482 17,600 91,671
Income taxes 16,306 3,598 7,538 6,508 33,950
-----------------------------------------------------------------------------------------------------------------------------
Net income $ 27,807 $ 4,878 $ 13,944 $ 11,092 $ 57,721
=============================================================================================================================
Earnings per share:
Basic $ 0.31 $ 0.05 $ 0.15 $ 0.12 $ 0.63
=============================================================================================================================
Diluted $ 0.31 $ 0.05 $ 0.15 $ 0.12 $ 0.63
=============================================================================================================================
Weighted average number of common
shares outstanding:
Basic 90,526 90,890 91,276 91,292 90,999
=============================================================================================================================
Diluted 90,881 91,073 91,276 91,292 91,238
=============================================================================================================================
Comprehensive income $ 27,303 $ 4,524 $ 14,083 $ 10,763 $ 56,673
=============================================================================================================================
(a) Included in the 2000 and 1999 net income amounts are the following aftertax
pooling-of-interests expenses and restructuring and other related charges
(in thousands):
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------------------------------------------------------------------
2000
Restructuring and other related charges (Note 12) $2,695 $ 3,874 $2,686 $7,880 $17,135
=============================================================================================================================
1999
Acquisition expenses, pooling-of-interests
(Note 2) $ -- $ 586 $ (962) $ -- $ (376)
Restructuring and other related charges (Note 12) -- 17,229 1,351 4,118 22,698
-----------------------------------------------------------------------------------------------------------------------------
Total $ -- $17,815 $ 389 $4,118 $22,322
=============================================================================================================================
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - Guarantor Subsidiaries
The Company's Senior Notes are fully and unconditionally guaranteed on an
unsecured, joint and several basis by certain wholly owned subsidiaries of the
Company (the "Guarantor Subsidiaries"). The following condensed consolidating
financial data illustrates the composition of Omnicare, Inc. ("Parent"), the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of December 31,
2000 and 1999 for the balance sheet, as well as the statement of income and cash
flows for each of the three year periods ended December 31, 2000, 1999 and 1998
(in thousands). Separate complete financial statements of the respective
Guarantor Subsidiaries would not provide additional information which would be
useful in assessing the financial condition of the Guarantor Subsidiaries and
thus are not presented. No eliminations column is presented for the condensed
consolidating statement of cash flows since there were no significant
eliminating amounts during the periods presented.
Summary Consolidating Statement of Income
Year ended December 31,
---------------------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
2000: Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
--------------------------------------------------------------------------------------------------------------------------
Sales $ -- $1,875,791 $155,611 $(60,054) $1,971,348
Cost of sales -- 1,373,297 132,712 (60,054) 1,445,955
--------------------------------------------------------------------------------------------------------------------------
Gross profit -- 502,494 22,899 -- 525,393
Selling, general and administrative
expenses 13,383 326,415 27,709 -- 367,507
Restructuring and other related charges -- 25,052 2,147 -- 27,199
--------------------------------------------------------------------------------------------------------------------------
Operating income (13,383) 151,027 (6,957) -- 130,687
Investment income 1,774 (274) 410 -- 1,910
Interest expense (54,126) (767) (181) -- (55,074)
--------------------------------------------------------------------------------------------------------------------------
Income before income taxes (65,735) 149,986 (6,728) -- 77,523
Income taxes (24,322) 53,990 (962) -- 28,706
Equity in net income of subsidiaries 90,230 -- -- (90,230) --
--------------------------------------------------------------------------------------------------------------------------
Net income $ 48,817 $ 95,996 $ (5,766) $(90,230) $ 48,817
==========================================================================================================================
1999:
--------------------------------------------------------------------------------------------------------------------------
Sales $ - $1,746,239 $181,845 $(66,163) $1,861,921
Cost of sales - 1,254,627 150,174 (66,163) 1,338,638
--------------------------------------------------------------------------------------------------------------------------
Gross profit - 491,612 31,671 - 523,283
Selling, general and administrative
expenses 9,903 309,041 32,695 - 351,639
Acquisition expenses, pooling of interests - (55) - - (55)
Restructuring and other related charges - 35,394 - - 35,394
--------------------------------------------------------------------------------------------------------------------------
Operating income (9,903) 147,232 (1,024) - 136,305
Investment income 1,432 (185) 285 - 1,532
Interest expense (44,605) (1,487) (74) - (46,166)
--------------------------------------------------------------------------------------------------------------------------
Income before income taxes (53,076) 145,560 (813) - 91,671
Income taxes (19,638) 53,771 (183) - 33,950
Equity in net income of subsidiaries 91,159 - - (91,159) -
--------------------------------------------------------------------------------------------------------------------------
Net income $ 57,721 $ 91,789 $ (630) $(91,159) $ 57,721
==========================================================================================================================
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary Consolidating Statement of Income-Continued
Year ended December 31,
--------------------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
1998: Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
Sales $ - $1,398,405 $157,874 $ (38,909) $1,517,370
Cost of sales - 975,715 121,937 (38,909) 1,058,743
-------------------------------------------------------------------------------------------------------------------------
Gross profit - 422,690 35,937 - 458,627
Selling, general and administrative
expenses 13,588 240,910 28,940 - 283,438
Acquisition expenses, pooling of interests - 15,441 - - 15,441
Restructuring and other related charges - 3,627 - - 3,627
-------------------------------------------------------------------------------------------------------------------------
Operating income (13,588) 162,712 6,997 - 156,121
Investment income 2,990 200 166 - 3,356
Interest expense (22,986) (516) (109) - (23,611)
-------------------------------------------------------------------------------------------------------------------------
Income before income taxes (33,584) 162,396 7,054 - 135,866
Income taxes (12,426) 64,439 3,474 - 55,487
Equity in net income of subsidiaries 101,537 - - (101,537) -
-------------------------------------------------------------------------------------------------------------------------
Net income $ 80,379 $ 97,957 $ 3,580 $(101,537) $ 80,379
=========================================================================================================================
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
Omnicare, Inc.
Guarantor Non-Guarantor and
December 31, 2000 Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 48,663 $ 59,274 $ 3,670 $ -- $ 111,607
Restricted cash -- 2,300 -- -- 2,300
Accounts receivable, net (including
intercompany) -- 433,061 30,150 (22,426) 440,785
Inventories -- 120,519 8,885 -- 129,404
Other current assets 580 127,341 5,721 -- 133,642
-------------------------------------------------------------------------------------------------------------------------
Total current assets 49,243 742,495 48,426 (22,426) 817,738
-------------------------------------------------------------------------------------------------------------------------
Properties and equipment, net 4,277 141,429 12,829 -- 158,535
Goodwill, net -- 1,101,120 67,031 -- 1,168,151
Other noncurrent assets 29,640 35,251 903 -- 65,794
Investment in subsidiaries 1,778,655 -- -- (1,778,655) --
-------------------------------------------------------------------------------------------------------------------------
Total assets $1,861,815 $2,020,295 $129,189 $(1,801,081) $2,210,218
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Other current liabilities (including
intercompany) $ 12,716 $ 230,415 $ 36,304 $ (22,426) $ 257,009
------------------------------------------------------------------------------------------------------------------------
Total current liabilities 12,716 230,415 36,304 (22,426) 257,009
------------------------------------------------------------------------------------------------------------------------
Long-term debt 435,000 633 73 -- 435,706
5.0% convertible subordinated
debentures, due 2007 345,000 -- -- -- 345,000
Other noncurrent liabilities 676 102,405 999 -- 104,080
Stockholders' equity 1,068,423 1,686,842 91,813 (1,778,655) 1,068,423
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $1,861,815 $2,020,295 $129,189 $(1,801,081) $2,210,218
=========================================================================================================================
F-22
Notes To Consolidated Financial Statements
Condensed Consolidating Balance Sheet-Continued
Omnicare, Inc.
Guarantor Non-Guarantor and
December 31, 2000 Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 52,009 $ 39,274 $ 5,984 $ -- $ 97,267
Accounts receivable, net (including
intercompany) -- 430,201 40,426 (48,344) 422,283
Inventory -- 110,967 9,313 -- 120,280
Other current assets 314 104,420 7,781 -- 112,515
-------------------------------------------------------------------------------------------------------------------------------
Total current assets 52,323 684,862 63,504 (48,344) 752,345
-------------------------------------------------------------------------------------------------------------------------------
Properties and equipment, net 2,418 147,301 12,414 -- 162,133
Goodwill, net -- 1,118,729 70,212 -- 1,188,941
Other noncurrent assets 23,059 40,302 1,193 -- 64,554
Investment in subsidiaries 1,783,270 -- -- (1,783,270) --
-------------------------------------------------------------------------------------------------------------------------------
Total assets $1,861,070 $1,991,194 $147,323 $(1,831,614) $2,167,973
===============================================================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current debt $ 75,000 $ 2,030 $ 383 $ -- $ 77,413
Other current liabilities (including
intercompany) 22,363 215,520 55,291 (48,344) 244,830
-------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 97,363 217,550 55,674 (48,344) 322,243
-------------------------------------------------------------------------------------------------------------------------------
Long-term debt 390,000 1,848 96 -- 391,944
5.0% convertible subordinated
debentures, due 2007 345,000 - -- -- 345,000
Other noncurrent liabilities 327 77,872 2,207 -- 80,406
Stockholders' equity 1,028,380 1,693,924 89,346 (1,783,270) 1,028,380
-------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $1,861,070 $1,991,194 $147,323 $(1,831,614) $2,167,973
===============================================================================================================================
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Year ended December 31,
----------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
2000: Parent Subsidiaries Subsidiaries Subsidiaries
------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Provision for doubtful accounts $ -- $ 22,604 $ 4,125 $ 26,729
Other (57,558) 158,883 4,647 105,972
------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (57,558) 181,487 8,772 132,701
------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses -- (36,018) (5,646) (41,664)
Capital expenditures (1,859) (26,423) (4,141) (32,423)
Transfer of cash to trusts for employee health and
severance costs, net of payments out of the trust -- (2,300) -- (2,300)
Other -- 1,044 (773) 271
------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (1,859) (63,697) (10,560) (76,116)
------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on line of credit facilities (30,000) -- -- (30,000)
Fees paid for financing arrangements -- (635) -- (635)
Other 86,071 (97,155) (58) (11,142)
------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 56,071 (97,790) (58) (41,777)
------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- -- (468) (468)
------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (3,346) 20,000 (2,314) 14,340
Cash and cash equivalents at beginning of period-
unrestricted 52,009 39,274 5,984 97,267
------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period-
unrestricted $ 48,663 $ 59,274 $ 3,670 $111,607
========================================================================================================================
1999:
------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Provision for doubtful accounts $ -- $ 20,194 $ 1,862 $ 22,056
Other (39,127) 110,540 7,645 79,058
------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (39,127) 130,734 9,507 101,114
------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses -- (140,351) (3,728) (144,079)
Capital expenditures (1,107) (53,602) (4,040) (58,749)
Other -- (565) (124) (689)
------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (1,107) (194,518) (7,892) (203,517)
------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowing on line of credit facilities 170,000 -- -- 170,000
Payments on line of credit facilities (10,000) -- -- (10,000)
Other (83,374) 68,876 -- (14,498)
------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 76,626 68,876 -- 145,502
------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- -- (144) (144)
------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 36,392 5,092 1,471 42,955
Cash and cash equivalents at beginning of period-
unrestricted 15,617 34,182 4,513 54,312
------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period-
unrestricted $ 52,009 $ 39,274 $ 5,984 $ 97,267
========================================================================================================================
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows-Continued
Year ended December 31,
---------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
1998: Parent Subsidiaries Subsidiaries Subsidiaries
------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Provision for doubtful accounts $ -- $ 11,855 $ 550 $ 12,405
Other (19,708) 95,395 1,415 77,102
------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (19,708) 107,250 1,965 89,507
------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses -- (398,686) -- (398,686)
Capital expenditures (1,105) (49,413) (2,661) (53,179)
Other -- 2,157 (10) 2,147
------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (1,105) (445,942) (2,671) (449,718)
------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings on line of credit facilities 305,000 -- -- 305,000
Other (363,565) 334,988 229 (28,348)
------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (58,565) 334,988 229 276,652
------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- -- (191) (191)
------------------------------------------------------------------------------------------------------------------------
Net (decrease) in cash and cash equivalents (79,378) (3,704) (668) (83,750)
Cash and cash equivalents at beginning of period-
unrestricted 94,995 37,886 5,181 138,062
------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period-
unrestricted $ 15,617 $ 34,182 $ 4,513 $ 54,312
========================================================================================================================
F-25
CONSOLIDATED STATEMENT OF INCOME
Omnicare, Inc. and Subsidiary Companies
(In thousands, except per share data)
Unaudited
Three Months
Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
-----------------------------------------------------------------------------------------------------------------------
Sales $530,065 $480,510 $1,053,710 $973,536
Cost of sales 388,002 353,716 771,383 714,125
-----------------------------------------------------------------------------------------------------------------------
Gross profit 142,063 126,794 282,327 259,411
Selling, general and administrative expenses 94,090 90,424 190,006 183,192
Other expense (Note 5) 3,000 -- 4,817 -
Restructuring and other related charges (Note 3) -- 6,150 -- 10,428
-----------------------------------------------------------------------------------------------------------------------
Operating income 44,973 30,220 87,504 65,791
Investment income 748 357 1,222 816
Interest expense (14,415) (13,634) (28,324) (26,799)
------------------------------------------------------------------------------------------------------------------------
Income before income taxes 31,306 16,943 60,402 39,808
Income taxes 11,910 6,267 22,962 14,739
------------------------------------------------------------------------------------------------------------------------
Net income $ 19,396 $ 10,676 $ 37,440 $ 25,069
========================================================================================================================
Earnings per share:
Basic $ 0.21 $ 0.12 $ 0.40 $ 0.27
========================================================================================================================
Diluted $ 0.21 $ 0.12 $ 0.40 $ 0.27
========================================================================================================================
Weighted average number of common shares outstanding:
Basic 93,198 92,155 92,812 91,877
========================================================================================================================
Diluted 94,042 92,155 93,692 91,877
========================================================================================================================
Comprehensive income $ 18,758 $ 10,283 $ 36,925 $ 24,364
========================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-26
CONSOLIDATED BALANCE SHEET
Omnicare, Inc. and Subsidiary Companies
(In thousands, except per share data)
Unaudited
June 30, December 31,
2001 2000
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 117,703 $ 111,607
Restricted cash 6,317 2,300
Accounts receivable, less allowance of $43,975 (2000-$40,497) 441,196 440,785
Unbilled receivables 26,627 18,933
Inventories 134,296 129,404
Deferred income tax benefits 21,500 26,338
Other current assets 91,656 88,371
-------------------------------------------------------------------------------------------------------------------------
Total current assets 839,295 817,738
Properties and equipment, at cost less accumulated depreciation of $146,209
(2000-$132,308) 155,512 158,535
Goodwill, less accumulated amortization of $131,867 (2000-$115,832) 1,146,171 1,168,151
Other noncurrent assets 78,582 65,794
-------------------------------------------------------------------------------------------------------------------------
Total assets $2,219,560 $2,210,218
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 116,802 $ 118,941
Amounts payable pursuant to acquisition agreements 5,723 4,372
Current debt 333 1,619
Accrued employee compensation 21,641 30,113
Deferred revenue 21,099 28,333
Income taxes payable 63 14,238
Other current liabilities 57,752 59,393
-------------------------------------------------------------------------------------------------------------------------
Total current liabilities 223,413 257,009
Long-term debt 50,705 435,706
5.0% convertible subordinated debentures, due 2007 345,000 345,000
8.125% senior subordinated notes, due 2011 375,000 --
Deferred income taxes 79,139 63,579
Amounts payable pursuant to acquisition agreements 6,821 12,675
Other noncurrent liabilities 30,448 27,826
-------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,110,526 1,141,795
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none issued and
outstanding -- --
Common stock, $1 par value, 200,000,000 shares authorized, 94,056,200 shares
issued (2000-92,730,600 shares issued) 94,056 92,731
Paid-in capital 713,456 692,695
Retained earnings 348,897 315,638
-------------------------------------------------------------------------------------------------------------------------
1,156,409 1,101,064
Treasury stock, at cost-821,000 shares (2000-574,200 shares) (16,256) (10,808)
Deferred compensation (27,438) (18,915)
Accumulated other comprehensive income (3,681) (2,918)
-------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,109,034 1,068,423
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,219,560 $2,210,218
=========================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-27
CONSOLIDATED STATEMENT OF CASH FLOWS
Omnicare, Inc. and Subsidiary Companies
(In thousands)
Unaudited
Six Months Ended
June 30,
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 37,440 $ 25,069
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation 16,322 17,322
Amortization 20,092 21,518
Provision for doubtful accounts 13,841 12,241
Deferred tax provision 22,101 2,900
Non-cash portion of restructuring charges -- 1,701
Changes in assets and liabilities, net of effects from acquisition of businesses:
Accounts receivable and unbilled receivables (15,131) (19,440)
Inventories (4,668) (14,578)
Current and noncurrent assets (7,080) (1,118)
Accounts payable (1,927) 4,749
Accrued employee compensation (6,294) (12,363)
Deferred revenue (7,234) 2,492
Current and noncurrent liabilities (13,406) 19,212
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities 54,056 59,705
-------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses (5,993) (25,662)
Capital expenditures (11,402) (16,224)
Transfer of cash to trusts for employee health and severance costs, net of payments
out of the trust (4,017) (4,733)
Other 293 200
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (21,119) (46,419)
-------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings on line of credit facilities 70,000 --
Payments on line of credit facilities (455,000) (10,000)
Proceeds from long-term borrowings 375,000 --
Principal payments on long-term obligations (1,429) (1,528)
Fees paid for financing arrangements (14,418) --
Proceeds from and (payments) for exercise of stock options, net of stock tendered
in payment 3,587 (756)
Dividends paid (4,181) (4,147)
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities (26,441) (16,431)
-------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (400) (202)
-------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 6,096 (3,347)
Cash and cash equivalents at beginning of period 111,607 97,267
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $117,703 $ 93,920
=========================================================================================================================
The Notes to Consolidated Financial Statements are an integral part of this
statement.
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Interim Financial Data
The interim financial data is unaudited; however, in the opinion of the
management of Omnicare, Inc., the interim data includes all adjustments (which
include only normal adjustments, except as described in Notes 3 and 5)
considered necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows of Omnicare, Inc. and its
consolidated subsidiaries ("Omnicare" or the "Company"). These financial
statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in Omnicare's Annual Report on Form 10-K
for the year ended December 31, 2000.
2. Segment Information
Based on the "management approach," as defined by Statement of Financial
Accounting Standards "SFAS") No. 131, Omnicare has two business segments. The
Company's largest segment is Pharmacy Services. Pharmacy Services provides
distribution of pharmaceuticals, related pharmacy consulting, data management
services and medical supplies to long-term care facilities in 43 states in the
United States of America ("USA"). The Company's other reportable segment is
Contract Research Organization ("CRO") Services, which provides comprehensive
product development services to client companies in pharmaceutical,
biotechnology, medical devices and diagnostics industries in 26 countries around
the world, including the USA.
The table below presents information about the reportable segments as of
and for the three and six months ended June 30, 2001 and 2000 (in thousands):
Six Months Ended June 30,
----------------------------------------------------
Corporate
Pharmacy CRO and Consolidated
2001: Services Services Consolidating Totals
-----------------------------------------------------------------------------------------------------------------------------
Sales $ 498,178 $ 31,887 $ -- $ 530,065
Depreciation and amortization 16,966 920 392 18,278
Operating income (expense), excluding other (expense) 52,305 2,801 (7,133) 47,973
Other (expense) (3,000) -- -- (3,000)
Operating income (expense) 49,305 2,801 (7,133) 44,973
Total assets 1,961,808 115,296 142,456 2,219,560
Expenditures for additions to long-lived assets 6,205 297 294 6,796
=============================================================================================================================
2000:
-----------------------------------------------------------------------------------------------------------------------------
Sales $ 452,924 $ 27,586 $ -- $ 480,510
Depreciation and amortization 17,806 1,027 295 19,128
Operating income (expense), excluding restructuring and
other related charges 43,003 1,042 (7,675) 36,370
Restructuring and other related charges (4,324) (1,826) -- (6,150)
Operating income (expense) 38,679 (784) (7,675) 30,220
Total assets 1,947,884 119,214 110,699 2,177,797
Expenditures for additions to long-lived assets 6,355 1,090 335 7,780
=============================================================================================================================
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30,
----------------------------------------------------
Corporate
Pharmacy CRO and Consolidated
2001: Services Services Consolidating Totals
-----------------------------------------------------------------------------------------------------------------------------
Sales $ 993,579 $ 60,131 $ -- $1,053,710
Depreciation and amortization 33,590 2,057 767 36,414
Operating income (expense), excluding other (expense) 101,527 4,813 (14,019) 92,321
Other (expense) (4,817) -- -- (4,817)
Operating income (expense) 96,710 4,813 (14,019) 87,504
Total assets 1,961,808 115,296 142,456 2,219,560
Expenditures for additions to long-lived assets 10,515 374 513 11,402
=============================================================================================================================
2000:
-----------------------------------------------------------------------------------------------------------------------------
Sales $ 913,870 $ 59,666 $ -- $ 973,536
Depreciation and amortization 36,271 2,032 537 38,840
Operating income (expense), excluding restructuring and
other related charges 86,344 3,774 (13,899) 76,219
Restructuring and other related charges (8,602) (1,826) -- (10,428)
Operating income (expense) 77,742 1,948 (13,899) 65,791
Total assets 1,947,884 119,214 110,699 2,177,797
Expenditures for additions to long-lived assets 13,733 2,103 388 16,224
=============================================================================================================================
3. Restructuring and Other Related Charges
In 2000, the Company completed its previously disclosed productivity and
consolidation program. As part of the program, the roster of pharmacies and
other operating locations was reconfigured through the consolidation,
relocation, closure and opening of sites, resulting in a net reduction of 59
locations. The program also resulted in the reduction of the Company's work
force by 16%, or approximately 1,800 full and part-time employees, and
annualized pretax savings in excess of $46 million upon completion.
Details of the year-to-date June 30, 2001 and December 31, 2000 activity
relating to the program follow (in thousands):
Balance at Utilized Balance at
December 31, during June 30,
2000 2001 2001
-------------------------------------------------------------------------------------------------------------
Restructuring charges:
Employee severance $3,390 $(2,602) $ 788
Employment agreement
buy-outs 676 (676) --
Lease terminations 2,593 (1,292) 1,301
Other assets and facility
exit costs 2,538 (1,881) 657
-------------------------------------------------------------------------------------------------------------
Total restructuring charges $9,197 $(6,451) $2,746
=============================================================================================================
Balance at Utilized Balance at
December 31, 2000 during December 31,
1999 Provision 2000 2000
-------------------------------------------------------------------------------------------------------------
Restructuring charges:
Employee severance $ 8,461 $ 3,296 $ (8,367) $3,390
Employment
agreement
buy-outs 3,363 1,048 (3,735) 676
Lease terminations 4,523 1,881 (3,811) 2,593
Other assets and
facility exit costs 1,648 10,627 (9,737) 2,538
-------------------------------------------------------------------------------------------------------------
Total restructuring
charges $17,995 16,852 $(25,650) $9,197
============ =========== ============
Other related charges 10,347
---------------------- ---------
Total restructuring
and other related
charges $27,199
===================== =========
In connection with the program, Omnicare expensed a total of $6.2 million
and $10.4 million pretax ($3.9 million and $6.6 million after taxes, or 4 cents
and 7 cents per diluted share, respectively) in the three and six months ended
June 2000, respectively. Additionally, $62.6 million pretax ($39.8 million after
taxes) was incurred for restructuring and other related charges over the
duration of the entire program (including 1999 activity). The restructuring
charges included severance pay, the buy-out of employment agreements, the
buy-out of lease obligations, the write-off of other assets (representing
approximately $11.0 million of pretax non-cash items over the life of the
program) and facility exit costs. The other related charges were primarily
comprised of
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consulting fees and duplicate costs associated with the program, as well as
the write-off of certain non-core healthcare investments. As of June 30, 2001,
the Company paid approximately $22.5 million of severance and other
employee-related costs relating to the employee reductions. The remaining
liabilities at June 30, 2001 represent amounts not yet paid relating to actions
taken in connection with the program (primarily severance payments and lease
payments), and will be adjusted as these matters are settled.
4. Long-Term Debt
On March 20, 2001, the Company completed the offering of $375.0 million of
8.125% senior subordinated notes due 2011 (the "Senior Notes"), issued at par
through a private placement. Concurrent with the issuance of the Senior Notes,
the Company entered into a new three-year syndicated $495.0 million revolving
credit facility (the "Revolving Credit Facility"), including a $25.0 million
letter of credit subfacility, with various lenders. Net proceeds from the Senior
Notes of approximately $365.0 million and borrowings under the new credit
facility of $70.0 million were used to repay outstanding indebtedness under the
Company's existing credit facilities, which totaled $435.0 million at December
31, 2000, and such existing facilities were terminated. Subsequent to the
closing of the Revolving Credit Facility, the Company received commitments from
additional banks that allowed it to increase the size of the Revolving Credit
Facility to $500.0 million. The Revolving Credit Facility bears interest at the
Company's option at a rate equal to either: (i) LIBOR plus a margin that
varies depending on certain ratings on the Company's senior long-term debt; or
(ii) the higher of (a) the administrative agent's prime rate, or (b) the sum of
the federal funds rate plus 0.50%. Additionally, the Company is charged a
commitment fee on the unused portion of the Revolving Credit Facility, which
also varies depending on such ratings. At June 30, 2001, the interest rate was
LIBOR plus 1.375% and the commitment fee was 0.375%. There is no utilization fee
associated with the Revolving Credit Facility.
5. Other Expense
Included in the year-to-date June 2001 results are other expense items
totaling $1.8 million pretax ($1.1 million aftertax, or 1 cent per diluted
share) and $3.0 million pretax ($1.9 million aftertax, or 2 cents per diluted
share). The $1.8 million one-time charge recorded in the first quarter of 2001
represents a repayment to the Medicare Part B program of overpayments made to
one of the Company's pharmacy units during the period from January 1997 through
April 1998. As part of its corporate compliance program, the Company learned of
the overpayments, which related to Medicare Part B claims that contained
documentation errors, and notified the Health Care Financing Administration for
review and determination of the amount of overpayment. The $3.0 million one-time
charge recorded in the second quarter of 2001 represents a settlement during
June 2001 of certain contractual issues with a customer, which issues and amount
relate to prior year periods.
6. Recently Issued Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" ("SFAS 141") and SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142").
SFAS 141, which supercedes Accounting Principles Board ("APB") Opinion
No. 16, "Business Combinations" and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises", requires that all
business combinations entered into after the effective date of July 1, 2001 be
accounted for by the purchase method, defines criteria for recognition of
intangible assets apart from goodwill, and further defines disclosure
requirements for business combinations. Omnicare does not expect this standard
to have a significant impact on the Company's consolidated financial position,
results of operations and cash flows.
SFAS 142, which replaces APB Opinion No. 17, "Intangible Assets",
defines new accounting treatment for goodwill and other intangible assets. This
standard eliminates the amortization of goodwill and other intangible assets
that have indefinite lives, establishes a requirement that goodwill and
intangible assets with indefinite lives be tested annually for impairment,
provides specific guidance on the process for this testing at the reporting unit
level and requires disclosures of information about goodwill and other
intangible assets in the years subsequent to their acquisition that was not
previously required. SFAS 142 is effective for fiscal years beginning after
December 15, 2001, except that goodwill and intangible assets acquired after
June 30, 2001 will be immediately subject to the new provisions. The Company is
currently evaluating the impact of this new standard on Omnicare's consolidated
financial position, results of operations and cash flows. It is anticipated that
this new standard will serve to significantly increase the Company's net income.
Additionally, an impairment analysis will be conducted upon implementation of
F-31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SFAS 142 and required adjustments, if any, to the carrying value of
goodwill will be recognized during 2002 as a change in accounting principle.
7. Guarantor Subsidiaries
The Company's Senior Notes are fully and unconditionally guaranteed on an
unsecured, joint and several basis by certain wholly owned subsidiaries of the
Company (the "Guarantor Subsidiaries"). The following condensed consolidating
financial data illustrates the composition of Omnicare, Inc. ("Parent"), the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of June 30, 2001
and December 31, 2000 for the balance sheet, the statement of income for each of
the three and six month periods ended June 30, 2001 and 2000, and the statement
of cash flows for the six months ended June 30, 2001 and 2000 (in thousands).
Separate complete financial statements of the respective Guarantor Subsidiaries
would not provide additional information which would be useful in assessing the
financial condition of the Guarantor Subsidiaries and thus are not presented. No
eliminations column is presented for the condensed consolidating statement of
cash flows since there were no significant eliminating amounts during the
periods presented.
F-32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary Consolidating Statement of Income
Three Months Ended June 30,
---------------------------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
2001: Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
Sales $ -- $507,428 $41,752 $(19,115) $530,065
Cost of sales -- 369,676 37,441 (19,115) 388,002
-------------------------------------------------------------------------------------------------------------------------
Gross profit -- 137,752 4,311 -- 142,063
Selling, general and administrative
expenses 4,052 84,174 5,864 -- 94,090
Other expense -- 3,000 -- -- 3,000
-------------------------------------------------------------------------------------------------------------------------
Operating income (4,052) 50,578 (1,553) -- 44,973
Investment income 617 86 45 -- 748
Interest expense (13,616) (587) (212) -- (14,415)
-------------------------------------------------------------------------------------------------------------------------
Income before income taxes (17,051) 50,077 (1,720) -- 31,306
Income taxes (6,479) 19,017 (628) -- 11,910
Equity in net income of subsidiaries 29,968 -- -- (29,968) --
-------------------------------------------------------------------------------------------------------------------------
Net income $19,396 $ 31,060 $(1,092) $(29,968) $ 19,396
=========================================================================================================================
2000:
-------------------------------------------------------------------------------------------------------------------------
Sales $ -- $456,864 $41,741 $(18,095) $480,510
Cost of sales -- 335,802 36,009 (18,095) 353,716
-------------------------------------------------------------------------------------------------------------------------
Gross profit -- 121,062 5,732 -- 126,794
Selling, general and administrative
expenses 3,106 80,202 7,116 -- 90,424
Restructuring and other related charges -- 5,386 764 -- 6,150
-------------------------------------------------------------------------------------------------------------------------
Operating income (3,106) 35,474 (2,148) -- 30,220
Investment income 337 (60) 80 -- 357
Interest expense (13,290) (315) (29) -- (13,634)
-------------------------------------------------------------------------------------------------------------------------
Income before income taxes (16,059) 35,099 (2,097) -- 16,943
Income taxes (5,942) 12,524 (315) -- 6,267
Equity in net income of subsidiaries 20,793 -- -- (20,793) --
-------------------------------------------------------------------------------------------------------------------------
Net income $10,676 $ 22,575 $(1,782) $(20,793) $ 10,676
=========================================================================================================================
F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary Consolidating Statement of Income
Six Months Ended June 30,
---------------------------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
2001: Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
Sales $ -- $1,007,964 $84,473 $(38,727) $1,053,710
Cost of sales -- 735,259 74,851 (38,727) 771,383
-------------------------------------------------------------------------------------------------------------------------
Gross profit -- 272,705 9,622 -- 282,327
Selling, general and administrative
expenses 7,945 169,685 12,376 -- 190,006
Other expense -- 4,817 -- -- 4,817
-------------------------------------------------------------------------------------------------------------------------
Operating income (7,945) 98,203 (2,754) -- 87,504
Investment income 1,012 97 113 -- 1,222
Interest expense (27,018) (886) (420) -- (28,324)
-------------------------------------------------------------------------------------------------------------------------
Income before income taxes (33,951) 97,414 (3,061) -- 60,402
Income taxes (12,901) 36,871 (1,008) -- 22,962
Equity in net income of subsidiaries 58,490 -- -- (58,490) --
-------------------------------------------------------------------------------------------------------------------------
Net income $37,440 $ 60,543 $(2,053) $(58,490) $ 37,440
=========================================================================================================================
2000:
-------------------------------------------------------------------------------------------------------------------------
Sales $ -- $ 924,861 $81,194 $(32,519) $ 973,536
Cost of sales -- 677,628 69,016 (32,519) 714,125
-------------------------------------------------------------------------------------------------------------------------
Gross profit -- 247,233 12,178 -- 259,411
Selling, general and administrative
expenses 6,203 162,447 14,542 -- 183,192
Restructuring and other related charges -- 9,664 764 -- 10,428
-------------------------------------------------------------------------------------------------------------------------
Operating income (6,203) 75,122 (3,128) -- 65,791
Investment income 781 (96) 131 -- 816
Interest expense (26,499) (201) (99) -- (26,799)
-------------------------------------------------------------------------------------------------------------------------
Income before income taxes (31,921) 74,825 (3,096) -- 39,808
Income taxes (11,811) 27,029 (479) -- 14,739
Equity in net income of subsidiaries 45,179 -- -- (45,179) --
-------------------------------------------------------------------------------------------------------------------------
Net income $25,069 $ 47,796 $(2,617) $(45,179) $ 25,069
=========================================================================================================================
F-34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Balance Sheet
Omnicare, Inc.
Guarantor Non-Guarantor and
June 30, 2001 Parent Subsidiaries Subsidiaries Eliminations Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 90,337 $ 21,631 $ 5,735 $ -- $ 117,703
Restricted cash -- 6,317 -- -- 6,317
Accounts receivable, net (including
intercompany) -- 416,837 34,815 (10,456) 441,196
Inventories -- 125,973 8,323 -- 134,296
Other current assets 1,701 133,673 4,409 -- 139,783
-------------------------------------------------------------------------------------------------------------------------
Total current assets 92,038 704,431 53,282 (10,456) 839,295
-------------------------------------------------------------------------------------------------------------------------
Properties and equipment, net 4,058 138,463 12,991 -- 155,512
Goodwill, net -- 1,080,811 65,360 -- 1,146,171
Other noncurrent assets 33,828 44,279 475 -- 78,582
Investment in subsidiaries 1,766,202 -- -- (1,766,202) --
-------------------------------------------------------------------------------------------------------------------------
Total assets $1,896,126 $1,967,984 $132,108 $(1,776,658) $2,219,560
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Other current liabilities (including
intercompany) $ 16,316 $ 192,223 $ 25,330 $ (10,456) $ 223,413
-------------------------------------------------------------------------------------------------------------------------
Total current liabilities 16,316 192,223 25,330 (10,456) 223,413
-------------------------------------------------------------------------------------------------------------------------
Long-term debt 50,000 639 66 -- 50,705
5.0% convertible subordinated
debentures, due 2007 345,000 -- -- -- 345,000
8.125% senior subordinated notes, due
2011 375,000 -- -- -- 375,000
Other noncurrent liabilities 776 102,805 12,827 -- 116,408
Stockholders' equity 1,109,034 1,672,317 93,885 (1,766,202) 1,109,034
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $1,896,126 $1,967,984 $132,108 $(1,776,658) $2,219,560
=========================================================================================================================
December 31, 2000
-------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 48,663 $ 59,274 $ 3,670 $ -- $ 111,607
Restricted cash -- 2,300 -- -- 2,300
Accounts receivable, net (including
intercompany) -- 433,061 30,150 (22,426) 440,785
Inventories -- 120,519 8,885 -- 129,404
Other current assets 580 127,341 5,721 -- 133,642
-------------------------------------------------------------------------------------------------------------------------
Total current assets 49,243 742,495 48,426 (22,426) 817,738
-------------------------------------------------------------------------------------------------------------------------
Properties and equipment, net 4,277 141,429 12,829 -- 158,535
Goodwill, net -- 1,101,120 67,031 -- 1,168,151
Other noncurrent assets 29,640 35,251 903 -- 65,794
Investment in subsidiaries 1,778,655 -- -- (1,778,655) --
-------------------------------------------------------------------------------------------------------------------------
Total assets $1,861,815 $2,020,295 $129,189 $(1,801,081) $2,210,218
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Other current liabilities (including
intercompany) $ 12,716 $ 230,415 $ 36,304 $ (22,426) $ 257,009
-------------------------------------------------------------------------------------------------------------------------
Total current liabilities 12,716 230,415 36,304 (22,426) 257,009
-------------------------------------------------------------------------------------------------------------------------
Long-term debt 435,000 633 73 -- 435,706
5.0% convertible subordinated
debentures, due 2007 345,000 -- -- -- 345,000
Other noncurrent liabilities 676 102,405 999 -- 104,080
Stockholders' equity 1,068,423 1,686,842 91,813 (1,778,655) 1,068,423
-------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $1,861,815 $2,020,295 $129,189 $(1,801,081) $2,210,218
=========================================================================================================================
F-35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30,
--------------------------------------------------------------
Omnicare, Inc.
Guarantor Non-Guarantor and
2001: Parent Subsidiaries Subsidiaries Subsidiaries
-------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Provision for doubtful accounts $ -- $ 13,109 $ 732 $ 13,841
Other (20,440) 57,465 3,190 40,215
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (20,440) 70,574 3,922 54,056
-------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses -- (5,993) -- (5,993)
Capital expenditures -- (9,987) (1,415) (11,402)
Transfer of cash to trusts for employee health and
severance costs, net of payments out of the trust -- (4,017) -- (4,017)
Other -- 16 277 293
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities -- (19,981) (1,138) (21,119)
-------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings on line of credit facilities 70,000 -- -- 70,000
Payments on line of credit facilities (455,000) -- -- (455,000)
Proceeds from long-term borrowings 375,000 -- -- 375,000
Fees paid for financing arrangements (14,418) -- -- (14,418)
Other 86,532 (88,236) (319) (2,023)
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 62,114 (88,236) (319) (26,441)
-------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- -- (400) (400)
-------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 41,674 (37,643) 2,065 6,096
Cash and cash equivalents at beginning of period-
unrestricted 48,663 59,274 3,670 111,607
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period-
unrestricted $ 90,337 $ 21,631 $ 5,735 $117,703
=========================================================================================================================
2000:
-------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Provision for doubtful accounts $ -- $ 11,619 $ 622 $ 12,241
Other (30,431) 77,989 (94) 47,464
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities (30,431) 89,608 528 59,705
-------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of businesses -- (25,662) -- (25,662)
Capital expenditures (61) (14,262) (1,901) (16,224)
Transfer of cash to trusts for employee health and
severance costs, net of payments out of the trust -- (4,733) -- (4,733)
Other -- 569 (369) 200
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities (61) (44,088) (2,270) (46,419)
-------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on line of credit facilities (10,000) -- -- (10,000)
Other 31,452 (37,889) 6 (6,431)
-------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities 21,452 (37,889) 6 (16,431)
-------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash -- -- (202) (202)
-------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (9,040) 7,631 (1,938) (3,347)
Cash and cash equivalents at beginning of period-
unrestricted 52,009 39,274 5,984 97,267
-------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period-
unrestricted $ 42,969 $ 46,905 $ 4,046 $ 93,920
=========================================================================================================================
F-36
================================================================================
All tendered old notes, executed letters of transmittal and other related
documents should be directed to the exchange agent. Questions and requests for
assistance and requests for additional copies of the prospectus, the letter of
transmittal and other related documents should be addressed to the exchange
agent as follows:
By Courier:
SunTrust Bank
424 Church Street, 6th Floor
Nashville, TN 37219
By Mail:
SunTrust Bank
424 Church Street, 6th Floor
Nashville, TN 37219
By Hand:
SunTrust Bank
424 Church Street, 6th Floor
Nashville, TN 37219
Facsimile for Eligible Institutions:
(615) 748-5331
To Confirm by Telephone:
(615) 748-5324
Originals of all documents submitted by facsimile should be sent promptly
by hand, overnight delivery, or registered by certified mail.
No dealer, salesperson or other person is authorized to give any
information to or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to exchange old notes only for the exchange notes offered
hereby, but only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus is current only as of its
date.
================================================================================
OMNICARE, INC.
$375,000,000
8 1/8% Series B Senior
Subordinated Notes due 2011
-----------
PROSPECTUS
-----------
TABLE OF CONTENTS
PROSPECTUS SUMMARY .................................................. 2
SUMMARY OF THE EXCHANGE OFFER ....................................... 4
SUMMARY OF TERMS OF THE EXCHANGE
NOTES .............................................................. 7
FORWARD-LOOKING INFORMATION ......................................... 10
RISK FACTORS ........................................................ 12
THE EXCHANGE OFFER .................................................. 19
USE OF PROCEEDS ..................................................... 30
CAPITALIZATION ...................................................... 30
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL INFORMATION .............................................. 31
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................... 34
BUSINESS ............................................................ 45
MANAGEMENT .......................................................... 61
DESCRIPTION OF NOTES ................................................ 63
DESCRIPTION OF CERTAIN INDEBTEDNESS ................................. 101
MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS ..................................................... 102
PLAN OF DISTRIBUTION ................................................ 102
LEGAL MATTERS ....................................................... 103
EXPERTS ............................................................. 103
WHERE YOU CAN FIND MORE
INFORMATION ........................................................ 103
DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS ..................................... 104
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS ......................................................... F-1
September , 2001
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Restated Certificate of Incorporation of Omnicare, Inc. provides that a
director of Omnicare, Inc. will not be liable to Omnicare, Inc. or its
stockholders for monetary damages for breach of fiduciary duty as a director, to
the full extent permitted by the Delaware General Corporation Law (the "DGCL"),
as amended or interpreted from time to time.
In addition, the Omnicare, Inc. Restated Certificate of Incorporation
states that Omnicare, Inc. shall, to the full extent permitted by the DGCL, as
amended or interpreted from time to time, indemnify all directors, officers and
employees whom it may indemnify pursuant thereto and, in addition, Omnicare,
Inc. may, to the extent permitted by the DGCL, indemnify agents of Omnicare,
Inc. or other persons.
Section 145 of the DGCL permits indemnification against expenses, fines,
judgments and settlements incurred by any director, officer or employee of a
company in the event of pending or threatened civil, criminal, administrative or
investigative proceeding, if such person was, or was threatened to be made, a
party by reason of the fact that he or she is or was a director, officer, or
employee of the company. Section 145 also provides that the indemnification
provided for therein shall not be deemed exclusive of any other rights to which
those seeking indemnification may otherwise be entitled. In addition, Omnicare,
Inc. maintains a directors' and officers' liability insurance policy.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No Description
---------- -----------
3.1 --Restated Certificate of Incorporation of Omnicare, Inc. (incorporated
herein by reference to our Annual Report on Form 10-K for the year ended
December 31, 1996)
3.2 --By-Laws of Omnicare, Inc., as amended (incorporated by reference herein
by reference to our registration statement on Form S-3 dated September
28, 1998)
4.1 --Indenture dated as of March 20, 2001, by and among Omnicare, Inc., the
Guarantors named therein and SunTrust Bank, as trustee, relating to the
Company's $375.0 million 8.125% Senior Subordinated Notes due 2011
(incorporated herein by reference to our Current Report on Form 8-K dated
March 23, 2001)
4.2 --Registration Rights Agreement dated as of March 20, 2001 by and among
Omnicare, Inc., the Guarantors named therein and the Initial Purchasers
named therein, relating to the Registrant's 8 1/8% Senior Subordinated
Notes due 2011 (incorporated herein by reference to our Current Report on
Form 8-K dated March 23, 2001)
5.1*--Opinion of Dewey Ballantine LLP regarding the validity of the exchange
notes
5.2*--Opinion of Thompson Hine LLP regarding the validity of the exchange
guarantees
12* --Statement of Computation of Ratio of Earnings to Fixed Charges
23.1 --Consent of PricewaterhouseCoopers LLP
23.2*--Consent of Dewey Ballantine LLP (included in its opinion filed as Exhibit
5.1 hereto)
23.3*--Consent of Thompson Hine LLP (included in its opinion filed as Exhibit
5.2 hereto)
24* --Powers of Attorney (included on page II-3)
25* --Statement of Eligibility of Trustee
99.1*--Form of Letter of Transmittal
99.2*--Form of Notice of Guaranteed Delivery
99.3*--Form of Letter to Clients
99.4*--Form of Letter to Brokers
99.5*--Form of Instructions to Registered Holders
---------
* Previously filed
II-1
Item 22. Undertakings.
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
4. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
5. The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE, INC.
By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman; Director September 20, 2001
----------------------------
(Edward L. Hutton)
* President; Director September 20, 2001
----------------------------
(Joel F. Gemunder)
* Executive Vice President--Operations; September 20, 2001
---------------------------- Director
(Patrick E. Keefe)
* Senior Vice President--Professional September 20, 2001
---------------------------- Services and Purchasing; Director
(Timothy E. Bien)
* Senior Vice President and Chief Financial September 20, 2001
---------------------------- Officer; Director
(David W. Froesel, Jr.)
* Senior Vice President and Secretary; September 20, 2001
---------------------------- Director
(Cheryl D. Hodges)
* Director September 20, 2001
----------------------------
(Charles H. Erhart, Jr.)
* Director September 20, 2001
----------------------------
(Sandra E. Laney)
* Director September 20, 2001
----------------------------
(Andrea R. Lindell, DNSc, RN)
* Director September 20, 2001
----------------------------
(Sheldon Margen, M.D.)
* Director September 20, 2001
----------------------------
(Kevin J. McNamara)
* Director September 20, 2001
----------------------------
(John T. Timoney)
*By /s/ CHERYL D. HODGES
-------------------------
(Cheryl D. Hodges)
Attorney-in-fact
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CHP ACQUISITION CORP.
By: *
-----------------------
(Robert A. Fusco)
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Robert A. Fusco
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-------------------------
Cheryl D. Hodges
Attorney-in-fact
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
MED WORLD ACQUISITION CORP.
By: *
-----------------------
Michael Rosenblum
President
*By: /s/ CHERYL D. HODGES
--------------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Michael Rosenblum
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-------------------------
Cheryl D. Hodges
Attorney-in-fact
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
NIHAN & MARTIN, INC.
By: *
-----------------------
Jody Fenelon
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Jody Fenelon
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-------------------------
Cheryl D. Hodges
Attorney-in-fact
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACIES OF PENNSYLVANIA
WEST, INC.
By: *
------------------------
Daniel Carto
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Daniel Carto
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-------------------------
Cheryl D. Hodges
Attorney-in-fact
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
PRN PHARMACEUTICAL SERVICES, INC.
By: *
-----------------------
Carolyn Copen
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Carolyn Copen
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-------------------------
Cheryl D. Hodges
Attorney-in-fact
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
AAHS ACQUISITION CORP.
EVERGREEN PHARMACEUTICAL, INC.
EVERGREEN PHARMACEUTICAL OF
CALIFORNIA, INC.
THG ACQUISITION CORP.
By: *
-----------------------
Carl E. Wood, Jr.
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Carl E. Wood, Jr.
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CREEKSIDE MANAGED CARE PHARMACY, INC.
By: *
-----------------------
David W. Medina
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
David W. Medina
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Carl E. Wood, Jr.
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
ACCU-MED SERVICES, INC.
By: *
-----------------------
Thomas Ludeke
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Thomas Ludeke
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
AMC-NEW YORK, INC.
ELECTRA ACQUISITION CORP.
HOME PHARMACY SERVICES, INC.
NORTH SHORE PHARMACY SERVICES, INC.
OCR-RA ACQUISITION CORP.
OMNICARE PHARMACIES OF MAINE
HOLDING COMPANY
PHARMACY ASSOCIATES OF GLENN
FALLS, INC.
VALUE PHARMACY, INC.
WILLIAMSON DRUG COMPANY,
INCORPORATED
WINSLOW'S PHARMACY
By: *
-----------------------
Jeffrey M. Stamps
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Jeffrey M. Stamps
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
AMC-TENNESSEE, INC.
By: *
-----------------------
Julie Frazier
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Julie Frazier
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CARE PHARMACEUTICAL SERVICES, INC.
By: *
-----------------------
John A. Schreiner
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
John A. Schreiner
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
ACP ACQUISITION CORP.
BPNY ACQUISITION CORP.
BPTX ACQUISITION CORP.
HMIS, INC.
OFL CORP.
PHARMACY CONSULTANTS, INC.
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
HOME CARE PHARMACY, INC.
By: *
-----------------------
Michael J. Arnold
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Michael J. Arnold
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
MOSI ACQUISITION CORP.
By: *
-----------------------
Linda Butler
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Linda Butler
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
PHARMACON CORP.
By: *
-----------------------
William J. Lyons
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
William J. Lyons
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SHORE PHARMACEUTICAL PROVIDERS, INC.
By: *
-----------------------
Paul B. Meyeroff
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Paul B. Meyeroff
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SOUTHSIDE APOTHECARY, INC.
By: *
-----------------------
Mark Malahosky
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Mark Malahosky
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
THREE FORKS APOTHECARY, INC.
By: *
-----------------------
Scarlet Grubbs
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Scarlet Grubbs
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
VALUE HEALTH CARE SERVICES, INC.
By: *
-----------------------
Lawrence Sobel
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Lawrence Sobel
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
VITAL CARE INFUSION SUPPLY, INC.
By: *
-----------------------
Stanley Kaplan
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Stanley Kaplan
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jeffrey M. Stamps
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BIO-PHARM INTERNATIONAL, INC.
EURO BIO-PHARM CLINICAL SERVICES, INC.
OMNICARE CLINICAL RESEARCH, INC.
OMNICARE PHARMACEUTICALS, INC.
THE HARDARDT GROUP, INC.
By: *
-----------------------
David Morra
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chief Executive Officer; Director September 20, 2001
----------------------------
David Morra
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
ENLOE DRUGS, INC.
JHC ACQUISITION, INC.
LPI ACQUISITION CORP.
NIV ACQUISITION CORP.
OMNICARE PHARMACY OF THE MIDWEST, INC.
WEBER MEDICAL SYSTEMS, INC.
By: *
-----------------------
A Samuel Enloe
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
A. Samuel Enloe
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CTLP ACQUISITION CORP.
By: *
-----------------------
Thomas D. MacPherson
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Thomas D. MacPherson
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
A. Samuel Enloe
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
HOME PHARMACY SERVICES, INC.
INTERLOCK PHARMACY SYSTEMS, INC.
By: *
-----------------------
Mark E. Price
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Mark E. Price
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
A. Samuel Enloe
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
PBM-PLUS, INC.
By: *
-----------------------
Thomas Ludeke
Chief Executive Officer
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chief Executive Officer September 20, 2001
----------------------------
Thomas Ludeke
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
A. Samuel Enloe
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
ROESCHEN'S HEALTHCARE CORP.
By: *
-----------------------
Peter Hovis
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Peter Hovis
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
A. Samuel Enloe
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CAMPO'S MEDICAL PHARMACY, INC.
LANGSAM HEALTH SERVICERS, INC.
PHARMED HOLDINGS, INC.
STERLING HEALTHCARE SERVICES, INC.
By: *
-----------------------
Joseph L. Dupuy
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Joseph L. Dupuy
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SPECIALIZED PATIENT CARE SERVICES,
INC.
BY: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Jospeh L. Dupuy
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACIES OF THE GREAT PLAINS
HOLDING COMPANY
OMNICARE PHARMACY AND SUPPLY SERVICES,
INC.
TCPI ACQUISITION CORP.
WESTHAVEN SERVICES COMPANY, INCORPORATED
By: *
-----------------------
Gary W. Kadlec
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Gary W. Kadlec
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
LO-MED PRESCRIPTION SERVICES, INC.
By: *
-----------------------
Anthony Solaro
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
David Morra
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Gary W. Kadlec
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-33
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SPECIALIZED PHARMACY SERVICES, INC.
By: *
-----------------------
Daniel E. Lohmeier
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Daniel E. Lohmeier
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
Gary W. Kadlec
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
UC ACQUISITION CORP.
By: *
-----------------------
John B. Dunbar III
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
John B. Dunbar III
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-35
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CIP ACQUISITION CORP.
By: *
-----------------------
Buddy Carter
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Buddy Carter
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
John B. Dunbar III
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
MEDICAL ARTS HEALTH CARE, INC.
By: *
-----------------------
Hal J. Henderson
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Hal J. Henderson
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
* Director September 20, 2001
----------------------------
John B. Dunbar III
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-37
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
MANAGED HEALTHCARE, INC.
By: *
-----------------------
John E. Sherwood
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
John E. Sherwood
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SUPERIOR CARE PHARMACY, INC.
By: *
-----------------------
Owen E. Wood
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Owen E. Wood
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-39
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
COMPSCRIPT, INC.
COMPSCRIPT-BOCA, INC.
COMPSCRIPT-MOBILE, INC.
MEDICAL SERVICES CONSORTIUM, INC.
By: /s/ JOSEPH L. DUPUY
-----------------------
Joseph L. Dupuy
President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Edward L. Hutton, Joel
F. Gemunder and Cheryl D. Hodges and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to the Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JOSEPH L. DUPUY President September 20, 2001
----------------------------
Joseph L. Dupuy
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
L. Tracy Finn
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
HYTREE PHARMACY, INC.
By: /s/ JEFFREY M. STAMPS
-----------------------
Jeffrey M. Stamps
President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Edward L. Hutton, Joel
F. Gemunder and Cheryl D. Hodges and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to the Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ JEFFREY M. STAMPS President September 20, 2001
----------------------------
Jeffrey M. Stamps
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
L. Tracy Finn
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
CP ACQUISITION CORP.
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
L. Tracy Finn
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-42
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE MANAGEMENT COMPANY
By: *
-----------------------
Joel F. Gemunder
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Joel F. Gemunder
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
David W. Froesel
Director September 20, 2001
----------------------------
Cheryl D. Hodges
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-43
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BACH'S PHARMACY SERVICES, LLC
By: Sole Member:
BACH'S PHARMACY (EAST), INC.
By: *
-----------------------
Jeffrey M. Stamps
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Tom R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION LLC
By: Sole Member:
OMNICARE HOLDING COMPANY
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNIBILL LLC
By: Sole Member:
OMNICARE HOLDING COMPANY
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Gary W. Kadlec
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director September 20, 2001
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-46
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF BROOKSVILLE LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-47
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF KENTUCKY LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF MINNESOTA LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF OHIO LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Jeffrey M. Stamps
* Vice President September 20, 2001
----------------------------
Douglas Ackley
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF ORLANDO LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF TAMPA LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-52
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
BADGER ACQUISITION OF TEXAS LLC
By: Sole Member:
BADGER ACQUISITION LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
LCPS ACQUISITION LLC
By: Sole Member:
LANGSAM HEALTH SERVICES, INC.
By: *
-----------------------
Joseph L. Dupuy
President
*By: /s/ CHERYL D. HODGES
-----------------------
(Cheryl D. Hodges)
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE CLINICAL RESEARCH, LLC
By: Sole Member:
OMNICARE, INC.
By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Dale B. Evans
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PENNSYLVANIA MED SUPPLY, LLC
By: Sole Member:
OMNICARE PHARMACIES OF PENNSYLVANIA
WEST, INC.
By: *
-----------------------
Daniel Carto
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Daniel Carto
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACIES OF PENNSYLVANIA
EAST, LLC
By: Sole Member:
OMNICARE PHARMACIES OF PENNSYLVANIA
WEST, INC.
By: *
-----------------------
Daniel Carto
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Daniel Carto
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF COLORADO LLC
By: Sole Member:
LCPS ACQUISITION, LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF MASSACHUSETTS LLC
By: Sole Member:
LCPS ACQUISITION, LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-59
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF TENNESSEE LLC
By: Sole Member:
LCPS ACQUISITION, LLC
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
L. Tracy Finn
* Vice President September 20, 2001
----------------------------
Bradley S. Abbott
* Treasurer September 20, 2001
----------------------------
Thomas R. Marsh
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF MAINE LLC
By: Sole Member:
OMNICARE PHARMACIES OF MAINE HOLDING
COMPANY
By: *
-----------------------
Jeffrey M. Stamps
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Jeffrey M. Stamps
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
PHARM-CORP OF MAINE LLC
By: Sole Member:
OMNICARE PHARMACIES OF MAINE HOLDING
COMPANY
By: *
-----------------------
Jeffrey M. Stamps
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Monica Levoie
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-62
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF NEBRASKA LLC
By: Sole Member:
OMNICARE PHARMACIES OF THE GREAT
PLAINS HOLDING COMPANY
By: *
-----------------------
Gary W. Kadlec
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Gary W. Kadlec
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
OMNICARE PHARMACY OF SOUTH DAKOTA LLC
By: Sole Member:
OMNICARE PHARMACIES OF THE GREAT
PLAINS HOLDING COMPANY
By: *
-----------------------
Gary W. Kadlec
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Gary W. Kadlec
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
ROYAL CARE OF MICHIGAN LLC
By: Sole Member:
SPECIALIZED PHARMACY SERVICES, INC.
By: *
-----------------------
Daniel E. Lohmeier
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Daniel E. Lohmeier
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SPECIALIZED HOME INFUSION OF
MICHIGAN LLC
By: Sole Member:
SPECIALIZED PHARMACY SERVICES, INC.
By: *
-----------------------
Daniel E. Lohmeier
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President; Director September 20, 2001
----------------------------
Daniel E. Lohmeier
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Covington,
Commonwealth of Kentucky, on September 20, 2001.
SHC ACQUISITION CO, LLC
By: Sole Member:
HMIS, INC.
By: *
-----------------------
L. Tracy Finn
President
*By: /s/ CHERYL D. HODGES
-----------------------
Cheryl D. Hodges
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* President September 20, 2001
----------------------------
Edwin M. Lewis
* Treasurer September 20, 2001
----------------------------
Bradley S. Abbott
* Director September 20, 2001
----------------------------
Thomas R. Marsh
* Director
----------------------------
Catherine I. Greany
*By /s/ CHERYL D. HODGES
------------------------
Cheryl D. Hodges
Attorney-in-fact
II-67
INDEX TO EXHIBITS
Exhibit No Description
---------- -----------
3.1 --Restated Certificate of Incorporation of Omnicare, Inc. (incorporated
herein by reference to our Annual Report on Form 10-K for the year ended
December 31, 1996)
3.2 --By-Laws of Omnicare, Inc., as amended (incorporated by reference herein
by reference to our registration statement on Form S-3 dated September
28, 1998)
4.1 --Indenture dated as of March 20, 2001, by and among Omnicare, Inc., the
Guarantors named therein and SunTrust Bank, as trustee, relating to the
Company's $375.0 million 8.125% Senior Subordinated Notes due 2011
(incorporated herein by reference to our Current Report on Form 8-K dated
March 23, 2001)
4.2 --Registration Rights Agreement dated as of March 20, 2001 by and among
Omnicare, Inc., the Guarantors named therein and the Initial Purchasers
named therein, relating to the Registrant's 8 1/8% Senior Subordinated
Notes due 2011 (incorporated herein by reference to our Current Report on
Form 8-K dated March 23, 2001)
5.1*--Opinion of Dewey Ballantine LLP regarding the validity of the exchange
notes
5.2*--Opinion of Thompson Hine LLP regarding the validity of the exchange
guarantees
12* --Statement of Computation of Ratio of Earnings to Fixed Charges
23.1 --Consent of PricewaterhouseCoopers LLP
23.2*--Consent of Dewey Ballantine LLP (included in its opinion filed as Exhibit
5.1 hereto)
23.3*--Consent of Thompson Hine LLP (included in its opinion filed as Exhibit
5.2 hereto)
24* --Powers of Attorney (included on page II-3)
25* --Statement of Eligibility of Trustee
99.1*--Form of Letter of Transmittal
99.2*--Form of Notice of Guaranteed Delivery
99.3*--Form of Letter to Clients
99.4*--Form of Letter to Brokers
99.5*--Form of Instructions to Registered Holders
---------
* Previously filed
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as.................. 'r'