EXHIBIT 99.1
Omnicare, Inc. 100 East RiverCenter Boulevard Covington, Kentucky 41011
859/392-3300 859/392-3360 Fax
Omnicare news release
- --------------------------------------------------------------------------------
[LOGO] CONTACT:
Cheryl D. Hodges
(859) 392-3331
Omnicare Reports Record Second Quarter 2003 Results
COVINGTON, Ky., July 31, 2003 - Omnicare, Inc. (NYSE:OCR), a leading provider of
pharmaceutical care for the elderly, reported today financial results for its
second quarter ended June 30, 2003 versus the comparable prior year period, as
follows:
o Earnings per diluted share increased 42% to 44 cents
o Net income rose 48% to $43.5 million
o Earnings before interest, income taxes, depreciation and amortization
(EBITDA) increased 43% to $103.6 million
o Sales grew 29% to $844.0 million
Results for the second quarter of 2003 included a previously announced special
charge of $4.1 million pretax ($2.5 million aftertax) relating to the early
redemption of a portion of the Company's 5% convertible subordinated debentures
prior to June 30, 2003. Results for the 2002 second quarter included a special
charge of $7.3 million pretax ($4.5 million aftertax) related to the second
phase of the Company's productivity and consolidation initiative completed in
September 2002. Adjusting for these special items, results for the quarter ended
June 30, 2003 were as follows:
o Adjusted earnings per diluted share increased 31% to 47 cents
o Adjusted net income rose 36% to $46.0 million
o Adjusted EBITDA increased 30% to $103.6 million
o Sales grew 29% to $844.0 million
To facilitate comparisons and to enhance understanding of core operating
performance, the discussion that follows includes financial measures that are
adjusted from the comparable amount under generally accepted accounting
principles (GAAP) to exclude the impact of the above-mentioned special items.
For a detailed presentation of reconciling items and related definitions and
components, please refer to the attached schedules or to reconciliation
schedules posted on the company's Web site at www.omnicare.com.
"The second quarter of 2003 was a period of great significance for Omnicare. Not
only did it mark our twelfth consecutive quarter of sequential, as well as
year-over-year
growth, but we also successfully completed a major refinancing and announced the
acquisition of SunScript, the institutional pharmacy business of Sun Healthcare
Group," said Joel F. Gemunder, president and chief executive officer of
Omnicare. "In addition, during the quarter, we began realizing the benefits from
our integration of NCS HealthCare (NCS), acquired in January 2003, along with
our ongoing cost control and productivity efforts and continued improvement in
our overall financial health."
Cash flow from operations for the second quarter totaled $114.7 million, 90%
above the $60.4 million in the comparable 2002 period on a GAAP basis. The 2003
quarter included $33.2 million in advance purchases of pharmaceuticals
(pre-buys) versus $29.7 million in 2002. The 2003 second quarter also included
$51 million in payments of the $56 million that had been past due in the first
quarter of 2003 relating to the previously announced broad-based slowdown in
payments from the Illinois Department of Public Aid (Medicaid). For the 2003
year-to-date period, cash flow from operations on a GAAP basis totaled $120.0
million, up 44% from the $83.3 million generated in the first half of 2002.
Free cash flow, defined as operating cash flow less capital expenditures and
dividends, of $109.4 million for the second quarter of 2003 was double the free
cash flow of $54.4 million generated in the 2002 quarter. On a year-to-date
basis, free cash flow totaled $108.6 million in the first half of 2003, 55%
higher than the $70.2 million generated in the comparable 2002 period. In light
of its strong cash flow, the Company repaid $50 million in bank debt during the
quarter.
Refinancing Successfully Completed
On June 13, 2003, the Company successfully completed a major refinancing which
served to finance longer term its acquisition of NCS HealthCare and enhance its
capital structure. The Company raised $250 million in a term loan A, $250
million in 6 1/8% senior subordinated notes, $188.6 million (6,468,750 shares)
in common stock and, through a statutory trust formed by the Company, $345
million in 4.0% convertible trust preferred securities (trust PIERS). The
proceeds from the term loan A and senior subordinated notes were used to repay
$474.0 million in short-term bank debt used to temporarily finance the NCS
acquisition. The proceeds from the trust PIERS and common stock issuance were
used to redeem all of the Company's outstanding 5% convertible notes, which,
including the conversion premium, totaled approximately $353.9 million, with
the remaining cash of $206 million to be used for transaction-related expenses
and general corporate purposes.
Also as part of its overall refinancing, Omnicare entered into a new $500
million bank revolving credit agreement with a four-year term, replacing its
existing $500 million bank revolving credit line, which was scheduled to mature
in March 2004.
In connection with the early redemption of the 5% convertible notes, a charge of
$4.1 million pretax was taken in the second quarter of 2003 representing the
proportionate share of the conversion premium and remaining unamortized
transaction expenses
2
related to the $106.5 million in notes redeemed prior to June 30, 2003. The
remaining $8.6 million pretax of such charge, relating to $238.5 million in
notes redeemed between July 1, 2003 and the final redemption date of July 14,
2003 will be taken in the third quarter of 2003.
"We are very pleased with the outcome of this refinancing. Not only did we move
the financing of the NCS transaction to longer term, at very attractive rates,
we also extended our overall maturities, maintained our credit ratings and
gained additional permanent equity without dilution to our current
shareholders," said Gemunder. "Moreover, our new capital structure provides
substantial flexibility for future growth."
Institutional Pharmacy Business
Omnicare's institutional pharmacy business generated record revenues of $802.8
million for the 2003 second quarter, 32% higher than the $610.4 million reported
in the comparable prior-year quarter. Operating profit in this business reached
$95.8 million for the 2003 quarter, 34% higher than the adjusted $71.6 million
recorded in the second quarter of 2002. At June 30, 2003, Omnicare served
approximately 938,000 beds, an increase of 27% over the approximately 738,000
beds served at June 30, 2002.
"Our pharmacy sales growth benefited significantly from the contribution of NCS,
along with other new contract additions, and the expansion of our clinical and
other service programs," Gemunder noted. "Further market penetration of newer
branded drugs targeted at the diseases of the elderly, partially offset by the
increasing usage of generic drugs, also contributed to the sales gain.
"Moreover, our sales increase was leveraged not only by the ongoing benefits of
our cost reduction efforts but also through the successful integration of NCS.
The trend in our pharmacy operating margin is tracking with the expectations we
described when we announced the acquisition of NCS. After the initial impact of
adding the lower margin NCS business during the first quarter of 2003, our
integration efforts have begun to result in the anticipated synergies. We
believe that as the integration of this business proceeds over the next two
quarters, and additional cost synergies are realized, the profitability of this
business will continue to increase. To date, the integration is proceeding apace
and is on track to achieve the synergies that, in our view, made this important
transaction so compelling."
CRO Business
Omnicare Clinical Research, the Company's contract research (CRO) business,
generated revenues of $41.2 million on a GAAP basis for the 2003 second quarter,
versus the prior-year quarter's revenues of $43.7 million. Included in both
periods were reimbursable out-of-pocket expenses totaling $5.9 million in the
2003 period and $7.1 million in the 2002 period. Excluding these reimbursable
out-of-pocket expenses, adjusted revenues of $35.4 million were marginally lower
than the $36.7 million recorded on this basis in the 2002 period. Operating
profit in the second quarter of
3
2003 was $4.5 million versus the adjusted $5.3 million earned during the
comparable prior-year period. Backlog at June 30, 2003 was approximately $199
million.
"Our CRO business performed in line with our expectations for the quarter," said
Gemunder. "As with others in the industry, we continue to be impacted by
client-driven delays in project commencement or continuation, but we are
nonetheless encouraged by the growth in our backlog, particularly in our
Peri-Approval and Geriatrics business, and the signing of a new preferred
provider agreement with a major pharmaceutical manufacturer."
Acquisition of SunScript Pharmacy Business
Also during the quarter, Omnicare announced the acquisition of the SunScript
pharmacy services business from Sun Healthcare Group (OTC: SUHG.OB), one of the
nation's largest providers of long-term, subacute and related specialty
healthcare services. The transaction was completed on July 15, 2003. The
SunScript business acquired is expected to provide pharmacy services for
long-term care facilities comprising approximately 43,000 beds in 19 states and
generate approximately $180 million in revenues on an annualized basis
(excluding revenues from Sun Healthcare facilities that are being turned over to
facility landlords as part of Sun Healthcare's previously announced
restructuring). Given the economies of scale and cost synergies anticipated, the
transaction is expected to be accretive to Omnicare's earnings beginning in the
fourth quarter of 2003.
Six Month Results
Financial results for the six months ended June 30, 2003, as compared with the
same period of 2002, were as follows:
o Earnings per diluted share increased 41% to 86 cents
o Net income rose 44% to $83.9 million
o EBITDA increased 37% to $197.4 million
o Sales grew 28% to $1,649.9 million
The first half of 2003 included the previously discussed charge of $4.1 million
related to the early redemption of convertible notes and the 2002 first half
included $12.1 million ($7.5 million aftertax) in restructuring charges related
to the Company's productivity and consolidation initiative completed in
September 2002. Adjusting for these special items, in both periods, results for
the first half of 2003 were as follows:
o Adjusted earnings per diluted share increased 28% to 88 cents
o Adjusted net income rose 32% to $86.4 million
o Adjusted EBITDA increased 27% to $197.4 million
o Sales grew 28% to $1,649.9 million
4
Omnicare Outlook
"During the second quarter, we continued to experience relative stability in the
operating environment in the long-term care industry underscored by increasing
Medicare admissions and improving occupancy reported in many areas," said
Gemunder. "Also during the quarter, we were encouraged to see the Centers for
Medicare and Medicaid Services (CMS) announce several proposals that would
increase reimbursement for skilled nursing facilities from its current level
beginning on October 1, 2003.
"We continue to monitor key issues related to healthcare funding, including the
increasing pressures on state Medicaid budgets arising from the economic
downturn coupled with growth in enrollees as eligibility is expanded; the
escalation in drug costs owing to higher drug utilization among seniors and the
introduction of new more efficacious, albeit more expensive, medications. In
this regard, we were pleased to see increased funding for state Medicaid
programs by the federal government in the recently-enacted tax bill which should
provide some economic relief for state budgets."
Continuing, Gemunder said, "We also are mindful of the debate on the Medicare
drug benefit and the long-term financing of the entire Medicare program. Given
the competing national and political priorities, it remains difficult to predict
the outcome and impact of any changes in healthcare policy relating to the
future funding of the Medicaid and Medicare programs.
"Nonetheless, we know that pharmaceuticals remain the most cost-effective means
of treating the chronic illnesses of the frailest members of our society and, as
such, should be considered nondiscretionary expenditures and should be
appropriately funded. The geriatric pharmaceutical business offers meaningful
solutions to containing healthcare costs while ensuring the well-being of the
nation's growing elderly population. Omnicare is positioned at the forefront of
these trends, and has demonstrated to payors, including state Medicaid programs,
that our clinical programs can yield substantially lower drug costs while
enhancing quality of care.
"We believe that our growth strategy, which has served us well in mitigating
reimbursement risks and strengthening our industry leading position, will allow
us to maximize cash flow, maintain a strong financial position, enhance the
efficiency of our operations and continue to develop our franchise in the
geriatric pharmaceutical market.
"In the current environment, we see many opportunities to further leverage our
operating cost structure. The addition of NCS and SunScript significantly
enhances our position to realize substantial opportunities for growth in
institutional pharmacy.
"Our core growth strategy includes the continued expansion of our customer base
in institutional pharmacy, as well as growth of our clinical programs, such as
our proprietary formulary, the Omnicare Geriatric Pharmaceutical Care
Guidelines'r', and health management programs, dialysis services and in Omnicare
Senior Health Outcomes'sm', our pharmaceutical case management services for the
broader based
5
senior marketplace. Moreover, the addition of both NCS and SunScript has brought
new and interesting business opportunities in information technology and
services as well as specialty pharmaceutical distribution.
"While volatility remains in the short-run, we see a positive long-term outlook
in Omnicare Clinical Research as we benefit from the streamlining and
globalization of our business, our unique capabilities in the geriatric market
and the strength of our presence in the overall drug development marketplace.
"Our revenue and earnings growth outlook remains positive for 2003 given our
strong underlying fundamentals and our sound strategy, combined with our
demonstrated ability to maintain financial strength and flexibility, and the
numerous opportunities to leverage our business both through internal and
external growth," Gemunder concluded.
Webcast Today
Omnicare will hold a conference call to discuss second-quarter results today at
9:30 a.m. EDT. The conference call will be available live via webcast at
Omnicare's Web site at www.omnicare.com by clicking on "Investors" and then on
"Conference Calls." An online replay will be available at www.omnicare.com
beginning approximately two hours after the completion of the live call and will
remain available for 14 days.
Omnicare, based in Covington, Kentucky, is a leading provider of pharmaceutical
care for the elderly. Including the SunScript acquisition, Omnicare serves
residents in long-term care facilities comprising approximately 981,000 beds in
47 states, making it 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
clinical research services for the pharmaceutical and biotechnology industries
in 29 countries worldwide.
Statements in this press release concerning Omnicare's business outlook or
position or future economic performance; the impact of Omnicare's completed
refinancing; the impact of the SunScript and NCS acquisitions; the impact of
Omnicare's cost control and productivity efforts; the financial condition of
Omnicare, including the strength of its cash flows; the impact of delayed
payment from Illinois Medicaid; expectations concerning budgetary matters in
Illinois; the impact of pre-buys; Omnicare's growth potential; the impact of
clinical and other programs; the impact of penetration of new drugs; trends
concerning the number and usage of generic drugs; the impact of the integration
of the NCS acquisition; expectations concerning margins and profitability;
trends concerning delays in project commencement or continuation by CRO clients,
as well as those concerning backlog and new CRO business; the operating
environment in the long-term care industry; trends concerning occupancy and
Medicare admissions; expectations concerning Medicare and Medicaid reimbursement
and funding trends; the impact of healthcare funding issues, including any
Medicare drug benefit; opportunities to contain healthcare costs while ensuring
the well-being of the elderly population; expectations concerning growth; the
ability to further leverage Omnicare's operating cost structure; opportunities
to expand Omnicare's information technology and services, health management and
specialty pharmaceutical distribution businesses; the impact of the streamlining
and globalization of Omnicare's CRO operations; Omnicare's capabilities in the
geriatric market and its strength in the drug development marketplace;
expectations concerning Omnicare's financial strength and flexibility, together
with other statements that are not historical, are forward-looking statements
that are estimates reflecting the best judgment of Omnicare based on
6
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 of the
businesses of Omnicare; the ability to implement productivity, consolidation and
cost reduction efforts and to realize anticipated benefits; the impact and pace
of pharmaceutical price increases; delays and further reductions in
reimbursement by the government and other payors to customers and to Omnicare as
a result of pressure on federal and state budgets due to the continuing economic
downturn and other factors; the overall financial condition of Omnicare's
customers; Omnicare's ability to assess and react to the financial condition of
its customers; the impact of seasonal illness trends on the business of
Omnicare; the ability of vendors and business partners to continue to provide
products and services to Omnicare; the continued successful integration of
acquired companies, including NCS and SunScript, and the ability to realize
anticipated revenues, economies of scale, cost synergies and profitability; the
continued availability of suitable acquisition candidates; pricing and other
competitive factors in the industry; increases or decreases in reimbursement;
the effect of new government regulations, executive orders and/or legislative
initiatives, including those relating to reimbursement and drug pricing policies
and changes in the interpretation and application of such policies; government
budgetary pressures and shifting priorities; efforts by payors to control costs;
the outcome of litigation; the failure of Omnicare or the long-term care
facilities it serves 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 clinical
research projects to produce revenues in future periods; the ability to attract
and retain needed management; potential liability for losses not covered by, or
in excess of, insurance; competition for qualified staff in the healthcare
industry; 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 the market for Omnicare's stock and in the financial markets
generally; changes in international economic and political conditions and
currency fluctuations between the U.S. dollar and other currencies; access to
capital and financing; the demand for Omnicare's products and services;
variations in costs or expenses; changes in tax law and regulation; changes in
accounting rules and standards; 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.
###
7
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, GAAP Basis
(000s, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -----------------------------------
2003 2002 2003 2002
----------- ----------- ------------- -------------
Sales $ 838,183 $ 647,101 $ 1,635,936 $ 1,279,116
Reimbursable out-of-pockets (a) 5,850 (a) 7,054 (a) 13,958 (a) 13,353 (a)
----------- ----------- ------------- -------------
Total net sales 844,033 654,155 1,649,894 1,292,469
----------- ----------- ------------- -------------
Cost of sales 617,206 476,171 1,206,998 943,982
Reimbursed out-of-pocket expenses (a) 5,850 (a) 7,054 (a) 13,958 (a) 13,353 (a)
----------- ----------- ------------- -------------
Total direct costs 623,056 483,225 1,220,956 957,335
----------- ----------- ------------- -------------
Gross profit 220,977 170,930 428,938 335,134
Selling, general and administrative expenses 130,090 102,501 257,018 202,119
Restructuring charge (d) - 7,302 (d) - 12,099 (d)
----------- ----------- ------------- -------------
Operating income 90,887 61,127 171,920 120,916
Investment income 1,166 667 1,754 1,465
Interest expense (b) (21,875) (b) (14,475) (38,331) (b) (28,651)
----------- ----------- ------------- -------------
Income before income taxes 70,178 47,319 135,343 93,730
Income taxes 26,677 17,961 51,419 35,596
----------- ----------- ------------- -------------
Net income $ 43,501 (b) $ 29,358 (d) $ 83,924 (b) $ 58,134 (d)
=========== =========== ============= =============
Earnings per share ("EPS"):
Basic $ 0.45 (b) $ 0.31 (d) $ 0.88 (b) $ 0.62 (d)
=========== =========== ============= =============
Diluted $ 0.44 (b)(c) $ 0.31 (d) $ 0.86 (b)(c) $ 0.61 (d)
=========== =========== ============= =============
Weighted average number of common
shares outstanding:
Basic 96,034 94,175 95,215 94,070
=========== =========== ============= =============
Diluted 102,925 (c) 95,292 103,372 (c) 94,984
=========== =========== ============= =============
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
8
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, Non-GAAP Basis (e)
Excluding EITF No. 01-14 and Special Items
(000s, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
2003 2002 2003 2002
----------- ----------- ------------ ------------
Adjusted sales $ 838,183 (f) $ 647,101 (f) $1,635,936 (f) $1,279,116 (f)
Adjusted cost of sales 617,206 (f) 476,171 (f) 1,206,998 (f) 943,982 (f)
----------- ----------- ------------ ------------
Gross profit 220,977 170,930 428,938 335,134
Selling, general and administrative expenses 130,090 102,501 257,018 202,119
----------- ----------- ------------ ------------
Adjusted operating income 90,887 68,429 (h) 171,920 133,015 (h)
Investment income 1,166 667 1,754 1,465
Interest expense (17,806) (g) (14,475) (34,262) (g) (28,651)
----------- ----------- ------------ ------------
Adjusted income before income taxes 74,247 54,621 139,412 105,829
Income taxes 28,223 20,736 52,965 40,194
----------- ----------- ------------ ------------
Adjusted net income $ 46,024 (g) $ 33,885 (h) $ 86,447 (g) $ 65,635 (h)
=========== =========== ============ ============
Adjusted earnings per share:
Basic $ 0.48 (g) $ 0.36 (h) $ 0.91 (g) $ 0.70 (h)
=========== =========== ============ ============
Diluted $ 0.47 (c)(g) $ 0.36 (h) $ 0.88 (c)(g) $ 0.69 (h)
=========== =========== ============ ============
Weighted average number of common
shares outstanding:
Basic 96,034 94,175 95,215 94,070
=========== =========== ============ ============
Diluted 102,925 (c) 95,292 103,372 (c) 94,984
=========== =========== ============ ============
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
9
Omnicare, Inc. and Subsidiary Companies
Summary Segment Financial Data, Non-GAAP Basis (e)
Excluding EITF No. 01-14 and Special Item
(000s)
Unaudited
Corporate
Pharmacy CRO and Consolidated
Services Services Consolidating Totals
----------- --------- -------------- -------------
Three Months Ended June 30, 2003:
Adjusted sales $ 802,828 $ 35,355 (f) $ - $ 838,183 (f)
=========== ========= ============== =============
Operating income $ 95,825 $ 4,485 $ (9,423) $ 90,887
Depreciation and amortization 11,626 483 579 12,688
----------- --------- -------------- -------------
Earnings before interest, income taxes,
depreciation and amortization ("EBITDA") $ 107,451 $ 4,968 $ (8,844) $ 103,575
=========== ========= ============== =============
Three Months Ended June 30, 2002:
Adjusted sales $ 610,412 $ 36,689 (f) $ - $ 647,101 (f)
=========== ========= ============== =============
Adjusted operating income $ 71,614 (h) $ 5,273 (h) $ (8,458) $ 68,429 (h)
Depreciation and amortization 9,948 592 771 11,311
----------- --------- -------------- -------------
Adjusted EBITDA $ 81,562 (h) $ 5,865 (h) $ (7,687) $ 79,740 (h)
=========== ========= ============== =============
Six Months Ended June 30, 2003:
Adjusted sales $1,565,982 $ 69,954 (f) $ - $ 1,635,936 (f)
=========== ========= ============== =============
Operating income $ 181,195 $ 9,215 $ (18,490) $ 171,920
Depreciation and amortization 23,374 901 1,174 25,449
----------- --------- -------------- -------------
EBITDA $ 204,569 $ 10,116 $ (17,316) $ 197,369
=========== ========= ============== =============
Six Months Ended June 30, 2002:
Adjusted sales $1,206,677 $ 72,439 (f) $ - $ 1,279,116 (f)
=========== ========= ============== =============
Adjusted operating income $ 139,819 (h) $ 10,188 (h) $ (16,992) $ 133,015 (h)
Depreciation and amortization 20,383 1,210 1,409 23,002
----------- --------- -------------- -------------
Adjusted EBITDA $ 160,202 (h) $ 11,398 (h) $ (15,583) $ 156,017 (h)
=========== ========= ============== =============
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
10
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets, GAAP Basis
(000s)
Unaudited
June 30, December 31,
2003 2002
------------- -------------
ASSETS
Cash and cash equivalents $ 594,532 $ 137,936
Restricted cash 5,819 3,147
Accounts receivable, net 625,103 522,857
Unbilled receivables 29,495 25,062
Inventories 248,078 190,464
Deferred income tax benefits and other current assets 118,728 122,092
------------- -------------
Total current assets 1,621,755 1,001,558
------------- -------------
Properties and equipment, net 149,534 139,908
Goodwill 1,627,203 1,188,907
Other noncurrent assets 135,946 97,212
------------- -------------
Total assets $ 3,534,438 $ 2,427,585
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 265,340 $ 175,648
Deferred revenue 23,262 25,254
Current debt (i) 20,403 110
Other current liabilities 139,459 95,638
------------- -------------
Total current liabilities 448,464 296,650
------------- -------------
Long-term debt, due in quarterly installments through 2007 (i) 180,343 187
5.0% convertible subordinated debentures, due 2007 (i) 238,465 345,000
8.125% senior subordinated notes, due 2011 375,000 375,000
6.125% senior subordinated notes, due 2013 (i) 250,000 -
4.0% contingent convertible notes, due 2033 (i) 345,000 -
Deferred income taxes and other noncurrent liabilities 158,384 135,686
------------- -------------
Total liabilities 1,995,656 1,152,523
------------- -------------
Stockholders' equity 1,538,782 1,275,062
------------- -------------
Total liabilities and stockholders' equity $ 3,534,438 $ 2,427,585
============= =============
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
11
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
(000s)
Unaudited
Three Months Six Months
Ended June 30, 2003
-----------------------------
Cash flows from operating activities:
Net income $ 43,501 $ 83,924
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 9,259 18,827
Amortization 3,429 6,622
Provision for doubtful accounts 12,135 23,180
Deferred tax provision 5,270 18,739
Write-off of debt issuance costs 1,164 1,164
Changes in assets and liabilities, net of effects
from acquisition of businesses 39,921 (32,426)
----------- -----------
Net cash flows from operating activities 114,679 120,030
----------- -----------
Cash flows from investing activities:
Acquisition of businesses (15,158) (492,157)
Capital expenditures (3,165) (7,155)
Other (10) (2,619)
----------- -----------
Net cash flows from investing activities (18,333) (501,931)
----------- -----------
Cash flows from financing activities:
Borrowings on line of credit facilities and term loans 250,000 749,000
Payments on line of credit facilities and term loans (524,000) (549,000)
Proceeds from/(payments on) long-term borrowings 485,221 485,221
Fees paid for financing arrangements (29,366) (29,366)
Gross proceeds from stock offering 188,629 188,629
Payments for stock awards and exercise of stock options,
net of stock tendered in payment (715) (3,832)
Dividends paid (2,125) (4,250)
Other 268 122
----------- -----------
Net cash flows from financing activities 367,912 836,524
----------- -----------
Effect of exchange rate changes on cash 1,284 1,973
----------- -----------
Net increase in cash and cash equivalents 465,542 456,596
Cash and cash equivalents at beginning
of period - unrestricted 128,990 137,936
----------- -----------
Cash and cash equivalents at
end of period - unrestricted $ 594,532 $ 594,532
=========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
12
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (e)
(000s)
Unaudited
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ----------------------------
2003 2002 2003 2002
----------- ---------- ----------- -----------
Adjusted operating income (earnings before
interest and income taxes, "EBIT"):
EBIT $ 90,887 $ 61,127 $ 171,920 $ 120,916
Special item (j) - 7,302 - 12,099
----------- ---------- ----------- -----------
Adjusted EBIT (j) $ 90,887 $ 68,429 $ 171,920 $ 133,015
=========== ========== =========== ===========
Adjusted income before income taxes:
Income before income taxes $ 70,178 $ 47,319 $ 135,343 $ 93,730
Special items (k) 4,069 7,302 4,069 12,099
----------- ---------- ----------- -----------
Adjusted income before income taxes (k) $ 74,247 $ 54,621 $ 139,412 $ 105,829
=========== ========== =========== ===========
Adjusted net income:
Net income $ 43,501 $ 29,358 $ 83,924 $ 58,134
Special items, net of taxes (k) 2,523 4,527 2,523 7,501
----------- ---------- ----------- -----------
Adjusted net income (k) $ 46,024 $ 33,885 $ 86,447 $ 65,635
=========== ========== =========== ===========
Adjusted earnings per share ("EPS"): (l)
Basic EPS $ 0.45 $ 0.31 $ 0.88 $ 0.62
Special items, net of taxes (k) 0.03 0.05 0.03 0.08
Adjusted basic EPS (k) $ 0.48 $ 0.36 $ 0.91 $ 0.70
=========== ========== =========== ===========
Diluted EPS $ 0.44 $ 0.31 $ 0.86 $ 0.61
Special items, net of taxes (k) 0.02 0.05 0.02 0.08
Adjusted diluted EPS (k) $ 0.47 $ 0.36 $ 0.88 $ 0.69
=========== ========== =========== ===========
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA"): (m)
EBIT $ 90,887 $ 61,127 $ 171,920 $ 120,916
Depreciation and amortization 12,688 11,311 25,449 23,002
----------- ---------- ----------- -----------
EBITDA (m) 103,575 72,438 197,369 143,918
Special item (j) - 7,302 - 12,099
----------- ---------- ----------- -----------
Adjusted EBITDA (j)(m) $ 103,575 $ 79,740 $ 197,369 $ 156,017
=========== ========== =========== ===========
Adjusted net cash flows from operating activities:
EBITDA (m) $ 103,575 $ 72,438 $ 197,369 $ 143,918
Subtract:
Interest expense, net of investment income (20,709) (13,808) (36,577) (27,186)
Income taxes (26,677) (17,961) (51,419) (35,596)
Changes in assets and liabilities, net of effects
from acquisition of businesses 39,921 6,570 (32,426) (22,019)
Add:
Provision for doubtful accounts 12,135 7,618 23,180 14,176
Deferred tax provision 5,270 2,333 18,739 4,375
Write-off of debt issuance costs 1,164 - 1,164 -
Non-cash portion of restructuring charges - 3,213 - 5,633
----------- ---------- ----------- -----------
Net cash flows from operating activities $ 114,679 $ 60,403 $ 120,030 $ 83,301
=========== ========== =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
(continued on next page)
13
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (e)
(000s)
Unaudited
(continued from previous page)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2003 2002 2003 2002
----------- ---------- ----------- -----------
Adjusted free cash flow: (n)
Net cash flows from operating activities $ 114,679 $ 60,403 $ 120,030 $ 83,301
Capital expenditures (3,165) (3,852) (7,155) (8,827)
Dividends (2,125) (2,119) (4,250) (4,237)
----------- ---------- ----------- -----------
Free cash flow (n) $ 109,389 $ 54,432 $ 108,625 $ 70,237
=========== ========== =========== ===========
Segment Reconciliations - Pharmacy Services
Adjusted EBIT - Pharmacy Services:
EBIT $ 95,825 $ 68,882 $ 181,195 $ 135,961
Special item (j) - 2,732 - 3,858
----------- ---------- ----------- -----------
Adjusted EBIT - Pharmacy Services (j) $ 95,825 $ 71,614 $ 181,195 $ 139,819
=========== ========== =========== ===========
Adjusted EBITDA - Pharmacy Services: (m)
EBITDA (m) $ 107,451 $ 78,830 $ 204,569 $ 156,344
Special item (j) - 2,732 - 3,858
----------- ---------- ----------- -----------
Adjusted EBITDA - Pharmacy Services (j)(m) $ 107,451 $ 81,562 $ 204,569 $ 160,202
=========== ========== =========== ===========
Segment Reconciliations - CRO Services
Adjusted EBIT - CRO Services:
EBIT $ 4,485 $ 703 $ 9,215 $ 1,947
Special item (j) - 4,570 - 8,241
----------- ---------- ----------- -----------
Adjusted EBIT - CRO Services (j) $ 4,485 $ 5,273 $ 9,215 $ 10,188
=========== ========== =========== ===========
Adjusted EBITDA - CRO Services: (m)
EBITDA (m) $ 4,968 $ 1,295 $ 10,116 $ 3,157
Special item (j) - 4,570 - 8,241
----------- ---------- ----------- -----------
Adjusted EBITDA - CRO Services (j)(m) $ 4,968 $ 5,865 $ 10,116 $ 11,398
=========== ========== =========== ===========
Segment - Corporate and Consolidating
EBIT $ (9,423) $ (8,458) $ (18,490) $ (16,992)
----------- ---------- ----------- -----------
EBITDA (m) (8,844) (7,687) (17,316) (15,583)
----------- ---------- ----------- -----------
Consolidated Segment Totals
EBIT $ 90,887 $ 61,127 $ 171,920 $ 120,916
=========== ========== =========== ===========
Adjusted EBIT (j) $ 90,887 $ 68,429 $ 171,920 $ 133,015
=========== ========== =========== ===========
EBITDA (m) $ 103,575 $ 72,438 $ 197,369 $ 143,918
=========== ========== =========== ===========
Adjusted EBITDA (j)(m) $ 103,575 $ 79,740 $ 197,369 $ 156,017
=========== ========== =========== ===========
DEFINITIONS:
GAAP: Amounts that conform with U.S. Generally Accepted Accounting Principles
("GAAP").
Non-GAAP: Amounts that do not conform with U.S. GAAP.
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
14
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s)
Unaudited
(a) In accordance with the adoption of Emerging Issues Task Force ("EITF") Issue
No. 01-14, "Income Statement Characterization of Reimbursements Received for
'Out-of-Pocket' Expenses Incurred" ("EITF No. 01-14"), Omnicare has recorded
reimbursements received for "out-of-pocket" expenses on a grossed-up basis
in the income statement as revenues and direct costs. EITF No. 01-14 relates
solely to the Company's contract research services business.
(b) The three and six month periods ended June 30, 2003 includes a call premium
and the write-off of a ratable portion of the remaining unamortized debt
issuance costs, aggregating $4,069 before taxes ($2,523 after taxes). The
call premium and the write-off of remaining unamortized debt issuance costs
relates to the Company's purchase of $106,535 of the aggregate principal
amount of its outstanding 5.0%, $345,000 of convertible subordinated
debentures in the second quarter of 2003, as discussed in further detail at
(i) below.
(c) The three and six month periods ended June 30, 2003 include the dilutive
effect of the 5% convertible subordinated debentures, which assumes
conversion using the "if converted" method. Under that method, the
convertible debentures are assumed to be converted to common shares
(weighted for the number of days assumed to be outstanding during the
period) and interest expense, net of taxes, related to the convertible
debentures is added back to net income. For purposes of the "if converted"
calculation, 5.8 million and 7.3 million shares were assumed to be converted
for the three month and six month periods ended June 30, 2003, respectively.
Additionally, interest expense, net of taxes, of $1.9 million and $4.9
million for the three and six month periods ended June 30, 2003,
respectively, was added back to net income for purposes of calculating
diluted earnings per share using this method.
(d) The three and six month periods ended June 30, 2002 includes a restructuring
charge of $7,302 before taxes ($4,527 after taxes) and $12,099 before taxes
($7,501 after taxes). The restructuring charge relates to the Company's
previously disclosed Phase II productivity and consolidation initiative.
(e) Omnicare believes that investors' understanding of Omnicare's performance is
enhanced by the Company's disclosure of certain non-GAAP financial measures
as presented in this financial information. Omnicare management believes
that the adjusted results provide added insight into the Company's
performance by focusing on the results generated by the Company's ongoing
core operations. Management uses the adjusted results for measurement
purposes. Omnicare's method of calculating these measures may differ from
those used by other companies and, therefore, comparability may be limited.
(f) The noted presentation excludes amounts that Omnicare is required to record
in its income statement relating to EITF Issue No. 01-14, as discussed in
further detail at footnote (a) above.
(g) The noted presentation for the three and six month periods ended June 30,
2003 excludes the call premium and the write-off of a ratable portion of the
remaining unamortized debt issuance costs, as discussed in further detail at
footnote (b) above.
(h) The noted presentation for the three and six month periods ended June 30,
2002 excludes the restructuring charge discussed in further detail at
footnote (d) above.
(continued on next page)
15
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s)
Unaudited
(continued from previous page)
(i) During the second quarter of 2003, the Company completed a refinancing in
which it raised $250,000 in a term loan, and completed an offering of
$250,000 of 6.125% senior subordinated notes, $345,000 of 4.0% contingent
convertible notes and 6,469 shares of its common stock. The Company used the
net proceeds from the 6.125% senior subordinated notes and the term loan to
repay the existing credit facility. A portion of the 4.0% contingent
convertible notes was used to purchase and retire $106,535 of the aggregate
principal amount of the Company's outstanding 5.0%, $345,000 of convertible
subordinated debentures in the second quarter of 2003, with the remaining
$238,465 retired in July 2003. The Company also entered into a four-year
$500,000 revolving credit facility during the quarter, which is undrawn.
(j) The special item represents the restructuring charge discussed in footnote
(d) above, and relates to the Company's previously disclosed Phase II
productivity and consolidation initiative (which management believes is not
related to the ongoing operations of Omnicare).
(k) The special items represent the call premium and the write-off of a ratable
portion of the remaining unamortized debt issuance costs for the three and
six month periods ended June 30, 2003 and the restructuring charge for the
three and six month periods ended June 30, 2002, as discussed in footnotes
(b) and (d) above, respectively. The call premium and the write-off of a
ratable portion of the remaining unamortized debt issuance costs related to
the Company's purchase of a portion of its outstanding 5.0%, $345,000 of
convertible subordinated debentures, and the restructuring charge relates to
the Company's previously disclosed Phase II productivity and consolidation
initiative. Management believes these items are not related to the ongoing
operations of Omnicare.
(l) EPS (basic EPS; special item, net of taxes; adjusted basic EPS; diluted EPS;
and adjusted diluted EPS) is reported independently for each amount
presented. Accordingly, the sum of the individual amounts may not
necessarily equal the separately calculated adjusted EPS amount for the
corresponding period.
(m) EBITDA represents earnings before interest expense (net of investment
income), income taxes, depreciation and amortization. Omnicare believes 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 net cash
flows from operating activities, as defined by U.S. GAAP, and should not be
considered as a substitute for net income as an indicator of Omnicare's
operating performance or operating cash flows as a measure of liquidity.
Omnicare's calculation of EBITDA may differ from the calculation of EBITDA
by others.
(n) Free cash flow represents net cash flows from operating activities less
capital expenditures and dividends paid by the Company. Omnicare believes
that certain investors find free cash flow to be a helpful measure of cash
generated from current operations, net of cash used for its ongoing capital
expenditures and dividend payment requirements. Omnicare's calculation of
free cash flow may differ from the calculation of free cash flow by others.
16