EXHIBIT 99.1
Omnicare, Inc. o 100 East RiverCenter Boulevard o Covington, Kentucky 41011
o 859/392-3300 o 859/392-3360 Fax
Omnicare news release
- --------------------------------------------------------------------------------
CONTACT:
[LOGO OMITTED] Cheryl D. Hodges
(859) 392-3331
Omnicare Reports Record Third Quarter 2003 Results
COVINGTON, Ky., October 30, 2003 - Omnicare, Inc. (NYSE:OCR), a leading provider
of pharmaceutical care for the elderly, reported today financial results for its
third quarter ended September 30, 2003 versus the comparable prior-year period,
as follows:
o Earnings per diluted share increased 52% to 47 cents
o Net income rose 68% to $48.8 million
o Earnings before interest, income taxes, depreciation and amortization
(EBITDA) increased 62% to $116.5 million
o Sales grew 36% to $901.7 million
Results for the third quarter of 2003 included a previously-announced special
charge of $8.6 million pretax ($5.3 million aftertax) relating to the early
redemption of the remaining $238 million of the Company's 5% convertible
subordinated debentures in the quarter ended September 30, 2003. Results for the
2002 third quarter included a special charge of $11.1 million pretax ($6.9
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 September 30, 2003 were as follows:
o Adjusted earnings per diluted share increased 39% to 53 cents
o Adjusted net income rose 51% to $54.2 million
o Adjusted EBITDA increased 40% to $116.5 million
o Sales grew 36% to $901.7 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 third quarter of 2003 was yet another important period in what has been a
dynamic year for Omnicare," said Joel F. Gemunder, Omnicare president and chief
executive officer. "During the quarter, we completed the acquisition of
SunScript, the institutional pharmacy business of Sun Healthcare Group, and
aggressively began to integrate this acquisition. Meanwhile, we continued the
integration process for the NCS HealthCare (NCS) acquisition, completed earlier
this year, and we are now realizing the anticipated benefits from that
acquisition. On top of this, we achieved our thirteenth consecutive quarter of
sequential, as well as year-over-year, earnings growth while diligently
maintaining our financial strength."
Cash flow from operations for the third quarter of 2003 totaled $62.3 million,
32% above the $47.3 million generated in the comparable 2002 period on a GAAP
basis. The 2003 quarter included $59.3 million in advance purchases of
pharmaceuticals (pre-buys) as compared with pre-buys of $39.9 million in the
2002 third quarter. Free cash flow, defined as operating cash flow less capital
expenditures and dividends, of $55.9 million for the third quarter of 2003 was
50% higher than the free cash flow of $37.2 million generated in the 2002
quarter. Free cash flow in both periods also included the aforementioned
pre-buys. In light of its strong cash flow, the Company repaid $40 million in
bank debt during the quarter, and ended the quarter with $274 million in cash.
Institutional Pharmacy Business
Omnicare's institutional pharmacy business generated record revenues of $865.9
million for the 2003 third quarter, 39% higher than the $623.2 million reported
in the comparable prior-year quarter. Operating profit in this business reached
$111.6 million for the 2003 third quarter, 49% higher than the adjusted $75.1
million recorded in the third quarter of 2002. At September 30, 2003, Omnicare
served approximately 994,000 beds, an increase of 33% over the approximately
746,000 beds served at September 30, 2002.
"Our pharmacy sales growth benefited significantly from the ongoing contribution
of NCS and the more recent addition of SunScript on July 15, 2003, along with
other new contract additions, and the expansion of our clinical and other
service programs," Gemunder noted. "In addition, 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 through ongoing productivity efforts
throughout the pharmacy organization as well as the cost savings and synergies
realized as part of the NCS acquisition. The NCS integration is proceeding on
schedule and we expect it to be largely completed by year end. As expected, this
leverage was partially offset by the addition of the lower-margin SunScript
business during the quarter. As the ongoing integration of SunScript proceeds
and cost synergies are fully realized, we expect the profitability of this
business to increase."
2
CRO Business
Omnicare Clinical Research, the Company's contract research (CRO) business,
generated revenues of $35.7 million on a GAAP basis for the 2003 third quarter,
versus the prior-year quarter's revenues of $41.5 million. Included in both
periods were reimbursable out-of-pocket expenses totaling $5.6 million in the
2003 period and $7.4 million in the 2002 period. Excluding these reimbursable
out-of-pocket expenses, adjusted revenues of $30.2 million in the 2003 third
quarter compared with revenues of $34.0 million in the comparable 2002 period.
Operating profit in the third quarter of 2003 was $1.6 million versus the
adjusted $5.4 million earned during the comparable prior-year period. Backlog at
September 30, 2003 was approximately $208 million.
"Third quarter revenues in our CRO business were below those of the comparable
prior-year period and prior quarter due primarily to several client-driven
start-up delays and, in particular, a sizeable contract that was slated to begin
producing revenues in the third quarter," said Gemunder. "We do, however, expect
these projects to be underway in early 2004. Despite the delays, we are
encouraged to see growth in our backlog, sequentially as well as year-over-year,
and a very high level of pending proposals."
Nine Month Results
Financial results for the nine months ended September 30, 2003, as compared with
the same period of 2002, were as follows:
o Earnings per diluted share increased 46% to $1.34
o Net income rose 52% to $132.8 million
o EBITDA increased 45% to $313.9 million
o Sales grew 30% to $2,551.5 million
The first nine months of 2003 included a total charge of $12.7 million pretax
($7.9 million aftertax) related to the redemption of the Company's 5%
convertible subordinated debentures and the first nine months of 2002 included
$23.2 million pretax ($14.4 million aftertax) in restructuring charges 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
first nine months of 2003 were as follows:
o Adjusted earnings per diluted share increased 32% to $1.41
o Adjusted net income rose 38% to $140.6 million
o Adjusted EBITDA increased 31% to $313.9 million
o Sales grew 30% to $2,551.5 million
For the 2003 year-to-date period, cash flow from operations on a GAAP basis
totaled $182.4 million, up 40% from the $130.6 million generated in the first
nine months of 2002. On a year-to-date basis, free cash flow totaled $164.6
million in the first nine months of 2003, 53% higher than the $107.5 million
generated in the comparable 2002
3
period. Both nine-month periods were impacted by the aforementioned pre-buys of
$59.3 million in the third quarter of 2003 and $39.9 million in the third
quarter of 2002.
Omnicare Outlook
"During the third 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. "We see these positive trends continuing, given that on October 1,
2003 our skilled nursing facility customers began receiving an increase in
reimbursement under Medicare.
"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,
offset somewhat by increasing use of generic medications. While the economic
downturn continues to affect many states, increased funding for state Medicaid
programs by the federal government in the recently-enacted tax bill is providing
some measure of economic relief for state budgets."
Continuing, Gemunder said, "While Congress makes progress towards a Medicare
drug benefit, diverging fiscal and political priorities remain to be resolved
before a meaningful benefit can be provided to seniors. Given the competing
national priorities, it remains difficult to predict the timing, outcome and
impact of this benefit or of any changes in healthcare policy relating to the
future funding of the Medicare and Medicaid 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, both
internally and externally, in the geriatric pharmaceutical market.
"Following this strategy has enabled us to increase the size of our core
pharmacy business by approximately 50% in the last 21 months. This significant
expansion of our core business gives us substantially greater ability to
leverage our clinical services and
4
information businesses, thereby enhancing our cost advantages in the
institutional pharmacy market.
"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 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 third-quarter results today at
11:00 a.m. EST. 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. Omnicare serves residents in long-term care facilities
comprising approximately 994,000 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 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 and amount 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 and timing of the
integration of the NCS and SunScript acquisitions; expectations concerning
margins and profitability; volatility in the CRO business; 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;
trends concerning future drug costs; 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; 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; the impact of Omnicare's growth strategy and its efforts to
expand its core business, both internally and externally; and the ability to
effectively leverage such internal and external growth, 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,
5
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, political 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 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; the demand for Omnicare's products and services; variations in costs
or expenses; changes in tax laws and regulations; 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.
###
6
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, GAAP Basis
(000s, except per share amounts)
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -------------------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
Sales $ 896,099 $ 657,270 $ 2,532,035 $ 1,936,386
Reimbursable out-of-pockets (a) 5,555 (a) 7,448 (a) 19,513 (a) 20,801 (a)
--------- --------- ----------- -----------
Total net sales 901,654 664,718 2,551,548 1,957,187
--------- --------- ----------- -----------
Cost of sales 668,844 481,703 1,875,842 1,425,685
Reimbursed out-of-pocket expenses (a) 5,555 (a) 7,448 (a) 19,513 (a) 20,801 (a)
--------- --------- ----------- -----------
Total direct costs 674,399 489,151 1,895,355 1,446,486
--------- --------- ----------- -----------
Gross profit 227,255 175,567 656,193 510,701
Selling, general and administrative
expenses 123,592 103,888 380,610 306,007
Restructuring charge (c) -- 11,096 (c) -- 23,195 (c)
--------- --------- ----------- -----------
Operating income 103,663 60,583 275,583 181,499
Investment income 880 651 2,634 2,116
Interest expense (b) (26,316) (b) (14,339) (64,647) (b) (42,990)
--------- --------- ----------- -----------
Income before income taxes 78,227 46,895 213,570 140,625
Income taxes 29,397 17,829 80,816 53,425
--------- --------- ----------- -----------
Net income $ 48,830 (b) $ 29,066 (c) $ 132,754 (b) $ 87,200 (c)
=========== ============= ============= =============
Earnings per share ("EPS"):
Basic $ 0.48 (b) $ 0.31 (c) $ 1.36 (b) $ 0.93 (c)
========= ========= =========== ===========
Diluted $ 0.47 (b) $ 0.31 (c) $ 1.34 (b)(d) $ 0.92 (c)
========= ========= =========== ===========
Weighted average number of common
shares outstanding:
Basic 101,965 94,245 97,490 94,129
========= ========= =========== ===========
Diluted 102,944 94,710 103,017 (d) 94,920
========= ========= =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
7
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 Nine Months Ended
September 30, September 30,
-------------------------- --------------------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
Adjusted sales $ 896,099 (f) $ 657,270 (f) $ 2,532,035 (f) $ 1,936,386 (f)
Adjusted cost of sales 668,844 (f) 481,703 (f) 1,875,842 (f) 1,425,685 (f)
--------- --------- ----------- -----------
Gross profit 227,255 175,567 656,193 510,701
Selling, general and administrative
expenses 123,592 103,888 380,610 306,007
--------- --------- ----------- -----------
Adjusted operating income 103,663 71,679 (h) 275,583 204,694 (h)
Investment income 880 651 2,634 2,116
Interest expense (17,719) (g) (14,339) (51,981) (g) (42,990)
--------- --------- ----------- -----------
Adjusted income before income taxes 86,824 57,991 226,236 163,820
Income taxes 32,664 22,045 85,629 62,239
--------- --------- ----------- -----------
Adjusted net income $ 54,160 (g) $ 35,946 (h) $ 140,607 (g) $ 101,581 (h)
========= ========= =========== ===========
Adjusted EPS:
Basic $ 0.53 (g) $ 0.38 (h) $ 1.44 (g) $ 1.08 (h)
========= ========= =========== ===========
Diluted $ 0.53 (g) $ 0.38 (h) $ 1.41 (d)(g) $ 1.07 (h)
========= ========= =========== ===========
Weighted average number of common
shares outstanding:
Basic 101,965 94,245 97,490 94,129
========= ========= =========== ===========
Diluted 102,944 94,710 103,017 (d) 94,920
========= ========= =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
8
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 September 30, 2003:
- -------------------------------------
Adjusted sales $ 865,923 $ 30,176 (f) $ -- $ 896,099 (f)
========== ======== ======== ==========
Operating income $ 111,587 $ 1,646 $ (9,570) $ 103,663
Depreciation and amortization 11,832 468 580 12,880
---------- -------- -------- ----------
Earnings before interest, income taxes,
depreciation and amortization ("EBITDA") $ 123,419 $ 2,114 $ (8,990) $ 116,543
========== ======== ======== ==========
Three Months Ended September 30, 2002:
- -------------------------------------
Adjusted sales $ 623,241 $ 34,029 (f) $ -- $ 657,270 (f)
========== ======== ======== ==========
Adjusted operating income $ 75,084 (h) $ 5,354 (h) $ (8,759) $ 71,679 (h)
Depreciation and amortization 10,176 524 662 11,362
---------- -------- -------- ----------
Adjusted EBITDA $ 85,260 (h) $ 5,878 (h) $ (8,097) $ 83,041 (h)
========== ======== ======== ==========
Nine Months Ended September 30, 2003:
- -------------------------------------
Adjusted sales $2,431,905 $100,130 (f) $ -- $2,532,035 (f)
========== ======== ======== ==========
Operating income $ 292,782 $ 10,861 $(28,060) $ 275,583
Depreciation and amortization 35,206 1,369 1,754 38,329
---------- -------- -------- ----------
EBITDA $ 327,988 $ 12,230 $(26,306) $ 313,912
========== ======== ======== ==========
Nine Months Ended September 30, 2002:
- -------------------------------------
Adjusted sales $1,829,918 $106,468 (f) $ -- $1,936,386 (f)
========== ======== ======== ==========
Adjusted operating income $ 214,903 (h) $ 15,542 (h) $(25,751) $ 204,694 (h)
Depreciation and amortization 30,559 1,734 2,071 34,364
---------- -------- -------- ----------
Adjusted EBITDA $ 245,462 (h) $ 17,276 (h) $(23,680) $ 239,058 (h)
========== ======== ======== ==========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
9
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets, GAAP Basis
(000s)
Unaudited
September 30, December 31,
2003 2002
---------- ----------
ASSETS
Cash and cash equivalents $ 268,250 $ 137,936
Restricted cash 5,819 3,147
Accounts receivable, net 620,156 522,857
Unbilled receivables 20,526 25,062
Inventories 296,289 190,464
Deferred income tax benefits and other current assets 132,795 122,092
---------- ----------
Total current assets 1,343,835 1,001,558
---------- ----------
Properties and equipment, net 149,631 139,908
Goodwill 1,706,269 1,188,907
Other noncurrent assets 130,659 97,212
---------- ----------
Total assets $3,330,394 $2,427,585
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 290,374 $ 175,648
Deferred revenue 22,116 25,254
Current debt (i) 18,899 110
Other current liabilities 128,407 95,638
---------- ----------
Total current liabilities 459,796 296,650
---------- ----------
Long-term debt, due in quarterly installments through 2007 (i) 141,791 187
5.0% convertible subordinated debentures, due 2007 (i) -- 345,000
8.125% senior subordinated notes, due 2011 375,000 375,000
6.125% senior subordinated notes, due 2013 (i) 232,784 --
4.0% contingent convertible notes, due 2033 (i) 345,000 --
Deferred income taxes and other noncurrent liabilities 170,712 135,686
---------- ----------
Total liabilities 1,725,083 1,152,523
---------- ----------
Stockholders' equity 1,605,311 1,275,062
---------- ----------
Total liabilities and stockholders' equity $3,330,394 $2,427,585
========== ==========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
10
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
(000s)
Unaudited
Three Months Nine Months
-----------------------------
Ended September 30, 2003
-----------------------------
Cash flows from operating activities:
Net income $ 48,830 $ 132,754
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 9,542 28,369
Amortization 3,338 9,960
Provision for doubtful accounts 11,496 34,676
Deferred tax provision 3,017 21,756
Write-off of debt issuance costs 2,591 3,755
Changes in assets and liabilities, net of effects
from acquisition of businesses (16,481) (48,907)
--------- ---------
Net cash flows from operating activities 62,333 182,363
--------- ---------
Cash flows from investing activities:
Acquisition of businesses (107,532) (599,689)
Capital expenditures (4,086) (11,241)
Other 5 (2,614)
--------- ---------
Net cash flows from investing activities (111,613) (613,544)
--------- ---------
Cash flows from financing activities:
Borrowings on line of credit facilities and term loans -- 749,000
Payments on line of credit facilities and term loans (40,000) (589,000)
(Payments on)/proceeds from long-term borrowings and obligations (244,463) 240,758
Fees paid for financing arrangements -- (29,366)
Gross proceeds from stock offering -- 188,629
Proceeds from stock awards and exercise of stock options,
net of stock tendered in payment 9,666 5,834
Dividends paid (2,309) (6,559)
Other -- 122
--------- ---------
Net cash flows from financing activities (277,106) 559,418
--------- ---------
Effect of exchange rate changes on cash 104 2,077
--------- ---------
Net (decrease) increase in cash and cash equivalents (326,282) 130,314
Cash and cash equivalents at beginning
of period - unrestricted 594,532 137,936
--------- ---------
Cash and cash equivalents at
end of period - unrestricted $ 268,250 $ 268,250
========= =========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
11
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (e)
(000s)
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Adjusted operating income (earnings before
interest and income taxes, "EBIT"):
EBIT $103,663 $ 60,583 $275,583 $181,499
Special item (j) -- 11,096 -- 23,195
-------- -------- -------- --------
Adjusted EBIT (j) $103,663 $ 71,679 $275,583 $204,694
======== ======== ======== ========
Adjusted income before income taxes:
Income before income taxes $ 78,227 $ 46,895 $213,570 $140,625
Special items (k) 8,597 11,096 12,666 23,195
-------- -------- -------- --------
Adjusted income before income taxes (k) $ 86,824 $ 57,991 $226,236 $163,820
======== ======== ======== ========
Adjusted net income:
Net income $ 48,830 $ 29,066 $132,754 $ 87,200
Special items, net of taxes (k) 5,330 6,880 7,853 14,381
-------- -------- -------- --------
Adjusted net income (k) $ 54,160 $ 35,946 $140,607 $101,581
======== ======== ======== ========
Adjusted earnings per share ("EPS"): (l)
Basic EPS $ 0.48 $ 0.31 $ 1.36 $ 0.93
Special items, net of taxes (k) 0.05 0.07 0.08 0.15
Adjusted basic EPS (k) $ 0.53 $ 0.38 $ 1.44 $ 1.08
======== ======== ======== ========
Diluted EPS $ 0.47 $ 0.31 $ 1.34 $ 0.92
Special items, net of taxes (k) 0.05 0.07 0.08 0.15
Adjusted diluted EPS (k) $ 0.53 $ 0.38 $ 1.41 $ 1.07
======== ======== ======== ========
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA"): (m)
EBIT $103,663 $ 60,583 $275,583 $181,499
Depreciation and amortization 12,880 11,362 38,329 34,364
-------- -------- -------- --------
EBITDA (m) 116,543 71,945 313,912 215,863
Special item (j) -- 11,096 -- 23,195
-------- -------- -------- --------
Adjusted EBITDA (j)(m) $116,543 $ 83,041 $313,912 $239,058
======== ======== ======== ========
Adjusted net cash flows from operating activities:
EBITDA (m) $116,543 $ 71,945 $313,912 $215,863
Subtract:
Interest expense, net of investment income (25,436) (13,688) (62,013) (40,874)
Income taxes (29,397) (17,829) (80,816) (53,425)
Changes in assets and liabilities, net of effects from
acquisition of businesses (16,481) (12,462) (48,907) (34,481)
Add:
Provision for doubtful accounts 11,496 7,938 34,676 22,114
Deferred tax provision 3,017 7,967 21,756 12,342
Write-off of debt issuance costs 2,591 -- 3,755 --
Non-cash portion of restructuring charges -- 3,427 -- 9,060
-------- -------- -------- --------
Net cash flows from operating activities 62,333 47,298 182,363 130,599
Advanced purchases of pharmaceuticals ("pre-buys") (n) 59,348 39,946 59,348 39,946
-------- -------- -------- --------
Adjusted net cash flows from operating activities (n) $121,681 $ 87,244 $241,711 $170,545
======== ======== ======== ========
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
(continued on next page)
12
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (e)
(000s)
Unaudited
(continued from previous page)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2003 2002 2003 2002
-------- ------- -------- --------
Adjusted free cash flow: (o)
Net cash flows from operating activities $62,333 $47,298 $182,363 $130,599
Capital expenditures (4,086) (7,935) (11,241) (16,762)
Dividends (2,309) (2,127) (6,559) (6,364)
-------- ------- -------- --------
Free cash flow (o) 55,938 37,236 164,563 107,473
Pre-buys (n) 59,348 39,946 59,348 39,946
-------- ------- -------- --------
Adjusted free cash flow (n)(o) $115,286 $77,182 $223,911 $147,419
======== ======= ======== ========
Segment Reconciliations - Pharmacy Services
- -------------------------------------------
Adjusted EBIT - Pharmacy Services:
EBIT $111,587 $72,173 $292,782 $208,134
Special item (j) -- 2,911 -- 6,769
-------- ------- -------- --------
Adjusted EBIT - Pharmacy Services (j) $111,587 $75,084 $292,782 $214,903
======== ======= ======== ========
Adjusted EBITDA - Pharmacy Services: (m)
EBITDA (m) $123,419 $82,349 $327,988 $238,693
Special item (j) -- 2,911 -- 6,769
-------- ------- -------- --------
Adjusted EBITDA - Pharmacy Services (j)(m) $123,419 $85,260 $327,988 $245,462
======== ======= ======== ========
Segment Reconciliations - CRO Services
- --------------------------------------
Adjusted EBIT - CRO Services:
EBIT $ 1,646 $(2,831) $ 10,861 $ (884)
Special item (j) -- 8,185 -- 16,426
-------- ------- -------- --------
Adjusted EBIT - CRO Services (j) $ 1,646 $ 5,354 $ 10,861 $ 15,542
======== ======= ======== ========
Adjusted EBITDA - CRO Services: (m)
EBITDA (m) $ 2,114 $(2,307) $ 12,230 $ 850
Special item (j) -- 8,185 -- 16,426
-------- ------- -------- --------
Adjusted EBITDA - CRO Services (j)(m) $ 2,114 $5,878 $ 12,230 $ 17,276
======== ======= ======== ========
Segment - Corporate and Consolidating
- -------------------------------------
EBIT $ (9,570) $(8,759) $(28,060) $(25,751)
-------- ------- -------- --------
EBITDA (m) (8,990) (8,097) (26,306) (23,680)
-------- ------- -------- --------
Consolidated Segment Totals
- ---------------------------
EBIT $103,663 $60,583 $275,583 $181,499
======== ======= ======== ========
Adjusted EBIT (j) $103,663 $71,679 $275,583 $204,694
======== ======= ======== ========
EBITDA (m) $116,543 $71,945 $313,912 $215,863
======== ======= ======== ========
Adjusted EBITDA (j)(m) $116,543 $83,041 $313,912 $239,058
======== ======= ======== ========
DEFINITIONS:
GAAP: Amounts that conform with U.S. Generally Accepted Accounting Principles
("GAAP").
Non-GAAP: Amounts that do not conform with U.S. GAAP.
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
13
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 nine month periods ended September 30, 2003 includes a call
premium and the write-off of the remaining unamortized debt issuance costs,
aggregating $8,597 before taxes ($5,330 after taxes) and $12,666 before
taxes ($7,853 after taxes), respectively. The call premium and the write-off
of remaining unamortized debt issuance costs relates to the Company's
purchase of the aggregate principal amount of its outstanding 5.0%, $345,000
of convertible subordinated debentures in 2003, as discussed in further
detail at (i) below.
(c) The three and nine month periods ended September 30, 2002 include a
restructuring charge of $11,096 before taxes ($6,880 after taxes) and
$23,195 before taxes ($14,381 after taxes), respectively. The restructuring
charge relates to the Company's previously disclosed Phase II productivity
and consolidation initiative.
(d) The nine month period ended September 30, 2003 includes 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, 4,840 shares
were assumed to be converted for the nine month period ended September 30,
2003. Additionally, interest expense, net of taxes, of $4,870 for the nine
month period ended September 30, 2003 was added back to net income for
purposes of calculating diluted earnings per share using this method.
(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 No. 01-14, as discussed in further
detail at footnote (a) above.
(g) The noted presentation for the three and nine month periods ended September
30, 2003 excludes the call premium and the write-off of the remaining
unamortized debt issuance costs, as discussed in further detail at footnote
(b) above.
(h) The noted presentation for the three and nine month periods ended September
30, 2002 excludes the restructuring charge discussed in further detail at
footnote (c) above.
(continued on next page)
14
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 and a portion of the net proceeds from the common stock
offering were used to purchase and retire the remaining $238,465 of the
aggregate principal amount of the Company's outstanding 5.0%, $345,000 of
convertible subordinated debentures in the third quarter of 2003. The
Company had previously purchased and retired $106,535 of the 5.0%, $345,000
of convertible subordinated debentures in the second quarter of 2003. The
Company also entered into a four-year $500,000 revolving credit facility
during the second quarter of 2003, which is undrawn.
(j) The special item represents the restructuring charge discussed in footnote
(c) 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 the
remaining unamortized debt issuance costs for the three and nine month
periods ended September 30, 2003 and the restructuring charge for the three
and nine month periods ended September 30, 2002, as discussed in footnotes
(b) and (c) above, respectively. The call premium and the write-off of the
remaining unamortized debt issuance costs relates to the Company's purchase
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 items, net of taxes; adjusted basic EPS; diluted
EPS; and adjusted diluted EPS) is reported independently for each amount
presented. Accordingly, the sum of the individual amounts may not
necessarily equal the separately calculated 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) Represents pre-buys for the quarter, primarily comprised of the purchasing
of pharmaceuticals in advance of price increases.
(o) 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.
15