EX-99.1 2 ocrerex991q32014.htm EXHIBIT OCR ER Ex. 99.1 Q3 2014


Exhibit 99.1

news release

Omnicare Reports Third-Quarter 2014 Financial Results;
Company Updates Full-Year 2014 Guidance


CINCINNATI, October 24, 2014 - Omnicare, Inc. (NYSE:OCR) reported today financial results for its third quarter ended September 30, 2014.

Third-Quarter Highlights:

Net sales increase of 6.1% to $1.6 billion
Adjusted cash earnings per diluted share from continuing operations 6.8% higher to $0.94; GAAP earnings per diluted share of $0.65
Adjusted operating income from continuing operations increase of 5.8% to $153 million

"We are pleased with our solid quarterly financial performance," said Nitin Sahney, Omnicare's Chief Executive Officer. "Throughout the year, we have continued our progress in executing our long-term strategic plan through an ongoing focus on growing our core platforms and demonstrating discipline within our operations. The third quarter marked a continuation of this journey, as we exhibited further strength in our operating results while making greater inroads within the markets in which we compete. As we further transform our organization into an integrated and diversified healthcare services company, we believe we will continue to produce favorable results for our shareholders, clients and employees."

Third-Quarter Results

Financial results from continuing operations for the quarter ended September 30, 2014, as compared with the same prior-year period, were as follows:

Net sales were $1,608 million versus $1,515 million
Gross profit was $351 million as compared with $352 million
GAAP earnings (loss) per diluted share was $0.65 versus $(0.68)
Adjusted cash earnings per diluted share was $0.94 versus $0.88
Adjusted EBITDA was $180 million versus $172 million


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Cash flows used in continuing operations for the quarter ended September 30, 2014 were $36 million, including previously announced and recorded litigation settlement payments of $120 million, versus $189 million in the comparable prior-year quarter.

Mr. Sahney continued, "For the third quarter, we reported solid year-over-year revenue growth of 6.1%, with each of our core businesses contributing to the increase. Our operating performance was also bolstered by another solid performance within our Specialty Care Group, which generated a 27.4% increase in operating profit. Additionally, we continued to realize the benefit of our ongoing efficiency initiatives across our business, with operating efficiencies contributing to a 23 basis-point sequential expansion in adjusted operating margin to 9.5%."

Year-to-Date Results

Financial results from continuing operations for the nine months ended September 30, 2014, as compared with the same prior-year period, were as follows:

Net sales were $4,790 million versus $4,477 million
Gross profit was $1,064 million as compared with $1,061 million
GAAP earnings per diluted share was $1.81 versus $0.24
Adjusted cash earnings per diluted share was $2.77 versus $2.57
Adjusted EBITDA was $534 million versus $502 million

Cash flows from operating activities of continuing operations for the nine months ended September 30, 2014, including the previously announced and recorded litigation settlement payments of $120 million, were $355 million versus $456 million in the comparable prior-year period.

Segment Information

Financial results for the Long-Term Care Group for the third-quarter ended September 30, 2014 were as follows:

Net sales of $1,183 million were 2.2% higher than $1,158 million in the same prior-year period
Adjusted operating income of $159 million was in-line with the same prior-year period

Financial results for the Specialty Care Group for the third-quarter ended September 30, 2014 were as follows:

Net sales of $425 million were 18.9% higher than $357 million in the same prior-year period
Operating income of $34 million increased 27.4% from $27 million in the same prior-year period

To facilitate comparisons and to enhance the understanding of core operating performance, discussions in this news release include financial measures that are adjusted from the comparable amounts under GAAP to exclude the impact of the

2



special items discussed 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 at the Investor Relations section of Omnicare's website at http://ir.omnicare.com. Additionally, the Company will make supplemental slides available in the same section on its website today that will include the number of scripts dispensed and other information relevant to Omnicare's operations.

Special Items

The results for the third-quarters ended September 30, 2014 and 2013 include the impact of special items and cash EPS adjustments as follows:

 
Three months ended
September 30,
Nine months ended
September 30,
 
2014
2013
2014
2013
 
After-tax impact
Per diluted share
After-tax impact
Per diluted share
After-tax impact
Per diluted share
After-tax impact
Per diluted share
Special Items Adj.
$11.5M
$0.11
$144.7M
$1.30
$41.8M
$0.39
$190.0M
$1.73
Cash EPS Adj.
$19.7M
$0.19
$22.3M
$0.20
$59.5M
$0.56
$64.8M
$0.59

All special items and cash EPS adjustments have been described in further detail in the “Footnotes and Definitions to Financial Information” section elsewhere herein.

Outlook

Based upon its solid nine-month results, Omnicare increased the lower end of its expectations for adjusted cash earnings per diluted share and reaffirmed other elements of its full-year guidance to reflect the following:
 
Original Guidance
Previous Guidance
Current Guidance
Revenue
$6.3B to $6.4B
$6.3B to $6.4B
$6.3B to $6.4B
Adjusted cash earnings per diluted share (excluding special items)
$3.64 to $3.72
$3.64 to $3.72
$3.70 to $3.72
Cash flows from operations (excluding settlement payments)
$475M to $550M
$500M to $550M
$500M to $550M

Webcast Today

Omnicare will hold a conference call to discuss its third-quarter 2014 financial results today, Friday, October 24, at 9:00 a.m. ET. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations section of Omnicare's website at http://ir.omnicare.com. An archived replay will be made available on the website following the conclusion of the conference call.


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About Omnicare

Omnicare, Inc., a Fortune 500 company based in Cincinnati, Ohio, provides comprehensive pharmaceutical services to patients and providers across the United States. As the market-leader in professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other chronic care institutions, Omnicare leverages its unparalleled clinical insight into the geriatric market along with some of the industry's most innovative technological capabilities to the benefit of its long-term care customers. Omnicare also provides specialty pharmacy and key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group. For more information, visit www.omnicare.com.

Forward-looking Statements

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 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 and pharmaceutical industries; the Company’s ability to attract new clients and service contracts and retain existing clients and service contracts; the Company’s ability to identify, finance and consummate acquisitions on favorable terms or at all; trends for the continued growth of the Company's businesses; changes in drug pricing; delays and reductions in reimbursement by the government and other payors to the Company and its customers; the overall financial condition of the Company's customers and the ability of the Company to assess and react to such financial condition; the ability and willingness of the Company’s vendors and business partners to continue to provide products and services to the Company; the successful integration of acquired companies and realization of contemplated synergies; the continued availability of suitable acquisition candidates; the ability to attract and retain skilled management; competition for qualified staff in the healthcare industry; variations in demand for the Company's products and services; variations in costs or expenses; the Company’s ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits; the potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, 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 calculation of average wholesale price; discontinuation of reporting average wholesale price, and/or implementation of new pricing benchmarks; legislative and regulatory changes impacting long term care pharmacies or specialty pharmacies; government budgetary pressures and changes, including federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of the Company's contracts with pharmaceutical benefit managers, Medicare Part D Plan sponsors and/or commercial health insurers or changes in the proportion of the Company's business covered by specific contracts; the outcome of pending and future legal or contractual disputes; potential liability for losses not covered by, or in excess of, insurance; the impact of executive separations; the impact of benefit plan terminations; the impact of differences in actuarial assumptions and estimates as compared to eventual outcomes; events or circumstances that could result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; our ability to successfully complete planned divestitures; 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 on acceptable terms; changes in our credit ratings given by rating agencies; timing of conversions of our convertible debt securities; changes in tax laws and regulations; changes in

4



accounting rules and standards; the impacts of potential cybersecurity risks and/or incidents; costs to comply with the Company's Corporate Integrity Agreement; and unexpected costs and interruptions from the implementation of our new information technology system. 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.




# # #

Contact:
Patrick C. Lee
(513) 719-1507
patrick.lee@omnicare.com

5




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, 2014
 
September 30, 2013
 
September 30, 2014
 
September 30, 2013
Net sales
$
1,608,055

 
$
1,515,168

 
$
4,789,677

 
$
4,477,229

Cost of sales
1,256,595

 
1,163,197

 
3,725,533

 
3,416,039

Gross profit
351,460

 
351,971

 
1,064,144

 
1,061,190

Selling, general and administrative expenses
178,940

 
182,668

 
549,816

 
565,276

Provision for doubtful accounts
19,911

 
24,963

 
62,562

 
75,113

Settlement, litigation and other related charges
12,868

 
143,484

 
27,467

 
169,615

Other charges
3,999

 
61,632

 
25,559

 
96,906

Operating income (loss)
135,742

 
(60,776
)
 
398,740

 
154,280

Interest expense, net of investment income
(28,717
)
 
(34,925
)
 
(88,138
)
 
(94,011
)
Income (loss) from continuing operations before income taxes
107,025

 
(95,701
)
 
310,602

 
60,269

Income tax provision
38,948

 
(26,350
)
 
117,641

 
34,004

Income (loss) from continuing operations
68,077

 
(69,351
)
 
192,961

 
26,265

(Loss) income from discontinued operations
(3,246
)
 
3,042

 
(42,385
)
 
13,999

Net income (loss)
$
64,831

 
$
(66,309
)
 
$
150,576

 
$
40,264

 
 
 
 
 
 
 
 
Earnings (loss) per common share - Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.65

 
$
(0.68
)
 
$
1.81

 
$
0.24

Discontinued Operations
(0.03
)
 
0.03

 
(0.40
)
 
0.13

Net Income (loss)
$
0.61

 
$
(0.65
)
 
$
1.42

 
$
0.37

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Diluted
$
105,548

 
$
101,811

 
$
106,450

 
$
109,612



The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

6



Omnicare, Inc. and Subsidiary Companies
Consolidated Balance Sheets
($000s)
Unaudited

 
September 30,
2014
 
December 31,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
286,943

 
$
356,001

Accounts receivable, less allowances
651,224

 
695,684

Inventories
494,563

 
512,418

Deferred income tax benefits
56,084

 
135,094

Other current assets
315,165

 
265,536

Current assets of discontinued operations

 
49,995

Total current assets
1,803,979

 
2,014,728

Properties and equipment, at cost less accumulated depreciation     
330,601

 
305,888

Goodwill
4,060,683

 
4,057,456

Identifiable intangible assets, less accumulated amortization
106,425

 
129,974

Other noncurrent assets
95,649

 
96,722

Noncurrent assets of discontinued operations

 
87,078

Total noncurrent assets
4,593,358

 
4,677,118

Total assets
$
6,397,337

 
$
6,691,846

LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
220,288

 
$
181,022

Accrued employee compensation
56,394

 
50,240

Current debt
495,713

 
527,204

Other current liabilities
166,324

 
355,845

Current liabilities of discontinued operations

 
18,846

Total current liabilities
938,719

 
1,133,157

Long-term debt, notes and convertible debentures
1,411,470

 
1,418,819

Deferred income tax liabilities
1,022,857

 
1,012,733

Other noncurrent liabilities
60,701

 
53,835

Noncurrent liabilities of discontinued operations

 
1,398

Total noncurrent liabilities
2,495,028

 
2,486,785

Total liabilities
3,433,747

 
3,619,942

 
 
 
 
Convertible debt
308,787

 
331,101

 
 
 
 
Stockholders' equity
2,654,803

 
2,740,803

Total liabilities and stockholders' equity
$
6,397,337

 
$
6,691,846





The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

7



Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
($000s)
Unaudited

 
September 30, 2014
 
Three months ended
 
Nine months ended
Cash flows from operating activities:
 
 
 
Net income
$
64,831

 
$
150,576

Loss from discontinued operations
3,246

 
42,385

Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 

Depreciation
14,733

 
43,010

Amortization
18,599

 
57,419

Debt redemption loss and costs, net
5

 
8,419

Disposition of business, net
285

 
805

Gale/Silver settlement payments, net
(120,000
)
 
(120,000
)
Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses:
 
 
 
Accounts receivable, net of provision for doubtful accounts
30,284

 
15,848

Inventories
(86,773
)
 
17,807

Current and noncurrent assets
(10,435
)
 
(20,853
)
Accounts payable
(13,030
)
 
58,399

Accrued employee compensation
(6,462
)
 
6,389

Current and noncurrent liabilities
69,051

 
94,350

Net cash flows (used in) from operating activities of continuing operations
(35,666
)
 
354,554

Net cash flows (used in) from operating activities of discontinued operations
(5,297
)
 
863

Net cash flows (used in) from operating activities
(40,963
)
 
355,417

Cash flows from investing activities:
 
 
 
Divestiture of businesses, net
64,080

 
71,194

Capital expenditures
(19,848
)
 
(67,871
)
Other
(58
)
 
(18
)
Net cash flows from investing activities of continuing operations
44,174

 
3,305

Net cash flows used in investing activities of discontinued operations
(133
)
 
(863
)
Net cash flows from investing activities
44,041

 
2,442

Cash flows from financing activities:
 

 
 

Payments on term loans
(5,313
)
 
(15,938
)
Payments on long-term borrowings and obligations
(1,868
)
 
(176,983
)
Decrease in cash overdraft balance
(12,916
)
 
(19,786
)
Payments for Omnicare common stock repurchases

 
(160,438
)
Proceeds for stock awards and exercise of stock options, net of stock tendered in payment
2,427

 
(293
)
Dividends paid
(19,440
)
 
(58,419
)
Other
819

 
4,940

Net cash flows used in financing activities
(36,291
)
 
(426,917
)
Net decrease in cash and cash equivalents
(33,213
)
 
(69,058
)
Less decrease in cash and cash equivalents from discontinued operations
(5,430
)
 

Decrease in cash and cash equivalents from continuing operations
(27,783
)
 
(69,058
)
Cash and cash equivalents at beginning of period
314,726

 
356,001

Cash and cash equivalents at end of period
$
286,943

 
$
286,943

 
 
 
 



The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

8



Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis
($000s, except per share amounts)
Unaudited
 
Three months ended
 
Nine months ended
 
September 30, 2014
 
September 30, 2013
 
September 30, 2014
 
September 30, 2013
Adjusted earnings per share ("EPS") from continuing operations:
 
 
 
 
 
 
 
Diluted earnings (loss) per share from continuing operations
$
0.65

 
$
(0.68
)
 
$
1.81

 
$
0.24

 
 
 
 
 
 
 
 
Amount related to adjusted diluted shares

 
0.05

 

 

 
 
 
 
 
 
 
 
Special Items: (a)
 
 
 
 
 
 
 
Settlement, litigation and other related charges
0.05

 
0.87

 
0.13

 
1.03

Other charges
0.02

 
0.37

 
0.15

 
0.57

Amortization of discount on convertible notes
0.04

 
0.03

 
0.11

 
0.10

Debt redemption costs

 
0.03

 

 
0.03

Total Special Items
0.11

 
1.30

 
0.39

 
1.73

Cash EPS Adjustments
0.19

 
0.20

 
0.56

 
0.59

Adjusted cash earnings per diluted share from continuing operations
$
0.94

 
$
0.88

 
$
2.77

 
$
2.57

 
 
 
 
 
 
 
 
Adjusted diluted share count:
 
 
 
 
 
 
 
Diluted shares outstanding
N/A
 
101,811

 
N/A
 
N/A
Convertible securities
 
 
8,926

 
 
 
 
Stock options, warrants and awards
 
 
723

 
 
 
 
Adjusted diluted shares outstanding
 
 
111,460

 
 
 
 
 
 
 
 
 
 
 
 
Adjusted earnings before interest, income taxes ("EBIT", "Operating income"), depreciation and amortization ("EBITDA") from continuing operations:
 
 
 
 
 
 
 
EBIT from continuing operations
$
135,742

 
$
(60,776
)
 
398,740

 
$
154,280

Depreciation and amortization
33,332

 
34,040

 
100,429

 
99,527

Amortization of discount on convertible notes
(6,139
)
 
(6,218
)
 
(18,484
)
 
(18,474
)
EBITDA from continuing operations
162,935

 
(32,954
)
 
480,685

 
235,333

Special items (a)
16,867

 
205,116

 
53,026

 
266,521

Adjusted EBITDA from continuing operations
179,802

 
172,162

 
533,711

 
501,854

 
 
 
 
 
 
 
 
EBITDA from continuing operations to net cash flows from operating activities:
 
 
 
 
 
 
 
EBITDA from continuing operations
162,935

 
(32,954
)
 
480,685

 
235,333

(Subtract)/Add:
 
 
 
 
 
 
 
Interest expense, net of investment income and amortization of discount on convertible notes
(22,578
)
 
(28,707
)
 
(69,654
)
 
(75,537
)
Income tax provision
(38,948
)
 
26,350

 
(117,641
)
 
(34,004
)
Other operating activities (including debt redemption costs)
5

 
55,652

 
8,419

 
55,652

Disposition of business, net
285

 
7,276

 
805

 
36,062

Gale/Silver settlement payments, net
(120,000
)
 

 
(120,000
)
 

Changes in certain assets and liabilities, net of effects from acquisition and
divestitures of businesses
(17,365
)
 
161,205

 
171,940

 
238,480

Net cash flows from operating activities of continuing operations
$
(35,666
)
 
$
188,822

 
$
354,554

 
$
455,986

 
 
 
 
 
 
 
 
Segment Reconciliations - Long-Term Care Group ("LTC")
 
 
 
 
 
 
 
Adjusted Operating Income - LTC:
 
 
 
 
 
 
 
Operating income from continuing operations
142,285

 
4,207

 
444,402

 
259,953

Special items (a)
16,421

 
154,248

 
36,451

 
213,680

Adjusted operating income from continuing operations - LTC
158,706

 
158,455

 
480,853

 
473,633

 
 
 
 
 
 
 
 


The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

9



Omnicare, Inc. and Subsidiary Companies
Footnotes and Definitions to Financial Information
($000s, except per share amounts and unless otherwise stated)
Unaudited

Footnotes:
Non-GAAP Information:
Omnicare, Inc. (“Omnicare” or the “Company”) management believes that presenting certain non-GAAP financial measures, which exclude items not considered part of the core operating results of the Company and certain non-cash charges and also includes certain tax deduction amounts ("Special Items"), enhances investors' understanding of how Omnicare management assesses the performance of the Company's business. Omnicare's management uses non-GAAP measures for budgeting purposes, measuring actual results, allocating resources and in determining employee incentive compensation. Omnicare's method of calculating non-GAAP financial results may differ from those used by other companies and, therefore, comparability may be limited.

(a)
Financial results included Special Items and Cash EPS adjustments as described below:
 
 
Q3 2014
 
YTD 2014
 
Q3 2013
 
YTD 2013
 
 
Pretax
After Tax (9)
 
Pretax
After Tax (9)
 
Pretax
After Tax (9)
 
Pretax
After Tax (9)
EBIT:
 
 
 
 
 
 
 
 
 
 
 
 
Settlement, litigation and other related charges (1)
 
$
12,868

$
5,360

 
$
27,467

$
14,340

 
$
143,484

$
97,074

 
$
169,615

$
113,160

 
 
 
 
 
 
 
 
 
 
 
 
 
Other charges
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition and other related costs (2)
 


 


 


 
2,300

1,416

Disposition of businesses (3)
 
285

174

 
805

494

 
10,116

9,391

 
38,902

27,112

Separation costs (4)
 
3,642

2,213

 
16,922

10,382

 
648

384

 
4,836

2,962

Loss on debt repurchase (5)
 
72

32

 
7,832

4,805

 
50,868

31,138

 
50,868

31,138

Subtotal - Other charges
 
3,999

2,419

 
25,559

15,681

 
61,632

40,913

 
96,906

62,628

Subtotal - EBIT Special Items
 
16,867

7,779

 
53,026

30,021

 
205,116

137,987

 
266,521

175,788

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Expense:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of discount on convertible notes (6)
 
6,139

3,746

 
18,484

11,339

 
6,218

3,767

 
18,474

11,312

Debt redemption costs (5)
 


 
647

398

 
4,784

2,929

 
4,784

2,929

Subtotal - Interest Expense Special Items
 
6,139

3,746

 
19,131

11,737

 
11,002

6,696

 
23,258

14,241

Subtotal - Special Items
 
23,006

11,525

 
72,157

41,758

 
216,118

144,683

 
289,779

190,029

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash EPS Items:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of intangibles
 
7,747

4,727

 
23,549

14,447

 
8,169

4,934

 
25,054

15,324

Goodwill amortization tax deduction (7)
 

7,098

 

21,106

 

9,203

 

28,037

Convertible debt tax deduction (8)
 

7,901

 

23,921

 

8,198

 

21,481

Subtotal - Cash EPS Items
 
7,747

19,726

 
23,549

59,474

 
8,169

22,335

 
25,054

64,842

 
 
 
 
 
 
 
 
 
 
 
 
 
Grand Total - Special Items
 
$
30,753

$
31,251

 
$
95,706

$
101,232

 
$
224,287

$
167,018

 
$
314,833

$
254,871

(1)
Operating income includes settlement, litigation and other related charges for resolution of certain large customer disputes, regulatory matters with various states and regulatory agencies, qui tam lawsuits and purported class and derivative actions against the Company. Additionally, Omnicare has made, and will continue to make, disclosures to the applicable governmental agencies of amounts, if any, determined to represent over-payments from the respective programs and, where applicable, those amounts, as well as any amounts relating to certain inspections, audits, inquiries and investigations activity are included in the pretax special item reflected in the table.
(2)
Operating income includes acquisition and other related costs primarily related to professional fees and acquisition related restructuring costs for acquisitions.
(3)
In the second quarter of 2013, the Company completed the disposition of certain assets in its Medical Supply Services business which was not considered significant to the operations of Omnicare.
(4)
Operating income includes separation related costs and accelerated stock based compensation expense for certain employees.
(5)
Operating income (loss) and interest expense include charges for debt redemption losses and costs related to the Company’s previously announced refinancing transactions.
(6)
The Company recorded non-cash interest expense from the amortization of debt discount on its convertible notes.
(7)
The tax benefit of being able to deduct goodwill amortization.
(8)
The tax benefit of being able to deduct higher interest expense on our convertible debt than what is actually paid.

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(9)
The tax effect was calculated by multiplying the tax-deductible pretax amounts by the appropriate effective tax rate.
Discontinued Operations:
During the fourth quarter of 2013, the Company's end-of-life hospice pharmacy business as well as certain retail operations qualified for discontinued operations treatment. As such, the results from continuing operations for all periods presented have been revised to reflect the results of these businesses as discontinued operations, including certain expenses of the Company related to the classification as discontinued operations.


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