-----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, O+B9kX6bNY5xkMOUw33j9yJj1FsPLNf4svSwAZNDQ24KrsJvSM1akuVJmG5GkOeJ Z1O/PNKFTqz8G5TBuuAwxg== 0000950152-98-004675.txt : 19980518 0000950152-98-004675.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950152-98-004675 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NYSE 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-08269 FILM NUMBER: 98625523 BUSINESS ADDRESS: STREET 1: 50 E RIVERCENTER BLVD STREET 2: STE 1530 CITY: COVINGTON STATE: KY ZIP: 41011 BUSINESS PHONE: 5137626666 MAIL ADDRESS: STREET 1: 2800 CHEMED CENTER STREET 2: 255 EAST FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202-4728 10-Q 1 OMNICARE, INC. 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended March 31, 1998 Commission File Number 1-8269 OMNICARE, INC. -------------- Incorporated under the laws of the I.R.S. Employer Identification State of Delaware No. 31-1001351 50 East RiverCenter Boulevard, Covington, Kentucky 41011 -------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (606) 291-6800 ------------------------------------------------------------------ Indicate by check mark whether the registrant: 1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and 2) has been subject to such filing requirement for the past 90 days. Yes x No -------- -------- COMMON STOCK OUTSTANDING - ------------------------
Number of Shares Date ------ ---- Common Stock, $1 par value 82,886,217 March 31, 1998
2 OMNICARE, INC. AND ------------------ SUBSIDIARY COMPANIES -------------------- Index
Page ------- Part I. Financial Information: Item 1. Financial Statements Consolidated Balance Sheet - March 31, 1998 and December 31, 1997 3 Consolidated Statement of Income - Three months ended - March 31, 1998 and 1997 4 Consolidated Statement of Cash Flows - Three months ended - March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 Part II. Other Information: Item 2. Recent Sales of Unregistered Securities 12 Item 6. Exhibits and Reports on Form 8-K 12
3 PART I -- FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements -------------------- OMNICARE, INC. AND SUBSIDIARY COMPANIES Consolidated Balance Sheet (In thousands, except share data)
UNAUDITED March 31, December 31, 1998 1997 ------------ -------------- ASSETS Current assets: Cash and cash equivalents $ 119,882 $ 131,042 Accounts receivable, less allowances of $17,817 (1997 - $15,872) 238,659 225,774 Inventories 98,018 87,186 Deferred income tax benefits 15,267 10,205 Other current assets 18,935 17,757 ----------- ----------- Total current assets 490,761 471,964 Properties and equipment, at cost less accumulated depreciation of $46,206 (1997-$42,204) 86,885 84,074 Goodwill, less accumulated amortization of $32,297 (1997-$27,763) 720,270 693,007 Other assets 40,318 40,584 ----------- ----------- Total assets $ 1,338,234 $ 1,289,629 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 60,432 $ 45,669 Amounts payable pursuant to acquisition agreements 6,000 17,073 Current portion of long-term debt 2,810 2,936 Income taxes payable 8,676 2,052 Accrued employee compensation 19,974 29,529 Other current liabilities 39,503 30,851 ----------- ----------- Total current liabilities 137,395 128,110 Long-term debt 350,468 352,579 Deferred income taxes 9,168 10,302 Amounts payable pursuant to acquisition agreements 10,769 10,404 Other noncurrent liabilities 19,096 14,038 ----------- ----------- Total liabilities 526,896 515,433 Stockholders' equity: Preferred stock-authorized 1,000,000 shares without par value; none issued Common stock-authorized 110,000,000 shares $1 par; 82,918,703 issued (1997 - 82,254,711 shares) 82,919 82,255 Paid-in capital 542,045 526,727 Retained earnings 202,432 183,887 ----------- ----------- 827,396 792,869 Treasury stock, at cost - 32,486 shares (1997 - 102,046 shares) (1,223) (2,926) Deferred compensation (14,421) (14,807) Unallocated stock of ESOP (414) (940) ----------- ----------- Total stockholders' equity 811,338 774,196 ----------- ----------- Contingencies (Note 3) Total liabilities and stockholders' equity $ 1,338,234 $ 1,289,629 =========== ===========
The Notes to Consolidated Financial Statements are an integral part of this statement. 3 4 OMNICARE, INC. AND SUBSIDIARY COMPANIES Consolidated Statement of Income UNAUDITED (In thousands, except per share data)
Three Months Ended March 31, --------------------------- 1998 1997 --------- --------- Sales $ 299,752 $ 181,608 Cost of sales 212,734 128,903 --------- --------- Gross profit 87,018 52,705 Selling, general and administrative expenses 51,347 30,570 Acquisition expenses, pooling-of-interests 491 978 --------- --------- Operating income 35,180 21,157 Investment income 1,444 1,802 Interest expense (4,534) (290) --------- --------- Income before income taxes 32,090 22,669 Income taxes 12,741 9,226 --------- --------- Net income $ 19,349 $ 13,443 ========= ========= Earnings per share: Basic $ 0.23 $ 0.17 ========= ========= Diluted $ 0.23 $ 0.17 ========= ========= Dividends paid per share: $ 0.02 $ 0.0175 ========= ========= Weighted average number of common shares outstanding: Basic 82,439 78,065 ========= ========= Diluted 82,695 78,218 ========= =========
The Notes to Consolidated Financial Statements are an integral part of this statement. 4 5 OMNICARE, INC. AND SUBSIDIARY COMPANIES Consolidated Statement of Cash Flows UNAUDITED
(In thousands) Three Months Ended March 31, --------------------------- 1998 1997 --------- --------- Cash flows from operating activities: Net income $ 19,349 $ 13,443 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 9,174 5,155 Provision for doubtful accounts 2,250 1,360 Deferred tax provision (1,133) 1,322 Changes in assets and liabilities, net of effects from acquisition/disposal of businesses: Accounts receivable (12,917) (14,670) Inventories (10,687) (24,649) Current and noncurrent assets (794) (11,014) Payables and accrued liabilities 20,150 16,236 Current and noncurrent liabilities 5,851 2,299 --------- --------- Net cash flows from operating activities 31,243 (10,518) --------- --------- Cash flows from investing activities: Acquisition of businesses (29,415) (74,040) Capital expenditures (7,955) (5,503) Other (98) 8 --------- --------- Net cash flows from investing activities (37,468) (79,535) --------- --------- Cash flows from financing activities: Principal payments on long-term obligations (1,163) (137) Exercise of stock options and warrants, net of stock tendered in payment (2,149) 4,105 Dividends paid (1,623) (1,367) --------- --------- Net cash flows from financing activities (4,935) 2,601 --------- --------- Net increase (decrease) in cash and cash equivalents (11,160) (87,452) Cash and cash equivalents at beginning of period 131,042 216,515 --------- --------- Cash and cash equivalents at end of period $ 119,882 $ 129,063 ========= ========= Supplemental disclosures of cash flow information Income taxes paid $ 390 $ 5,151 Interest paid 184 138
The Notes to Consolidated Financial Statements are an integral part of this statement. 5 6 OMNICARE, INC. AND SUBSIDIARY COMPANIES Notes to Consolidated Financial Statements 1. The interim financial data are unaudited; however, in the opinion of the management of Omnicare, Inc., the interim data include all adjustments (which include only normal adjustments) considered necessary for a fair presentation of the consolidated financial position, results of operations and cash flows of Omnicare, Inc. and its consolidated subsidiaries ("Omnicare" or the "Company"). Certain reclassifications of prior year amounts have been made to conform with the current year presentation. 2. 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 other assets, generally insignificant in size, which are combined with existing pharmacy operations to augment their internal growth. The Company may, from time to time, acquire certain non-pharmaceutical companies which complement the Company's core business. Since January 1, 1998, the Company has completed three acquisitions (excluding insignificant purchases of pharmacy contracts and other assets) of institutional pharmacy businesses and one data management business. All of the institutional pharmacy transactions were accounted for as purchase transactions and the data management business as a pooling-of-interests. These four transactions added approximately $15 million in revenues on an annualized basis. For all acquisitions accounted for as purchases, including insignificant purchases of pharmacy contracts and other assets, the purchase price paid for each has been allocated to the fair value of the assets acquired and liabilities assumed. The results of operations of the acquired companies have been included in the consolidated results of the Company from the effective dates of the acquisitions. The impact of the pooling-of-interests transaction on the Company's historical consolidated financial statements was not material; consequently, prior period and current year financial statements have not been restated for this transaction. CompScript - ---------- On February 23, 1998, Omnicare and CompScript, Inc. (CompScript) (NASDAQ:CPRX) announced the execution of a definitive merger agreement pursuant to which Omnicare will acquire CompScript through the merger of a wholly-owned subsidiary of Omnicare with CompScript. In the merger, each outstanding CompScript common share will be converted into $4.50 market value of Omnicare common shares, subject to the terms of the merger agreement. Omnicare expects to issue approximately $63.3 million in Omnicare stock. In addition, CompScript has approximately $7.5 million in debt. The transaction is structured as a pooling- of-interests and a tax-free reorganization. CompScript is a Boca Raton, Florida-based provider of comprehensive pharmacy management, infusion therapy and related consulting services to the long-term care, alternate care and managed care markets. CompScript serves approximately 20,000 residents in 137 long- 6 7 term care facilities in five states. CompScript operates seven pharmacy locations in the states of Florida, Ohio, Louisiana, Alabama and Mississippi. CompScript's annualized revenues are approximately $53.0 million based on the fourth quarter of 1997. The transaction, which has been approved by the Boards of Directors of both Omnicare and CompScript, is subject to the approval of CompScript's shareholders, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Act, and certain other terms and conditions. In connection with this transaction, CompScript has granted Omnicare an option to purchase up to 19.9% of CompScript's common shares, exercisable upon the occurrence of certain circumstances specified in the agreement. It is anticipated that the transaction will be completed prior to the end of the third quarter of 1998. IBAH - ---- On March 31, 1998, Omnicare and IBAH, Inc. (IBAH) (NASDAQ:IBAH) announced the execution of a definitive agreement under which Omnicare will acquire IBAH, the fifth largest global contract research organization ("CRO"), in a stock-for-stock merger. In the merger, each outstanding IBAH common share will be converted into $5.75 market value of Omnicare common shares, subject to the terms of the agreement. Omnicare expects to issue approximately $169 million in Omnicare stock. The transaction is structured as a pooling-of-interests and a tax-free reorganization. The definitive agreement has been approved by both Boards of Directors and is subject to the approval of IBAH's shareholders, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Act, and certain other terms and conditions. In connection with this transaction, IBAH has granted Omnicare an option to purchase up to 19.9% of IBAH's common shares exercisable upon the occurrence of certain circumstances specified in the agreement. It is anticipated that the transaction will be completed by the end of the third quarter of 1998. IBAH, Inc., headquartered in Blue Bell, Pennsylvania, is a worldwide leader in providing comprehensive product development services to client companies in the pharmaceutical, biotechnology, medical device and diagnostics industries. IBAH offers services for all stages of drug development, helping client companies to accelerate products from discovery through development and commercialization more rapidly and cost-effectively. IBAH's net revenues are running at the annualized rate of approximately $99 million based on the fourth quarter of 1997. 7 8 3. On April 17, 1998, Omnicare announced that the previously announced tentative settlement with the U.S. Attorney's office in the Southern District of Illinois regarding the government's investigation of its subsidiary, Home Pharmacy Services, Inc. ("HPSI"), has been concluded on the terms previously disclosed. The HPSI pharmacy operation accounted for less than 3% of Omnicare's total sales and earnings for the three months ended March 31, 1998. As previously announced, in May 1996 the Company became aware of a government investigation of HPSI, its institutional pharmacy subsidiary in Belleville, Illinois, and certain individuals employed at that time. Omnicare was informed that HPSI was the sole focus of the investigation and that neither Omnicare nor any of its other operating units were targets of the inquiry. Omnicare cooperated fully with the government investigation and, in August 1997, announced that a tentative settlement had been reached. In anticipation of the completion of the settlement, Omnicare recorded a pretax charge to earnings in the third quarter of 1997 of $6.3 million to establish a reserve for the estimated costs and legal and other expenses associated with resolving the matter. The reserve is adequate to cover the final settlement costs. 8 9 Item 2. Management's Discussion and Analysis of Results of Operations and ----------------------------------------------------------------- Financial Condition - ------------------- Results of Operations - --------------------- Quarter Ended March 1998 vs. 1997 - --------------------------------- Excluding the impact of acquisition related expenses for pooling-of-interests transactions from both periods, net income for the quarter ended March 31, 1998 was up 38% to $19,764,000 from the $14,297,000 earned in the same period a year ago. Basic and diluted earnings per share, on this basis, were $.24, up 33% from the $.18 earned in the comparable prior-year period. The 1998 quarter included pooling expenses of $491,000 before taxes ($415,000 after taxes) while the 1997 quarter included $978,000 before taxes ($854,000 after taxes) in pooling expenses. Sales for the first quarter of 1998 increased 65% to $299,752,000 versus the $181,608,000 recorded in the comparable prior-year quarter. The increases in the Company's sales and earnings were the product of its continued focus on acquisitions of long-term care pharmacy providers and sustained internal growth. During the first quarter of 1998, the Company acquired three institutional pharmacy providers (excluding insignificant purchases of pharmacy contracts and other assets), which when combined with internal growth, brought the total number of nursing facility residents served to 457,200 at March 31, 1998, up 35% over the number served one year ago. The Company also acquired a data management business during the quarter. These four transactions added approximately $15 million in revenues on an annualized basis. Internal growth resulted from an increase in acuity levels of residents in client facilities, expansion of services such as infusion therapy, efforts of the Company's National Sales and Marketing Group and pharmacy staff in developing and purchasing new pharmacy contracts, drug price inflation and other changes in sales mix. Investment income for the three months ended March 31, 1998 decreased by $358,000 in comparison to the same period of 1997 due to a lower average invested cash balance during the first quarter of 1998 than in the first quarter of 1997. The use of cash is primarily attributable to the Company's acquisition program. The Company's effective tax rate in the first quarter of 1998 was 39.7% versus 40.7% in the comparable 1997 period. The decrease was primarily attributable to a reduction in nondeductible pooling-of-interests expenses in the current year quarter versus the comparable prior year period. 9 10 Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents at March 31, 1998 were $120 million versus $131 million at December 31, 1997. Acquisitions of businesses in the first quarter of 1998 required $29 million of cash payments (including amounts payable pursuant to acquisition agreements relating to pre-1998 acquisitions) which were funded by the reduction in cash and cash equivalents and the use of cash flows generated from first quarter operating activities. The Company generated positive net cash flow from operating activities of $31 million during the three months ended March 31, 1998. The improvement in net cash flow from operating activities during the three months ended March 31, 1998 versus the comparable prior year period is primarily attributable to improved management of working capital and changes in estimated tax assets and liabilities. Specifically, there was a significant increase in inventories during the first quarter of 1997 associated with a change in pricing and payment terms with the Company's primary supplier of pharmaceuticals from four weeks to one week and the purchase of inventories in advance of pharmaceutical price increases from manufacturers, whereas neither of these circumstances significantly impacted the first quarter of 1998. The Company's capital requirements are primarily related to its acquisition program. During the three months ended March 31, 1998, the Company made four acquisitions (excluding insignificant purchases of other assets) for an aggregate capital investment of approximately $14 million. Such acquisitions were financed from cash and cash equivalents and the issuance of approximately 156,000 shares of common stock. There are no material commitments outstanding at March 31, 1998, other than estimated future acquisition-related payments to be made in accordance with purchase agreements. The Company's current ratio at March 31, 1998 and December 31, 1997 was 3.6 to 1.0 and 3.7 to 1.0, respectively. The decline in the current ratio is primarily attributable to the Company's utilization of cash to fund its acquisition program. On February 4, 1998, the Company's Board of Directors increased the quarterly cash dividend by 14% to 2 cents per share for an indicated annual rate of 8 cents per share in 1998. Dividends of $1.6 million were paid during the three months ended March 31, 1998 versus the $1.4 million paid in the comparable prior year period. The Company believes its sources of liquidity and capital are adequate for its ongoing operating needs. If needed, other external sources of financing are readily available to the Company. 10 11 Recently Issued Accounting Standards - ------------------------------------ In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) Nos. 130 and 131, "Reporting Comprehensive Income" and "Disclosures about Segments of an Enterprise and Related Information," respectively. Effective January 1, 1998, SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses). SFAS No. 131 is effective for fiscal years beginning after December 15, 1997, although it is not applicable to interim periods in the initial year of adoption. SFAS No. 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 130 did not impact the Company's reporting and disclosures during the first quarter of 1998. Further, SFAS No. 131 is not expected to significantly impact the Company's reporting and disclosures. The American Institute of Certified Public Accountants recently issued Statement of Position ("SOP") Nos. 98-1 and 98-5, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" and "Start-Up Activities," respectively. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use. SOP 98-5 requires costs of start-up activities and organization costs to be expensed as incurred. These statements are effective for financial statements for fiscal years beginning after December 15, 1998. SOP Nos. 98-1 and 98-5 are not expected to have a significant impact on the Company's financial position, results of operations, reporting and disclosures. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of - ----------------------------------------------------------------------------- 1995 Regarding Forward-Looking Information - ------------------------------------------ In addition to historical information, this Form 10-Q contains forward-looking statements and performance trends which are subject to certain risks and uncertainties that could cause actual results to differ materially from these statements and trends. Such factors include, but are not limited to: the continued availability of suitable acquisition candidates; changing economic and market conditions that could impact the suitability of such candidates; Omnicare's ability to integrate acquisitions; the effect of changes in government regulation and reimbursement policies and in the interpretation and application of such policies; the failure of the Company to obtain or maintain required regulatory approvals or licenses; and other risks and uncertainties as described in the Company's 1997 Report on Form 10-K for the year ended December 31, 1997. 11 12 PART II. -- OTHER INFORMATION ----------------------------- Item 2. Recent Sales of Unregistered Securities --------------------------------------- The Company, as part of its ongoing acquisition program, issues its common shares and warrants ("Securities") from time to time in private transactions in connection with the purchase of the assets or stock of businesses acquired. During the quarter ended March 31, 1998, the Company completed three transactions involving unregistered Securities. In connection with these and a prior transaction, a total of 309,912 shares of common stock and 80,000 warrants were issued. No underwriters were involved in these acquisition transactions. The Securities were issued in reliance on the exemption from registration contained at Section 4(2) of the Securities Act of 1933. See Note 2 to the Consolidated Financial Statements for additional information regarding the 1998 acquisition transactions. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Exhibit ------ ------- 11 Computation of Earnings per Common Share (b) Reports on Form 8-K - On February 18, 1998, a Form 8-K was filed to report the sales and earnings of the Company for the month ended January 31, 1998. 12 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Omnicare, Inc. ---------------------------- Registrant Date May 15, 1998 By /s/David W. Froesel, Jr. ------------------------------- ------------------------ David W. Froesel, Jr. Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 13 EX-11 2 EXHIBIT 11 1 Exhibit 11 OMNICARE, INC. AND SUBSIDIARY COMPANIES Computation of Earnings Per Common Share (in thousands, except per share data)
Three Months Ended March 31, ---------------------- 1998* 1997 ------- ------- Basic Earnings Net income $19,349 $13,443 Other -- 4 ------- ------- Net income as adjusted $19,349 $13,447 ======= ======= Shares Weighted average number of common shares outstanding 82,439 78,065 ======= ======= Basic earnings per common share $ 0.23 $ 0.17 ======= ======= Diluted Earnings Net income $19,349 $13,443 Other -- 4 ------- ------- Net income as adjusted $19,349 $13,447 ======= ======= Shares Weighted average number of common shares outstanding 82,439 78,065 Additional shares assuming conversion of stock options and stock warrants 256 153 ------- ------- Average common shares outstanding and equivalent as adjusted 82,695 78,218 ======= ======= Diluted earnings per common share $ 0.23 $ 0.17 ======= =======
* The $345,000,000 of 5.0% Convertible Subordinated Notes due 2007 that are convertible into 8,712,121 shares at $39.60 per share were outstanding during the quarter ended March 31, 1998, but were not included in the computation of diluted EPS because the impact was anti-dilutive. EX-27 3 EXHIBIT 27
5 0000353230 OMNICARE, INC. 1 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 119,882 0 256,476 17,817 98,018 490,761 133,091 46,206 1,338,234 137,395 0 0 0 82,919 728,419 1,338,234 299,752 299,752 212,734 212,734 51,838 2,250 4,534 32,090 12,741 19,349 0 0 0 19,349 .23 .23
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