Omnicare Reports Third-Quarter Results
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-- Adjusted Diluted EPS from Continuing Operations of 76 Cents, Including
Favorable Income Tax Adjustment of $19 Million, or 16 Cents Per Diluted
Share
-- Strong Quarterly Operating Cash Flow of $169 Million
-- Year-Over-Year, Sequential Increases in Number of Beds Served
-- Company Raises 2009 Cash Flow Guidance; Sees Full-Year 2009 Earnings
Guidance Range (Before Favorable Income Tax Adjustments) of $2.50 -
$2.52 In Adjusted Diluted EPS
COVINGTON, Ky.--(BUSINESS WIRE)-- Omnicare, Inc. (NYSE: OCR), one of the nation's leading providers of pharmaceutical care for the elderly, reported today financial results for its third quarter ended September 30, 2009.
Commenting on the results for the quarter, Joel F. Gemunder, Omnicare's president and chief executive officer, said, "We are pleased to report third quarter earnings (before tax benefits) that were consistent with Street consensus estimates and cash flow that continued exceptionally strong. During the quarter, we made further operational advancements within our pharmacy business, as we benefitted from incremental cost savings attributable to our productivity and cost reduction initiatives and delivered another quarter of net bed growth. Moreover, our specialty pharmacy business continued to generate substantial growth and our hospice pharmacy business also contributed positively to our performance for the quarter. These factors helped mitigate the effects of anticipated reimbursement actions on certain generic drugs and the softness in our contract research business in the quarter. Moreover, tight working capital management drove our highest quarterly cash flow output of the year-to-date, enabling us to further improve our financial position."
Third-Quarter Results
Financial results from continuing operations for the quarter ended September 30, 2009 under U.S. Generally Accepted Accounting Principles ("GAAP"), including a favorable income tax benefit, restructuring and related charges, the effects of recently adopted accounting rules and other special items described below, as compared with the same prior-year period, were as follows:
-- Earnings per diluted share were 67 cents versus 46 cents
-- Income from continuing operations was $78.7 million as compared with
$54.4 million
-- Sales were $1,543.9 million as compared with $1,578.3 million
Results for both the third quarter of 2009 and 2008 include the impact of special items and accounting changes (described below) totaling $17.5 million pretax and $28.8 million pretax, respectively. Adjusting for these special items and accounting changes, but including the impact of the aforementioned favorable income tax adjustment, results from continuing operations for the quarter ended September 30, 2009 and 2008, respectively, were as follows:
-- Adjusted earnings per diluted share were 76 cents versus 61 cents
-- Adjusted income from continuing operations was $89.5 million as compared
with $72.0 million
-- Sales were $1,543.9 million as compared with $1,578.3 million
As mentioned above, the third quarter 2009 results include a favorable income tax adjustment of approximately $19 million, or 16 cents per diluted share, primarily attributable to the reversal of certain unrecognized tax benefits for tax positions settled through the expiration of statutes of limitations.
Financial Position
Operating cash flow for the quarter ended September 30, 2009 was $168.8 million versus $103.0 million in the comparable prior-year quarter. The 2008 third quarter included one extra weekly payment to the Company's drug wholesaler of approximately $65 million.
Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the third quarter of 2009, including the special items and accounting changes discussed below, were $159.0 million versus $156.5 million in the third quarter of 2008. Excluding the special items and accounting changes, adjusted EBITDA in the 2009 quarter was $168.4 million versus $178.8 million in the 2008 quarter.
During the third quarter of 2009, the Company repaid $75.0 million of its senior term A loan, had no borrowings outstanding on its revolving credit facility and, at September 30, 2009, had $327.1 million in cash on its balance sheet. The Company's total debt to total capital at September 30, 2009 was 36.1%, down approximately 390 basis points from 40.0% at September 30, 2008 as restated for the retrospective adoption of the authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement).
To facilitate comparisons and to enhance the understanding of core operating performance, this discussion includes financial measures that are adjusted from the comparable amount under GAAP to exclude the impact of the special items and accounting changes described elsewhere herein, and to present results on a continuing operations basis. 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.
Pharmacy Services Business
Omnicare's pharmacy services business generated sales of $1,507.0 million for the third quarter of 2009 as compared with sales of $1,526.8 million reported in the third quarter of 2008. Adjusted operating profit in this business was $164.4 million in the 2009 third quarter as compared with the $174.2 million earned in the same 2008 quarter.
At September 30, 2009, Omnicare served long-term care facilities as well as chronic care and other settings comprising approximately 1,389,000 beds, including approximately 63,000 patients served under the patient assistance programs of its specialty pharmacy services business. The comparable number at June 30, 2009 was 1,384,000 beds (including approximately 59,000 patients served under the patient assistance programs of the specialty pharmacy services business). The comparable number at September 30, 2008 was 1,387,000 beds (including approximately 67,000 patients served under the patient assistance programs of the specialty pharmacy services business). The Company noted that sequential quarterly growth in beds served in the third quarter was achieved despite approximately 5,500 beds voluntarily foregone owing to pricing or payment issues as well as facility closures or sales.
Revenues in the pharmacy services business for the third quarter of 2009 were modestly lower than in the 2008 third quarter owing largely to the increased availability and utilization of generic drugs, reductions in reimbursement and/or utilization for certain drugs and a lower year-over-year average number of net beds served, along with a shift in mix toward assisted living which typically has lower penetration rates. These factors were largely offset by drug price inflation, continued strong growth in specialty pharmacy services and the increased use of certain higher acuity drugs. The year-over-year decrease in third-quarter operating profit was due primarily to reductions in reimbursement and/or utilization for certain drugs, partially offset by the increased use of higher margin generic drugs as well as reduced costs and increased productivity associated with the Full Potential Plan and strategic sourcing initiatives.
CRO Business
The Company's CRO business generated revenues of $36.9 million on a GAAP basis for the third quarter of 2009 as compared with the $51.5 million in revenues generated in the same prior-year quarter. Included in the 2009 and 2008 periods were reimbursable out-of-pocket expenses totaling $3.4 million and $8.3 million, respectively. Excluding these reimbursable out-of-pocket expenses, adjusted revenues were $33.5 million for the 2009 third quarter as compared with $43.2 million for the same prior-year period. Adjusted operating profit for the 2009 third quarter totaled $0.7 million versus $4.5 million in the same prior-year period. Backlog at September 30, 2009 was $235.7 million.
Nine Months Results
Financial results from continuing operations for the nine months ended September 30, 2009, as compared with the same prior-year period, including the impact of the favorable income tax adjustment and the special items and accounting changes described below were as follows:
-- Earnings per diluted share were $1.30 versus 97 cents
-- Income from continuing operations was $153.0 million as compared with
$115.4 million
-- Sales were $4,626.5 million as compared with $4,631.4 million
Results from continuing operations for both the first nine months of 2009 and 2008 include the impact of special items and accounting changes (which are described later herein) of $123.3 million pretax and $100.1 million pretax, respectively. Adjusting for these special items, but including the impact of the favorable income tax adjustment, results for the nine months ended September 30, 2009, as compared with the same prior-year period, were as follows:
-- Adjusted earnings per diluted share were $2.04 versus $1.49
-- Adjusted income from continuing operations was $240.3 million as
compared with $176.8 million
-- Sales were $4,626.5 million as compared with $4,631.4 million
As mentioned earlier herein, the 2009 year-to-date results include a favorable income tax adjustment of approximately $19 million, or 16 cents per diluted share, primarily attributable to the reversal of certain unrecognized tax benefits for tax positions settled through the expiration of statutes of limitations.
EBITDA for the first nine months of 2009, including special items and accounting changes, was $422.2 million versus $391.1 million in the comparable prior-year period. Excluding special items and accounting changes, adjusted EBITDA in the first nine months of 2009 was $520.5 million as compared with $472.0 million in the first nine months of 2008.
Operating cash flow for the first nine months of 2009 totaled $431.0 million. Operating cash flow over the same period in 2008 was $330.2 million. The 2008 period included one extra weekly payment to the Company's drug wholesaler of approximately $65 million.
Special Items and Accounting Changes
As noted above, the results for the third quarter of 2009 include the impact of special items and accounting changes totaling approximately $17.5 million pretax ($10.8 million aftertax, or approximately 9 cents per diluted share). Operating income for the third quarter of 2009 includes a pretax charge of $6.3 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, a pretax charge of $2.0 million relating to incremental costs associated with the closure of one of the Company's repackaging operations, and $1.1 million in pretax charges relating primarily to stock option expense under the prior implementation of the authoritative guidance for share-based payment accounting change. The third-quarter results also include special litigation charges of $1.7 million pretax associated with litigation and other related professional fees in connection primarily with certain government inquiries, the Company's lawsuit against UnitedHealth Group, Inc. and its affiliates ("United"), and certain large customer disputes.
As a result of the Company's retrospective adoption of the authoritative guidance for accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement), effective January 1, 2009, results for the third quarter of 2009 also include an incremental, non-cash interest expense of $7.1 million pretax. In addition, the Company reported a pretax credit in the 2009 third quarter of $0.6 million comprised primarily of a reduction in the Company's original estimate of contingent consideration payable for an acquisition under the recently adopted authoritative guidance for business combinations.
The results for the third quarter of 2008 include the impact of special items and an accounting change totaling $28.8 million pretax ($17.6 million aftertax, or approximately 15 cents per diluted share). Operating income for the third quarter of 2008 includes special litigation charges of $13.5 million pretax associated with litigation and other related professional fees in connection primarily with the Company's lawsuit against United and certain large customer disputes, as well as previously disclosed government inquiries, a pretax charge of $7.7 million for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax charges of $6.5 million pertaining to the aforementioned adoption of the new convertible debt authoritative guidance, and a pretax charge of $1.2 million relating to incremental costs associated with the closure of one of the Company's repackaging operations.
Results for the first nine months of 2009 include special items totaling $123.3 million pretax ($87.4 million aftertax, or approximately 74 cents per diluted share), including $71.8 million pretax associated with the above-mentioned litigation and other related professional fees, $19.1 million pretax for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax charges of $20.8 million pertaining to the adoption of the aforementioned new convertible debt authoritative guidance, $5.2 million pretax relating to incremental costs associated with the closure of one of the Company's repackaging operations, $4.2 million in pretax charges relating primarily to stock option expense under share-based payment authoritative guidance, and $2.2 million pretax relating to the adoption of recently issued authoritative guidance for business combinations.
Results for the first nine months of 2008 include special items totaling $100.1 million pretax ($61.5 million aftertax, or approximately 52 cents per diluted share), including $51.1 million pretax associated with the above-mentioned litigation and other related professional fees, $24.9 million pretax for restructuring and other related costs associated primarily with the implementation of the Omnicare Full Potential Plan, pretax charges of $19.3 million pertaining to the adoption of the aforementioned new convertible debt authoritative guidance, and $4.8 million pretax relating to incremental costs associated with the closure of one of the Company's repackaging operations.
Outlook
The Company also noted that, with one quarter remaining, it is tightening its range of full-year 2009 earnings guidance to $2.50-$2.52 per diluted share from continuing operations, as adjusted to exclude special items and accounting changes. Incremental to this range will be the favorable income tax adjustment that benefitted its third quarter results of 16 cents per diluted share and a similar tax benefit of approximately 10 cents per diluted share that is expected in the fourth quarter. Additionally, in light of its strong cash flow for the year-to-date, the Company increased its full-year 2009 cash flow guidance to $500-$550 million (excluding one-time litigation payments).
Webcast Today
Omnicare will hold a conference call to discuss third-quarter results today, Thursday, November 5, 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, chronic care and other settings comprising approximately 1.4 million beds in 47 states, the District of Columbia and Canada. Omnicare is the largest U.S. provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers as well as for hospice patients in homecare and other settings. Omnicare's pharmacy services also include distribution and patient assistance services for specialty pharmaceuticals. Omnicare offers clinical research services for the pharmaceutical and biotechnology industries in 31 countries worldwide. For more information, visit the company's Web site at www.omnicare.com.
Forward-Looking Statements
In addition to historical information, this press release contains certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Such forward-looking statements, together with other statements that are not historical, are based on management's current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in the Company's Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: overall economic, financial, political and business conditions; trends in the long-term healthcare, pharmaceutical and contract research industries; the ability to attract new clients and service contracts and retain existing clients and service contracts; the ability to consummate pending acquisitions; trends for the continued growth of the Company's businesses; trends in drug pricing; delays and reductions in reimbursement by the government and other payors to customers and to the Company; the overall financial condition of the Company's customers and the ability of the Company to assess and react to such financial condition of its customers; the ability of vendors and business partners to continue to provide products and services to the Company; the continued successful integration of acquired companies; the continued availability of suitable acquisition candidates; the ability to attract and retain needed management; competition for qualified staff in the healthcare industry; 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 potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, including its implementing regulations and any subregulatory guidance, reimbursement and drug pricing policies and changes in the interpretation and application of such policies, including changes in the calculation of average wholesale price; government budgetary pressures and shifting priorities; federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of the Company's contracts with Medicare Part D plan sponsors or to the proportion of the Company's Part D business covered by specific contracts; 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 as compared to eventual outcomes; events or circumstances which result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; the final outcome of divestiture activities; market conditions; the outcome of audit, compliance, administrative, regulatory 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 costs to comply with the Company's Corporate Integrity Agreements. 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.
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,
2009 2008 2009 2008
(a)(c)(e)(g) (a)(b)(c)(e) (a)(c)(f)(g) (a)(b)(c)(f)
Net sales $ 1,543,901 $ 1,578,251 $ 4,626,513 $ 4,631,401
Cost of sales 1,175,946 1,172,791 3,496,492 3,482,236
Repack matters 1,755 1,041 3,672 4,175
Gross profit 366,200 404,419 1,126,349 1,144,990
Selling, general and
administrative 203,394 228,325 623,018 681,503
expenses
Provision for 23,098 27,180 71,079 79,425
doubtful accounts
Restructuring and
other related 6,295 7,655 19,095 24,887
charges
Litigation and other
related professional 1,739 13,479 71,761 51,143
fees
Repack matters 277 129 1,549 628
Acquisition and (632 ) - 2,218 -
other related costs
Operating income 132,029 127,651 337,629 307,404
Investment income 1,202 1,441 4,641 6,011
Interest expense (29,588 ) (36,662 ) (90,650 ) (109,168 )
Amortization of
discount on (7,059 ) (6,544 ) (20,783 ) (19,265 )
convertible notes
Income from
continuing 96,584 85,886 230,837 184,982
operations before
income taxes
Income tax expense 17,838 31,536 77,869 69,601
Income from
continuing 78,746 54,350 152,968 115,381
operations
Loss from
discontinued
operations,
including impairment (6,231 ) (591 ) (20,840 ) (2,537 )
charge of $12,065
aftertax during the
nine months ended
2009 period (a)
Net income $ 72,515 $ 53,759 $ 132,128 $ 112,844
Earnings (loss) per
common share -
Basic:(d)
Continuing $ 0.67 $ 0.47 $ 1.31 $ 0.98
operations
Discontinued (0.05 ) (0.01 ) (0.18 ) (0.02 )
operations (a)
Net income $ 0.62 $ 0.46 $ 1.13 $ 0.96
Earnings (loss) per
common share -
Diluted:(d)
Continuing $ 0.67 $ 0.46 $ 1.30 $ 0.97
operations
Discontinued (0.05 ) (0.01 ) (0.18 ) (0.02 )
operations (a)
Net income $ 0.61 $ 0.46 $ 1.12 $ 0.95
Weighted average
number of common
shares outstanding:
Basic 117,598 115,983 116,970 117,904
Diluted 118,145 117,483 117,711 118,764
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Summary Segment Financial Data, Non-GAAP Basis (h)
Excluding Reimbursable Out-of-Pockets and Special Items
(000s)
Unaudited
Corporate
Pharmacy CRO and Consolidated
Services (a) Services Consolidating Totals (a)
Three months
ended September
30, 2009 (a):
Adjusted net $ 1,507,031 $ 33,505 (i) $ - $ 1,540,536 (i)
sales
Adjusted
operating income
(expense) from $ 164,401 $ 663 $ (22,547 ) $ 142,517
continuing
operations (j)
Depreciation and
amortization 19,455 526 14,023 34,004
expense
Amortization of
discount on - - (7,059 ) (7,059 )
convertible notes
Incremental
share-based
payment - - (1,054 ) (1,054 )
amortization
expense
Adjusted earnings
before interest,
income taxes,
depreciation and $ 183,856 $ 1,189 $ (16,637 ) $ 168,408
amortization
("EBITDA") from
continuing
operations (j)(k)
Three months
ended September
30, 2008 (a)(b):
Adjusted net $ 1,526,787 $ 43,184 (i) $ - $ 1,569,971 (i)
sales
Adjusted
operating income
(expense) from $ 174,238 $ 4,544 $ (28,827 ) $ 149,955
continuing
operations (j)
Depreciation and
amortization 21,154 473 13,716 35,343
expense
Amortization of
discount on - - (6,544 ) (6,544 )
convertible notes
Adjusted EBITDA
from continuing $ 195,392 $ 5,017 $ (21,655 ) $ 178,754
operations (j)(k)
Nine months ended
September 30,
2009 (a):
Adjusted net $ 4,504,097 $ 108,108 (i) $ - $ 4,612,205 (i)
sales
Adjusted
operating income
(expense) from $ 501,960 $ 5,327 $ (67,126 ) $ 440,161
continuing
operations (j)
Depreciation and
amortization 61,682 1,469 42,206 105,357
expense
Amortization of
discount on - - (20,783 ) (20,783 )
convertible notes
Incremental
share-based
payment - - (4,237 ) (4,237 )
amortization
expense
Adjusted EBITDA
from continuing $ 563,642 $ 6,796 $ (49,940 ) $ 520,498
operations (j)(k)
Nine months ended
September 30,
2008 (a)(b):
Adjusted net $ 4,477,133 $ 129,807 (i) $ - $ 4,606,940 (i)
sales
Adjusted
operating income
(expense) from $ 459,754 $ 12,386 $ (83,903 ) $ 388,237
continuing
operations (j)
Depreciation and
amortization 59,353 1,362 42,280 102,995
expense
Amortization of
discount on - - (19,265 ) (19,265 )
convertible notes
Adjusted EBITDA
from continuing $ 519,107 $ 13,748 $ (60,888 ) $ 471,967
operations (j)(k)
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheets, GAAP Basis
(000s)
Unaudited
September 30, December 31,
2009 (a) 2008 (a)(b)
ASSETS
Current assets:
Cash and cash equivalents $ 324,137 $ 214,668
Restricted cash 2,929 1,891
Accounts receivable, net 1,248,370 1,337,558
Unbilled receivables, CRO 26,239 22,329
Inventories 345,554 449,023
Deferred income tax benefits 147,430 134,249
Other current assets 180,912 176,989
Current assets of discontinued operations 23,180 34,986
Total current assets 2,298,751 2,371,693
Properties and equipment, net 212,331 208,527
Goodwill 4,246,320 4,211,221
Identifiable intangible assets, net 305,678 329,446
Other noncurrent assets 284,096 272,113
Noncurrent assets of discontinued operations 44,724 57,245
Total noncurrent assets 5,093,149 5,078,552
Total assets $ 7,391,900 $ 7,450,245
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 256,484 $ 333,728
Accrued employee compensation 33,419 50,082
Deferred revenue, CRO 12,964 23,227
Current debt 176,374 1,784
Other current liabilities 289,736 221,632
Current liabilities of discontinued operations 9,098 10,336
Total current liabilities 778,075 640,789
Long-term debt, notes and convertible debentures 1,972,952 2,352,824
Deferred income tax liabilities 571,197 525,426
Other noncurrent liabilities 257,983 276,284
Noncurrent liabilities of discontinued operations 53 53
Total noncurrent liabilities 2,802,185 3,154,587
Total liabilities 3,580,260 3,795,376
Stockholders' equity 3,811,640 3,654,869
Total liabilities and stockholders' equity $ 7,391,900 $ 7,450,245
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statement of Cash Flows, GAAP Basis
(000s)
Unaudited
Three months ended Nine month ended
September 30, 2009 (a) September 30, 2009 (a)
Cash flows from operating
activities:
Net income $ 72,515 $ 132,128
Loss from discontinued 6,231 20,840
operations
Adjustments to reconcile net
income to net cash flows from
operating activities:
Depreciation expense 11,868 37,335
Amortization expense 22,136 68,022
Changes in assets and
liabilities, net of effects 56,003 172,708
from acquisition and
divestiture of businesses
Net cash flows from operating
activities of continuing 168,753 431,033
operations
Net cash flows from operating
activities of discontinued (94 ) 568
operations
Net cash flows from operating 168,659 431,601
activities
Cash flows from investing
activities:
Acquisition of businesses, net (21,398 ) (64,498 )
of cash received
Capital expenditures (10,951 ) (26,266 )
Transfer of cash to trusts for
employee health and severance (305 ) 538
costs, net of payments out of
the trust
Disbursements for loans and (5,600 ) (5,600 )
investments
Other (140 ) (1,929 )
Net cash flows used in
investing activities of (38,394 ) (97,755 )
continuing operations
Net cash flows used in
investing activities of (60 ) (504 )
discontinued operations
Net cash flows used in (38,454 ) (98,259 )
investing activities
Cash flows from financing
activities:
Payments on revolving credit
facility, term A loan and (75,383 ) (226,376 )
long-term borrowings and
obligations
Decrease in cash overdraft (1,586 ) (1,723 )
balance
Payments for stock awards and
exercise of stock options, net 700 10,164
of stock tendered in payment
Excess tax benefits from 1 2,367
stock-based compensation
Dividends paid (2,691 ) (8,043 )
Net cash flows used in
financing activities of (78,959 ) (223,611 )
continuing operations
Net cash flows used in
financing activities of - -
discontinued operations
Net cash flows used in (78,959 ) (223,611 )
investing activities
Effect of exchange rate changes (1,029 ) (198 )
on cash
Net increase in cash and cash 50,217 109,533
equivalents
Less (decrease) increase in cash
and cash equivalents of (154 ) 64
discontinued operations
Increase in cash and cash
equivalents of continuing 50,371 109,469
operations
Cash and cash equivalents at 273,766 214,668
beginning of period
Cash and cash equivalents at end $ 324,137 $ 324,137
of period
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (h)
(000s, except per share amounts)
Unaudited
Three months ended Nine months ended
September 30, September 30,
2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b)
Adjusted net sales:
Net sales (c) $ 1,543,901 $ 1,578,251 $ 4,626,513 $ 4,631,401
Reimbursable (3,365 ) (8,280 ) (14,308 ) (24,461 )
out-of-pockets (c)
Adjusted net
sales, excluding $ 1,540,536 $ 1,569,971 $ 4,612,205 $ 4,606,940
reimbursable
out-of-pockets (i)
Adjusted gross
profit:
Gross profit $ 366,200 $ 404,419 $ 1,126,349 $ 1,144,990
Special items (j) 1,755 1,041 3,672 4,175
Adjusted gross $ 367,955 $ 405,460 $ 1,130,021 $ 1,149,165
profit (j)
Adjusted operating
income (earnings
before interest and
income taxes,
"EBIT"):
EBIT $ 132,029 $ 127,651 $ 337,629 $ 307,404
Special items (j) 10,488 22,304 102,532 80,833
Adjusted EBIT (j) $ 142,517 $ 149,955 $ 440,161 $ 388,237
Adjusted income from
continuing
operations before
income taxes:
Income from
continuing $ 96,584 $ 85,886 $ 230,837 $ 184,982
operations before
income taxes
Special items (j) 17,547 28,848 123,315 100,098
Adjusted income
from continuing $ 114,131 $ 114,734 $ 354,152 $ 285,080
operations before
income taxes (j)
Adjusted income, net
of taxes:
Income from
continuing $ 78,746 $ 54,350 $ 152,968 $ 115,381
operations
Special items, net 10,754 17,632 87,380 61,455
of taxes (j)
Adjusted income
from continuing 89,500 71,982 240,348 176,836
operations (j)
Loss from
discontinued
operations,
including
impairment charge (6,231 ) (591 ) (20,840 ) (2,537 )
of $12,065 aftertax
during the nine
months ended 2009
period (a)
Adjusted net $ 83,269 $ 71,391 $ 219,508 $ 174,299
income
Adjusted earnings
per share ("EPS"):
(d)
Basic earnings per
share from $ 0.67 $ 0.47 $ 1.31 $ 0.98
continuing
operations
Special items, net 0.09 0.15 0.75 0.52
of taxes (j)
Adjusted basic
earnings per
share from $ 0.76 $ 0.62 $ 2.05 $ 1.50
continuing
operations (j)
Basic earnings per
share from (0.05 ) (0.01 ) (0.18 ) (0.02 )
discontinued
operations
Adjusted basic
earnings per $ 0.71 $ 0.62 $ 1.88 $ 1.48
share
Diluted earnings
per share from $ 0.67 $ 0.46 $ 1.30 $ 0.97
continuing
operations
Special items, net 0.09 0.15 0.74 0.52
of taxes (j)
Adjusted diluted
earnings per
share from $ 0.76 $ 0.61 $ 2.04 $ 1.49
continuing
operations (j)
Diluted earnings
per share from (0.05 ) (0.01 ) (0.18 ) (0.02 )
discontinued
operations
Adjusted diluted
earnings per $ 0.71 $ 0.61 $ 1.87 $ 1.47
share
Adjusted earnings
before interest,
income taxes,
depreciation and
amortization
("EBITDA") from
continuing
operations: (k)
EBIT from
continuing $ 132,029 $ 127,651 $ 337,629 $ 307,404
operations
Depreciation and
amortization 34,004 35,343 105,357 102,995
expense
Amortization of
discount on (7,059 ) (6,544 ) (20,783 ) (19,265 )
convertible notes
EBITDA from
continuing 158,974 156,450 422,203 391,134
operations (k)
Special items (j) 9,434 22,304 98,295 80,833
Adjusted EBITDA
from continuing $ 168,408 $ 178,754 $ 520,498 $ 471,967
operations (j)(k)
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (h)
(000s)
Unaudited
Three months ended Nine months ended
September 30, September 30,
2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b)
EBITDA from continuing
operations to net cash
flows from operating
activities:
EBITDA from continuing $ 158,974 $ 156,450 $ 422,203 $ 391,134
operations(k)
(Subtract)/Add:
Interest expense, net of (28,386 ) (35,221 ) (86,009 ) (103,157 )
investment income
Income tax provision (17,838 ) (31,536 ) (77,869 ) (69,601 )
Changes in assets and
liabilities, net of
effects from acquisition 56,003 13,293 172,708 111,855
and divestitures of
businesses
Net cash flows from
operating activities of 168,753 102,986 431,033 330,231
continuing operations
Net cash flows from
operating activities of (94 ) 287 568 1,654
discontinued operations
Net cash flows from $ 168,659 $ 103,273 $ 431,601 $ 331,885
operating activities
Free cash flow from
continuing operations: (l)
Net cash flows from
operating activities of $ 168,753 $ 102,986 $ 431,033 $ 330,231
continuing operations
Capital expenditures (10,951 ) (18,249 ) (26,266 ) (45,679 )
Dividends (2,691 ) (2,668 ) (8,043 ) (8,080 )
Free cash flow from $ 155,111 $ 82,069 $ 396,724 $ 276,472
continuing operations(l)
Segment Reconciliations -
Pharmacy Services:
Adjusted EBIT - Pharmacy
Services:
EBIT from continuing $ 158,814 $ 152,783 $ 409,553 $ 382,684
operations
Special items (j) 5,587 21,455 92,407 77,070
Adjusted EBIT from
continuing operations - $ 164,401 $ 174,238 $ 501,960 $ 459,754
Pharmacy Services (j)
Adjusted EBITDA - Pharmacy
Services: (k)
EBITDA from continuing $ 178,269 $ 173,937 $ 471,235 $ 442,037
operations (k)
Special items (j) 5,587 21,455 92,407 77,070
Adjusted EBITDA from
continuing operations - $ 183,856 $ 195,392 $ 563,642 $ 519,107
Pharmacy Services (j)(k)
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis (h)
(000s)
Unaudited
Three months ended Nine months ended
September 30, September 30,
2009 2008 (b) 2009 2008 (b)
Segment Reconciliations -
Corporate and Consolidating:
Adjusted EBIT - Corporate
and Consolidating:
EBIT $ (24,826 ) $ (29,676 ) $ (73,924 ) $ (86,292 )
Special items (j) 2,279 849 6,798 2,389
Adjusted EBIT - Corporate $ (22,547 ) $ (28,827 ) $ (67,126 ) $ (83,903 )
and Consolidating (j)
Adjusted EBITDA - Corporate
and Consolidating: (k)
EBITDA (k) $ (17,862 ) $ (22,504 ) $ (52,501 ) $ (63,277 )
Special items (j) 1,225 849 2,561 2,389
Adjusted EBITDA -
Corporate and $ (16,637 ) $ (21,655 ) $ (49,940 ) $ (60,888 )
Consolidating (j)(k)
Segment Reconciliations -
CRO Services:
Adjusted net sales - CRO
Services:
Net sales (c) $ 36,870 $ 51,464 $ 122,416 $ 154,268
Reimbursable out-of-pockets (3,365 ) (8,280 ) (14,308 ) (24,461 )
(c)
Adjusted net sales - CRO $ 33,505 $ 43,184 $ 108,108 $ 129,807
Services (i)
Adjusted EBIT - CRO
Services:
EBIT $ (1,959 ) $ 4,544 $ 2,000 $ 11,012
Special items (j) 2,622 - 3,327 1,374
Adjusted EBIT - CRO $ 663 $ 4,544 $ 5,327 $ 12,386
Services (j)
Adjusted EBITDA - CRO
Services: (k)
EBITDA (k) $ (1,433 ) $ 5,017 $ 3,469 $ 12,374
Special items (j) 2,622 - 3,327 1,374
Adjusted EBITDA - CRO $ 1,189 $ 5,017 $ 6,796 $ 13,748
Services (j)(k)
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"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Discontinued Operations - Summary Financial Data, Non-GAAP Basis (h)
(000s)
Unaudited
Three months ended Nine months ended
September 30, September 30,
2009 (a) 2008 (a)(b) 2009 (a) 2008 (a)(b)
Net sales
Pharmacy Services -
continuing $ 1,507,031 $ 1,526,787 $ 4,504,097 $ 4,477,133
operations
Pharmacy Services -
discontinued 18,388 25,138 59,661 81,119
operations
Total Pharmacy 1,525,419 1,551,925 4,563,758 4,558,252
Services
CRO Services(i) 33,505 43,184 108,108 129,807
Total net sales -
continuing 1,540,536 1,569,971 4,612,205 4,606,940
operations (i)
Total net sales -
discontinued 18,388 25,138 59,661 81,119
operations
Total net sales (i) $ 1,558,924 $ 1,595,109 $ 4,671,866 $ 4,688,059
Adjusted operating
income (loss) (j)
Pharmacy Services -
continuing $ 164,401 $ 174,238 $ 501,960 $ 459,754
operations (j)
Pharmacy Services -
discontinued
operations
including
impairment charge (10,103 ) (951 ) (28,808 ) (4,101 )
of $14,492 pretax
during the nine
months ended 2009
period (a)
Total Pharmacy 154,298 173,287 473,152 455,653
Services
CRO Services (j) 663 4,544 5,327 12,386
Corporate (j) (22,547 ) (28,827 ) (67,126 ) (83,903 )
Total adjusted
operating income - 142,517 149,955 440,161 388,237
continuing
operations (j)
Total adjusted
operating loss -
discontinued
operations
including (10,103 ) (951 ) (28,808 ) (4,101 )
impairment charge
of $14,492 pretax
during the nine
months ended 2009
period (a)
Total operating $ 132,414 $ 149,004 $ 411,353 $ 384,136
income (j)
Depreciation and
amortization ("D&A")
Pharmacy Services -
continuing $ 19,455 $ 21,154 $ 61,682 $ 59,353
operations
Pharmacy Services -
discontinued 1,126 1,325 3,507 4,057
operations
Total Pharmacy 20,581 22,479 65,189 63,410
Services
CRO Services 526 473 1,469 1,362
Corporate (j) 5,910 7,172 17,186 23,015
Total D & A -
continuing 25,891 28,799 80,337 83,730
operations (j)
Total D & A -
discontinued 1,126 1,325 3,507 4,057
operations
Total D & A (j) $ 27,017 $ 30,124 $ 83,844 $ 87,787
Loss from
discontinued
operations (a)
Loss from
operations of $ (10,107 ) $ (963 ) $ (14,329 ) $ (4,135 )
disposal group,
pretax
Income tax benefit 3,876 372 5,554 1,598
Loss from
operations of (6,231 ) (591 ) (8,775 ) (2,537 )
disposal group,
aftertax
Impairment charge, - - (14,492 ) -
pretax
Income tax benefit
on impairment - - 2,427 -
charge
Impairment charge, - - (12,065 ) -
aftertax
Loss from
discontinued $ (6,231 ) $ (591 ) $ (20,840 ) $ (2,537 )
operations,
aftertax
Loss from
operations of $ (0.05 ) $ (0.01 ) $ (0.07 ) $ (0.02 )
disposal group per
diluted share
Loss from
impairment charge - - (0.10 ) -
per diluted share
Loss from
discontinued $ (0.05 ) $ (0.01 ) $ (0.18 ) $ (0.02 )
operations per
diluted share
The footnotes presented at the separate "Footnotes to Financial Information"
pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies Footnotes to Financial Information (000s, except per share amounts and unless otherwise stated) Unaudited
In the second quarter of 2009, the Company commenced activities to divest
certain home healthcare and related ancillary businesses ("the disposal
group") that are non-strategic in nature. The disposal group, historically
part of Omnicare's Pharmacy Services segment, primarily represents
ancillary businesses which accompanied other more strategic assets obtained
(a) by Omnicare in connection with the Company's institutional pharmacy
acquisition program. The results from continuing operations for all periods
presented have been revised to reflect the results of the disposal group as
discontinued operations, including certain expenses of the Company related
to the divestiture. The Company anticipates completing the divestiture
within twelve months. All amounts disclosed herein relate to the Company's
continuing operations unless otherwise stated.
Effective January 1, 2009, the Company retrospectively adopted the
provisions of new authoritative guidance regarding the accounting for
(b) convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement). Financial statements for all prior
periods presented have been restated for this change in accounting.
In accordance with the authoritative guidance for income statement
characterization of reimbursements received for 'out-of-pocket' expenses
incurred, Omnicare has recorded reimbursements received for "out-of-pocket"
(c) expenses on a grossed-up basis in the income statement as net sales and
cost of sales. The respective amounts are disclosed at the "Segment
Reconciliations - CRO Services" section of the Financial Information. This
authoritative guidance relates solely to the Company's contract research
services business.
EPS (basic EPS; special items, net of taxes; adjusted basic EPS; diluted
EPS; and adjusted diluted EPS) is reported independently for each amount
(d) presented. Accordingly, the sum of the individual amounts may not
necessarily equal the separately calculated amounts for the corresponding
period.
The three months ended September 30, 2009 and 2008 continuing operations
(e) include the following special items and accounting change impacts totaling
$17,547 and $28,848 pretax, respectively ($10,754 and $17,632 aftertax,
respectively):
For the three months ended September 30, 2009 and 2008, operating
income includes restructuring and other related charges of $6,295
and $7,655 before taxes ($3,863 and $4,651 after taxes, or $0.03 and
(i) $0.04 per diluted share), respectively. This charge relates to the
implementation of the "Omnicare Full Potential" Plan, a major
initiative primarily designed to re-engineer the pharmacy operating
model to increase efficiency and enhance customer growth, as well as
other realignment and right-sizing across the entire organization.
The three months ended September 30, 2009 and 2008 also include
special litigation and other related professional fees of $1,739 and
$13,479 before taxes ($1,058 and $8,179 after taxes, or $0.01 and
$0.07 per diluted share), respectively. The $1,739 pretax charge for
the three months ended September 30, 2009 includes
litigation-related professional expenses in connection with the
investigation by the United States Attorney's Office, District of
Massachusetts, the Company's lawsuit against UnitedHealth Group,
Inc. and its affiliates ("United"), the Company's response to
subpoenas related to other legal proceedings to which the Company is
not a party, the inquiry conducted by the Attorney General's Office
(ii) in Michigan relating to certain billing issues under the Michigan
Medicaid program, certain other large customer disputes, and the
purported class and derivative actions. The $13,479 pretax charge
for the three months ended September 30, 2008 relates primarily to
litigation-related professional expenses in connection with the
Company's lawsuit against United, certain other larger customer
disputes, the investigation by the United States Attorney's Office,
District of Massachusetts, the purported class and derivative
actions, the investigation by the federal government and certain
states relating to drug substitutions, and the Company's response to
subpoenas related to other legal proceedings to which the Company is
not a party.
For the three months ended September 30, 2009, operating income
includes a special charge of $2,032 before taxes ($1,755 and $277
was recorded in the cost of sales and operating expense sections of
the income statement, respectively) ($1,248 after taxes, or $0.01
per diluted share) for additional costs precipitated by the
(iii) previously disclosed quality control, product recall and fire issues
at one of the Company's repackaging locations ("Repack Matters").
For the three months ended September 30, 2008, operating income
includes a special charge of $1,170 before taxes ($1,041 and $129
was recorded in the cost of sales and operating expense sections of
the income statement, respectively) ($709 after taxes, or $0.01 per
diluted share) for costs associated with the Repack Matters.
For the three months ended September 30, 2009, operating income
included acquisition and other related costs/(credit) of $(632)
before taxes ($(393) after taxes, or $(0.00) per diluted share)
related to the implementation of the authoritative guidance for
(iv) business combinations accounting change. This amount primarily
relates to a reduction in the Company's original estimate of
contingent consideration payable for an acquisition, partially
offset by professional fees and acquisition related restructuring
costs for 2009 acquisitions.
For the three months ended September 30, 2009, selling, general and
administrative expenses included charges of $1,054 before taxes
($645 after taxes, or $0.01 per diluted share) relating to the prior
implementation of the authoritative guidance for share-based payment
accounting change, which primarily relates to stock option expense.
(v) This guidance requires the Company to record compensation costs
relating to share-based payment transactions, including stock
options, in its consolidated financial statements, based on
estimated fair values. The incremental costs related to this
authoritative guidance in the comparable prior period were not
considered significant.
For the three months ended September 30, 2009 and 2008, the Company
recorded amortization of discount on convertible notes of $7,059 and
$6,544 before taxes ($4,333 and $4,093 after taxes, or $0.04 and
(vi) $0.03 per diluted share), respectively, for a non-cash increase in
pretax interest expense related to the accounting change for the
retrospective adoption of the authoritative guidance for accounting
for convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement).
The nine months ended September 30, 2009 and 2008 continuing operations
(f) include the following special items and accounting change impacts totaling
$123,315 and $100,098 pretax, respectively ($87,380 and $61,455 aftertax,
respectively):
For the nine months ended September 30, 2009 and 2008, operating
income includes restructuring and other related charges of $19,095
(i) and $24,887 before taxes ($11,768 and $15,211 after taxes, or $0.10
and $0.13 per diluted share), respectively. This charge relates to
the implementation of the aforementioned "Omnicare Full Potential"
Plan.
The nine months ended September 30, 2009 and 2008 also include
special litigation and other related professional fees of $71,761
and $51,143 before taxes ($55,607 and $31,259 after taxes, or $0.47
and $0.26 per diluted share), respectively. The $71,761 pretax
charge for the nine months ended September 30, 2009 includes
litigation-related settlements and professional expenses in
connection with the Company's lawsuit against United, the
investigation by the United States Attorney's Office, District of
Massachusetts, the Company's response to subpoenas related to other
legal proceedings to which the Company is not a party, certain other
large customer disputes, the inquiry conducted by the Attorney
(ii) General's Office in Michigan relating to certain billing issues
under the Michigan Medicaid program, the investigation by the
federal government and certain states relating to drug substitutions
and the purported class and derivative actions. The $51,143 pretax
charge for the nine months ended September 30, 2008 relates
primarily to litigation-related professional expenses in connection
with the Company's lawsuit against United, certain other larger
customer disputes, the investigation by the United States Attorney's
Office, District of Massachusetts, the purported class and
derivative actions, the investigation by the federal government and
certain states relating to drug substitutions, and the Company's
response to subpoenas related to other legal proceedings to which
the Company is not a party.
For the nine months ended September 30, 2009, operating income
includes a special charge of $5,221 before taxes ($3,672 and $1,549
was recorded in the cost of sales and operating expense sections of
the income statement, respectively) ($3,218 after taxes, or $0.03
per diluted share) for additional costs precipitated by the
(iii) previously disclosed Repack Matters. For the nine months ended
September 30, 2008, operating income includes a special charge of
$4,803 before taxes ($4,175 and $628 was recorded in the cost of
sales and operating expense sections of the income statement,
respectively) ($2,936 after taxes, or $0.02 per diluted share) for
costs associated with the Repack Matters.
For the nine months ended September 30, 2009, operating income
included acquisition and other related costs of $2,218 before taxes
($1,367 after taxes, or $0.01 per diluted share) related to the
(iv) implementation of the authoritative guidance for business
combinations accounting change. These expenses were primarily
related to professional fees for 2009 acquisitions, partially offset
by a reduction in the Company's original estimate of contingent
consideration payable for an acquisition.
For the nine months ended September 30, 2009, selling, general and
administrative expenses included charges of $4,237 before taxes
($2,611 after taxes, or $0.02 per diluted share) relating to the
prior implementation of the authoritative guidance for share-based
payment accounting change, which primarily relates to stock option
(v) expense. This guidance requires the Company to record compensation
costs relating to share-based payment transactions, including stock
options, in its consolidated financial statements, based on
estimated fair values. The incremental costs related to the prior
implementation of this authoritative guidance in the comparable
prior period were not considered significant.
For the nine months ended September 30, 2009 and 2008, the Company
recorded amortization of discount on convertible notes of $20,783
and $19,265 before taxes ($12,809 and $12,049 after taxes, or $0.11
(vi) and $0.10 per diluted share), respectively, for a non-cash increase
in pretax interest expense related to the retrospective adoption of
the authoritative guidance for accounting for convertible debt
instruments that may be settled in cash upon conversion (including
partial cash settlement) accounting change.
Income tax expense for the three and nine months ended September 30, 2009
(g) was reduced by approximately $19 million ($0.16 per diluted share)
primarily due to the reversal of certain unrecognized tax benefits for tax
positions settled through the expiration of statutes of limitations.
Omnicare believes that investors' understanding of Omnica
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