-----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, QYhdrDrrjawIOGoiLAixto/F+VzZJyMqKBprelSlJGr3TZIgYeefzpjwZ8niTaW1 ac8VXylPABa01W64DgH1xQ== 0000950152-98-006864.txt : 19980817 0000950152-98-006864.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950152-98-006864 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 10-Q SEC ACT: SEC FILE NUMBER: 001-08269 FILM NUMBER: 98691691 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: 50 E RIVERCENTER BLVD STREET 2: STE 1530 CITY: COVINGTON STATE: KY ZIP: 41011 10-Q 1 OMNICARE, INC. QUARTERLY REPORT FORM 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For Quarter Ended June 30, 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 89,411,372 June 30, 1998 2 OMNICARE, INC. AND ------------------ SUBSIDIARY COMPANIES -------------------- Index
Page ---- Part I. Financial Information: Item 1. Financial Statements Consolidated Balance Sheet - June 30, 1998 and December 31, 1997 3 Consolidated Statement of Income - Three and six months ended - June 30, 1998 and 1997 4 Consolidated Statement of Cash Flows - Six months ended - June 30, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 10 Part II. Other Information: Item 2. Recent Sales of Unregistered Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibits and Reports on Form 8-K 16
3 PART I -- FINANCIAL INFORMATION ------------------------------- Item 1. Financial Statements -------------------- OMNICARE, INC. AND SUBSIDIARY COMPANIES Consolidated Balance Sheet UNAUDITED (In thousands, except share data)
June 30, December 31, 1998 1997 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $ 68,723 $ 138,062 Accounts receivable, less allowances of $20,397 (1997 - $17,994) 319,691 278,525 Inventories 93,074 90,366 Deferred income tax benefits 13,190 10,465 Other current assets 23,823 24,954 Total current assets 518,501 542,372 Properties and equipment, at cost less accumulated depreciation of $63,719 (1997-$53,703) 113,301 101,662 Goodwill, less accumulated amortization of $40,238 (1997-$30,247) 796,148 726,696 Other assets 43,456 41,416 ----------- ------------ Total assets $ 1,471,406 $ 1,412,146 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 76,510 $ 54,840 Amounts payable pursuant to acquisition agreements 6,963 17,073 Current portion of long-term debt 5,661 13,252 Accrued employee compensation 25,271 34,304 Deferred revenue 20,734 22,270 Other current liabilities 53,436 45,808 ----------- ------------ Total current liabilities 188,575 187,547 Long-term debt 350,711 359,148 Deferred income taxes 11,182 10,517 Amounts payable pursuant to acquisition agreements 11,866 10,404 Other noncurrent liabilities 20,840 14,777 ----------- ------------ Total liabilities 583,174 582,393 Stockholders' equity: Preferred stock-authorized 1,000,000 shares without par value; none issued Common stock-authorized 200,000,000 shares $1 par; 89,438,044 shares issued (1997 - authorized 110,000,000 shares; 88,260,600 shares issued) 89,438 88,261 Paid-in capital 636,551 609,117 Retained earnings 177,198 151,153 ----------- ------------ 903,187 848,531 Treasury stock, at cost - 26,672 shares (1997 - 102,046 shares) (970) (2,926) Deferred compensation (13,889) (14,807) Unallocated stock of ESOP (273) (940) Translation adjustment 177 (105) ----------- ------------ Total stockholders' equity 888,232 829,753 ----------- ------------ Contingencies (Note 4) Total liabilities and stockholders' equity $ 1,471,406 $ 1,412,146 =========== ===========
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 Six Months Ended June 30, June 30, ---------------------- ---------------------- 1998 1997 1998 1997 --------- --------- --------- --------- Sales $ 358,194 $ 236,896 $ 698,452 $ 449,320 Cost of sales 249,615 165,680 488,551 314,808 --------- --------- --------- --------- Gross profit 108,579 71,216 209,901 134,512 Selling, general and administrative expenses 67,408 46,307 130,944 87,053 Acquisition expenses, pooling-of-interests 14,096 944 14,587 2,535 Restructuring costs 3,627 1,078 3,627 1,078 --------- --------- --------- --------- Operating income 23,448 22,887 60,743 43,846 Investment income 977 1,456 2,423 3,487 Interest expense (4,435) (405) (9,206) (861) Other expenses -- -- -- (800) --------- --------- --------- --------- Income before income taxes 19,990 23,938 53,960 45,672 Income taxes 11,884 10,217 25,448 19,679 --------- --------- --------- --------- Income from continuing operations 8,106 13,721 28,512 25,993 Loss from discontinued operations -- (1,854) -- (2,154) --------- --------- --------- --------- Net income $ 8,106 $ 11,867 $ 28,512 $ 23,839 ========= ========= ========= ========= Earnings per share: Basic Continuing operations $ 0.09 $ 0.16 $ 0.32 $ 0.31 Discontinued operations -- (0.02) -- (0.03) --------- --------- --------- --------- Net income $ 0.09 $ 0.14 $ 0.32 $ 0.28 ========= ========= ========= ========= Diluted Continuing operations $ 0.09 $ 0.16 $ 0.32 $ 0.30 Discontinued operations -- (0.02) -- (0.02) --------- --------- --------- --------- Net income $ 0.09 $ 0.14 $ 0.32 $ 0.28 ========= ========= ========= ========= Weighted average number of common shares outstanding: Basic 88,824 85,674 88,466 84,593 ========= ========= ========= ========= Diluted 89,918 86,586 89,516 85,636 ========= ========= ========= =========
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) Six Months Ended June 30, ---------------------- 1998 1997 --------- --------- Cash flows from operating activities: Net income $ 28,512 $ 23,839 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 22,272 13,187 Provision for doubtful accounts 5,393 2,918 Deferred tax provision 3,996 3,159 Discontinued operations -- 2,154 Other 1,948 800 Changes in assets and liabilities, net of effects from acquisition/disposal of businesses: Accounts receivable (42,516) (37,774) Inventories (2,001) (20,714) Current and noncurrent assets 1,904 (9,587) Payables and accrued liabilities 33,034 9,183 Deferred revenue (1,499) (2,447) Current and noncurrent liabilities (2,498) 882 --------- --------- Net cash flows from operating activities 48,545 (14,400) --------- --------- Cash flows from investing activities: Acquisition of businesses (76,411) (99,931) Capital expenditures (23,496) (16,893) Other 2,135 2,787 --------- --------- Net cash flows from investing activities (97,772) (114,037) --------- --------- Cash flows from financing activities: Net proceeds from borrowings -- 4,406 Principal payments on long-term obligations (15,353) (1,851) Exercise of stock options and warrants, net of stock tendered in payment (1,533) 6,669 Dividends paid (3,277) (2,770) Effect of exchange rate changes on cash 51 (404) --------- --------- Net cash flows from financing activities (20,112) 6,050 --------- --------- Net increase (decrease) in cash and cash equivalents (69,339) (122,387) Cash and cash equivalents at beginning of period 138,062 232,961 ========= ========= Cash and cash equivalents at end of period $ 68,723 $ 110,574 ========= ========= Supplemental disclosures of cash flow information - ------------------------------------------------- Income taxes paid $ 15,779 $ 11,615 Interest paid 9,190 552
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 eight acquisitions (excluding insignificant purchases of other assets) of institutional pharmacy businesses, one data management business and one contract research organization (CRO). Seven of the institutional pharmacy transactions were accounted for as purchase transactions and one institutional pharmacy, the data management business and the CRO, as poolings-of-interests. These ten transactions added approximately $198 million in revenues on an annualized basis. For all acquisitions accounted for as purchases, including insignificant purchases of other assets, the purchase price paid for each has been allocated to the fair value of the assets acquired and liabilities assumed and 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. Pooling-of-Interests Transactions - --------------------------------- The consolidated financial statements have been restated for all periods to include the historical results of operations, financial position and cash flows of the two entities acquired in June 1998 in pooling-of-interests transactions, described as follows: On June 26, 1998, Omnicare completed the acquisition of CompScript, Inc. ("CompScript"). Pursuant to the terms of the merger agreement, CompScript stockholders received .12947 of a share of Omnicare common stock for each share owned of CompScript common stock. Omnicare issued approximately 1.8 million shares of its common stock with a value of approximately $67 million in this transaction, which was accounted for as a pooling-of-interests and a tax free reorganization. 6 7 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-term care facilities in five states. CompScript operates seven pharmacy locations in the states of Florida, Ohio, Louisiana, Alabama and Mississippi. On June 29, 1998, Omnicare completed the acquisition of IBAH, Inc. ("IBAH"). Pursuant to the terms of the merger agreement, IBAH stockholders received .1638 of a share of Omnicare common stock for each share owned of IBAH common stock. Omnicare issued approximately 4.3 million shares of common stock with a value of approximately $159 million in this transaction, which was accounted for as a pooling-of-interests and a tax free reorganization. IBAH, 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. Summarized results of operations of Omnicare, Compscript and IBAH for the period from January 1, 1998 through June 30, 1998 and January 1, 1997 through June 30, 1997 are as follows (in thousands):
Omnicare CompScript IBAH Combined -------- ---------- ---- -------- Three months ended June 30, 1998: Sales $316,701 $14,388 $27,105 $358,194 Net income (excluding pooling expenses, restructuring costs, other nonrecurring expenses and discontinued operations) 22,237 277 983 23,497 Net income/(loss) 15,736 (2,445) (5,185) 8,106 Three months ended June 30, 1997: Sales $203,060 $12,848 $20,988 $236,896 Net income/(loss) (excluding pooling expenses, restructuring costs, other nonrecurring expenses and discontinued operations) 15,713 (348) 260 15,625 Net income/(loss) 15,138 (423) (2,848) 11,867
7 8 Six months ended June 30, 1998: Sales $616,453 $28,237 $53,762 $698,452 Net income (excluding pooling expenses, restructuring costs, other nonrecurring expenses and discontinued operations) 42,001 575 1,742 44,318 Net income/(loss) 35,085 (2,147) (4,426) 28,512 Six months ended June 30, 1997 Sales $384,668 $24,347 $40,305 $449,320 Net income/(loss) (excluding pooling expenses, restructuring costs, other nonrecurring expenses and discontinued operations) 30,010 (852) 705 29,863 Net income/(loss) 28,581 (2,039) (2,703) 23,839
In connection with the CompScript and IBAH mergers, in the 1998 second quarter Omnicare recorded a charge to operating expenses of $17,723,000 ($15,392,000 after taxes) for direct and other merger-related costs pertaining to the merger transactions and certain related restructuring actions. Merger transaction costs consisted primarily of fees for investment bankers, attorneys, accountants, financial printing and other related charges. Restructuring costs include severance and exit costs. Details of these costs follow (amounts in thousands):
Merger transaction costs $14,096 Restructuring costs Employee severance 1,413 Exit costs 2,214 ------- Total $17,723 =======
Restructuring costs include the costs of restructuring the CompScript mail order pharmacy business and the cancellation of certain of its vendor agreements along with severance and exit costs associated with the consolidation of certain IBAH facilities and the restructuring of its pharmaceutics business. These actions will result in the reduction of approximately 20 employees. Included in the exit costs are $1,948,000 of non-cash items. At June 30, 1998, all liabilities relating to these actions were classified as current liabilities. Pharmacy Operations of Extendicare - ---------------------------------- On July 30, 1998, Omnicare and Extendicare Health Services, Inc. ("EHSI"), a wholly-owned subsidiary of Extendicare Inc. ("Extendicare") announced the execution of a definitive agreement pursuant to which Omnicare will acquire the institutional pharmacy operations of EHSI for $250 million in cash, 125,000 shares of Omnicare common stock and 1.5 million warrants to purchase Omnicare common stock at $48.00 per share. The transaction is structured as a purchase of assets. 8 9 Based in Milwaukee, Wisconsin, the pharmacy business of EHSI, operating under the name United Professional Companies, Inc. ("UPC"), has contracts to provide comprehensive pharmacy, related consulting and infusion therapy services to approximately 55,000 residents in more than 550 facilities in 12 states. This transaction also offers Omnicare the opportunity to provide pharmacy services to an additional 77 Extendicare facilities with capacity for 9,300 residents in Canada and the United Kingdom. UPC's pharmacy revenues are currently running at the annualized rate of approximately $163 million. The transaction has been approved by the Board of Directors of both Omnicare and Extendicare, and is subject to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the satisfaction of certain other conditions. It is expected that the transaction will close by September 30, 1998. 3. In 1997, IBAH closed the software commercialization business unit of Resources Biometrics, Inc. ("RBI"), a wholly-owned subsidiary of IBAH. Accordingly, all operating results were reclassified from continuing operations to discontinued operations. In addition, a loss on disposal of this unit of $1,547,000 was recorded. The remaining liabilities related to the loss on disposal at June 30, 1998 are not significant. 4. 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"), was concluded in accordance with the terms previously disclosed. The HPSI pharmacy operation accounted for less than 2% of Omnicare's total sales and earnings (excluding nonrecurring expenses) for the six months ended June 30, 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. 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 was adequate to cover the final settlement costs. 9 10 Item 2. Management's Discussion and Analysis of Results of Operations and ----------------------------------------------------------------- Financial Condition - ------------------- Results of Operations - --------------------- Quarter Ended June 1998 vs. 1997 - -------------------------------- On June 26, 1998, the Company issued approximately 1.8 million shares of its common stock for all of the outstanding common stock of Boca Raton, Florida-based CompScript, Inc. ("CompScript"), a provider of pharmaceuticals to long-term care facilities. Additionally, on June 29, 1998, the Company issued approximately 4.3 million shares of its common stock for all outstanding preferred and common stock of Blue Bell, Pennsylvania-based IBAH, Inc. ("IBAH"), a worldwide leader in providing comprehensive product development services to client companies in pharmaceutical, biotechnology, medical device and diagnostics industries. Both of these transactions were accounted for as pooling-of-interests and, accordingly, the Company's consolidated financial statements have been restated for all periods presented herein to include the results of operations, financial position and cash flows of CompScript and IBAH. Excluding the impact of acquisition-related expenses for pooling-of-interests transactions and other nonrecurring expenses from both periods, diluted earnings per share from continuing operations for the three months ended June 30, 1998 were $.26, up 44% from the $.18 earned in the same period a year ago. Income from continuing operations, on this basis, for the 1998 quarter was up 50%, to $23,497,000 from the $15,625,000 earned from continuing operations in the second quarter of 1997. Revenues for the 1998 quarter increased 51% to $358,194,000 versus the $236,896,000 recorded in the comparable prior-year quarter. The 1998 quarter included pooling expenses of $14,096,000 before taxes ($12,702,000 after taxes) covering transaction-related expenses in the CompScript and IBAH acquisitions. The 1998 quarter also included $3,627,000 before taxes ($2,689,000 after taxes) in nonrecurring charges related to the restructuring of the CompScript mail order pharmacy business and the cancellation of certain of its vendor agreements along with severance and exit costs associated with the consolidation of certain IBAH facilities and the restructuring of its pharmaceutics business. The 1997 quarter included pooling expenses of $944,000 before taxes ($826,000 after taxes) for transactions completed by Omnicare, CompScript and IBAH and a restructuring charge of $1,078,000 before taxes ($1,078,000 after taxes) recorded by IBAH. 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 other complementary non-pharmaceutical service businesses and sustained internal growth. During the second quarter of 1998, the Company acquired five institutional pharmacy providers (including CompScript, but excluding insignificant purchases of other assets) which when combined with internal growth, brought the total number of nursing facility residents served to 496,000 at June 30, 1998, up 39% over the number served one year ago. These transactions, together with the IBAH acquisition, added approximately $183 million in revenues on an annualized basis. 10 11 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 new pharmacy contracts, drug price inflation and other changes in sales mix. Investment income for the three months ended June 30, 1998 was $977,000, a decrease of $479,000 in comparison to the same period of 1997 due to a lower average invested cash balance during the second quarter of 1998 than in the second quarter of 1997. The use of cash is primarily attributable to the Company's acquisition program. Interest expense during the three months ended June 30, 1998 was $4,435,000, an increase of $4,030,000 versus the comparable prior year period primarily due to the impact of interest expense associated with the $345,000,000 5.0% Convertible Subordinated Notes issued in December 1997. The Company's effective tax rate in the second quarter of 1998 was 59.4% versus 42.7% in the comparable 1997 period. The increase was primarily attributable to higher nondeductible pooling-of-interests expenses recorded in the current year quarter versus the comparable prior year period. Year-to-Date June 1998 vs. 1997 - ------------------------------- Excluding the acquisition-related pooling, restructuring and nonrecurring charges from both periods, diluted earnings per share from continuing operations for the six months ended June 30, 1998 of $.50 were 43% higher than the $.35 earned from continuing operations in the first six months of 1997. Income from continuing operations, on this basis, of $44,318,000 for the first half of 1998 was 48% above the $29,863,000 earned from continuing operations in the first half of 1997. Revenues for the 1998 period were $698,452,000, up 55% over the $449,320,000 recorded in the first half of 1997. The 1998 period included pooling expenses of $14,587,000 before taxes ($13,117,000 after taxes) consisting of those mentioned above, along with $491,000 before taxes ($415,000 after taxes) in pooling expenses incurred in connection with an acquisition completed by Omnicare during the first quarter, and the aforementioned restructuring charges related to the IBAH and CompScript transactions. The 1997 period includes pooling expenses of $2,535,000 before taxes ($2,293,000 after taxes) consisting of those mentioned above and $1,591,000 ($1,467,000 after taxes) related to pooling expenses incurred in connection with acquisitions completed by Omnicare and CompScript during the first quarter of 1997. The 1997 period also included nonrecurring expenses of $1,878,000 before taxes ($1,577,000 after taxes) consisting of the previously mentioned IBAH restructuring charge and a one-time charge of $800,000 ($499,000 after taxes) relating to the write-down of a note receivable of CompScript in the first quarter of 1997. 11 12 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 other complementary non-pharmaceutical service businesses and sustained internal growth. During the six months ended 1998, the Company acquired eight institutional pharmacy providers (excluding insignificant purchases of other assets) which when combined with internal growth, brought the total number of nursing facility residents served to 496,000 at June 30, 1998, up 39% over the number served one year ago. The Company also acquired a data management business and a during this six-month period. These ten transactions added approximately $198 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 new pharmacy contracts, drug price inflation and other changes in sales mix. Investment income for the six months ended June 30, 1998 was $2,423,000 a decrease of $1,064,000 in comparison to the same period of 1997 due to a lower average invested cash balance during the first half of 1998 than in the first half of 1997. The use of cash is primarily attributable to the Company's acquisition program. Interest expense during the six months ended June 30, 1998 was $9,206,000, an increase of $8,345,000 versus the comparable prior year period primarily due to the $345,000,000, 5.0% Convertible Subordinated Notes issued in December 1997. The Company's effective tax rate during the June 1998 year to date period was 47.2% versus 43.1% in the similar 1997 period. The increase was primarily attributable to additional nondeductible pooling-of-interests expenses recorded in the current year period versus the comparable prior year prior. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents at June 30, 1998 were $69 million versus $138 million at December 31, 1997. Acquisitions of businesses through June 30, 1998 required $76 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 $48.5 million during the six months ended June 30, 1998. The improvement in net cash flow from operating activities during the six months ended June 30, 1998 versus the comparable prior year period is primarily attributable to improved management of working capital and changes in estimated tax assets and liabilities as well as the acquisitions of IBAH and CompScript. 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 six months of 1998. 12 13 The Company's capital requirements are primarily related to its acquisition program. During the six months ended June 30, 1998, the Company made ten acquisitions (excluding insignificant purchases of other assets) for an aggregate capital investment of approximately $272 million. Such acquisitions were financed from cash and cash equivalents and the issuance of approximately 6.5 million shares of common stock. There are no material commitments outstanding at June 30, 1998, other than estimated future acquisition-related payments to be made in accordance with purchase agreements. The Company's current ratio at June 30, 1998 and December 31, 1997 was 2.7 to 1.0 and 2.9 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 $3.3 million were paid during the six months ended June 30, 1998 versus the $2.8 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. Recently Issued Accounting Standards - ------------------------------------ In 1997, the Financial Accounting Standards Board (the "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. 130 did not impact the Company's reporting and disclosures during the first six months of 1998. 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. 131 is not expected to significantly impact the Company's reporting and disclosures. In 1998, SFAS Nos. 132 and 133, "Disclosure about Pensions and other Post-Retirement Benefits" and "Accounting for Derivative Instruments and Hedging Activities", respectively, were issued by the Board. SFAS No. 132 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. 132 amends certain reporting and disclosure requirements of SFAS Nos. 87 and 106, while SFAS No. 133 standardizes the accounting for derivative instruments by requiring that all derivatives be recognized as assets and liabilities and be measured at fair value. SFAS No. 133 is applicable for fiscal years beginning after June 15, 1999, but earlier application is permitted as of the beginning of any fiscal quarter subsequent to June 15, 1998. SFAS Nos. 132 and 133 are not expected to significantly impact the Company's financial position, results of operations or financial reporting. 13 14 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 or financial reporting. "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. 14 15 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 June 30, 1998, the Company completed four transactions involving unregistered Securities. In connection with these transactions, a total of 301,379 shares of common stock 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. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) Omnicare held its Annual Meeting of Stockholders on May 18, 1998. (b) The names of each director elected at this Annual Meeting are as follows:
Edward L. Hutton Thomas C. Hutton Joel F. Gemunder Patrick E. Keefe Ronald K. Baur Sandra E. Laney Timothy E. Bien Andrea R. Lindell, DNSc, RN Charles H. Erhart, Jr. Sheldon Margen, M.D. Mary Lou Fox Kevin J. McNamara Cheryl D. Hodges D. Walter Robbins, Jr.
With respect to the election of directors, the number of votes cast for each nominee was as follows:
Broker Votes For Votes Withheld Non-Votes --------- -------------- --------- E. L. Hutton 66,630,133 4,016,194 -0- J. F. Gemunder 66,646,274 4,000,053 -0- R. K. Baur 66,648,610 3,997,717 -0- T. E. Bien 66,648,310 3,998,017 -0- C. H. Erhart, Jr. 66,797,253 3,849,074 -0- M. L. Fox 66,134,134 4,522,193 -0- C. D. Hodges 66,646,813 3,999,514 -0- T. C. Hutton 66,642,253 4,004,074 -0- P. E. Keefe 66,648,410 3,997,917 -0-
15 16
Broker Votes For Votes Withheld Non-Votes --------- -------------- --------- S. E. Laney 66,647,533 3,998,794 -0- A. R. Lindell, DNSc, RN 66,780,451 3,865,876 -0- S. Margen M.D. 66,742,825 3,903,502 -0- K. J. McNamara 66,647,937 3,998,390 -0- D.W. Robbins, Jr. 66,750,491 3,895,836 -0-
(c) The Stockholders approved an amendment to the Company's Restated Certificate of Incorporation increasing the number of authorized shares of common stock from 110,000,000 to 200,000,000. 68,897,154 votes were cast in favor of the amendment, 1,571,011 votes were cast against and 178,162 votes abstained. (d) The Stockholders ratified the selection by the Board of Directors of Price Waterhouse LLP as independent accountants for the Company and its consolidated subsidiaries for the 1998 year. 70,527,036 votes were cast in favor of the proposal, 35,552 votes were cast against it and 83,739 votes abstained. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits Exhibit Number Exhibit ------ ------- 11 Computation of Earnings per Common Share 27 Financial Data Schedule (b) Reports on Form 8-K - On April 20, 1998, a Form 8-K was filed to report the settlement of a previously announced government investigation. On May 19, 1998, a Form 8-K was filed to report the unaudited sales and earnings of the Company for the month ended April 30, 1998. 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Omnicare, Inc. -------------- Registrant Date August 14, 1998 By /s/David W. Froesel, Jr. ------------------ ------------------------ David W. Froesel, Jr. Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 17 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 Six Months Ended June 30, June 30, -------------------- -------------------- 1998* 1997 1998* 1997 -------- -------- -------- -------- Basic Earnings Income from continuing operations $ 8,106 $ 13,721 $ 28,512 $ 25,993 Loss from discontinued operations -- (1,854) -- (2,154) -------- -------- -------- -------- Net income $ 8,106 $ 11,867 $ 28,512 $ 23,839 ======== ======== ======== ======== Shares Weighted average number of common shares outstanding 88,824 85,674 88,466 84,593 ======== ======== ======== ======== Basic earnings per common share Income from continuing operations $ 0.09 $ 0.16 $ 0.32 $ 0.31 Loss from discontinued operations -- (0.02) -- (0.03) -------- -------- -------- -------- Net income $ 0.09 $ 0.14 $ 0.32 $ 0.28 ======== ======== ======== ======== Diluted Earnings Income from continuing operations $ 8,106 $ 13,721 $ 28,512 $ 25,993 Loss from discontinued operations -- (1,854) -- (2,154) -------- -------- -------- -------- Net income $ 8,106 $ 11,867 $ 28,512 $ 23,839 ======== ======== ======== ======== Shares Weighted average number of common shares outstanding 88,824 85,674 88,466 84,593 Additional shares assuming conversion of stock options and stock warrants 1,094 912 1,050 1,043 -------- -------- -------- -------- Average common shares outstanding as adjusted 89,918 86,586 89,516 85,636 ======== ======== ======== ======== Diluted earnings per common share Income from continuing operations $ 0.09 $ 0.16 $ 0.32 $ 0.30 Loss from discontinued operations -- (0.02) -- (0.02) -------- -------- -------- -------- Net income $ 0.09 $ 0.14 $ 0.32 $ 0.28 ======== ======== ======== ========
* 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 three and six months ended June 30, 1998 but were not included in the computation of diluted EPS because the impact was anti-dilutive. EX-27.1 3 EXHIBIT 27.1
5 0000353230 OMNICARE, INC. 1 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 68,723 0 340,088 20,397 93,074 518,501 177,020 63,719 1,471,406 188,575 0 0 0 89,438 798,794 1,471,406 698,452 698,452 488,551 488,551 149,158 5,393 9,206 53,960 25,448 28,512 0 0 0 28,512 .32 .32
EX-27.2 4 EXHIBIT 27.2
5 0000353230 OMNICARE, INC. 1 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 138,062 0 296,519 17,994 90,366 542,372 155,365 53,703 1,412,146 187,547 0 0 0 88,261 741,492 1,412,146 449,320 449,320 314,808 314,808 91,466 2,918 861 45,672 19,679 25,993 (2,154) 0 0 23,839 .28 .28
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