Exhibit 99(a)
[LETTERHEAD OF OMNICARE]
Omnicare news release
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[LOGO]
CONTACT:
Cheryl D. Hodges
(859) 392-3331
OMNICARE ANNOUNCES SECOND PHASE OF
PRODUCTIVITY AND CONSOLIDATION INITIATIVE
o 12-Month Program Expected to Save $17 Million Annually
o Represents Outgrowth of Recently Completed Restructuring Program
o Restructuring Charge of $24.2 Million to be Recorded; $15.4 Million in Q3 2001
Covington, Kentucky, September 28, 2001 -- Omnicare, Inc. (NYSE:OCR)
today announced that it is implementing the second phase of a productivity and
consolidation initiative. Expected to result in annualized savings of
approximately $17.0 million by September 30, 2002, the program is intended to
further streamline operations, increase efficiency and enhance the company's
position as a high quality, cost-effective provider of pharmaceutical services.
"Smaller in scope, this new initiative is a natural outgrowth of the
major productivity and consolidation initiative we completed in December 2000,"
said Joel F. Gemunder, president and chief executive officer of Omnicare. "Our
Phase II program includes pharmacy consolidations and reconfigurations as well
as resource realignments in both our pharmacy and contract research (CRO)
businesses. The intent is to capitalize on follow-up opportunities identified in
Phase I to reduce costs and increase efficiency.
"Success in today's healthcare environment requires delivery of
high-quality service at the lowest possible cost. We believe it is essential to
remain focused on this goal and to take advantage of every opportunity to
increase the efficiency of our operations and the quality of the service to our
customers," Gemunder said.
The Phase II program is expected to generate approximately $17.0
million in annual savings on a pretax basis ($10.5 million aftertax) upon full
implementation. It will result in a pretax restructuring charge of approximately
$24.2 million ($15.0 million aftertax), of which approximately $3.9 million
(pretax) will be non-cash items. Approximately $15.4 million ($9.6 million
aftertax or 10 cents per diluted share) will be recorded in the third quarter
ending September 30, 2001, with the remaining approximately $8.8 million ($5.4
million aftertax or 6 cents per share) to be taken over the following four
quarters. The restructuring charge primarily includes severance pay, lease
terminations, the write-off of leasehold improvements and other assets, and
related fees and expenses. The estimated $17.0 million in annualized savings
represents a payback period of less than two years when compared with the
restructuring charge of $24.2 million.
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Pharmacy Operations to Further Streamline
In mid-1999, Omnicare embarked on a strategic initiative with A.T.
Kearney, one of the world's top management consultants, to streamline
operations, reduce costs and increase the efficiency of its operating units by
standardizing around best practices. The initiative eliminated redundant
efforts, simplified work processes and utilized technology to apply best
practices and maximize employee productivity. 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 and cost-effective services to its customers. By year-end 2000, the
net number of pharmacy locations had been reduced by 29% to 134, productivity
programs had been implemented in virtually all of the operating units and the
company had achieved the planned 16% headcount reduction. Cost savings were
slightly ahead of the targeted $46 million, significantly reducing operating
costs.
"For the pharmacy business, most of the Phase II actions are the direct
result of recommendations made by our operating management and outside
consultants, who identified additional opportunities during the implementation
of our Phase I restructuring to take our productivity and consolidation efforts
one step further," Gemunder noted.
Building on the previous efforts, the Phase II program will include the
merging or closing of seven pharmacy locations and the reconfiguration in size
and function of an additional 10 locations. Further, additional productivity and
best-practice initiatives will be implemented in a number of pharmacy and other
operating locations. Upon completion of Phase II, Omnicare expects to have 127
strategically located pharmacy units in 43 states positioned to deliver the
company's innovative programs and services more efficiently.
CRO to Leverage Global Structure
In mid-2000, Omnicare began integrating the three contract research
organizations it had previously acquired into a single business unit, Omnicare
Clinical Research. The integration efforts centered on shifting to a global,
centralized structure organized along functional lines to streamline operations
and leverage efficiencies in global business development, project management and
information technology. Subsequently, A.T. Kearney was engaged to study process
improvement opportunities for the newly consolidated CRO business, resulting in
the identification of additional ways to reduce fixed expenses and redirect
resources to produce the greatest value for customers.
As a result of the global integration efforts at Omnicare Clinical
Research, Phase II of the restructuring includes a reduction in occupied
building space in certain locations, and the rationalization or redirection of
staffing levels in order to better garner the efficiencies of the functional
reorganization.
"In our CRO business, these actions are designed to reduce overhead
expense and infrastructure to free up greater resources for customer-focused
initiatives that will enhance growth and leverage this more efficient cost
structure. Reallocating our human and capital resources not only will make us an
even more nimble and responsive organization, but will produce greater returns
for both our customers and our company," Gemunder added.
Enhancing Position as High-Quality, Low-Cost Provider
Gemunder noted, "The Phase II actions are borne of our ongoing
commitment to search for efficiencies and synergies that allow us to deliver the
best service at the lowest cost. These
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actions will strengthen our ability to serve our customers efficiently and
effectively, enhance our competitive position and reinforce our industry
leadership."
Omnicare expects the Phase II measures to lead to a net reduction of
approximately 460 employees, or about 5% of its total workforce. Where possible,
the company is making use of normal attrition and transfer to other locations.
Employees whose jobs are eliminated will be offered appropriate financial
assistance.
"Our employees continue to be key to Omnicare's success," Gemunder
said. "While improving efficiency and enhancing our competitive position is a
positive for most employees, and for the company as a whole, we well know it can
bring about change and we will work to make the changes as smooth as possible.
As they proved during the first phase of this effort, we are confident that our
employees are equal to the challenge," said Gemunder.
Gemunder noted, "Given the timing, we do not expect much impact on
our earnings from this program for the remainder of this calendar year. In 2002,
we anticipate that the savings will follow a quarterly ramp-up, reaching an
annualized run rate of $17 million (pretax) by the end of the third quarter. We
believe this gives us a solid foundation for achieving our target growth rate
for 2002."
"Productivity enhancement and consolidation of our organization have
long been a part of our strategic plan. With the mounting cost pressures and
sweeping change that have characterized the healthcare industry, it is as
important as ever to remain vigilant in seeking new and innovative ways to
deliver service cost-effectively. The Phase II program will enable us to
maintain our industry leadership position and maximize the financial strength
and growth opportunities inherent in our strategy," Gemunder said.
"Importantly, the underlying fundamentals of our business are sound and
serve as a foundation for our growth: the aging population and increasing life
span, pharmaceuticals' position as the most cost-effective means of treating the
elderly, the accelerating pace of new drug discovery, and the growing need to
control healthcare costs. The initiatives we announced today will enable us to
leverage our resources while reducing expenses, and enhance our ability to
capitalize on these key trends," Gemunder concluded.
About the Company
Omnicare, based in Covington, Kentucky, is a leading geriatric
pharmaceutical care company serving approximately 650,000 residents in 8,500
long-term care facilities in 43 states. Omnicare is the nation's largest
provider of professional pharmacy, related consulting and data management
services for skilled nursing, assisted living and other institutional healthcare
providers. Omnicare also provides comprehensive clinical research services for
the pharmaceutical and biotechnology industries in 26 countries worldwide.
Statements in this press release concerning Omnicare's business outlook
or position or future economic performance, including savings and other benefits
expected to result from the productivity and consolidation program; the impact
of demographic trends; expectations concerning the accelerating pace of new drug
discovery and its impact on Omnicare; the impact of the growing need to control
healthcare costs; together with other statements that are not historical, are
forward-looking statements that are estimates reflecting the best judgment of
Omnicare based on currently available information. Such forward-looking
statements involve actual known and unknown risks, uncertainties, contingencies
and other factors that could cause actual results, performance or achievements
to differ materially from those stated. Such risks, uncertainties, contingencies
and other factors, many of which are beyond the control of Omnicare, include
overall economic, financial and business conditions; trends for the continued
growth
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of the businesses of Omnicare; the ability to implement the productivity and
consolidation program and to realize anticipated benefits; delays in
reimbursement by the government and other payors to customers and Omnicare; the
overall financial condition of its customers; Omnicare's ability to assess and
react to the financial condition of its customers; the impact of seasonality on
the business of Omnicare; the continued successful integration of the CRO
business and acquired companies; pricing and other competitive factors in the
industry; the effect of new government regulations, executive orders and/or
legislative initiatives, including those relating to reimbursement and drug
pricing policies and in the interpretation and application of such policies; the
outcome of litigation; the failure of Omnicare to obtain or maintain required
regulatory approvals or licenses; loss or delay of contracts pertaining to
Omnicare's contract research organization business for regulatory or other
reasons; the ability of CRO projects to produce revenues in subsequent periods;
the ability to attract and retain needed management; the impact and pace of
technological advances; the ability to obtain or maintain rights to data,
technology and other intellectual property; the impact of consolidation in the
pharmaceutical and long-term care industries; volatility in Omnicare's stock
price; access to capital and financing; the demand for Omnicare's products and
services; variations in costs or expenses; the continued availability of
suitable acquisition candidates; changes in tax law and regulation; and other
risks and uncertainties described in Omnicare's reports and filings with the
Securities and Exchange Commission.
For more information on Omnicare, Inc., via the Internet, including a
full menu of news releases, visit www.omnicare.com or
http://prnewswire.com/comp/136781.html.
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