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
- --------------------------------------------------------------------------------
[Omnicare Logo] CONTACT:
Cheryl D. Hodges
(859) 392-3331
Omnicare Reports Third-Quarter 2004 Results
COVINGTON, Ky., October 28, 2004 - Omnicare, Inc. (NYSE:OCR), a leading provider
of pharmaceutical care for the elderly, reported today financial results for its
third-quarter ended September 30, 2004 versus the comparable prior-year period,
including special charges discussed below, as follows:
o Earnings per diluted share increased 15% to 54 cents
o Net income rose 14% to $55.9 million
o Earnings before interest, income taxes, depreciation and amortization
(EBITDA) increased 3% to $120.5 million
o Sales grew 17% to $1,053.9 million
Results for both the third quarter of 2004 and 2003 include special charges
(described later herein) of $5.2 million pretax (impacting gross profit and
operating income) and $8.6 million pretax (impacting interest expense),
respectively. Adjusting for these special items in both periods, results for the
quarter ended September 30, 2004 were as follows:
o Adjusted earnings per diluted share increased 8% to 57 cents
o Adjusted net income rose 9% to $59.1 million
o Adjusted EBITDA increased 8% to $125.6 million
o Sales grew 17% to $1,053.9 million
Commenting on the results for the quarter, Joel F. Gemunder, Omnicare's
president and chief executive officer, said, "Our sales were strong for the
quarter, reaching new record levels, and we are also making good progress in the
cost savings initiatives we laid out to restore our margins.
"Our results continued to be impacted, however, by the external factors we
described last quarter, namely Medicaid reimbursement issues and intensified
competitive pricing pressures that compressed the margins in our institutional
pharmacy business. Then, too, margins were temporarily affected by recent
acquisition activity. Given that we see pricing and reimbursement pressures
continuing in the fourth quarter, coupled with the fact that the majority of our
cost savings are longer term in nature, we now see diluted
earnings per share (excluding special items or accounting changes) for the
fourth quarter at 54 to 58 cents, bringing the full year earnings to $2.29 -
$2.33 per share.
"Our growth strategy over the years has enabled us to significantly 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
us weather many different and often difficult business conditions in our own
industry, and in that of our customers, and has allowed us to mitigate
reimbursement risks while strengthening our position, maximizing cash flow
generation and enhancing the efficiency of our operations.
"We are confident that we will address the challenges in the current environment
successfully and efficiently. As our cost savings programs begin to gain real
traction in the coming year, and synergies from our acquisition program are
realized, we expect to see improved performance. 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
Cash flow from operations for the third quarter ended September 30, 2004 was
$40.4 million as compared with $62.3 million generated in the comparable 2003
period. The 2004 quarter included $14.3 million in advance purchases of
pharmaceuticals (pre-buys) as compared with pre-buys of $59.3 million in the
2003 third quarter. After funding these pre-buys and acquisition activity,
Omnicare ended the quarter with approximately $109 million in cash and a total
debt-to-total capitalization ratio of 38.5%, down 280 basis points from the
comparable prior-year quarter.
"In the third quarter of 2004, we once again experienced a slowdown in payments
from the Illinois Department of Public Aid (Illinois Medicaid) resulting in a
delay in cash receipts of approximately $18 million. We are continuing to work
with Illinois Medicaid to minimize delays to us.
"Also, as we reported in the first and second quarters of this year, 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," said
Gemunder. "While cash receipts were again delayed in the third quarter,
resulting in a total back-up of approximately $37 million, an increase of $13
million from the $24 million delayed as of June 30, 2004, we are pleased to
report that all provider numbers have now been granted and a substantial portion
of the $37 million owed to us has been billed to the state of California.
Moreover, we have already begun receiving cash in October."
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)
2
to exclude the impact of the special items described elsewhere herein. 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
$1,021.0 million for the third quarter of 2004, 18% higher than the $865.9
million reported in the comparable prior-year quarter of 2003. Adjusted
operating income in this business reached $120.0 million, 8% higher than the
$111.6 million recorded in the third quarter of 2003. At September 30, 2004,
Omnicare served approximately 1,071,000 beds versus approximately 994,000 at
September 30, 2003, an increase of approximately 8%.
"Strong sales growth in our pharmacy business continues to be driven by the
aggressive execution of our acquisition strategy as well as the expansion of our
clinical and other service programs, further market penetration of newer branded
drugs and drug price inflation, offset in part by the increasing use of generic
drugs and the aforementioned pricing and reimbursement issues," said Gemunder.
"On a sequential basis, our margins were impacted by additional Medicaid
reimbursement reductions, including reimbursement formula changes, drug-specific
pricing changes and a slight shift in payor mix toward Medicaid as well as
competitive pricing pressures. In addition to these factors, the margins were
also impacted by newer acquisitions, which come in at a lower margin initially;
however, as synergies are realized, these acquisitions begin to have a salutary
impact on our margins.
"As we have done successfully in the past, we are realigning our operating costs
to bring them in line with the current pricing and reimbursement dynamics. We
are doing this through the acceleration of our cost reduction and productivity
enhancement initiatives and through innovative procurement programs. We are also
implementing several longer-term initiatives 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 now in place or are in the process of being implemented
and are on track to have a gradual positive effect on our results as we progress
through the year ahead.
"Then too, we believe that realizing the synergies from the number of smaller
acquisitions we have completed during the first nine months of this year will
have a positive impact on our margins. 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
3
specialty pharmacy services and pharmaceutical informatics also having a
salutary impact on margins.
"We are also pleased to note that we have entered into a comprehensive pharmacy
services agreement with VITAS Healthcare Corporation, the nation's largest
hospice provider and a wholly owned subsidiary of Chemed Corporation (NYSE:
CHE). Under this new agreement, Omnicare will be providing pharmacy and related
clinical and administrative services for VITAS' 32 hospice programs in 11
states. This alliance allows VITAS to take advantage of Omnicare's broad
geographic coverage, clinical expertise, particularly in the elderly population,
and information resources, while enabling Omnicare to further penetrate the
rapidly growing hospice market," said Gemunder.
CRO Business
Omnicare Clinical Research, the Company's contract research (CRO) business,
generated revenues of $33.0 million on a GAAP basis for the third quarter of
2004, versus the comparable prior-year quarter's revenues of $35.7 million.
Included in both periods were reimbursable out-of-pocket expenses, totaling $4.5
million in the 2004 period and $5.6 million in the 2003 period. Excluding these
reimbursable out-of-pocket expenses, adjusted revenues were $28.4 million versus
the $30.2 million recorded on this basis in the 2003 period. Operating income in
the third quarter of 2004 was $3.2 million versus the $1.6 million earned during
the prior-year period. Backlog in the CRO business at September 30, 2004 was
approximately $182 million.
"As seen elsewhere in the industry, the results of our CRO business were
impacted by certain project cancellations and by slower than anticipated
ramp-ups of two large trials," Gemunder said. "We were encouraged, however, by a
solid increase in new project proposals, and the continued interest in our
Peri-Approval and Geriatric Clinical Studies Group.
"Moreover, our efforts to enhance productivity and streamline the business, have
successfully kept our overall costs in check and have enhanced and maintained
our operating margins.
"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."
Special Items
As noted earlier, results for the third quarter of 2004 included a special
charge totaling $5.2 million pretax ($3.2 million aftertax or 3 cents per
diluted share) in connection with certain state Medicaid audits related to prior
periods, lowering gross profit by approximately $2.7 million and increasing
selling, general and administrative expenses by $2.5 million. The third quarter
of 2003 included a special charge of $8.6 million pretax ($5.3 million aftertax,
or 5 cents per diluted share) to interest expense relating to
4
the early redemption of the remaining $238 million of the Company's 5%
convertible subordinated debentures in the quarter ended September 30, 2003.
Nine Month Results
Financial results, including the aforementioned special charges, for the nine
months ended September 30, 2004, as compared with the same period of 2003, were
as follows:
o Earnings per diluted share increased 28% to $1.72
o Net income rose 35% to $179.8 million
o EBITDA grew 20% to $376.4 million
o Sales grew 19% to $3,046.8 million
The first nine months of 2004 included the previously mentioned charge of $5.2
million pretax ($3.2 million aftertax). 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. Adjusting
for these special items in both periods, results for the first nine months of
2004 were as follows:
o Adjusted earnings per diluted share increased 24% to $1.75
o Adjusted net income rose 30% to $183.1 million
o Adjusted EBITDA grew 22% to $381.6 million
o Sales grew 19% to $3,046.8 million
For the 2004 year-to-date period, cash flow from operations on a GAAP basis was
$130.2 million, compared with the $182.4 million generated in the first nine
months of 2003. Both periods reflect third quarter pre-buys of $14.3 million in
2004 and $59.3 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.
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. Omnicare is continuing to work with the
FTC with respect to the filing.
5
The Company's tender offer is scheduled to expire at 5:00 p.m., New York City
time, on October 29, 2004, unless extended.
Commenting on the tender offer for NeighborCare, 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
are monitoring 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 January 2006, was published for public comment during the
quarter. All public comments were due to be submitted by October 4, 2004. The
Centers for Medicaid and Medicare Services (CMS) is in the process of reviewing
those comments for consideration and application in the final regulations. Until
such final regulations are promulgated, 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
Omnicare will hold a conference call to discuss third-quarter results Thursday,
October 28 at 11:00 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
6
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 1,071,000 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 30
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, hospice care;
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, 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
7
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. 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.
###
8
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,
-------------------------- ---------------------------
2004 2003 2004 2003
---------- -------- --------- ----------
Sales $1,049,412 $896,099 $3,033,207 $2,532,035
Reimbursable out-of-pockets (a) 4,521 (a) 5,555 (a) 13,602 (a) 19,513 (a)
---------- -------- ---------- ----------
Total net sales 1,053,933 901,654 3,046,809 2,551,548
---------- -------- ---------- ----------
Cost of sales 790,842 668,844 2,264,349 1,875,842
Reimbursed out-of-pocket expenses (a) 4,521 (a) 5,555 (a) 13,602 (a) 19,513 (a)
---------- -------- ---------- ----------
Total direct costs 795,363 674,399 2,277,951 1,895,355
---------- -------- ---------- ----------
Gross profit 258,570 227,255 768,858 656,193
Selling, general and administrative expenses 152,249 123,592 434,238 380,610
---------- -------- ---------- ----------
Operating income 106,321 (b) 103,663 334,620 (b) 275,583
Investment income 691 880 2,230 2,634
Interest expense (17,582) (26,316) (c) (51,537) (64,647) (c)
---------- -------- ---------- ----------
Income before income taxes 89,430 78,227 285,313 213,570
Income taxes 33,544 29,397 105,482 80,816
---------- -------- ---------- ----------
Net income $ 55,886 (b) $ 48,830 (c) $ 179,831 (b) $ 132,754 (c)
========== ======== ========== ==========
Earnings per share ("EPS"): (d)
Basic $ 0.54 (b) $ 0.48 (c) $ 1.73 (b) $ 1.36 (c)
========== ======== ========== ==========
Diluted $ 0.54 (b) $ 0.47 (c) $ 1.72 (b) $ 1.34 (c)(e)
========== ======== ========== ==========
Weighted average number of common shares outstanding:
Basic 104,171 101,965 103,876 97,490
========== ======== ========== ==========
Diluted 104,357 102,944 104,723 103,017 (e)
========== ======== ========== ==========
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 (f)
Excluding EITF No. 01-14 and Special Item
(000s)
Unaudited
Corporate
Pharmacy CRO and Consolidated
Services Services Consolidating Totals
---------- -------- ------------- ------------
Three Months Ended September 30, 2004:
- --------------------------------------
Adjusted sales $1,020,972 $ 28,440 (g) $ -- $1,049,412 (g)
========== ======== ======== ==========
Adjusted operating income $ 120,032 (h) $ 3,161 $(11,712) $ 111,481 (h)
Depreciation and amortization 13,160 336 656 14,152
---------- -------- -------- ----------
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA") (i) $ 133,192 (h) $ 3,497 $(11,056) $ 125,633 (h)
========== ======== ======== ==========
Three Months Ended September 30, 2003:
- --------------------------------------
Adjusted sales $ 865,923 $ 30,176 (g) $ -- $ 896,099 (g)
========== ======== ======== =========
Operating income $ 111,587 $ 1,646 $ (9,570) $ 103,663
Depreciation and amortization 11,832 468 580 12,880
---------- -------- -------- ---------
EBITDA (i) $ 123,419 $ 2,114 $ (8,990) $ 116,543
========== ======== ======== =========
Nine Months Ended September 30, 2004:
- -------------------------------------
Adjusted sales $2,946,253 $ 86,954 (g) $ -- $3,033,207 (g)
========== ======== ======== =========
Adjusted operating income $ 364,011 (h) $ 9,637 $(33,868) $ 339,780 (h)
Depreciation and amortization 38,902 1,037 1,883 41,822
---------- -------- -------- ---------
Adjusted EBITDA (i) $ 402,913 (h) $ 10,674 $(31,985) $ 381,602 (h)
========== ======== ======== ==========
Nine Months Ended September 30, 2003:
- -------------------------------------
Adjusted sales $2,431,905 $100,130 (g) $ -- $2,532,035 (g)
========== ======== ======== ==========
Operating income $ 292,782 $ 10,861 $(28,060) $ 275,583
Depreciation and amortization 35,206 1,369 1,754 38,329
---------- -------- -------- ----------
EBITDA (i) $ 327,988 $ 12,230 $(26,306) $ 313,912
========== ======== ======== ==========
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
September 30, December 31,
2004 2003
------------- ------------
ASSETS
Cash and cash equivalents $ 103,122 $ 187,413
Restricted cash 5,777 714
Deposit with drug wholesaler 44,000 --
Accounts receivable, net 799,000 678,255
Unbilled receivables 13,133 15,281
Inventories 318,417 326,550
Deferred income tax benefits and other current assets 229,519 174,875
---------- -----------
Total current assets 1,512,968 1,383,088
---------- -----------
Properties and equipment, net 141,836 148,307
Goodwill 1,868,094 1,690,558
Other noncurrent assets 193,644 173,068
---------- ----------
Total assets $3,716,542 $3,395,021
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 300,117 $ 296,089
Deferred revenue 16,338 22,454
Current debt 24,745 20,709
Other current liabilities 116,330 123,508
---------- ----------
Total current liabilities 457,530 462,760
---------- ----------
Long-term debt 177,681 135,855
8.125% senior subordinated notes, due 2011 375,000 375,000
6.125% senior subordinated notes, net, due 2013 233,459 226,822
4.0% contingent convertible notes, due 2033 345,000 345,000
Deferred income taxes and other noncurrent liabilities 255,260 173,560
---------- ----------
Total liabilities 1,843,930 1,718,997
---------- ----------
Stockholders' equity 1,872,612 1,676,024
---------- ----------
Total liabilities and stockholders' equity $3,716,542 $3,395,021
========== ==========
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 Statement of Cash Flows, GAAP Basis
(000s)
Unaudited
Three Months Nine Months
Ended September 30, 2004
-------------------------
Cash flows from operating activities:
Net income $ 55,886 $ 179,831
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 8,666 26,728
Amortization 5,486 15,094
Provision for doubtful accounts 11,534 33,424
Deferred tax provision 29,386 54,473
Changes in assets and liabilities, net of effects
from acquisition of businesses (70,547) (179,348)
--------- ---------
Net cash flows from operating activities 40,411 130,202
--------- ---------
Cash flows from investing activities:
Acquisition of businesses (95,297) (239,940)
Capital expenditures (3,749) (13,586)
Other (20) (5,022)
--------- ---------
Net cash flows from investing activities (99,066) (258,548)
--------- ---------
Cash flows from financing activities:
Borrowings on line of credit facility 217,000 407,000
Payments on line of credit facility and term A loan (223,154) (361,360)
Payments on long-term borrowings and obligations (335) (378)
Proceeds from stock awards and exercise of stock options and
warrants, net of stock tendered in payment 1,658 7,871
Dividends paid (2,350) (7,030)
--------- ---------
Net cash flows from financing activities (7,181) 46,103
--------- ---------
Effect of exchange rate changes on cash (744) (2,048)
--------- ---------
Net decrease in cash and cash equivalents (66,580) (84,291)
Cash and cash equivalents at beginning
of period -- unrestricted 169,702 187,413
--------- ---------
Cash and cash equivalents at
end of period -- unrestricted $ 103,122 $ 103,122
========= =========
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 (f)
(000s, except per share amounts)
Unaudited
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- ------------------------------
2004 2003 2004 2003
-------- -------- --------- --------
Adjusted operating income (earnings before interest
and income taxes, "EBIT"):
EBIT $106,321 $103,663 $ 334,620 $275,583
Special item (j) 5,160 -- 5,160 --
-------- -------- --------- --------
Adjusted EBIT (j) $111,481 $103,663 $ 339,780 $275,583
======== ======== ========= ========
Adjusted income before income taxes:
Income before income taxes $ 89,430 $ 78,227 $ 285,313 $213,570
Special items (k) 5,160 8,597 5,160 12,666
-------- -------- --------- --------
Adjusted income before income taxes (k) $ 94,590 $ 86,824 $ 290,473 $226,236
======== ======== ========= ========
Adjusted net income:
Net income $ 55,886 $ 48,830 $ 179,831 $132,754
Special items, net of taxes (k) 3,225 5,330 3,225 7,853
-------- -------- --------- --------
Adjusted net income (k) $ 59,111 $ 54,160 $ 183,056 $140,607
======== ======== ========= ========
Adjusted earnings per share ("EPS"): (d)
Basic EPS $ 0.54 $ 0.48 $ 1.73 $ 1.36
Special items, net of taxes (k) 0.03 0.05 0.03 0.08
Adjusted basic EPS (k) $ 0.57 $ 0.53 $ 1.76 $ 1.44
======== ======== ========= ========
Diluted EPS $ 0.54 $ 0.47 $ 1.72 $ 1.34
Special items, net of taxes (k) 0.03 0.05 0.03 0.08
Adjusted diluted EPS (k) $ 0.57 $ 0.53 $ 1.75 $ 1.41
======== ======== ========= ========
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA"): (i)
EBIT $106,321 $103,663 $ 334,620 $275,583
Depreciation and amortization 14,152 12,880 41,822 38,329
-------- -------- --------- --------
EBITDA (i) 120,473 116,543 376,442 313,912
Special item (j) 5,160 -- 5,160 --
-------- -------- --------- --------
Adjusted EBITDA (i)(j) $125,633 $116,543 $ 381,602 $313,912
-------- -------- --------- --------
Net cash flows from operating activities:
EBITDA (i) $120,473 $116,543 $ 376,442 $313,912
Subtract:
Interest expense, net of investment income (16,891) (25,436) (49,307) (62,013)
Income taxes (33,544) (29,397) (105,482) (80,816)
Changes in assets and liabilities, net of effects from
acquisition of businesses (70,547) (16,481) (179,348) (48,907)
Add:
Provision for doubtful accounts 11,534 11,496 33,424 34,676
Deferred tax provision 29,386 3,017 54,473 21,756
Write-off of debt issuance costs -- 2,591 -- 3,755
-------- -------- --------- --------
Net cash flows from operating activities $ 40,411 $ 62,333 $ 130,202 $182,363
======== ======== ========= ========
Free cash flow: (l)
Net cash flows from operating activities $ 40,411 $ 62,333 $ 130,202 $182,363
Capital expenditures (3,749) (4,086) (13,586) (11,241)
Dividends (2,350) (2,309) (7,030) (6,559)
-------- -------- --------- --------
Free cash flow (l) $ 34,312 $ 55,938 $ 109,586 $164,563
======== ======== ========= ========
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
13
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (f)
(000s, except per share amounts)
Unaudited
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- ------------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Segment Reconciliations - Pharmacy Services:
- --------------------------------------------
Adjusted EBIT -- Pharmacy Services:
EBIT $114,872 $111,587 $358,851 $292,782
Special item (j) 5,160 -- 5,160 --
-------- -------- -------- --------
Adjusted EBIT -- Pharmacy Services (j) $120,032 $111,587 $364,011 $292,782
======== ======== ======== ========
Adjusted EBITDA -- Pharmacy Services: (i)
EBITDA (i) $128,032 $123,419 $397,753 $327,988
Special item (j) 5,160 -- 5,160 --
-------- -------- -------- --------
Adjusted EBITDA -- Pharmacy Services (i)(j) $133,192 $123,419 $402,913 $327,988
======== ======== ======== ========
Segment Reconciliations -- CRO Services
- ---------------------------------------
Adjusted Sales -- CRO Services:
Total net sales (a) $ 32,961 $ 35,731 $100,556 $119,643
Reimbursable out-of-pockets (a) (4,521) (5,555) (13,602) (19,513)
-------- -------- -------- --------
Adjusted sales (g) $ 28,440 $ 30,176 $ 86,954 $100,130
======== ======== ======== ========
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.
14
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s, except per share amounts)
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 nine month periods ended September 30, 2004 include a special
charge of $5,160 before taxes ($3,225 after taxes) in connection with
certain state Medicaid audits related to prior periods.
(c) The three and nine month periods ended September 30, 2003 include 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, relating to the Company's
purchase of the aggregate principal amount of its 5.0%, $345,000 of
convertible subordinated debentures in 2003.
(d) 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.
(e) 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, respectively, was added back to net
income for purposes of calculating diluted earnings per share using this
method.
(f) 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.
(g) The noted presentation excludes amounts that Omnicare is required to record
in its income statement relating to EITF No. 01-14, as previously discussed
in footnote (a) above.
(h) The noted presentation for the three and nine month periods ended September
30, 2004 excludes the special charge in connection with certain state
Medicaid audits related to prior periods, as previously discussed in
footnote (b) above.
(i) 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.
(j) The special item during the three and nine month periods ended September
30, 2004 represents the charge in connection with certain state Medicaid
audits related to prior periods, as previously discussed in footnote (b)
above. Management believes this item is not related to the ongoing
operations of Omnicare.
(k) The special items represent the charge in connection with certain state
Medicaid audits related to prior periods for the three and nine month
periods ended September 30, 2004, and 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, as previously discussed in
footnotes (b) and (c), respectively. Management believes these items
are not related to the ongoing operations of Omnicare.
(l) 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