-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QE3FrioZWdXziVy0SxSjvXRC5e/sXNmYUODJys2GDvrZrbZtBVPkbX51xO4gxynM GIqIApUAiQotU21i2DMV9w== 0000950152-97-000663.txt : 19970225 0000950152-97-000663.hdr.sgml : 19970225 ACCESSION NUMBER: 0000950152-97-000663 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970206 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970206 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OMNICARE INC CENTRAL INDEX KEY: 0000353230 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 311001351 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08269 FILM NUMBER: 97519005 BUSINESS ADDRESS: STREET 1: 255 EAST FIFTH ST STREET 2: 2800 CHEMED CENTER CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137626666 MAIL ADDRESS: STREET 1: 2800 CHEMED CENTER STREET 2: 255 EAST FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202-4728 8-K 1 OMNICARE, INC. 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 6, 1997 OMNICARE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware ----------------------------------------------- (State or other jurisdiction of incorporation) 1-8269 31-1001351 ------------------------------------------------------------------------------ (Commission File Number) (IRS Employer Identification No.) 50 East RiverCenter Boulevard, Suite 1530, Covington, Kentucky 41011 ---------------------------------------------------------------------- (Address of Principal executive offices) (Zip Code) Registrant's telephone number, including area code: (606) 655-1180 ------------------------------------------------------------------ 2 Item 5. Other Events ------------ Omnicare, Inc. (the "Company") hereby files its audited consolidated financial statements as of and for the three years ended December 31, 1996. Item 7. Financial Statements and Exhibits --------------------------------- (c) Exhibits Exhibit Number Exhibit -------------- ------- 27 Financial Data Schedule 2 3 SIGNATURE --------- 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: February 6, 1997 By: /s/ David W. Froesel, Jr. ------------------- ------------------------------ David W. Froesel, Jr. Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 3 4 Report of Independent Accountants --------------------------------- To the Stockholders and Board of Directors of Omnicare, Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, cash flows and stockholders' equity present fairly, in all material respects, the financial position of Omnicare, Inc. and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP - ------------------------ Price Waterhouse LLP Cincinnati, Ohio January 29, 1997 5 CONSOLIDATED STATEMENT OF INCOME Omnicare, Inc. and Subsidiary Companies (In thousands, except per share data)
For the years ended December 31, 1996 1995 1994 ---------------------------------------- Sales $536,604 $399,636 $307,655 Cost of sales 381,768 287,715 227,533 -------- -------- -------- Gross profit 154,836 111,921 80,122 Selling, general and administrative expenses 89,636 66,970 50,111 Acquisition expenses, pooling- of-interests 690 1,292 2,380 -------- -------- -------- Operating income 64,510 43,659 27,631 Investment income 11,285 3,475 1,580 Interest expense (3,652) (5,954) (6,533) -------- -------- -------- Income before income taxes 72,143 41,180 22,678 Income taxes 28,693 16,420 9,147 -------- -------- -------- Net income $ 43,450 $ 24,760 $ 13,531 ======== ======== ======== Earnings per share: Primary $ .64 $ .47 $ .30 ======== ======== ======== Fully diluted $ .61 $ .43 $ .30 ======== ======== ======== Weighted average number of common shares outstanding: Primary 67,388 52,396 44,958 ======== ======== ======== Fully diluted 75,429 65,284 56,858 ======== ======== ========
The Notes to Consolidated Financial Statements are an integral part of this statement. 2 6 CONSOLIDATED BALANCE SHEET Omnicare, Inc. and Subsidiary Companies (In thousands, except share data)
December 31, 1996 1995 ------------------------- ASSETS Current assets: Cash and cash equivalents $216,515 $ 40,137 Accounts receivable, less allowances of $5,631 (1995-$4,761) 118,913 80,247 Inventories 43,585 28,841 Deferred income tax benefits 6,036 6,600 Other current assets 5,686 5,247 -------- -------- Total current assets 390,735 161,072 Properties and equipment, at cost less accumulated depreciation of $28,415 (1995-$19,036) 56,055 32,458 Goodwill, less accumulated amortization of $15,550 (1995-$10,448) 259,507 157,843 Other assets 15,400 9,463 -------- -------- Total assets $721,697 $360,836 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 21,432 $ 22,020 Amounts payable pursuant to acquisition agreements 11,651 13,642 Current portion of long-term debt 1,199 1,051 Accrued employee compensation 10,645 5,338 Liabilities relating to discontinued operations 806 1,547 Other current liabilities 16,000 11,090 -------- -------- Total current liabilities 61,733 54,688 Long-term debt 1,992 82,692 Deferred income taxes 4,197 2,621 Amounts payable pursuant to acquisition agreements 9,088 1,418 Other noncurrent liabilities 10,309 4,656 -------- -------- Total liabilities 87,319 146,075 -------- -------- Stockholders' equity: Preferred stock-authorized 1,000,000 shares without par value; none issued Common stock-authorized 110,000,000 shares $1 par; 77,025,661 shares issued (1995-26,344,588 pre-1996 stock split shares) 77,026 26,345 Paid-in capital 433,117 99,686 Retained earnings 135,398 93,598 -------- -------- 645,541 219,629 Treasury stock, at cost-0 shares (1995-24,268 pre-1996 stock split shares) - (482) Deferred compensation (9,503) (2,126) Unallocated stock of ESOP (1,660) (2,260) -------- -------- Total stockholders' equity 634,378 214,761 Contingencies (Note 12) -------- -------- Total liabilities and stockholders' equity $721,697 $360,836 ======== ========
The Notes to Consolidated Financial Statements are an integral part of this statement. 3 7 CONSOLIDATED STATEMENT OF CASH FLOWS Omnicare, Inc. and Subsidiary Companies
(In thousands) For the years ended December 31, 1996 1995 1994 --------------------------------------- Cash flows from operating activities: Net income $ 43,450 $ 24,760 $ 13,531 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 15,407 11,117 8,264 Provision for doubtful accounts 3,614 3,086 2,298 Deferred tax provision 3,083 1,750 917 Changes in assets and liabilities, net of effects from acquisition/disposal of businesses: Accounts receivable (31,555) (19,286) (14,192) Inventories (8,356) (4,930) (3,652) Current and noncurrent assets (8,625) (1,402) (443) Payables and accrued liabilities 882 4,335 2,785 Current and noncurrent liabilities 4,783 444 3,129 --------- -------- -------- Net cash flows from operating activities 22,683 19,874 12,637 --------- -------- -------- Cash flows from investing activities: Acquisition of businesses (96,895) (35,373) (40,084) Capital expenditures (26,716) (13,603) (9,659) Marketable securities - 45,245 (45,245) Proceeds from sales of properties and equipment 199 261 606 Cash flows from discontinued operations (741) (852) (1,370) --------- -------- -------- Net cash flows from investing activities (124,153) (4,322) (95,752) --------- -------- -------- Cash flows from financing activities: Net borrowings on line-of-credit - (3,670) (215) Proceeds from long-term borrowings - 5,343 141 Principal payments on long-term obligations (470) (9,130) (3,426) Net proceeds from stock offering 279,159 - 59,211 Proceeds from exercise of stock options and warrants, net of stock tendered in payment 3,059 70 1,291 Dividends paid (3,900) (2,581) (2,756) --------- -------- -------- Net cash flows from financing activities 277,848 (9,968) 54,246 --------- -------- -------- Net increase (decrease) in cash and cash equivalents 176,378 5,584 (28,869) Cash and cash equivalents at beginning of period 40,137 34,553 63,422 --------- -------- -------- Cash and cash equivalents at end of period $ 216,515 $ 40,137 $ 34,553 ========= ======== ========
The Notes to Consolidated Financial Statements are an integral part of this statement. 4 8 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Omnicare, Inc. And Subsidiary Companies
(In thousands, except per share data) Unallocated Total Common Paid-in Retained Treasury Deferred Stock of Stockholders' Stock Capital Earnings Stock Compensation ESOP Equity ------- ------- -------- ------------ ------------ ------------ ------------ Balance at December 31, 1993 $13,098 $64,556 $59,382 $(31,126) $ - $(3,160) $102,750 Pooling of interests (Note 2) 371 (341) 1,120 - - - 1,150 Net income - - 13,531 - - - 13,531 Dividends paid ($.045 per share) - - (1,759) - - - (1,759) Dividends to former owners of Evergreen - - (397) - - - (397) Dividends to former owners of Lo-Med - - (402) - - - (402) Stock issued in public offering 1,624 57,587 - - - - 59,211 Stock and warrants issued in connection with acquisitions 75 3,616 - - - - 3,691 Exercise of warrants - 529 - 658 - - 1,187 Exercise of stock options 117 2,432 - (2,592) - - (43) Stock awards, net of amortization 51 1,592 - - (858) - 785 Decrease in unallocated stock of ESOP - - - - - 400 400 ------- -------- -------- -------- ------- ------- -------- Balance at December 31, 1994 15,336 129,971 71,475 (33,060) (858) (2,760) 180,104 Net income - - 24,760 - - - 24,760 Dividends paid ($.05 per share) - - (2,581) - - - (2,581) Two-for-one stock split 10,429 (45,524) - 35,095 - - - Conversion of subordinated debt 4 49 - - - - 53 Stock and warrants issued in connection with acquisitions 254 10,632 - - - - 10,886 Exercise of warrants - 298 - (298) - - - Exercise of stock options 82 1,760 - (1,902) - - (60) Stock awards, net of amortization 52 2,636 - (317) (1,268) - 1,103 Decrease in unallocated stock of ESOP - - - - - 500 500 Other 188 (136) (56) - - - (4) ------- -------- -------- -------- ------- ------- -------- Balance at December 31, 1995 26,345 99,686 93,598 (482) (2,126) (2,260) 214,761 Pooling of interests (Note 2) 193 (1,673) 2,250 - - - 770 Net income - - 43,450 - - - 43,450 Dividends paid ($.06 per share) - - (3,900) - - - (3,900) Stock issued in public offering 5,750 273,409 - - - - 279,159 Two-for-one stock split 32,689 (33,147) - 458 - - - Conversion of subordinated debt 10,815 67,423 - - - - 78,238 Stock and warrants issued in connection with acquisitions 540 16,156 - - - - 16,696 Exercise of warrants 405 2,313 - 44 - - 2,762 Exercise of stock options 97 (290) - 562 - - 369 Stock awards, net of amortization 192 9,352 - (582) (7,377) - 1,585 Decrease in unallocated stock of ESOP - - - - - 600 600 Other - (112) - - - - (112) ------- -------- -------- -------- ------- ------- -------- Balance at December 31, 1996 $77,026 $433,117 $135,398 $ - $(9,503) $(1,660) $634,378 ======= ======== ======== ======== ======= ======= ========
The Notes to Consolidated Financial Statements are an integral part of this statement. 5 9 Notes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies Principles of Consolidation Omnicare, Inc. ("Omnicare" or the "Company") primarily operates in one business segment which includes the distribution of pharmaceuticals, related pharmacy management services and medical supplies to long-term care institutions and their residents in the United States. The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Cash Equivalents Cash equivalents include all investments in highly liquid instruments with original maturities of three months or less. Inventories Inventories consist primarily of purchased pharmaceuticals and medical supplies held for sale to customers and are stated at the lower of cost or market. Cost is determined using the first-in, first-out ("FIFO") method. Properties and Equipment Properties and equipment are stated at cost. Expenditures for maintenance, repairs, renewals and betterments that do not materially prolong the useful lives of the assets are charged to expense as incurred. Depreciation of properties and equipment is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease terms, including renewal options, or their useful lives. Goodwill, Intangibles and Other Assets Intangible assets, comprised primarily of goodwill, arising from business combinations accounted for as purchase transactions, are amortized using the straight-line method over their estimated useful lives, not in excess of forty years. On an annual basis, the Company reviews the recoverability of goodwill. The measurement of possible impairment is based primarily on the ability to recover the balance of the goodwill from expected future operating cash flows on an undiscounted basis. In management's opinion, no such impairment exists as of December 31, 1996 or 1995. 6 10 Debt issuance costs as of December 31, 1995 are included in other assets and are amortized using the straight-line method over the life of the related debt. Fair Value of Financial Instruments The fair value of all financial instruments of the Company approximates the amounts presented on the consolidated balance sheet. Revenue Recognition Revenue is recognized when products or services are provided to the customer. A significant portion of the Company's revenues from sales of pharmaceutical and medical products are reimbursable from Medicaid and Medicare programs. The Company monitors its receivables from these reimbursement sources under policies established by management and reports such revenues at the net realizable amount expected to be received from these third-party payors. Income Taxes The Company accounts for income taxes using the asset and liability method under which deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates to differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. Per Share Data Primary earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period and common stock equivalents, if material. Fully diluted earnings per share include common stock equivalents and for the years ended December 31, 1996, 1995 and 1994, assumed the conversion of the 5.75% Convertible Subordinated Notes due 2003 into common stock. Additionally, for the years ended December 31, 1996, 1995 and 1994, interest expense and amortization of debt issuance costs arising from these convertible securities were added, net of related income taxes, to income for the purpose of calculating fully diluted earnings per share. The Convertible Subordinated Notes were converted on October 3, 1996; accordingly, they had no impact on the fully diluted earnings per share calculation subsequent to that date. 7 11 The Board of Directors declared a two-for-one split of the Company's $1 par value common stock effective June 27, 1996. As a result of the split, 32,697,700 additional shares were issued including 8,677 from treasury stock. Paid-in capital and treasury stock were reduced by $33,147,000 and $458,000, respectively. All references in the consolidated financial statements to the number of common shares and per share amounts have been adjusted to reflect the stock split unless otherwise indicated. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Accounting Change Effective January 1, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." This statement establishes financial accounting and reporting standards for stock-based employee compensation plans. As permitted by SFAS No. 123, the Company continued to follow the measurement principles prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and has disclosed the pro forma impact of using the fair value measurement principles of SFAS No. 123 in the notes to the consolidated financial statements. Reclassifications Certain reclassifications of prior year amounts have been made to conform with the current year presentation. Note 2 - Acquisitions Since 1989, the Company has been involved in a program to acquire providers of pharmaceutical and related pharmacy management services and medical supplies to long-term care facilities and their residents. The Company's strategy includes acquisitions of freestanding institutional pharmacy businesses as well as pharmacy contracts and other assets, generally insignificant in size, which are combined with existing pharmacy operations to augment their internal growth. From time to time, the Company may acquire other businesses such as long-term care software companies, pharmacy consulting companies and medical supply companies. To date, none of these non-pharmacy acquisitions have been significant. 8 12 During the year ended December 31, 1996, the Company completed 18 acquisitions (excluding insignificant acquisitions), including 17 institutional pharmacy businesses and a long-term care software company. Seventeen of the acquisitions were accounted for as purchases and one as a pooling-of-interests. During the year ended December 31, 1995, the Company completed 10 acquisitions (excluding insignificant acquisitions), including nine institutional pharmacy businesses and a long-term care software company. Nine of the acquisitions were accounted for as purchases and one as a pooling-of- interests. During the year ended December 31, 1994, the Company completed seven acquisitions (excluding insignificant acquisitions) of institutional pharmacy businesses. Five of the acquisitions were accounted for as purchases and two as poolings-of-interests. Purchases - --------- For all acquisitions accounted for as purchases, including insignificant acquisitions, the purchase price paid for each has been allocated to the fair value of the assets acquired and liabilities assumed. Purchase price allocations are subject to final determination within one year after the acquisition date. The following table summarizes the aggregate purchase price for all businesses acquired which have been accounted for as purchases (in thousands):
Businesses acquired in --------------------------------- 1996 1995 1994 ---- ---- ---- Cash $ 72 953 $21,309 $17,954 Amounts payable in the future 19,026 4,797 3,107 Common stock 13,814 10,856 2,819 Warrants 696 30 872 Assumption of indebtedness 4,831 197 2,027 -------- ------- ------- $111,320 $37,189 $26,779 ======== ======= =======
Cash in the above table represents payments made in the year of acquisition. This amount differs from cash paid for the acquisition of the businesses in the consolidated statement of cash flows due primarily to purchase price payments made during the year pursuant to acquisition agreements entered into in prior years. 9 13 Warrants outstanding as of December 31, 1996 represent the right to purchase 905,000 shares of common stock and were issued in connection with certain acquisitions. These warrants can be exercised at any time through 2002 at prices ranging from $7.70 to $29.18 per share. Warrants to purchase 407,000 shares of common stock, issued in prior years, were exercised in 1996. Amounts contingently payable totaled $19,995,000 as of December 31, 1996 and, if paid, will be recorded as additional purchase price, serving to increase goodwill in the period in which the contingencies are resolved. Amounts payable in the future are subject to set-off for claims of indemnity. The results of operations of the companies acquired in purchase transactions have been included in the consolidated results of operations of the Company from the dates of acquisition. Unaudited pro forma combined results of operations of the Company for the years ended December 31, 1996 and 1995, are presented below. Such pro forma presentation has been prepared assuming that the acquisitions had been made as of January 1, 1995 (in thousands, except per share data).
For the years ended December 31, Pro Forma 1996 1995 - ---------- --------------------------- Sales $ 589,825 $ 494,185 Net income 45,228 25,702 Earnings per share: Primary $ .67 $ .48 Fully diluted $ .63 $ .44
The pro forma information does not purport to be indicative of operating results which would have occurred had the acquisitions been made at the beginning of the respective periods or of results which may occur in the future. Pooling-Of-Interests - -------------------- The impact of the 1996 pooling-of-interests transaction and one of the 1994 pooling-of-interests transactions on the Company's historical consolidated financial statements were not material; consequently, prior period and current year financial statements have not been restated for these transactions. On June 30, 1995, the Company issued 806,370 shares of its common stock for all of the outstanding common stock of Specialized Pharmacy Services, Inc. ("Specialized"). On September 30, 1994, the Company issued 4,445,288 shares of its common stock for all the outstanding common stock of Evergreen Pharmaceutical, Inc. and Evergreen Pharmaceutical East, Inc. (collectively, "Evergreen"). These acquisitions were accounted for as poolings-of- interests and, accordingly, the Company's consolidated financial statements have been restated for all periods prior to the acquisitions to include 10 14 the results of operations, financial position and cash flows of Specialized and Evergreen. Net sales and net income for Omnicare and Specialized prior to the Specialized transaction and Omnicare and Evergreen prior to the Evergreen transaction are as follows (in thousands):
Omnicare Specialized Evergreen -------- ----------- --------- Six months ended June 30, 1995: Sales $171,211 $16,441 (a) Net Income 9,861 286 (a) Year ended December 31, 1994: Sales 275,663 31,992 (a) Net income 13,406 125 (a) Nine months ended September 30, 1994: Sales 172 876 23,748 $25,324 Net income 7,091 66 1,877 (a) The results of operations of Evergreen are included in the consolidated results of Omnicare for these periods.
In accordance with accounting rules for pooling-of-interests transactions, charges to operating income for acquisition-related expenses were recorded upon completion of the pooling acquisitions. These acquisition-related expenses totaled $690,000 ($534,000 aftertax) for the 1996 transactions, $1,292,000 ($989,000 aftertax) for the Specialized transaction and $2,380,000 ($1,860,000 aftertax) for the Evergreen transaction. 11 15 Note 3 - Cash and Cash Equivalents A summary of cash and cash equivalents follows (in thousands):
December 31, 1996 1995 ------------------- Cash and cash equivalents: Cash $ 16,108 $ 7,418 Money market funds 177 197 U.S. Treasury-backed repurchase agreements 200,230 32,522 -------- ------- $216,515 $40,137 ======== =======
Repurchase agreements represent investments in U.S. Treasury bills under agreements to resell, usually overnight, but in no case longer than 30 days. The Company has a collateralized interest in the underlying securities, which are segregated in the accounts of the bank counterparty. Note 4 - Properties and Equipment A summary of properties and equipment follows (in thousands):
December 31, 1996 1995 -------------------- Land $ 1,355 $ 247 Buildings 2,459 1,496 Machinery and equipment 44,930 27,487 Furniture, fixtures and leasehold improvements 35,726 22,264 ------- ------- 84,470 51,494 Accumulated depreciation (28,415) (19,036) ------- ------- $56,055 $32,458 ======= =======
Note 5 - Leasing Arrangements The Company has operating leases which cover various real and personal property. In most cases, the Company expects that these leases will be renewed or replaced by other leases in the normal course of business. There are no significant contingent rentals in the Company's operating leases. 12 16 The following is a schedule of future minimum rental payments required under operating leases that have initial or remaining noncancellable terms in excess of one year as of December 31, 1996 (in thousands): 1997 $ 3,943 1998 3,446 1999 2,990 2000 2,263 2001 1,729 Later years 3,722 ------- Total minimum payments required $18,093 =======
Total rent expense under operating leases for the years ended December 31, 1996, 1995 and 1994 were $5,889,000, $4,567,000 and $3,470,000, respectively. Note 6 - Long-Term Debt A summary of long-term debt follows (in thousands):
December 31, 1996 1995 -------------------------- Convertible Subordinated Notes due 2003 $ - $80,445 Employee Stock Ownership Plan ("ESOP") Loan Guarantee 1,660 2,260 Capitalized lease obligations 1,531 1,038 ------- ------- 3,191 83,743 Less current portion (1,199) (1,051) ------- ------- $ 1,992 $82,692 ======= =======
The following is a schedule by year of required long-term debt payments as of December 31, 1996 (in thousands): 1997 1,199 1998 1,443 1999 387 2000 162 2001 - Later years - ------- $ 3,191 =======
Total interest payments made for the years ended December 31, 1996, 1995 and 1994 were $4,968,000, $5,421,000 and $6,145,000, respectively. Convertible Subordinated Notes - ------------------------------ On October 1, 1993, the Company issued $80,500,000 principal amount of 5.75% Convertible Subordinated Notes ("Notes") due 2003. The Notes were convertible into common stock at any time at the option of the holder at a price of $7.22 per share. The remaining Notes were converted in October 1996 into 10,201,700 shares of common stock. Prior to the October conversion, Notes were converted into 613,444 shares of common stock during 1996. In connection with the Notes conversions, the Company recorded the $1.9 million in unamortized deferred debt issuance costs against the paid-in capital balance for the common 13 17 stock issued. The Company amortized $220,000 of deferred debt issuance costs in 1996 (prior to the final Notes conversion) and $310,000 in 1995. ESOP Loan Guarantee - ------------------- In 1988, the Company established an Employee Stock Ownership Plan ("ESOP") which currently covers certain acquired entities' employees and corporate headquarters employees. The ESOP used proceeds from a $4 million bank loan to purchase 1,973,748 shares of the Company's common stock on the open market at prices ranging from $1.94 to $2.13 per share. Inasmuch as the Company has guaranteed the repayment of this obligation, it has recorded the ESOP's bank debt as long-term debt and also as a reduction of stockholders' equity in the accompanying consolidated balance sheet. The ESOP services its debt with Company contributions which were previously made to the Company's Employee Savings and Investment Plan, and dividends received on shares held by the ESOP. Principal and interest payments on the bank debt are made in increasing quarterly installments over a ten-year period, the final payment being due on December 31, 1998. The loan bears interest at the per annum rate of 7% and is secured by the unallocated shares of common stock held by the ESOP trust. These unallocated shares had a fair market value equal to $18,515,000 and $18,230,000 as of December 31, 1996 and 1995, respectively. The Company funds ESOP expense as accrued. The components of total ESOP expense are as follows (in thousands):
For the years ended December 31, 1996 1995 1994 -------------------------------- Interest expense $ 145 $ 182 $ 214 Principal payments 600 500 400 Dividends on ESOP stock (90) (76) (70) ----- ----- ----- $ 655 $ 606 $ 544 ===== ===== =====
Revolving Credit Facility - ------------------------- In October 1996, the Company negotiated a five-year, $400 million line of credit agreement with a consortium of sixteen banks, which replaced the existing $135 million revolving credit facility. Borrowings under this agreement bear interest based upon LIBOR plus a spread of 25 to 60 basis points, dependent upon the Company's Fixed Charge Coverage Ratio, or other rates negotiated with the banks. Additionally, a commitment fee on the unused portion of the facility ranges from 9 to 20 basis points, and is also based on the Company's Fixed Charge Coverage Ratio. The agreement also contains debt covenants which include the Fixed Charge Coverage Ratio and minimum consolidated net worth. The Company is in compliance with all of the covenants in the agreement. No amounts were outstanding under this agreement as of December 31, 1996. 14 18 Note 7 - Public Offering of Common Stock In March 1996, the Company completed a public offering of 5,750,000 shares (pre-1996 stock split) of common stock resulting in gross proceeds of $298,281,000 (before underwriting discounts and expenses). Note 8 - Stock Incentive Plans The Company has stock incentive plans under which it may grant stock options or stock awards to key employees at a price equal to the fair market value at the date of grant. Under these plans, stock options become exercisable beginning one year following the date of grant in four equal annual installments. As of December 31, 1996, 290,084 shares were available for granting. Summary information for stock options relating to these plans is presented below (in thousands, except per share data):
1996 1995 1994 -------------------------- ---------------------------- --------------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Price Shares Exercise Price Shares Exercise Price - --------------------------------------------------------------------------------------------------------------- Options outstanding, beginning of year 2,242 $ 7.89 1,526 $ 4.04 1,996 $ 3.89 Options granted 508 26.36 1,058 12.19 - - Options exercised (273) 7.03 (326) 3.65 (470) 3.41 Options forfeited (3) 26.22 (16) 12.13 - - - --------------------------------------------------------------------------------------------------------------- Options outstanding, end of year 2,474 $11.76 2,242 $7.89 1,526 $4.04 - --------------------------------------------------------------------------------------------------------------- Options exercisable, end of year 1,083 748 726 - ---------------------------------------------------------------------------------------------------------------
15 19 The following summarizes information about stock options outstanding as of December 31, 1996 (in thousands, except per share data):
OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ---------------------------------------------------------------------------- -------------------------------------- Weighted-Average Number Remaining Number Range of Outstanding at Contractual Life Weighted-Average Exercisable at Weighted-Average Exercise Prices 12/31/96 (in years) Exercise Price 12/31/96 Exercise Price - ---------------------------------------------------------------------------- -------------------------------------- $ 2.78 - $ 4.64 1,018 5.37 $ 4.09 914 $ 4.10 11.39 - 12.13 934 8.17 12.10 165 12.11 18.41 - 25.75 34 9.24 22.29 4 18.41 26.22 - 28.25 488 9.24 26.38 - - - ---------------------------------------------------------------------------- -------------------------------------- $ 2.78 - $28.25 2,474 7.24 $11.76 1,083 $ 5.37 - ---------------------------------------------------------------------------- --------------------------------------
During 1995, the Company's Board of Directors and stockholders approved the 1995 Premium-Priced Stock Option Plan, providing options to purchase 2,520,000 shares of Company common stock available for grant at an exercise price of 125% of the stock's fair market value at the date of grant. No options have been granted under this plan. Nonvested stock awards are granted to key employees at the discretion of the Compensation Committee. Nonvested stock awards are restricted as to the transfer of ownership and vest over 5 to 7 years. Unrestricted stock awards are granted annually to members of the Board of Directors. The fair value of a stock award is equal to the fair market value of a share of Company stock at the grant date. Summary information relating to stock award grants is presented below:
For the years ended December 31, 1996 1995 1994 -------------------------------- Nonvested shares 378,092 198,944 197,312 Unrestricted shares 6,400 6,400 7,200 Weighted-average grant date fair value $ 23.99 $ 11.68 $ 7.56
16 20 When granted, the cost of nonvested stock awards is deferred and amortized over the vesting period. Unrestricted stock awards are expensed during the year granted. During 1996, 1995 and 1994, the amount of compensation expense related to stock awards charged against income was $937,000, $506,000 and $277,000, respectively. As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," the Company accounts for stock options and stock awards granted under these plans according to APB Opinion 25, "Accounting for Stock Issued to Employees." As a result, no compensation cost has been recognized for the stock options granted under the incentive plans. The fair value of each option at grant date is estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 1996 and 1995: risk-free interest rate of 6%, volatility of 32%, dividend yield of 0.2% and expected life of 4.2 years. The weighted average fair value at grant date during 1996 and 1995 was $9.13 and $4.22, respectively. No options were granted during 1994. Unaudited pro forma data as though the Company had accounted for stock-based compensation cost in accordance with SFAS No. 123 are as follows (in thousands, except per share data):
For the years ended December 31, 1996 1995 -------------------------------- Pro Forma - --------- Net income $ 42,269 $ 24,225 Earnings per share: Primary $ .63 $ .46 Fully diluted $ .60 $ .42
The above pro forma information includes only stock options granted in 1996 and 1995. Because it does not include stock options granted prior to 1995, the pro forma effects are not representative of effects on net income or earnings per share for future years. Note 9 - Related Party Transactions The Company contracted with a division of Chemed Corporation ("Chemed"), a 1% stockholder, to assist in the development of a new information system to integrate and standardize all operational and financial reporting functions. The Company also subleases its corporate offices from Chemed and is charged for the occasional use of Chemed's corporate aviation department and other incidental expenses based on Chemed's cost. The Company believes that the method by which such charges are determined is reasonable and that the charges are essentially equal to that which would have been incurred if the Company had operated as an unaffiliated entity. Charges to the Company for these services for the years ended December 31, 1996, 1995 and 1994 were $7,139,000, $4,535,000 and $2,951,000, respectively. Net amounts owed by the Company to Chemed as of December 31, 1996 and 1995 were $946,000 and $667,000, respectively. Note 10 - Employee Benefit Plans The Company has a non-contributory, defined benefit pension plan covering certain corporate headquarters employees and the employees of several companies sold by the Company in 1992, for which benefits ceased accruing upon the sale (the "Qualified Plan"). Benefits accruing under this plan to corporate headquarters employees were fully vested and frozen as of January 1, 1994. The Company also has an excess benefits plan which provides retirement payments to participants in amounts consistent with what they would have received under the Qualified Plan if payments to them under the Qualified Plan were not limited by the Internal Revenue Code and other restrictions. Retirement benefits are based primarily on an employee's years of service and compensation near retirement. Plan assets are invested primarily in U.S. Treasury obligations. The Company's policy is to fund pension costs in accordance with the funding provisions of the Employee Retirement Income Security Act. 17 21 Actuarial assumptions used to calculate the Accumulated Benefit Obligation and net expenses include a 7.25% interest rate as of December 31, 1996 and 1995 (8% at December 31, 1994), an expected long-term rate of return on assets of 8% and a 6% rate of increase in compensation levels in years prior to 1994. The Accumulated Benefit Obligation in excess of plan assets as of December 31, 1996 and 1995 was $7,422,000 and $3,188,000, respectively. The net expenses relating to the Company's defined contribution and defined benefit plans (including the ESOP described in Note 6) for the years ended December 31, 1996, 1995 and 1994 were $1,907,000, $1,663,000 and $1,481,000, respectively. Note 11 - Income Taxes The provision for income taxes is comprised of the following (in thousands):
For the years ended December 31, 1996 1995 1994 --------------------------- Current: Federal $21,917 $13,197 $7,158 State and local 3,693 1,473 1,072 ------- ------- ------ 25,610 14,670 8,230 ------- ------- ------ Deferred: Federal 2,993 1,272 802 State 90 478 115 ------- ------- ------ 3,083 1,750 917 ------- ------- ------ Income taxes $28,693 $16,420 $9,147 ======= ======= ======
Tax benefits related to the exercise of stock options and stock awards have been credited to paid-in capital in amounts of $2,243,000, $1,357,000 and $947,000 for 1996, 1995 and 1994, respectively. 18 22 The difference between the Company's reported income tax expense and the federal income tax expense computed at the statutory rate of 35% is explained in the following table (in thousands):
For the years ended December 31, 1996 1995 1994 ----------------- ---------------- --------------- Federal income tax at the statutory rate $25,250 35.0% $14,413 35.0% $7,937 35.0% State and local income taxes, net of federal income tax benefit 2,459 3.4 1,268 3.1 772 3.4 Amortization of nondeductible intangible assets 448 0.6 408 1.0 372 1.6 Other 536 0.8 331 0.8 66 0.3 ------- ---- ------- ---- ------ ---- Income taxes $28,693 39.8% $16,420 39.9% $9,147 40.3% ======= ==== ======= ==== ====== ====
Income tax payments made in 1996, 1995 and 1994 amounted to $19,749,000, $14,014,000 and $5,569,000, respectively. A summary of deferred tax assets and liabilities follows (in thousands):
December 31, 1996 1995 ------ ------ Accounts receivable reserves $3,912 $4,469 Accrued liabilities 3,841 4,929 Other 106 104 ------ ------ Gross deferred tax assets $7,859 $9,502 ====== ====== Fixed assets and depreciation methods $ 945 $ 973 Amortization of intangibles 4,046 3,798 Other 1,029 752 ------ ------ Gross deferred tax liabilities $6,020 $5,523 ====== ======
The Company has evaluated its net deferred tax asset position and has concluded that a valuation allowance is not required as these net assets are more likely than not to be realized. 19 23 Note 12 - Contingencies In May 1996, the Company became aware of a government investigation of Home Pharmacy Services, Inc. ("Home"), a wholly-owned subsidiary of the Company acquired in 1992, based in Belleville, Illinois and certain individuals at that unit. Home accounted for less than four percent of Omnicare's total sales and earnings in 1996. The Company is cooperating fully with the government's inquiry. Home continues to provide pharmacy services without interruption to nursing home residents in the region. The outcome of this investigation is not currently predictable. Note 13 - Summary of Quarterly Results (Unaudited) The following table presents the Company's quarterly financial information for 1996 and 1995 (in thousands, except per share data):
First Second Third Fourth Full Quarter Quarter Quarter Quarter Year ------------------------------------------------------------------------ 1996 Sales $117,185 $121,833 $140,733 $156,853 $536,604 Cost of sales 83,553 86,738 100,111 111,366 381,768 -------- -------- -------- -------- -------- Gross profit 33,632 35,095 40,622 45,487 154,836 Selling, general and administrative expenses 19,433 20,639 23,213 26,351 89,636 Acquisition expenses, pooling- of-interests - - - 690(b) 690(b) -------- -------- -------- -------- -------- Operating income 14,199 14,456 17,409 18,446(b) 64,510(b) Investment income, net of interest (expense) (760) 2,803 2,512 3,078 7,633 -------- -------- -------- -------- -------- Income before income taxes 13,439 17,259 19,921 21,524(b) 72,143(b) Income taxes 5,310 6,863 8,108 8,412 28,693 -------- -------- -------- -------- -------- Net income $ 8,129 $ 10,396 $ 11,813 $ 13,112(b) 43,450(b) ======== ======== ======== ======== ======== Earnings per share (a): Primary $ .15 $ .15 $ .17 $ .17(b) $ .64(b) ======== ======== ======== ======== ======== Fully diluted $ .13 $ .14 $ .16 $ .17(b) $ .61(b) ======== ======== ======== ======== ======== 1995 Sales $ 90,527 $ 97,125 $102,145 $109,839 $399,636 Cost of sales 65,879 70,168 73,198 78,470 287,715 -------- -------- -------- -------- -------- Gross profit 24,648 26,957 28,947 31,369 111,921 Selling, general and administrative expenses 15,413 16,549 16,789 18,219 66,970 Acquisition expenses, pooling- of-interests - 1,292(c) - - 1,292(c) -------- -------- -------- -------- -------- Operating income 9,235 9,116(c) 12,158 13,150 43,659(c) (Interest expense), net of investment income (535) (591) (638) (715) (2,479) -------- -------- -------- -------- -------- Income before income taxes 8,700 8,525(c) 11,520 12,435 41,180(c) Income taxes 3,449 3,629 4,585 4,757 16,420 -------- -------- -------- -------- -------- Net income $ 5,251 $ 4,896(c) $ 6,935 $ 7,678 $ 24,760(c) ======== ======== ======== ======== ======== Earnings per share (a): Primary $ .10 $ .09(c) $ .13 $ .14 $ .47(c) ======== ======== ======== ======== ======== Fully diluted $ .09 $ .09(c) $ .12 $ .13 $ .43(c) ======== ======== ======== ======== ======== (a) Earnings per share is calculated independently for each quarter and the sum of the quarters may not necessarily be equal to the full year earnings per share amount. (b) Includes acquisition-related expenses of $690,000 relating to the 1996 pooling-of-interests transaction. Such expenses, on an aftertax basis, were $534,000. Net income, excluding these expenses, was $13,646,000 for the fourth quarter, or $.17 per share (primary and fully diluted) and $43,984,000 for the full year 1996, or $.65 per primary share and $.61 fully diluted. (c) Includes acquisition-related expenses of $1,292,000 relating to the 1995 pooling-of-interests transaction. Such expenses, on an aftertax basis, were $989,000. Net income, excluding these expenses, was $5,885,000 for the second quarter, or $.11 per share (primary and fully diluted) and $25,749,000 for the full year 1995, or $.49 per primary share and $.44 fully diluted.
20 EX-27 2 EXHIBIT 27
5 0000353230 OMNICARE, INC. YEAR DEC-31-1996 DEC-31-1996 216,515 0 124,544 5,631 43,585 390,735 84,470 28,415 721,697 61,733 1,992 77,026 0 0 557,352 721,697 536,604 536,604 381,768 381,768 90,326 3,614 3,652 72,143 28,693 43,450 0 0 0 43,450 .64 .61
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