1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended June 30, 1995
Commission File Number 1-8269
OMNICARE, INC.
--------------
Incorporated under the laws of I.R.S. Employer Identification
State of Delaware No. 31-1001351
2800 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202-4728
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(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (513) 762-6666
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Indicate by check mark whether the registrant:
1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports) and
2) has been subject to such filing requirement for the past 90 days.
Yes x No
--- ---
COMMON STOCK OUTSTANDING
NUMBER
OF
SHARES DATE
------ ----
Common Stock, $1 par value 26,255,558 June 30, 1995
2
OMNICARE, INC. AND
SUBSIDIARY COMPANIES
Index
PAGE
----
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1995 and December 31, 1994 3
Consolidated Statement of Income -
Three and six months ended -
June 30, 1995 and 1994 4
Consolidated Statement of Cash Flow -
Six months ended -
June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
Part II. Other Information:
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
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Item 1. Financial Statements
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
UNAUDITED
(in thousands except share data)
JUNE 30, DECEMBER 31,
1995 1994
-------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 28,090 $ 34,553
Marketable securities 26,005 45,245
Accounts receivable, less allowances 68,791 60,083
Inventories 25,638 21,116
Deferred income tax benefits 6,182 5,818
Other current assets 4,407 3,445
-------- --------
Total current assets 159,113 170,260
Properties and equipment, at cost
less accumulated depreciation 27,605 23,452
Intangible assets, less accumulated amortization 137,301 117,832
other assets 6,677 5,661
-------- --------
Total assets $330,696 $317,205
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,648 $ 17,666
Amounts payable pursuant to acquisition agreements 6,146 4,576
Current portion of long-term debt 701 5,549
Income taxes payable 318 1,875
Accrued employee compensation 3,427 3,230
Liabilities relating to discontinued operations 1,989 2,399
Other current liabilities 10,212 9,415
-------- --------
Total current liabilities 42,441 44,710
Long-term debt 82,720 85,323
Deferred income taxes 2,444 1,616
Amounts payable pursuant to acquisition agreements 1,400 2,910
Other noncurrent liabilities 2,877 2,542
-------- --------
Total liabilities 131,882 137,101
-------- --------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 44,000,000 shares
$1 par; 26,279,731 shares issued
(1994-30,672,051 shares) (a) 26,280 15,336
Paid-in capital 97,667 129,971
Retained earnings 80,291 71,475
-------- --------
204,238 216,782
Treasury stock, at cost-24,173 shares
(1994-4,976,548 shares) (a) (453) (33,060)
Deferred compensation (2,461) (858)
Unallocated stock of ESOP (2,510) (2,760)
-------- --------
Total stockholders' equity 198,814 180,104
-------- --------
Total liabilities and stockholders' equity $330,696 $317,205
======== ========
<FN>
(a) Adjusted For two-for-one stock split distributed on June 21, 1995.
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Income
UNAUDITED
(in thousands except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
1995 1994(a) 1995 1994(a)
---- ------- ---- -------
Sales $97,125 $73,901 $187,652 $142,116
Cost of sales 70,168 54,828 136,047 105,826
------- ------- -------- --------
Gross profit 26,957 19,073 51,605 36,290
Selling, general and administrative expenses 16,549 11,959 31,962 22,509
Acquisition expenses 1,292 - 1,292 -
------- ------- -------- --------
Operating income 9,116 7,114 18,351 13,781
Investment income 985 367 2,081 782
Interest expense (1,576) (1,677) (3,207) (3,317)
------- ------- -------- --------
Income before income taxes 8,525 5,804 17,225 11,246
Income taxes 3,629 2,241 7,078 4,274
------- ------- -------- --------
Net income $ 4,896 $ 3,563 $ 10,147 $ 6,972
======= ======= ======== ========
Earnings per share(b):
Primary $ .19 $ .16 $ .39 $ .32
Fully diluted $ .18 $ .16 $ .36 $ .31
Dividends paid per share(b) $ .025 $ .023 $ .05 $ .045
Weighted average number of
common shares outstanding(b):
Primary 26,230 22,111 26,100 22,087
======= ======= ======== ========
Fully diluted 32,506 28,067 32,390 28,007
======= ======= ======== ========
<FN>
(a) Restated for the June 30, 1995 acquisition of Specialized Pharmacy
Services, Inc. in a pooling of interests transaction.
(b) Adjusted for two-for-one stock split distributed on June 21, 1995.
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Cash Flow
UNAUDITED
(in thousands) SIX MONTHS ENDED
JUNE 30,
-------------------
1995 1994
------- --------
Cash flow from operating activities:
Net income $ 10,147 $ 6,972
Adjustments to reconcile net income
to net cash flow from operating activities:
Depreciation and amortization 4,936 3,901
Provision for doubtful accounts 1,351 850
Deferred tax provision 368 312
Changes in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (7,467) (8,252)
Inventories (2,906) (209)
Current and noncurrent assets (1,080) (1,342)
Income taxes payable (1,557) 20
Payables and accrued liabilities 1,423 1,924
Current and noncurrent liabilities 1,418 445
-------- --------
Net cash flow from operating activities 6,633 4,621
-------- --------
Cash flow from investing activities:
Acquisition of businesses (16,774) (28,488)
Capital expenditures (6,718) (3,826)
Marketable securities 19,240 -
Proceeds from sale of properties 187 297
Cash flow from discontinued operations (410) (582)
-------- --------
Net cash flow from investing activities (4,475) (32,599)
-------- --------
Cash flow from financing activities:
Net borrowings (repayments) under revolving
lines of credit (3,670) 1,727
Proceeds from long-term borrowings 856 261
Principal payments on long-term obligations (4,448) (868)
Exercise of stock options net of stock
tendered in payment (84) (61)
Dividends paid (1,275) (1,731)
-------- --------
Net cash flow from financing activities (8,621) (672)
-------- --------
Net decrease in cash and cash equivalents (6,463) (28,650)
Cash and cash equivalents at beginning of period 34,553 63,422
-------- --------
Cash and cash equivalents at end of period $ 28,090 $ 34,772
======== ========
Supplemental disclosures of cash flow information
Income taxes paid $ 6,603 $ 3,292
Interest paid 2,937 2,931
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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OMNICARE, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
1. The interim financial data are unaudited; however, in the opinion of the
management of Omnicare, Inc., the interim data include all adjustments (which
include only normal recurring adjustments) considered necessary for a fair
presentation of the consolidated financial position, results of operations and
cash flow of Omnicare, Inc. and its consolidated subsidiaries ("Company").
2. During the period January 1, 1995 to June 30, 1995, the Company has
completed six acquisitions including Shore Pharmaceutical Providers, Inc.
("Shore"), in Westbury, New York, in January, North Shore Pharmacy
Services, Inc. ("North Shore"), in Boston, Massachusetts, Genrex Nursing Home
Pharmacy Division of Genovese Drug Stores, Inc. ("Genrex"), in Melville, New
York, Consulting and Pharmaceutical Services, Inc. ("CAPS"), in Yakima,
Washington, all in March, Pioneer I.V., Ltd. ("Pioneer") in Moline, Illinois,
in May, and Specialized Pharmacy Services, Inc. ("Specialized"), in Livonia,
Michigan in June. The Shore, North Shore, Genrex, CAPS and Pioneer
acquisitions have been accounted for as purchase transactions and, accordingly,
the purchase price paid for each has been allocated to the fair value of the
assets acquired and liabilities assumed.
The Company acquired all the outstanding stock of Specialized on June 30,
1995 for 403,185 shares of the Company's common stock, $1 par value, in a
pooling of interests transaction, and, accordingly, the consolidated financial
statements have been restated for all periods prior to the acquisition to
include the
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historical results of operations, financial position and cash flow of
Specialized.
Summarized results of operations of the Company and Specialized for the
period from January 1, 1995 through June 30, 1995, the date of acquisition, are
as follows (in thousands):
OMNICARE SPECIALIZED
-------- -----------
Three months ended June 30, 1995:
Sales $ 88,738 $ 8,387
Net income 4,674 222
Three months ended June 30, 1994:
Sales $ 66,089 $7,812
Net income 3,536 27
Six months ended June 30, 1995:
Sales $171,211 $16,441
Net income 9,861 286
Six months ended June 30, 1994:
Sales $126,786 $15,330
Net income 6,918 54
3. On May 15, 1995, the Board of Directors declared a two-for-one split of the
Company's $1 par value common stock. As a result of the split, 12,944,180
additional shares were issued including 2,514,994 from treasury stock.
Additional paid-in capital and treasury stock were reduced by $45,524,000 and
$35,095,000, respectively. All references in the accompanying financial
statements to the number of common shares and per share amounts for 1994 have
been restated to reflect the stock split.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Results of Operations
On June 30, 1995, the Company issued 403,185 shares of its common stock for
all the outstanding common stock of Specialized Pharmacy Services, Inc.
("Specialized"). Specialized is a leading provider of institutional pharmacy
services for long-term care facilities in Michigan with $32 million in annual
sales. The acquisition was accounted for as a pooling of interests and,
accordingly, the Company's consolidated financial statements have been restated
for all periods presented herein to include the results of operations,
financial position and cash flows of Specialized (See Note 2 to the
Consolidated Financial Statements). In accordance with accounting rules for
pooling of interests transactions, a charge to operating income for
acquisition-related expenses was recorded in the second quarter of 1995.
The following table presents the Company's consolidated results of
operations excluding the effect of acquisition expenses (in thousands except per
share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ----------------
1995 1994 1995 1994
------ ------ ------- ------
Net income, as reported $4,896 $3,563 $10,147 $6,972
Acquisition expenses, net of taxes 989 - 989 -
------ ------ ------- ------
Pro forma net income $5,885 $3,563 $11,136 $6,972
====== ====== ======= ======
Pro forma earnings per share:
Primary $ 0.22 $ 0.16 $ 0.43 $ 0.32
====== ====== ======= ======
Fully diluted $ 0.21 $ 0.16 $ 0.39 $ 0.31
====== ====== ======= ======
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Excluding the aforementioned charge for acquisition expenses, net
income for the quarter ended June 30, 1995 rose 65% to $5,885,000 over net
income of $3,563,000 earned in the same period of 1994, while earnings per
share, on a primary basis, increased 38% to $0.22 and, on a fully diluted
basis, were up 31% to $0.21 versus the $0.16 earned on both a primary and fully
diluted basis in the second quarter of 1994. The average number of shares
outstanding was higher by 19%, on a primary basis, and 16%, on a fully diluted
basis, over the prior year quarter. The 1995 quarter included the
aforementioned acquisition expenses of $1,292,000 before taxes and $989,000
after taxes, or $0.04 per primary share and $0.03 per fully diluted share. Net
income for the 1995 second quarter, including these acquisition expenses, was
$4,896,000, or $0.19 per primary share and $0.18 per fully diluted share.
Sales for the second quarter of 1995 of $97,125,000 were 31% higher than
the $73,901,000 recorded in the comparable 1994 period. Operating income of
$10,408,000 for the 1995 quarter, excluding acquisition expenses, was 46%
higher than in the prior year quarter.
Excluding the acquisition expenses from the results for the first six
months of 1995, net income increased 60% to $11,136,000 over the $6,972,000
earned in the comparable 1994 period. Primary earnings per share, on this
basis, of $0.43 were up 34% over the $0.32 earned in the first half of 1994 and
fully diluted earnings per share of $0.39 were up 26% over the $0.31 earned in
the 1994 period. Net income, including acquisition expenses, for the 1995
six-month period was $10,147,000 versus $6,972,000 for the 1994 period and
earnings per share for the 1995 period were $0.39 on a primary basis and $0.36
fully diluted versus $0.32 primary and $0.31 fully diluted in the 1994 first
half.
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Sales for the six months ended June 30, 1995 were $187,652,000, up 32%
over the $142,116,000 earned in the 1994 first half. Operating income of
$19,643,000 for the 1995 period, excluding acquisition expenses, was 43% higher
than in the 1994 period.
The increases in quarterly and year-to-date sales over comparable prior
year periods are due to the Company's continued focus on advancing its growth
strategy in the long-term care pharmacy market. The year-to-date results have
benefitted from the contribution of acquisitions made during the second half of
1994 and in 1995, as well as internal growth. During the quarter, two
acquisitions were completed (See Note 2 to the Consolidated Financial
Statements), and since June 30, 1995, one additional acquisition has been
completed, bringing the total number of acquisitions to date in 1995 to seven.
Together, these acquisitions have added approximately 36,400 new nursing
facility residents to Omnicare's base of business. The June acquisition of
Specialized, based in Livonia, Michigan, added 18,100 new nursing facility
residents and approximately $32 million in annual sales. In May, Omnicare
completed the acquisition of Pioneer I.V., Ltd., an institutional pharmacy
provider serving 1,150 nursing facility residents in Moline, Illinois. Also,
during July, the Company acquired CPM Datascript, Corp., based in Hollis, New
York, which provides long-term care pharmacy services to over 3,400 residents
on Long Island and in New York City.
The Company's existing pharmacy operations continued to generate solid
growth through the addition of new clients, increases in drug utilization
reflecting higher acuity levels of nursing home residents, and the rapid
expansion of infusion therapy services.
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As a result of both acquisition activity and internal growth, the total
number of nursing facility residents served by the Company rose to
approximately 190,700, up 29% over year-end 1994 and up 57% over the number
served one year ago.
Interest expense, net of investment income, of $591,000 and $1,126,000,
for the three and six month periods ended June 30, 1995, respectively,
decreased by $719,000 and $1,409,000, respectively, over the same periods of
1994 due to an increase in the invested cash balance, owing primarily to the
receipt of $59.2 million in net proceeds from a stock offering in November
1994.
During the three and six month periods ended June 30, 1995, the effective
tax rates of 42.6% and 41.1%, respectively, increased 4.0 and 3.1 percentage
points, respectively, over the comparable prior year periods. These 1995
increases were caused by the favorable impact on last year's tax rate of the
income of Evergreen Pharmaceutical East, Inc., an S Corporation, acquired on
September 30, 1994 in a pooling of interests transaction, which was not subject
to corporate tax. The 1995 rates were also affected by the nondeductibility of
a portion of the expenses related to the Specialized acquisition. Had these
acquisition expenses not been incurred in 1995, the effective tax rates for the
three and six month periods ended June 30, 1995 would have been 40.1% and
39.9%, respectively.
Liquidity and Capital Resources
Cash and cash equivalents and marketable securities at June 30, 1995
decreased $25,703,000 to $54,095,000 from the $79,798,000 at December 31, 1994.
The Company's capital requirements are primarily
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related to its acquisition program. In the first six months of 1995, the
Company made six acquisitions for an aggregate capital investment of
approximately $26 million. Such acquisitions were financed from cash and cash
equivalents and a total of 788,429 shares of the Company's common stock
(adjusted for the two-for-one stock split distributed June 21, 1995). There are
no material commitments outstanding at June 30, 1995 other than
acquisition-related payments which may be made contingent on the performance
of businesses acquired.
In April, 1995 the Company increased its revolving line of credit from $50
million to $135 million at significantly more favorable terms. The Company's
current ratio at June 30, 1995 and December 31, 1994 was 3.8 to 1.
On February 1, 1995, the Company's Board of Directors increased the
quarterly cash dividend by 11% to 2.5 cents per share, on a post-June 21, 1995
stock split basis, for an indicated annual rate of 10 cents per share in 1995.
Dividends paid consisted of (in thousands):
Six months ended
June 30,
-----------------
1995 1994
-------- -------
Omnicare, Inc. quarterly dividends of 2.5 cents and
2.3 cents per share in 1995 and 1994, respectively $1,275 $ 834
Dividends paid to former Lo-Med owners(a) - 402
Dividends paid to former Evergreen owners(a) - 495
------ ------
Total $1,275 $1,731
======= ======
(a) Lo-Med and Evergreen were acquired in pooling of interests transactions
on June 30, 1994 and September 30, 1994, respectively.
The Company believes its sources of liquidity and capital are adequate for
its needs.
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PART II. -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Omnicare held its Annual Meeting of Stockholders on May 15, 1995.
(b) The names of each director elected at this Annual Meeting are as follows:
Edward L. Hutton Thomas C. Hutton
Joel F. Gemunder Patrick E. Keefe
Ronald K. Baur Sandra E. Laney
Kenneth W. Chesterman Andrea R. Lindell
Charles H. Erhart, Jr. Sheldon Margen, M.D.
Mary Lou Fox Kevin J. McNamara
John A. Mount Timothy S. O'Toole
Cheryl D. Hodges D. Walter Robbins
(c) The Stockholders approved the adoption of the amendment to the
Company's Certificate of Incorporation increasing the number of
authorized shares of Common Stock from 22,000,000 to 44,000,000.
9,613,437 votes were cast in favor of the proposal, 698,070 votes
were cast against it, 22,979 votes abstained and 3,847 were
broker non-votes.
(d) The Stockholders approved the adoption of the Company's 1995
Premium-Priced Stock Option Plan. 10,150,228 votes were cast in
favor of the proposal, 133,288 votes were cast against it and
54,817 votes abstained.
(e) The Stockholders ratified the selection by the Board of Directors
of Price Waterhouse LLP as independent accountants for the
Company and its consolidated subsidiaries for the year 1995.
10,250,523 votes were cast in favor of the proposal, 31,250 votes
were cast against it, 26,650 votes abstained and zero were broker
non-votes.
With respect to the election of directors, the number of votes
cast for each nominee was as follows:
VOTES BROKER
VOTES FOR WITHHELD NON-VOTES
--------- -------- ---------
E. L. Hutton 10,308,384 29,949 -0-
J. F. Gemunder 10,311,228 24,261 -0-
R. K. Baur 10,311,628 23,461 -0-
K. W. Chesterman 10,310,681 25,355 -0-
C. H. Erhart, Jr. 10,308,279 30,159 -0-
M. L. Fox 10,311,769 23,179 -0-
C. D. Hodges 10,311,476 23,765 -0-
T. C. Hutton 10,312,126 22,465 -0-
P. E. Keefe 10,311,826 23,065 -0-
S. E. Laney 10,312,131 22,455 -0-
A. R. Lindell 10,311,072 24,573 -0-
S. Margen 10,308,367 29,983 -0-
K. J. McNamara 10,311,781 23,155 -0-
J. A. Mount 10,311,068 24,581 -0-
T. S. O'Toole 10,311,723 23,271 -0-
D. W. Robbins 10,306,990 32,737 -0-
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT
------- -------
3(i) Articles of Incorporation:
Omnicare, Inc. Restated Certificate of Incorporation was
filed as Exhibit 3 to its Registration Statement on Form
S-3 (Registration No. 33-59689) and is incorporated herein
by reference.
4 Instruments defining the Rights of
Security Holders, including Indentures:
Omnicare, Inc. Revolving Credit Agreement dated as of
April 7, 1995
10 Material Contracts:
Omnicare, Inc. 1995 Premium-Priced Stock Option Plan was
filed as an exhibit to its Proxy Statement for its 1995
Annual Meeting of Stockholders and is incorporated herein
by reference.
11 Computation of Earnings per Share
27.1 Financial Data Schedule for the six months ended June 30, 1995.
27.2 Financial Data Schedule for the three months ended March 31,
1995 (as restated).
27.3 Financial Data Schedule for the year ended December 31,
1994 (as restated).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter ended June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Omnicare, Inc.
-----------------------------------
(Registrant)
Date August 14, 1995 By /s/ Joel F. Gemunder
------------------- --------------------------------
Joel F. Gemunder
President
(Principal Executive Officer)
Date August 14, 1995 By /s/ Thomas R. Marsh
------------------- --------------------------------
Thomas R. Marsh
Vice President and
Controller and Acting Treasurer
(Principal Financial and
Accounting Officer)
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