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EXHIBIT 99.1
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Omnicare, Inc. o 100 East RiverCenter Boulevard o Covington, Kentucky 41011
o 859/392-3300 o 859/392-3360 Fax
Omnicare news release
- --------------------------------------------------------------------------------
[OMNICARE LOGO] CONTACT:
Cheryl D. Hodges
(859) 392-3331
Omnicare Reports Second-Quarter 2004 Results
and Revises Earnings Guidance
COVINGTON, Ky., July 26, 2004 - Omnicare, Inc. (NYSE:OCR), a leading provider of
pharmaceutical care for the elderly, reported today financial results for its
second-quarter ended June 30, 2004 versus the comparable prior-year period, as
follows:
o Earnings per diluted share increased 32% to 58 cents
o Net income rose 39% to $60.5 million
o Earnings before interest, income taxes, depreciation and amortization
(EBITDA) increased 22% to $126.0 million
o Sales grew 20% to $1,010.6 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. Adjusting for this special item in the
prior-year period, results for the quarter ended June 30, 2004 were as follows:
o Adjusted earnings per diluted share increased 23% to 58 cents
o Adjusted net income rose 31% to $60.5 million
o EBITDA increased 22% to $126.0 million
o Sales grew 20% to $1,010.6 million
Commenting on the results for the quarter, Joel F. Gemunder, Omnicare's
president and chief executive officer said, "While we saw increases in sales of
20% and in adjusted diluted earnings per share of 23%, for the second quarter of
2004, our earnings were below our expectations as well as those of Wall Street.
In analyzing this quarter's results, we believe our anticipated earnings growth
was affected by the cumulative impact of a variety of external factors, in
particular intensified pricing pressures and drug pricing issues and an
unexpected shift in our payor mix toward Medicaid during the quarter that
impacted the margins in our institutional pharmacy business. In light of these
factors, we have revised our outlook for the year and now expect diluted
earnings per share to be in the range of $2.35 to $2.45 for 2004.
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"We have begun taking aggressive actions to ameliorate the impact of
these external factors and restore margins. We are realigning our operating
costs to adjust to the current dynamic in pricing, including the acceleration of
initiatives to reduce costs and enhance productivity as well as putting into
place innovative new purchasing programs. We will also accelerate the
implementation of several longer-term initiatives to take advantage of the
inherent strength and leverage of our pharmacy business's national platform,
including using an advanced "hub and spoke" system and increased utilization of
our two centralized repackaging facilities. As the year progresses, we also
expect to realize the full synergies from both purchasing and consolidation
savings for acquisitions completed in 2004.
"Our growth strategy over the years has enabled us to substantially
increase the size of our core pharmacy business with the ability to generate
substantial economies of scale and enhance our comparative cost advantages. This
has helped mitigate reimbursement risks while strengthening our position,
maximizing cash flow generation and enhancing the efficiency of our operations.
"We view the current situation as a rough patch, the type of which
we've managed through before, and which we are confident we will address
successfully and efficiently. The long-term fundamentals underpinning Omnicare's
business remain intact and we believe our company's strategy continues to be
sound and appropriate," said Gemunder.
Financial Position
"Our ongoing focus on enhancing cash flow continued during the second
quarter," said Gemunder. "Cash flow from operations for the second quarter ended
June 30, 2004 was $66.0 million as compared with $23.8 million for the first
quarter ended March 31, 2004. In the first quarter of 2004, a broad-based
slowdown occurred in payments from the Illinois Department of Public Aid
(Illinois Medicaid), impacting cash flow by approximately $29 million. We are
pleased to report that Illinois Medicaid released funds in the second quarter of
2004, allowing us to recover the full $29 million that had been delayed in the
prior quarter. Lastly, as reported in the first quarter of 2004, a statewide
administrative backup in the transfer of Medi-Cal provider numbers, which
affected the California-based pharmacies acquired in the SunScript acquisition
and other acquisitions, created a temporary delay in cash receipts of
approximately $19 million. The delay continued during the second quarter of
2004, which has now resulted in approximately $24 million being temporarily
delayed by the state of California. We expect to receive these funds in due
course.
"Nonetheless, the strength of our cash flow during the quarter allowed
us to continue our capital deployment strategies in acquisition efforts, advance
purchases of pharmaceuticals (pre-buys) and paying down debt. Pre-buys for the
second quarter of 2004 were $48.1 million as compared with $25.6 million for the
first quarter of 2004. Furthermore, we paid down $29.1 million in bank debt
during the second quarter of 2004."
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Cash flow from operations for the quarter ended June 30, 2004 was $66.0
million as compared with $114.7 million in the prior-year quarter. As noted
above, Omnicare received the full $29 million in delayed payments from Illinois
Medicaid in the current quarter and similarly, in the quarter ended June 30,
2003, $51 million in payments from Illinois Medicaid were received that had
previously been delayed. Furthermore, as previously mentioned, pre-buys in the
quarter ended June 30, 2004 were $48.1 million as compared with $33.2 million
for the quarter ended June 30, 2003.
During the quarter ended June 30, 2004, the Company maintained a strong
financial position with cash balances of approximately $175 million and total
debt-to-total capitalization of 39.4%, down 840 basis points from the comparable
prior-year quarter and 140 basis points down from the first quarter of 2004.
To facilitate comparisons and to enhance the understanding of core
operating performance, certain discussion herein 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 item. 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.
Institutional Pharmacy Business
Omnicare's institutional pharmacy business generated record sales of
$976.8 million for the second quarter of 2004, 22% higher than the $802.8
million reported in the comparable prior-year quarter of 2003. Operating income
in this business reached $120.5 million, 26% higher than the $95.8 million
recorded in the second quarter of 2003. At June 30, 2004, Omnicare served
approximately 1,054,000 beds versus approximately 938,000 at June 30, 2003, an
increase of approximately 12%.
"The year-over-year growth in our pharmacy business is the product of
aggressive execution of our acquisition strategy. Not only did we benefit from
the acquisitions and related integration efforts in 2003, we have also increased
the number of beds served through a number of smaller acquisitions throughout
the first half of 2004," said Gemunder. "Also contributing to year-over-year
growth was the expansion of our clinical and other service programs as well as
further market penetration of newer branded drugs and drug price inflation,
offset in part by increasing use of generic drugs and the previously-mentioned
pricing issues.
"On a sequential basis, our results were impacted by margin compression
resulting primarily from increased competitive pricing and drug-specific pricing
issues under various state Medicaid programs. While we have not recently seen a
significant increase in the number of legislative changes in Medicaid pharmacy
reimbursement formulas, many states have used their broad administrative powers
to
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limit or reduce drug-specific prices on generic drugs, often with limited or
no prior public notice. These factors, along with the shift in payor mix toward
lower-margin Medicaid business, resulted in sequentially lower margins for the
quarter. Then too, the full synergies from both purchasing and consolidation
savings for acquisitions completed in 2004 have yet to be realized. We expect
such synergies to be realized over the balance of the year.
"As we have done successfully in the past, we are committed to
addressing the intensified pricing pressures and Medicaid issues we are seeing
in institutional pharmacy. We are realigning our operating costs to bring them
in line with the current pricing dynamics. We are doing this through the
acceleration of our cost reduction and productivity enhancement initiatives and
through innovative procurement programs we have already implemented, which are
yielding cost savings beyond previous expectations. As also mentioned earlier,
we will accelerate several longer-term plans to realize substantial operating
efficiencies, including the rollout of a "hub and spoke" configuration for our
pharmacy business beginning in select markets and specific measures to increase
the utilization of our two centralized repackaging facilities to benefit our
local pharmacies," Gemunder commented.
"These initiatives are in place or are in the process of being
implemented and their impact is expected to have a gradual positive effect on
our results as we progress through this year and next year.
"Then too, we believe that realizing the synergies from the number of
smaller acquisitions we have made year-to-date will have a positive impact on
our margins over the balance of the year. That said, we plan to continue to be
aggressive in our acquisition program as industry consolidation makes even more
strategic and economic sense today. Longer term, we see growth in our higher
margin businesses such as specialty pharmacy services and pharmaceutical
informatics also having a salutary impact on margins," commented Gemunder.
CRO Business
Omnicare Clinical Research, the Company's contract research (CRO)
business, generated revenues of $33.8 million on a GAAP basis for the second
quarter of 2004, versus the comparable prior-year quarter's revenues of $41.2
million. Included in both periods were reimbursable out-of-pocket expenses,
totaling $4.5 million in the 2004 period and $5.9 million in the 2003 period.
Excluding these reimbursable out-of-pocket expenses, adjusted revenues were
$29.3 million versus the $35.4 million recorded on this basis in the 2003
period. Operating income in the second quarter of 2004 was $3.3 million versus
the $4.5 million earned during the prior-year period. Backlog in our CRO
business at June 30, 2004 grew to approximately $200 million.
"Our CRO business performed in line with our expectations for the
quarter against tough year-over-year comparisons," said Gemunder. "Performance
on a sequential basis continued to show improvement in profitability. During the
quarter,
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we saw solid new business wins and our PeriApproval and Geriatric Clinical
Studies Unit continued to exceed growth expectations. These factors, combined
with productivity improvements and cost reduction efforts, point to improving
performance during the second half of the year.
"While our CRO business at times experiences short-term volatility, 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."
Six Month Results
Financial results for the six months ended June 30, 2004, as compared
with the same period of 2003, were as follows:
o Earnings per diluted share increased 37% to $1.18
o Net income rose 48% to $123.9 million
o EBITDA grew 30% to $256.0 million
o Sales grew 21% to $1,992.9 million
The first half of 2003 included the previously discussed charge of $4.1
million pretax related to the early redemption of the 5% convertible notes.
Adjusting for this special item in the prior-year period, results for the first
half of 2004 were as follows:
o Adjusted earnings per diluted share increased 34% to $1.18
o Adjusted net income rose 43% to $123.9 million
o EBITDA grew 30% to $256.0 million
o Sales grew 21% to $1,992.9 million
For the 2004 year-to-date period, cash flow from operations on a GAAP
basis was $89.8 million, versus the $120.0 million generated in the first half
of 2003. Both periods reflect second quarter pre-buys of $48.1 million in 2004
and $33.2 million in 2003.
NeighborCare Transaction
On June 4, 2004, Omnicare commenced a tender offer for all of the
outstanding shares of the common stock of NeighborCare, Inc. (NASDAQ: NCRX) for
$30.00 per share in cash. Omnicare's tender offer price represents a 70% premium
over NeighborCare's closing stock price on May 21, the last day of trading
before Omnicare's proposed offer to acquire NeighborCare was made public on May
24. It also represents a 40% premium over the 30-day trading average prior to
the announcement of the offer, a 30% premium to Wall Street's median price
target for NeighborCare's stock over the next 12 months (based on stock price
targets immediately prior to the announcement of Omnicare's offer) and $4.00
more per share than NeighborCare's previous all-time high.
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On July 13, 2004, Omnicare announced that it received a request for
additional information from the Federal Trade Commission (FTC) relating to its
filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act)
in connection with its tender offer for NeighborCare. The request extends the
waiting period under the HSR Act during which the FTC is permitted to review the
proposed transaction until 10 days after Omnicare has substantially complied
with the request. Omnicare will continue to work with the FTC with respect to
the filing.
The company's tender offer is scheduled to expire at 5:00 p.m., New
York City time, on July 30, 2004, unless extended.
Commenting on the tender offer for NeighborCare, Mr. Gemunder said, "We
remain as committed as ever to the acquisition of NeighborCare, which continues
to make compelling business sense. In fact, the generation of economies of scale
in our industry through consolidation has been and will continue to be a major
part of the solution to maintaining quality of care while addressing ongoing
pricing or reimbursement pressures and the need to contain overall healthcare
costs."
Industry Outlook
"While we continue to see relative stability in the long-term care
industry, we continue to monitor key issues related to healthcare funding,
including the efforts of state Medicaid programs to contain or reduce costs
through the legislative process or by other means, the escalation in drug costs
owing to higher utilization among seniors and the introduction of new, more
efficacious, albeit more expensive, medications, offset somewhat by increasing
use of generic medications."
Gemunder also noted that the first draft of regulations governing the
implementation of the Medicare drug benefit, signed into law in December 2003
and effective in 2006, is expected to be made public soon and until such
regulations can be fully reviewed, it remains difficult to predict the impact or
outcome of this legislation or of any changes in healthcare policy relating to
the future funding of the Medicare and Medicaid programs. "We believe, however,
that our extensive experience in geriatric pharmaceutical care, the expertise we
have developed in pharmaceutical case management and our vast database on drug
utilization and outcomes in the elderly have positioned us well as the
implementation of the Medicare drug benefit develops.
"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," concluded Gemunder.
Webcast Today
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Omnicare will hold a conference call to discuss second-quarter results
Monday, July 26 at 10:00 a.m. ET. The conference call will be webcast live at
Omnicare's Web site at www.omnicare.com by clicking on "Investors" and then on
"Conference Calls", and will be accessible by telephone at the following
numbers:
Calling from the United States or Canada: 888-634-8522
Calling from other countries: 706-634-6522
Reference: Omnicare
An online replay will be available at www.omnicare.com beginning
approximately two hours after the completion of the live call and will remain
available for 14 days.
Omnicare, a Fortune 500 company based in Covington, Kentucky, is a
leading provider of pharmaceutical care for the elderly. Omnicare serves
residents in long-term care facilities comprising approximately 1,054,000 beds
in 47 states and the District of Columbia, 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.
In addition to historical information, this report contains certain statements
that constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
made on the basis of management's views and assumptions regarding business
performance as of the time the statements are made, and management does not
undertake any obligation to update these statements. These forward-looking
statements include, but are not limited to, all statements regarding the intent,
belief or current expectations regarding the matters discussed or incorporated
by reference in this document (including statements as to "beliefs,"
"expectations," "anticipations," "intentions" or similar words) and all
statements which are not statements of historical fact. Forward-looking
statements in this report include, but are not limited to, the following:
expectations concerning the Company's financial performance, results of
operations, sales, earnings or business outlook; trends in the long-term
healthcare and contract research industries generally; expectations concerning
the Company's ability to leverage its core business; anticipated growth in
alternative institutional markets such as correctional facilities, mental health
and personal care or supportive living facilities; expectations concerning
continued relative stability in the operating environment in the long-term care
industry; the ability to leverage the Company's CRO business and its core
pharmacy business as anticipated; volatility in the CRO business; anticipated
business performance of the CRO; expectations in the CRO business resulting from
streamlining and globalization efforts, the Company's unique capabilities in the
geriatric market and strength of presence in the drug development marketplace;
trends in healthcare funding issues, including, but not limited to, state
Medicaid budgets, enrollee eligibility, escalating drug prices due to higher
utilization among seniors and the aging of the population; expectations
concerning increasing Medicare admissions and improving occupancy rates; the
introduction of more expensive medications and the increasing use of generic
medications; the impact of any changes in healthcare policy relating to the
future funding of the Medicaid and Medicare programs; the cost-effectiveness of
pharmaceuticals in treating chronic illnesses for the elderly; the impact of the
Medicare drug benefit, signed into law in December 2003 and effective in 2006,
and its implementing regulations; the effect of any changes and considerations
in long-term healthcare funding policies for Medicare and Medicaid programs; the
ability of the Company to utilize its expertise in geriatric pharmaceutical care
and pharmaceutical cost management and its database on drug utilization and
outcomes in the elderly to meet the anticipated challenges of the healthcare
environment and the implementation of the Medicare drug benefit; the
effectiveness of the Company's growth strategy in allowing the Company to
maximize cash flow,
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maintain a strong financial position, enhance the efficiency of its operations
and continue to develop the Company's franchise in the geriatric pharmaceutical
market; the ability of expansion in the Company's core business to provide the
Company greater ability to leverage its clinical services and information
business, thereby enhancing cost advantages in the institutional pharmacy
market; and expectations concerning opportunities for future growth. These
forward-looking statements, together with other statements that are not
historical, involve known and unknown risks, uncertainties, contingencies and
other factors that could cause 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 the Company, include, but are
not limited to: overall economic, financial, political and business conditions;
trends in the long-term healthcare and contract research industries; competition
in the pharmaceutical, long-term care and contract research industries; the
impact of consolidation in the pharmaceutical and long-term care industries;
trends in long-term care occupancy rates and demographics; the ability to
attract new clients and service contracts and retain existing clients and
service contracts; trends for the continued growth of the Company's businesses;
expectations concerning the development and performance of the Company's
informatics business; the effectiveness of the Company's formulary compliance
program; trends in drug pricing, including the impact and pace of pharmaceutical
price increases; delays and reductions in reimbursement by the government and
other payors to customers and to the Company as a result of pressures on federal
and state budgets or for other reasons; the overall financial condition of the
Company's customers; the ability of the Company to assess and react to the
financial condition of its customers; the effectiveness of the Company's
pharmaceutical purchasing programs and its ability to obtain discounts and
manage pharmaceutical costs; the ability of vendors and business partners to
continue to provide products and services to the Company; the continued
successful integration of acquired companies and the ability to realize
anticipated sales, 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
rates and the impact of other cost control measures; the impact on the Company's
sales, profits and margins resulting from market trends in the use of newer
branded drugs versus generic drugs; the number and usage of generic drugs and
price competition in the drug marketplace; the ability to attract and retain
needed management; 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 demand for the
Company's products and services; variations in costs or expenses; the ability to
implement productivity, consolidation and cost reduction efforts and to realize
anticipated benefits; the ability of clinical research projects to produce
revenues in future periods; the ability to benefit from streamlining and
globalization efforts at the CRO; trends concerning CRO backlog; the
effectiveness of the Company's implementation and expansion of its clinical and
other service programs; the effect of new legislation, government regulations,
and/or executive orders, including those relating to reimbursement and drug
pricing policies and changes in the interpretation and application of such
policies; the impact of the Medicare drug benefit and its implementing
regulations; legislation and regulations affecting payment and reimbursement
rates for skilled nursing facilities; trends in federal and state budgets and
their impact on Medicaid reimbursement rates; government budgetary pressures and
shifting priorities; the Company's ability to adjust to federal and state budget
shortfalls; efforts by payors to control costs; the failure of the Company or
the long-term care facilities it serves to obtain or maintain required
regulatory approvals or licenses; loss or delay of contracts pertaining to the
CRO business for regulatory or other reasons; the outcome of litigation;
potential liability for losses not covered by, or in excess of, insurance; the
impact of differences in actuarial assumptions and estimates pertaining to
employee benefit plans; events or circumstances which result in an impairment of
goodwill; market conditions; the outcome of audit, compliance, administrative or
investigatory reviews; volatility in the market for the Company's stock and in
the financial markets generally; access to adequate capital and financing;
changes in international economic and political conditions and currency
fluctuations between the U.S. dollar and other currencies; changes in tax laws
and regulations; changes in accounting rules and standards; and other risks and
uncertainties described in the Company's reports and filings with the Securities
and Exchange Commission. Should one or more of these risks or uncertainties
materialize or should underlying assumptions prove incorrect, the Company's
actual results, performance or achievements could differ materially from those
expressed in, or implied by, such forward-looking statements.
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Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Except as otherwise
required by law, the Company does not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
For more information on Omnicare, Inc., visit www.omnicare.com.
###
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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,
------------------------------- --------------------------------
2004 2003 2004 2003
----------- ---------- ----------- -----------
Sales $ 1,006,053 $ 838,183 $ 1,983,795 $ 1,635,936
Reimbursable out-of-pockets (a) 4,544 (a) 5,850 (a) 9,081 (a) 13,958 (a)
----------- ---------- ----------- -----------
Total net sales 1,010,597 844,033 1,992,876 1,649,894
----------- ---------- ----------- -----------
Cost of sales 750,433 617,206 1,473,507 1,206,998
Reimbursed out-of-pocket expenses (a) 4,544 (a) 5,850 (a) 9,081 (a) 13,958 (a)
----------- ---------- ----------- -----------
Total direct costs 754,977 623,056 1,482,588 1,220,956
----------- ---------- ----------- -----------
Gross profit 255,620 220,977 510,288 428,938
Selling, general and administrative expenses 143,327 130,090 281,989 257,018
----------- ---------- ----------- -----------
Operating income 112,293 90,887 228,299 171,920
Investment income 905 1,166 1,539 1,754
Interest expense (17,243) (21,875)(b) (33,955) (38,331)(b)
----------- ---------- ----------- -----------
Income before income taxes 95,955 70,178 195,883 135,343
Income taxes 35,501 26,677 71,938 51,419
----------- ---------- ----------- -----------
Net income $ 60,454 $ 43,501 (b) $ 123,945 $ 83,924 (b)
=========== ========== =========== ===========
Earnings per share ("EPS"): (c)
Basic $ 0.58 $ 0.45 (b) $ 1.19 $ 0.88 (b)
=========== ========== =========== ===========
Diluted $ 0.58 $ 0.44 (b)(d) $ 1.18 $ 0.86 (b)(d)
=========== ========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 103,996 96,034 103,727 95,215
=========== ========== =========== ===========
Diluted 105,002 102,925 (d) 104,888 103,372 (d)
=========== ========== =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
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Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, Non-GAAP Basis (e)
Excluding EITF No. 01-14 and Special Item
(000s, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
2004 2003 2004 2003
----------- ---------- ----------- -----------
Adjusted sales $ 1,006,053 (f) $ 838,183 (f) $ 1,983,795 (f) $ 1,635,936 (f)
Adjusted cost of sales 750,433 (f) 617,206 (f) 1,473,507 (f) 1,206,998 (f)
----------- ---------- ----------- -----------
Gross profit 255,620 220,977 510,288 428,938
Selling, general and administrative expenses 143,327 130,090 281,989 257,018
----------- ---------- ----------- -----------
Operating income 112,293 90,887 228,299 171,920
Investment income 905 1,166 1,539 1,754
Interest expense (17,243) (17,806)(g) (33,955) (34,262)(g)
----------- ---------- ----------- -----------
Adjusted income before income taxes 95,955 74,247 195,883 139,412
Income taxes 35,501 28,223 71,938 52,965
----------- ---------- ----------- -----------
Adjusted net income $ 60,454 $ 46,024 (g) $ 123,945 $ 86,447 (g)
=========== ========== =========== ===========
Adjusted EPS: (c)
Basic $ 0.58 $ 0.48 (g) $ 1.19 $ 0.91 (g)
=========== ========== =========== ===========
Diluted $ 0.58 $ 0.47 (d)(g) $ 1.18 $ 0.88 (d)(g)
=========== ========== =========== ===========
Weighted average number of common
shares outstanding:
Basic 103,996 96,034 103,727 95,215
=========== ========== =========== ===========
Diluted 105,002 102,925 (d) 104,888 103,372 (d)
=========== ========== =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
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Omnicare, Inc. and Subsidiary Companies
Summary Segment Financial Data, Non-GAAP Basis (e)
Excluding EITF No. 01-14
(000s)
Unaudited
Corporate
Pharmacy CRO and Consolidated
Services Services Consolidating Totals
----------- -------- ------------- ------------
Three Months Ended June 30, 2004:
- ---------------------------------
Adjusted sales $ 976,768 $ 29,285 (f) $ - $ 1,006,053 (f)
=========== ======== =========== ===========
Operating income $ 120,549 $ 3,268 $ (11,524) $ 112,293
Depreciation and amortization 12,774 354 615 13,743
----------- -------- ----------- -----------
Earnings before interest, income taxes,
depreciation and amortization ("EBITDA") (h) $ 133,323 $ 3,622 $ (10,909) $ 126,036
=========== ======== =========== ===========
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
----------- -------- ----------- -----------
EBITDA (h) $ 107,451 $ 4,968 $ (8,844) $ 103,575
=========== ======== =========== ===========
Six Months Ended June 30, 2004:
- -------------------------------
Adjusted sales $ 1,925,281 $ 58,514 (f) $ - $ 1,983,795 (f)
=========== ======== =========== ===========
Operating income $ 243,979 $ 6,476 $ (22,156) $ 228,299
Depreciation and amortization 25,742 701 1,227 27,670
----------- -------- ----------- -----------
EBITDA (h) $ 269,721 $ 7,177 $ (20,929) $ 255,969
=========== ======== =========== ===========
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 (h) $ 204,569 $ 10,116 $ (17,316) $ 197,369
=========== ======== =========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
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Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets, GAAP Basis
(000s)
Unaudited
June 30, December 31,
2004 2003
----------- -----------
ASSETS
Cash and cash equivalents $ 169,702 $ 187,413
Restricted cash 5,777 714
Deposit with drug wholesaler 44,000 -
Accounts receivable, net 732,593 678,255
Unbilled receivables 12,551 15,281
Inventories 317,023 326,550
Deferred income tax benefits and other current assets 221,466 174,875
----------- -----------
Total current assets 1,503,112 1,383,088
----------- -----------
Properties and equipment, net 146,195 148,307
Goodwill 1,783,183 1,690,558
Other noncurrent assets 193,371 173,068
----------- -----------
Total assets $ 3,625,861 $ 3,395,021
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 296,025 $ 296,089
Deferred revenue 13,673 22,454
Current debt 24,748 20,709
Other current liabilities 124,884 123,508
----------- -----------
Total current liabilities 459,330 462,760
----------- -----------
Long-term debt 183,567 135,855
8.125% senior subordinated notes, due 2011 375,000 375,000
6.125% senior subordinated notes, net, due 2013 221,959 226,822
4.0% contingent convertible notes, due 2033 345,000 345,000
Deferred income taxes and other noncurrent liabilities 226,703 173,560
----------- -----------
Total liabilities 1,811,559 1,718,997
----------- -----------
Stockholders' equity 1,814,302 1,676,024
----------- -----------
Total liabilities and stockholders' equity $ 3,625,861 $ 3,395,021
=========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
13
<Page>
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
(000s)
Unaudited
Three Months Six Months
Ended June 30, 2004
--------------------------------
Cash flows from operating activities:
Net income $ 60,454 $ 123,945
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 8,981 18,062
Amortization 4,762 9,608
Provision for doubtful accounts 11,414 21,890
Deferred tax provision 10,279 25,087
Changes in assets and liabilities, net of effects
from acquisition of businesses (29,857) (108,801)
----------- -----------
Net cash flows from operating activities 66,033 89,791
----------- -----------
Cash flows from investing activities:
Acquisition of businesses (38,707) (144,643)
Capital expenditures (4,769) (9,837)
Other 26 (5,002)
----------- -----------
Net cash flows from investing activities (43,450) (159,482)
----------- -----------
Cash flows from financing activities:
Borrowings on line of credit facility 75,000 190,000
Payments on line of credit facility and term A loan (104,103) (138,206)
Proceeds from/(payments on) long-term borrowings and obligations 9 (43)
Proceeds from stock awards and exercise of stock options and
warrants, net of stock tendered in payment 5,141 6,213
Dividends paid (2,347) (4,680)
----------- -----------
Net cash flows from financing activities (26,300) 53,284
----------- -----------
Effect of exchange rate changes on cash (650) (1,304)
----------- -----------
Net decrease in cash and cash equivalents (4,367) (17,711)
Cash and cash equivalents at beginning
of period - unrestricted 174,069 187,413
----------- -----------
Cash and cash equivalents at
end of period - unrestricted $ 169,702 $ 169,702
=========== ===========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
14
<Page>
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,
--------------------------- --------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Adjusted income before income taxes:
Income before income taxes $ 95,955 $ 70,178 $ 195,883 $ 135,343
Special item (i) - 4,069 - 4,069
--------- --------- --------- ---------
Adjusted income before income taxes (i) $ 95,955 $ 74,247 $ 195,883 $ 139,412
========= ========= ========= =========
Adjusted net income:
Net income $ 60,454 $ 43,501 $ 123,945 $ 83,924
Special item, net of taxes (i) - 2,523 - 2,523
--------- --------- --------- ---------
Adjusted net income (i) $ 60,454 $ 46,024 $ 123,945 $ 86,447
========= ========= ========= =========
Adjusted earnings per share ("EPS"): (c)
Basic EPS $ 0.58 $ 0.45 $ 1.19 $ 0.88
Special item, net of taxes (i) - 0.03 - 0.03
Adjusted basic EPS (i) $ 0.58 $ 0.48 $ 1.19 $ 0.91
========= ========= ========= =========
Diluted EPS $ 0.58 $ 0.44 $ 1.18 $ 0.86
Special item, net of taxes (i) - 0.02 - 0.02
Adjusted diluted EPS (i) $ 0.58 $ 0.47 $ 1.18 $ 0.88
========= ========= ========= =========
Earnings before interest, income taxes,
depreciation and amortization ("EBITDA"): (h)
Earnings before interest and income taxes ("EBIT") $ 112,293 $ 90,887 $ 228,299 $ 171,920
Depreciation and amortization 13,743 12,688 27,670 25,449
--------- --------- --------- ---------
EBITDA (h) $ 126,036 $ 103,575 $ 255,969 $ 197,369
========= ========= ========= =========
Net cash flows from operating activities:
EBITDA (h) $ 126,036 $ 103,575 $ 255,969 $ 197,369
Subtract:
Interest expense, net of investment income (16,338) (20,709) (32,416) (36,577)
Income taxes (35,501) (26,677) (71,938) (51,419)
Changes in assets and liabilities, net of effects from
acquisition of businesses (29,857) 39,921 (108,801) (32,426)
Add:
Provision for doubtful accounts 11,414 12,135 21,890 23,180
Deferred tax provision 10,279 5,270 25,087 18,739
Write-off of debt issuance costs - 1,164 - 1,164
--------- --------- --------- ---------
Net cash flows from operating activities $ 66,033 $ 114,679 $ 89,791 $ 120,030
========= ========= ========= =========
Free cash flow: (j)
Net cash flows from operating activities $ 66,033 $ 114,679 $ 89,791 $ 120,030
Capital expenditures (4,769) (3,165) (9,837) (7,155)
Dividends (2,347) (2,125) (4,680) (4,250)
--------- --------- --------- ---------
Free cash flow (j) $ 58,917 $ 109,389 $ 75,274 $ 108,625
========= ========= ========= =========
Segment Reconciliations - CRO Services
- --------------------------------------
Adjusted Sales - CRO Services:
Total net sales (a) $ 33,829 $ 41,205 $ 67,595 $ 83,912
Reimbursable out-of-pockets (a) (4,544) (5,850) (9,081) (13,958)
--------- --------- --------- ---------
Adjusted sales (f) $ 29,285 $ 35,355 $ 58,514 $ 69,954
========= ========= ========= =========
DEFINITIONS:
- ------------
GAAP: Amounts that conform with U.S. Generally Accepted Accounting
Principles ("GAAP").
Non-GAAP: Amounts that do not conform with U.S. GAAP.
Pre-buys: Cash outlays primarily comprised of purchases of pharmaceuticals
in advance of price increases.
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
15
<Page>
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s)
Unaudited
(a) In accordance with 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 include 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),
relating to the Company's purchase of $106,535 of the aggregate principal
amount of its 5.0%, $345,000 of convertible subordinated debentures in the
second quarter of 2003.
(c) 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.
(d) 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, 5,808 and 7,260 shares were assumed to be converted for the
three and six month periods ended June 30, 2003, respectively. Additionally,
interest expense, net of taxes, of $1,948 and $4,870 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.
(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 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) 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 operating cash flows as a measure of
liquidity or net income as an indicator of Omnicare's operating performance.
Omnicare's calculation of EBITDA may differ from the calculation of EBITDA
by others.
(i) The special item during the three and six month periods ended June 30, 2003
represents 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 5.0%, $345,000 of convertible subordinated debentures,
as discussed in footnote (b) above. Management believes these items are not
related to the ongoing operations of Omnicare.
(j) 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