Omnicare, Inc. 100 East RiverCenter Boulevard Covington, Kentucky 41011
859/392-3300 859/392-3360 Fax
Omnicare news release
- --------------------------------------------------------------------------------
CONTACT:
[OMNICARE LOGO] Cheryl D. Hodges
(859) 392-3331
Omnicare Reports Fourth-Quarter and Full-Year 2004 Results
Quarter and Full-Year Sales Reach Record Highs
Adjusted Earnings In Line With Expectations
COVINGTON, Ky. - February 24, 2005 - Omnicare, Inc. (NYSE:OCR), a leading
provider of pharmaceutical care for the elderly, reported today financial
results for its fourth quarter and full year ended December 31, 2004.
Financial results for the quarter ended December 31, 2004, as compared with the
prior-year period, including the special charge and an accounting change noted
below, were as follows:
o Earnings per diluted share were 52 cents versus 57 cents
o Net income was $56.2 million as compared with $61.6 million
o Sales reached $1,073.1 million as compared with $947.6 million
The fourth quarter of 2004 includes a special charge (described below) of $2.2
million pretax. In addition, for the fourth quarter of both years, the diluted
earnings per share amounts have been restated to reflect the adoption of
Emerging Issues Task Force Issue No. 04-8 (EITF No. 04-8) related to the
calculation of diluted earnings per share for contingently convertible
securities as discussed below. Adjusting for the special item and the accounting
change in both periods, results for the quarter ended December 31, 2004 were as
follows:
o Adjusted earnings per diluted share were 56 cents versus 59 cents
o Adjusted net income was $57.6 million as compared with $61.6 million
o Sales reached $1,073.1 million as compared with $947.6 million
Financial results for the year ended December 31, 2004, as compared with the
full year 2003, including special charges and the accounting change, were as
follows:
o Earnings per diluted share were $2.17 versus $1.89
o Net income was $236.0 million as compared with $194.4 million
o Sales reached $4,119.9 million as compared with $3,499.2 million
Results for 2004 included the special charges of $7.4 million pretax ($4.6
million aftertax) described later herein. Results for the year 2003 included
$12.7 million pretax ($7.9 million aftertax) related to the redemption of the
Company's 5% convertible subordinated debentures. Both periods reflect the
adoption of EITF No. 04-8 as
described below. Adjusting for the special items and accounting change,
full-year results for 2004 were as follows:
o Adjusted earnings per diluted share were $2.31 versus $2.01
o Adjusted net income was $240.6 million as compared with $202.2 million
o Sales reached $4,119.9 million as compared with $3,499.2 million
Commenting on the results for the quarter and full year, Joel F. Gemunder,
Omnicare's president and chief executive officer, said, "Our sales were strong
for the quarter and year, reaching new record levels, driven by the continued
growth in our pharmacy business as well as an uptick in our clinical research
business (CRO). We are continuing to make progress in our cost savings and
margin improvement programs designed to restore our margins. As a result, our
fourth quarter and full year earnings per share (excluding special items and the
accounting change) were in line with consensus estimates.
"We continue to address the challenges presented by competitive pricing
pressures and select reimbursement issues in the current environment.
Fortunately, 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 that produce greater resources and enhance our
cost efficiency. We believe this positioning will be a greater advantage as we
prepare to operate under the new Medicare Drug benefit, effective in January
2006.
"Our acquisition program continues, and we are seeing savings from our margin
improvement initiatives. The long-term fundamentals underpinning Omnicare's
business remain solid, and we believe our strategy continues to be on track to
take advantage of these trends for the benefit of our shareholders," said
Gemunder.
Financial Position
Cash flow from operations for the fourth quarter ended December 31, 2004 was
$35.7 million versus a net use of cash of $17.6 million in the fourth quarter of
2003. The fourth quarter of 2004 included $29.9 million in advance purchases of
pharmaceuticals (pre-buys) as compared with $86.1 million in pre-buys in the
comparable 2003 quarter. Cash flow from operations for the full year 2004 was
$168.9 million as compared with $174.1 million in 2003. As previously reported,
cash flow for the full year 2004 was impacted by a reduction of $44.0 million
related to a change in payment terms under a new contract with the Company's
drug wholesaler. Furthermore, cash flow for the full years 2004 and 2003 was
unfavorably impacted by the reduction in an acquired company's payable to its
previous drug wholesaler for approximately $18 million and $15 million,
respectively. Free cash flow, defined as operating cash flow less capital
expenditures and cash dividends, for the fourth quarter of 2004 was $29.0
million. This brought full-year free cash flow for 2004 to $141.5 million, as
compared with the $148.1 million generated in 2003.
"We, like all providers, once again experienced a slowdown in payments from the
Illinois
2
Department of Public Aid (Illinois Medicaid) resulting in a delay in cash
receipts of approximately $27 million in the fourth quarter of 2004. We continue
to work with Illinois Medicaid to minimize these delays," said Gemunder.
"On a positive note, as we reported earlier 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," continued
Gemunder. "We are pleased to report that we began receiving cash in October, and
by year-end most of our overdue receivables from Medi-Cal had been collected."
Gemunder also noted that at December 31, 2004, the Company had $84.4 million in
cash on its balance sheet, and total debt to total capitalization was 39.9%,
down 30 basis points from the comparable prior-year quarter.
Earnings before interest, income taxes, depreciation and amortization (EBITDA)
for the fourth quarter of 2004, including the special charge discussed below,
was $122.3 million versus $126.7 million in the fourth quarter of 2003.
Excluding the special charge, adjusted EBITDA in the 2004 quarter was $124.5
million versus $126.7 million in the 2003 quarter. For the full year 2004,
EBITDA, including special items, was $498.7 million versus $440.6 million in
2003. Excluding special items, 2004 adjusted EBITDA was $506.1 million versus
$440.6 million in 2003.
Special Items and Accounting Change
As noted earlier, results for the fourth quarter of 2004 included a special
charge totaling $2.2 million pretax ($1.4 million aftertax or 1 cent per diluted
share), and results for the full year 2004 included special charges totaling
$7.4 million pretax ($4.6 million aftertax, or 4 cents per diluted share) in
connection with prior-period Medicaid audits in certain states. The full year
2003 results included a total charge of $12.7 million pretax ($7.9 million
aftertax, or 7 cents per diluted share) to interest expense relating to the
Company's early redemption of $345 million of 5% convertible subordinated
debentures.
As noted previously, the Emerging Issues Task Force of the Financial Accounting
Standards Board adopted EITF No. 04-8, "The Effect of Contingently Convertible
Debt on Diluted Earnings per Share," effective for periods ending after December
15, 2004. EITF No. 04-8 requires the shares underlying contingently convertible
debt instruments to be included in diluted earnings per share computations using
the "if-converted" accounting method, regardless of whether the market price
trigger has been met. Accordingly, diluted earnings per share have been
retroactively restated for all prior periods back to the issuance of the
Company's 4% contingent convertible notes due 2033 underlying the Trust
Preferred Income Equity Redeemable Securities (PIERS) in June 2003. (See
footnote "e" to the attached financial statements.) The effect of the adoption
of EITF No. 04-8 for the periods presented was to reduce the diluted earnings
per share for each of the fourth quarters of 2004 and 2003 by 2 cents, and by 9
cents
3
and 4 cents for the full-year 2004 and 2003, respectively.
On February 7, 2005, the Company initiated an offer to exchange the 4% Trust
PIERS for new 4% Trust PIERS that are substantially similar to the old Trust
PIERS, except that the new 4% Trust PIERS will contain a net share settlement
feature that will allow the treasury stock method of accounting for these
securities, which is substantially less dilutive. The exchange offer is
scheduled to expire on March 7, 2005, unless extended.
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.
Institutional Pharmacy Business
Omnicare's institutional pharmacy business generated record revenues of $1,037.4
million for the fourth quarter, 14% higher than the $913.4 million reported in
the comparable prior-year quarter. Operating profit in this business reached
$121.6 million, as compared with the $120.2 million recorded in the fourth
quarter of 2003. For the full year 2004, pharmacy sales reached $3,983.6
million, up 19% from the $3,345.3 million reported in 2003 and operating profit
was $485.6 million, 18% higher than the $413.0 million earned in 2003. At
December 31, 2004, Omnicare served approximately 1,086,000 beds versus
approximately 1,003,000 at December 31, 2003, an increase of 8%.
"The substantial sales growth we have seen in our pharmacy business, both in the
fourth quarter and for the year, has been driven largely by the continued
execution of our acquisition strategy. In fact, our acquisition strategy
broadened to include Omnicare's entry into the Canadian market with the
acquisition of Medico Pharmacy, an institutional pharmacy provider based in
Toronto, Ontario at the end of the quarter. In addition, our sales benefited
during the quarter from the expansion of our clinical and other service
programs, as well as market penetration of newer branded drugs, offset in part
by increasing use of generic drugs," said Gemunder. "Despite the fact that the
expected strong flu season did not materialize in the fourth quarter, we
nonetheless saw higher acuity producing increased usage of intravenous
therapies.
"Our strong sales growth was achieved despite the continuation of trends we have
seen over the last two quarters, namely Medicaid reimbursement reductions,
including reimbursement formula changes and drug-specific pricing changes, as
well as intense competitive pricing pressures, that have impacted our margins.
That said, we are realigning our operating costs to bring them in line with the
current pricing and reimbursement dynamics. We have cost reduction and
productivity enhancement initiatives now in place or are in the process of being
implemented. We believe these
4
programs are on track and should have a gradual positive effect on our results
as we progress through 2005 and beyond."
CRO Business
Omnicare Clinical Research, the Company's CRO business, generated revenues of
$35.7 million on a GAAP basis for the 2004 fourth quarter, a 4% increase over
the prior-year quarter's revenues of $34.2 million. Included in both periods
were reimbursable out-of-pocket expenses totaling $5.1 million in the 2004
period and $5.3 million in the 2003 period. Excluding these reimbursable
out-of-pocket expenses, adjusted revenues of $30.6 million in the 2004 fourth
quarter were up 6% when compared with revenues of $28.9 million in the 2003
quarter. Operating profit in the 2004 fourth quarter was $3.4 million, double
the $1.7 million earned in 2003.
For the full year 2004, the CRO recorded revenues of $136.3 million versus
$153.9 million in 2003. Included in both full year periods were reimbursable
out-of-pocket expenses totaling $18.7 million and $24.8 million for the 2004 and
2003 periods, respectively. Excluding reimbursable out-of-pocket expenses in
both periods, revenues were $117.6 million in 2004 versus $129.1 million in
2003. Operating profit was $13.0 million in 2004 as compared with $12.6 million
in 2003. Backlog at December 31, 2004 was $276.9 million.
"In mid-December, we completed the acquisition of Clinimetrics, which increased
our CRO business by one-third and gives us a significantly enhanced presence
with biotechnology and early stage pharmaceutical companies, which typically
require greater services from CRO companies as their in-house drug development
capabilities are often less robust than their large pharmaceutical company
counterparts," said Gemunder. "Beyond this important addition, we are encouraged
by the increase in both revenues and backlog on both a sequential and
year-over-year quarterly basis in our CRO business. We see a positive long-term
outlook in Omnicare Clinical Research as we benefit from the streamlining and
globalization of our business, our capabilities in the geriatric market and our
strong presence in the overall drug development marketplace."
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
5
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.
On December 23, 2004, Omnicare proposed a slate of three highly qualified
independent directors for election at NeighborCare's upcoming shareholder
meeting. "This slate will help ensure that the interests of NeighborCare's
shareholders, which we believe have been made quite clear through the tender,
are well represented," said Gemunder.
The Company's tender offer is scheduled to expire at 5:00 p.m., New York City
time, on March 4, 2005, unless extended.
Commenting on the tender offer for NeighborCare, Gemunder said, "We have always
been - and remain today - confident in our ability to consummate the offer. We
are a determined, disciplined buyer and we continue to believe that this
transaction makes compelling business sense."
Omnicare Outlook
"With regard to the long-term care industry, there do not appear to be any major
reimbursement changes imminent that would upset the relatively stable
environment of our customers. We continue to monitor the key issues relating to
healthcare funding, including the efforts of state Medicaid programs to contain
or reduce costs either through the legislative process or by other means,"
Gemunder said.
"The most significant news for our industry is the upcoming implementation of
the Medicare drug benefit effective January 1, 2006. On January 21, 2005, the
Centers for Medicare and Medicaid Services (CMS) released its final regulations
governing the new Medicare Part D benefit. As detailed in these regulations,
Prescription Drug Plans, or PDPs, sponsored by commercial insurers or other
private entities approved by CMS, are scheduled to begin offering a drug benefit
to Medicare-eligible beneficiaries, including those dually eligible under
Medicaid, which will include many residents of the skilled nursing facilities we
serve. We believe Omnicare has much to bring to the PDPs - from providing
required long-term care pharmacy services to sophisticated programs that help
manage both drug costs and quality of care. That being said, there are still
many specifics yet to be determined through sub-regulatory guidance from CMS,
from its long-term care study due in June and through the outcome of our
negotiations with PDPs over the next several months. All things considered, we
see nothing materially adverse about the regulations at this time and believe we
are well-positioned to add value under the new Medicare Part D benefit. We will
monitor developments and continue to ready our company as the year progresses."
Gemunder added, "It behooves all to remember that pharmaceuticals remain among
the most cost-effective means of treating the chronic illnesses of the frailest
members of our
6
society and, as such, 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 well-positioned to address these trends, and has demonstrated its
commitment to payors to advance clinical programs that can yield substantially
lower drug costs while enhancing quality of care," said Gemunder.
"We remain committed to and focused on shareholder value. Our revenue and
earnings growth outlook remains positive given our solid underlying fundamentals
and our proven strategy, combined with our financial strength and flexibility,
and the numerous opportunities to leverage our business," Gemunder concluded.
Webcast Today
Omnicare will hold a conference call to discuss fourth-quarter results Thursday,
February 24, 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
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, Inc. (NYSE:OCR), 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 1,086,000 beds
in 47 states in the United States and in Canada, making it the largest U.S.
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
7
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 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
8
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.
###
9
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, GAAP Basis
(000s, except per share amounts)
Unaudited
Three Months Ended Year Ended
December 31, December 31,
---------------------------- ------------------------------
2004 2003 2004 2003
---------- -------- ---------- ----------
Sales $1,068,017 $942,319 $4,101,224 $3,474,354
Reimbursable out-of-pockets (a) 5,065 (a) 5,307 (a) 18,667 (a) 24,820 (a)
---------- -------- ---------- ----------
Total net sales 1,073,082 947,626 4,119,891 3,499,174
---------- -------- ---------- ----------
Cost of sales 806,507 700,952 3,070,856 2,576,794
Reimbursed out-of-pocket expenses (a) 5,065 (a) 5,307 (a) 18,667 (a) 24,820 (a)
---------- -------- ---------- ----------
Total direct costs 811,572 706,259 3,089,523 2,601,614
---------- -------- ---------- ----------
Gross profit 261,510 241,367 1,030,368 897,560
Selling, general and administrative expenses 153,694 129,367 587,932 509,977
---------- -------- ---------- ----------
Operating income 107,816 (b) 112,000 442,436 (b) 387,583
Investment income 954 1,532 3,184 4,166
Interest expense (18,884) (16,653) (70,421) (81,300) (c)
---------- -------- ---------- ----------
Income before income taxes 89,886 96,879 375,199 310,449
Income taxes 33,706 35,265 139,188 116,081
---------- -------- ---------- ----------
Net income $ 56,180 (b) $ 61,614 $ 236,011 (b) $ 194,368 (c)
========== ======== ========== ==========
Earnings per share ("EPS"): (d)
Basic $ 0.55 (b) $ 0.60 $ 2.29 (b) $ 1.97 (c)
========== ======== ========== ==========
Diluted $ 0.52 (b)(e) $ 0.57 (e) $ 2.17 (b)(e) $ 1.89 (c)(e)(f)
========== ======== ========== ==========
Weighted average number of common
shares outstanding:
Basic 101,321 102,688 103,238 98,800
========== ======== ========== ==========
Diluted 111,498 (e) 112,195 (e) 112,819 (e) 107,896 (e)(f)
========== ======== ========== ==========
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
Summary Segment Financial Data, Non-GAAP Basis (g)
Excluding EITF No. 01-14 and Special Item
(000s)
Unaudited
Corporate
Pharmacy CRO and Consolidated
Services Services Consolidating Totals
---------- -------- ------------- -----------
Three Months Ended December 31, 2004:
Adjusted sales $1,037,388 $ 30,629 (h) $ -- $1,068,017 (h)
========== ======== ======== ==========
Adjusted operating income $ 121,610 (j) $ 3,368 $(14,933) $ 110,045 (j)
Depreciation and amortization 13,345 467 662 14,474
---------- -------- -------- ----------
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA") (i) $ 134,955 (j) $ 3,835 $(14,271) $ 124,519 (j)
========== ======== ======== ==========
Three Months Ended December 31, 2003:
Adjusted sales $ 913,396 $ 28,923 (h) $ -- $ 942,319 (h)
========== ======== ======== ==========
Operating income $ 120,204 $ 1,701 $ (9,905) $ 112,000
Depreciation and amortization 13,709 401 581 14,691
---------- -------- -------- ----------
EBITDA (i) $ 133,913 $ 2,102 $ (9,324) $ 126,691
========== ======== ======== ==========
Year Ended December 31, 2004:
Adjusted sales $3,983,641 $117,583 (h) $ -- $4,101,224 (h)
========== ======== ======== ==========
Adjusted operating income $ 485,621 (j) $ 13,005 $(48,801) $ 449,825 (j)
Depreciation and amortization 52,247 1,504 2,545 56,296
---------- -------- -------- ----------
Adjusted EBITDA (i) $ 537,868 (j) $ 14,509 $(46,256) $ 506,121 (j)
========== ======== ======== ==========
Year Ended December 31, 2003:
Adjusted sales $3,345,301 $129,053 (h) $ -- $3,474,354 (h)
========== ======== ======== ==========
Operating income $ 412,986 $ 12,562 $(37,965) $ 387,583
Depreciation and amortization 48,915 1,770 2,335 53,020
---------- -------- -------- ----------
EBITDA (i) $ 461,901 $ 14,332 $(35,630) $ 440,603
========== ======== ======== ==========
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 Balance Sheets, GAAP Basis
(000s)
Unaudited
December 31,
2004 2003
---------- ----------
ASSETS
Cash and cash equivalents $ 84,169 $ 187,413
Restricted cash 262 714
Deposit with drug wholesaler 44,000 --
Accounts receivable, net 838,705 678,255
Unbilled receivables 14,007 15,281
Inventories 331,367 326,550
Deferred income tax benefits and other current assets 238,769 174,875
---------- ----------
Total current assets 1,551,279 1,383,088
---------- ----------
Properties and equipment, net 142,421 148,307
Goodwill 2,003,223 1,690,558
Other noncurrent assets 203,758 173,068
---------- ----------
Total assets $3,900,681 $3,395,021
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 282,956 $ 296,089
Deferred revenue 24,245 22,454
Current debt 25,218 20,709
Other current liabilities 136,563 123,508
---------- ----------
Total current liabilities 468,982 462,760
---------- ----------
Long-term debt 281,559 135,855
8.125% senior subordinated notes, due 2011 375,000 375,000
6.125% senior subordinated notes, net, due 2013 232,508 226,822
4.0% contingent convertible notes, due 2033 345,000 345,000
Deferred income taxes and other noncurrent liabilities 270,524 173,560
---------- ----------
Total liabilities 1,973,573 1,718,997
---------- ----------
Stockholders' equity 1,927,108 1,676,024
---------- ----------
Total liabilities and stockholders' equity $3,900,681 $3,395,021
========== ==========
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
Condensed Consolidated Statement of Cash Flows, GAAP Basis
(000s)
Unaudited
Three Months Year
Ended December 31, 2004
--------------------------------
Cash flows from operating activities:
Net income $ 56,180 $ 236,011
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 8,281 35,009
Amortization 6,193 21,287
Provision for doubtful accounts 11,688 45,112
Deferred tax provision 3,681 58,154
Changes in assets and liabilities, net of effects
from acquisition of businesses (50,363) (226,715)
--------- ---------
Net cash flows from operating activities 35,660 168,858
--------- ---------
Cash flows from investing activities:
Acquisition of businesses (158,619) (398,559)
Capital expenditures (4,340) (17,926)
Other 5,534 512
--------- ---------
Net cash flows from investing activities (157,425) (415,973)
--------- ---------
Cash flows from financing activities:
Borrowings on line of credit facility 428,000 835,000
Payments on line of credit facility and term A loan (324,153) (685,513)
Payments on long-term borrowings and obligations (163) (541)
Change in cash overdraft balance (1,926) (4,922)
Proceeds from stock awards and exercise of stock options and
warrants, net of stock tendered in payment 1,933 9,804
Dividends paid (2,356) (9,386)
--------- ---------
Net cash flows from financing activities 101,335 144,442
--------- ---------
Effect of exchange rate changes on cash 1,477 (571)
--------- ---------
Net decrease in cash and cash equivalents (18,953) (103,244)
Cash and cash equivalents at beginning
of period - unrestricted 103,122 187,413
--------- ---------
Cash and cash equivalents at
end of period - unrestricted $ 84,169 $ 84,169
========= =========
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 (g)
(000s, except per share amounts)
Unaudited
Three Months Ended December 31, Year Ended December 31,
------------------------------- --------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Adjusted operating income (earnings before
interest and income taxes, "EBIT"):
EBIT $107,816 $112,000 $442,436 $387,583
Special item 2,229 (k) -- 7,389 (k) --
-------- -------- -------- --------
Adjusted EBIT $110,045 (k) $112,000 $449,825 (k) $387,583
======== ======== ======== ========
Adjusted income before income taxes:
Income before income taxes $ 89,886 $ 96,879 $375,199 $310,449
Special items 2,229 (k) -- 7,389 (k) 12,666 (l)
-------- -------- -------- --------
Adjusted income before income taxes $ 92,115 (k) $ 96,879 $382,588 (k) $323,115 (l)
======== ======== ======== ========
Adjusted net income:
Net income $ 56,180 $ 61,614 $236,011 $194,368
Special items, net of taxes 1,393 (k) -- 4,618 (k) 7,853 (l)
-------- -------- -------- --------
Adjusted net income $ 57,573 (k) $ 61,614 $240,629 (k) $202,221 (l)
======== ======== ======== ========
Adjusted earnings per share ("EPS"): (d)
Basic EPS $ 0.55 $ 0.60 $ 2.29 $ 1.97
Special items, net of taxes 0.01 (k) -- 0.04 (k) 0.08 (l)
Adjusted basic EPS $ 0.57 (k) $ 0.60 $ 2.33 (k) $ 2.05 (l)
======== ======== ======== ========
Diluted EPS $ 0.52 (e) $ 0.57 (e) $ 2.17 (e) $ 1.89 (e)(f)
Special items, net of taxes 0.01 (k) -- 0.04 (k) 0.07 (l)
Adjusted diluted EPS $ 0.54 (e)(k) $ 0.57 (e) $ 2.21 (e)(k) $ 1.97 (e)(l)
======== ======== ======== ========
Diluted EPS, excluding "if-converted"
impact of 4.0% contingent convertible notes,
due 2033 ("co-co's") $ 0.55 (e) $ 0.59 (e) $ 2.26 (e) $ 1.93 (e)
======== ======== ======== ========
Adjusted diluted EPS, excluding co-co's $ 0.56 (e)(k) $ 0.59 (e) $ 2.31 (e)(k) $ 2.01 (e)(l)
======== ======== ======== ========
Weighted average number of shares outstanding:
Diluted 111,498 (e) 112,195 (e) 112,819 (e) 107,896 (e)(f)
Subtract: "if-converted" impact of 4.0% co-co's (8,451)(e) (8,451) (e) (8,451) (e) (4,653) (e)
-------- -------- -------- --------
Adjusted diluted, excluding 4.0% co-co's 103,047 103,744 104,368 103,243
======== ======== ======== ========
Adjusted earnings before interest, income taxes,
depreciation and amortization ("EBITDA"): (i)
EBIT $107,816 $112,000 $442,436 $387,583
Depreciation and amortization 14,474 14,691 56,296 53,020
-------- -------- -------- --------
EBITDA (i) 122,290 126,691 498,732 440,603
Special item 2,229 (k) -- 7,389 (k) --
-------- -------- -------- --------
Adjusted EBITDA (i) $124,519 (k) $126,691 $506,121 (k) $440,603
======== ======== ======== ========
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
Reconciliation Statement and Definitions, Non-GAAP Basis (g)
(000s, except per share amounts)
Unaudited
Three Months Ended December 31, Year Ended December 31,
------------------------ ------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Net cash flows from operating activities:
EBITDA (i) $ 122,290 $ 126,691 $ 498,732 $ 440,603
Subtract:
Interest expense, net of investment income (17,930) (15,121) (67,237) (77,134)(1)
Income taxes (33,706) (35,265) (139,188) (116,081)
Changes in assets and liabilities, net of effects from
acquisition of businesses (50,363) (125,886) (226,715) (165,442)
Add:
Provision for doubtful accounts 11,688 10,004 45,112 44,680
Deferred tax provision 3,681 21,929 58,154 43,685
Write-off of debt issuance costs -- -- -- 3,755
--------- --------- --------- ---------
Net cash flows from operating activities $ 35,660 $ (17,648) $ 168,858 $ 174,066
========= ========= ========= =========
Free cash flow: (m)
Net cash flows from operating activities $ 35,660 $ (17,648) $ 168,858 $ 174,066
Capital expenditures (4,340) (5,874) (17,926) (17,115)
Dividends (2,356) (2,317) (9,386) (8,876)
--------- --------- --------- ---------
Free cash flow (m) $ 28,964 $ (25,839) $ 141,546 $ 148,075
========= ========= ========= =========
Segment Reconciliations - Pharmacy Services:
Adjusted EBIT - Pharmacy Services:
EBIT $ 119,381 $ 120,204 $ 478,232 $ 412,986
Special item 2,229 (k) -- 7,389 (k) --
--------- --------- --------- ---------
Adjusted EBIT - Pharmacy Services $ 121,610 (k) $ 120,204 $ 485,621 (k) $ 412,986
========= ========= ========= =========
Adjusted EBITDA - Pharmacy Services: (i)
EBITDA (i) $ 132,726 $ 133,913 $ 530,479 $ 461,901
Special item 2,229 (k) -- 7,389 (k) --
--------- --------- --------- ---------
Adjusted EBITDA - Pharmacy Services (i) $ 134,955 (k) $ 133,913 $ 537,868 (k) $ 461,901
========= ========= ========= =========
Segment Reconciliations - CRO Services
Adjusted Sales - CRO Services:
Total net sales (a) $ 35,694 $ 34,230 $ 136,250 $ 153,873
Reimbursable out-of-pockets (a) (5,065) (5,307) (18,667) (24,820)
--------- --------- --------- ---------
Adjusted sales (h) $ 30,629 $ 28,923 $ 117,583 $ 129,053
========= ========= ========= =========
DEFINITIONS:
GAAP: Amounts that conform with U.S. Generally Accepted Accounting
Principles ("GAAP").
Non-GAAP: Amounts that do not conform with U.S. GAAP.
The footnotes presented at the separate "Footnotes to Financial Information"
page are an integral part of this financial information.
15
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 months ended December 31, 2004 includes a special charge of
$2,229 before taxes ($1,393 after taxes), and the year ended December 31,
2004 includes special charges of $7,389 before taxes ($4,618 after taxes)
in connection with certain state Medicaid audits related to prior periods.
(c) The year ended December 31, 2003 includes a call premium and the write-off
of the remaining unamortized debt issuance costs, aggregating $12,666
before taxes ($7,853 after taxes), 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) In December 2004, the Emerging Issues Task Force of the Financial
Accounting Standards Board adopted EITF No. 04-8, "The Effect of
Contingently Convertible Debt on Diluted Earnings per Share" ("EITF No.
04-8"), which requires the shares underlying contingently convertible debt
instruments to be included in diluted earnings per share computations using
the "if-converted" accounting method, regardless of whether the market
price trigger has been met. 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. Diluted earnings per common share amounts have been retroactively
restated for all prior periods presented to give effect to the application
of EITF No. 04-8 as it relates to the Company's 4.0% contingent convertible
notes issued in the second quarter of 2003. The effect of Omnicare's fourth
quarter 2004 adoption of EITF No. 04-8 was to decrease diluted earnings
per share $0.02 for the three months ended December 31, 2004 and 2003;
and $0.09 and $0.04 for the years ended December 31, 2004, and 2003,
respectively. For purposes of the "if-converted" calculation, 8,451 shares
were assumed to be converted for the quarters ended December 31, 2004
and 2003, and the year ended December 31, 2004, with 4,653 shares assumed
to be converted for the year ended December 31, 2003. Additionally,
interest expense, net of taxes, of $2,266 for the quarters ended
December 31, 2004 and 2003, and $9,062 and $4,959 for the years ended
December 31, 2004 and 2003, respectively, was added back to net income
for purposes of calculating diluted earnings per share using this method.
16
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s, except per share amounts)
Unaudited
(f) The year ended December 31, 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, 3,630 shares were assumed
to be converted for the year ended December 31, 2003. Additionally,
interest expense, net of taxes, of $4,870 for the year ended December 31,
2003, was added back to net income for purposes of calculating diluted
earnings per share using this method.
(g) 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.
(h) The noted presentation excludes amounts that Omnicare is required to record
in its income statement pursuant to EITF No. 01-14, as previously discussed
in footnote (a) 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, which is also the primary purpose
for which management uses this financial measure. 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. Omnicare's calculation of EBITDA may differ from
the calculation of EBITDA by others.
(j) The noted presentation for the year ended December 31, 2004 excludes the
special charge in connection with certain state Medicaid audits related to
prior periods, as previously discussed in footnote (b) above.
(k) The special item during the year ended December 31, 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.
(l) The special item during the year ended December 31, 2003 represents the
charge for the call premium and the write-off of the remaining unamortized
debt issuance costs, as previously discussed in footnote (c). Management
believes these items are not related to the ongoing operations of Omnicare.
17
Omnicare, Inc. and Subsidiary Companies
Footnotes to Financial Information
(000s, except per share amounts)
Unaudited
(m) 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.
18