[LETTERHEAD OF OMNICARE]
FOR IMMEDIATE RELEASE
CONTACT:
Cheryl D. Hodges
(606)392-3331
OMNICARE ANNOUNCES PRODUCTIVITY, CONSOLIDATION INITIATIVE
18-Month Program Expected to Save Company $46 Million Annually
COVINGTON, KENTUCKY, June 29, 1999.....Omnicare Inc. (NYSE:OCR) today
announced a comprehensive plan to streamline company-wide operations through the
implementation of a productivity and consolidation program that is expected to
result in annualized savings of approximately $46 million by December 2000.
The productivity and consolidation program, to be implemented over the
next 18 months, is centered on benchmarking to best practices, defined to be
those which bring lower costs and higher quality to key operational and support
functions throughout the organization. The productivity and consolidation
initiatives are expected to eliminate redundant efforts, simplify work processes
and apply technology to maximize employee productivity and standardize
operations around best practices. Facilities in overlapping geographic
territories will be consolidated to better align pharmacies around customers so
as to improve efficiency and enhance the Company's ability to deliver innovative
services and programs to its customers.
Productivity initiatives will be introduced at the majority of the
Company's 220 pharmacy and other operating locations, which will enable them to
reach Omnicare's benchmark standards for efficiency.
Also as part of the initiative, the roster of pharmacies and other
operating locations will be reconfigured through consolidations, relocations,
the creation of nine new sites, and the closing of approximately 20 sites. Upon
completion of the plan, Omnicare will have 140 strategically located
pharmacy units, 23 global contract research sites and two software development
and marketing operations.
"Over the last decade, Omnicare has been successful in executing a
growth strategy through 85 pharmacy acquisitions, introducing innovative
clinically advanced programs, and leveraging our core business through our entry
into the contract research industry. All of this has enabled us to build our
leadership position in the national marketplace," said Joel F. Gemunder,
president of Omnicare.
"To gain maximum benefit from our acquisition program and to respond to
recent changes in the healthcare industry, we have identified synergies which
make it possible to generate greater economies of scale through the
standardization of practices and procedures, and to geographically position our
operating organization for cost-efficient delivery of enhanced customer
service," he added.
Omnicare expects these strategic measures to lead to the net reduction
of approximately 1,700 full- and part-time jobs from its work force of
approximately 11,500 over the next 18 months. Where possible, the Company will
make use of normal attrition and transfers to other locations. Employees whose
jobs are eliminated will be offered severance packages.
"While the productivity and consolidation initiative is a very positive
move for most employees, and for the Company as a whole, we know this will bring
about significant change. Our work force is a key factor in Omnicare's success
and we will work to make the changes as smooth as possible. We have great
confidence that our employees are equal to the challenge," Gemunder said.
The productivity and consolidation initiative is expected to generate
approximately $46 million in annual savings on a pretax basis (or $29 million
after taxes) upon full implementation. It will result in a pretax restructuring
charge of approximately $32 million ($21 million after taxes), of which $27
million ($17 million after taxes, or $0.19 per diluted share) will be recorded
in the second quarter ending June 30, 1999. The majority of the remaining
approximately $5 million ($3.2 million after taxes, or 4 cents per diluted
share) will be taken over the following three quarters. The restructuring charge
includes primarily severance pay, the buy out of lease obligations and the
write-off of leasehold improvements and other related assets. In addition,
incremental capital expenditures
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required over the 18-month period are expected to total $3.7 million for the
expansion of existing facilities and the establishment of new facilities to be
created as part of the plan. The estimated $46 million in annual savings when
compared with the restructuring charge of $32 million, represents a payback
period of less than two years.
"Our transition will be carefully timed and phased so that our more
than 8,600 long-term care clients and the residents they serve will be assured
of high-quality services without interruption during this period," Gemunder
said.
"Productivity enhancement and consolidation of our organization have
long been a part of our strategic plan. Today, with the implementation of
sweeping changes in the health care industry, it is more important than ever for
all health care providers to deliver the highest quality services in the most
cost-efficient manner possible. The time to enhance our productivity and
efficiency is now, not later. This will enable us to continue our industry
leadership, and maximize the financial strength and growth opportunities
inherent in our strategy," Gemunder said.
"Most importantly, the underlying fundamentals of our business are
sound and serve as a foundation for our growth: an aging population and
increasing life span, pharmaceuticals as the most cost-effective way of treating
the elderly, the accelerated pace of new drug discovery, and the growing need to
control health care costs. The initiatives we announced today enable us to
leverage our resources while reducing our expenses and, therefore, enhance our
ability to capitalize on these trends," he added.
Omnicare, based in Covington, Kentucky, is a leading geriatric
pharmaceutical care company. Currently serving approximately 617,000 residents
in more than 8,600 long-term care facilities in 43 states, Omnicare is the
nation's largest provider of professional pharmacy, related consulting and data
management services for skilled-nursing, assisted living and other institutional
health care providers. Omnicare also provides comprehensive clinical research
services for the pharmaceutical and biotechnology industries.
Statements in this press release concerning Omnicare's business outlook
or position or future economic performance, including savings and other benefits
expected to result from the productivity and consolidation program; the impact
of the program on productivity and operational efficiency, including
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the realization of synergies, economies of scale, and standardization of
practices and procedures; expectations concerning incremental capital
expenditures in connection with the establishment of new facilities; assurances
regarding the maintenance of services; expectations concerning work force
reductions; expectations concerning the accelerated pace of new drug discoveries
and the impact of such discoveries on the business of Omnicare; together with
other statements that are not historical, are forward-looking statements that
are estimates reflecting the best judgment of Omnicare based on currently
available information. Such forward-looking statements involve 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 Omnicare, include overall economic, financial and business
conditions; trends for the continued growth of the businesses of Omnicare; the
ability to implement the productivity and consolidation program and to realize
anticipated efficiencies, synergies, economies of scale and standardization;
pricing and other competitive factors in the industry; the effect of new
government regulations and/or legislative initiatives, including those relating
to reimbursement policies and in the interpretation and application of such
policies; the failure of Omnicare to obtain or maintain required regulatory
approvals or licenses; the demand for Omnicare's products and services;
variations in costs or expenses; the impact of the Year 2000 issues; and other
risks and uncertainties described in Omnicare's reports and filings with the
Securities and Exchange Commission.
For more information on Omnicare, Inc., via the Internet, including a
full menu of news releases, visit prnewswire.com\comp\136781.html.
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