UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): April 29, 2015
Omnicare, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
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1-8269 | 31-1001351 |
(Commission File Number) | (I.R.S. Employer Identification No.) |
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OMNICARE, INC.
900 OMNICARE CENTER
201 E. FOURTH STREET
CINCINNATI, OH 45202 |
(Address of Principal Executive Offices, Including Zip Code) |
(513) 719-2600
(Registrant’s telephone number, including area code)
Not applicable
(Former name and former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On April 29, 2015, Omnicare, Inc. issued a press release announcing its financial results for the three months ended March 31, 2015. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated by reference herein.
In addition, a copy of the supplemental slides that will be discussed during the Company’s earnings call at 9:00 a.m. Eastern Time on Wednesday, April 29, 2015 is furnished herewith as Exhibit 99.2 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press release of Omnicare, Inc., dated April 29, 2015.
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99.2 | Supplemental slides provided in connection with the first quarter 2015 earnings call of Omnicare, Inc. |
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 hereunto duly authorized.
OMNICARE, INC.
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| | |
| By: | /s/ Robert O. Kraft |
| Name: Title:
| Robert O. Kraft Senior Vice President and Chief Financial Officer |
Dated: April 29, 2015
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
99.1 Press release of Omnicare, Inc., dated April 29, 2015.
99.2 Supplemental slides provided in connection with the first quarter 2015 earnings
call of Omnicare, Inc.
Exhibit 99.1
news release
Omnicare Reports First-Quarter 2015 Financial Results;
Company Updates Full-Year 2015 Guidance
CINCINNATI, April 29, 2015 - Omnicare, Inc. (NYSE:OCR) reported today financial results for its first quarter ended March 31, 2015.
First-Quarter Highlights:
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• | Net sales increase of 5.7% to $1.7 billion |
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• | Adjusted cash earnings per diluted share from continuing operations 12.1% higher to $1.02; GAAP earnings per diluted share of $0.75 |
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• | Adjusted operating income from continuing operations increase of 8.5% to $163 million |
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• | Cash flows from continuing operations increased 96% to a record quarter level of $336 million |
“The first quarter marked a successful beginning to the year with double-digit adjusted cash earnings per share growth,” said Nitin Sahney, Omnicare’s President and Chief Executive Officer. “We continued our disciplined approach to growth by optimizing on our core competencies and driving efficiency through our operations. The first quarter of 2015 attests to the success of our organization in providing comprehensive services and positions us well as a key player in the continued evolution of innovative and cost-effective patient care solutions.”
First-Quarter Results
Financial results from continuing operations for the quarter ended March 31, 2015, as compared with the same prior-year period, were as follows:
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• | Net sales were $1,660 million versus $1,571 million |
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• | Gross profit was $349 million as compared with $358 million |
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• | GAAP earnings per diluted share was $0.75 versus $0.59 |
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• | Adjusted cash earnings per diluted share was $1.02 versus $0.91 |
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• | Adjusted EBITDA was $190 million versus $178 million |
Cash flows from continuing operations for the quarter ended March 31, 2015 were $336 million versus $172 million in the comparable prior-year quarter.
“Both operating segments performed well in the quarter and contributed to our solid first-quarter results,” continued Mr. Sahney. “Our Long-Term Care group delivered another consecutive quarter of year-over-year revenue growth and we maintained our double-digit increases within our Specialty Care Group in both revenue and operating profit. We continue to leverage our expertise in both senior and specialty care in driving organic growth and securing our position as a leader in complex pharmaceutical patient care.”
Financial Position
Omnicare concluded the first quarter of 2015 with no borrowings outstanding on its revolving credit facility, other than approximately $13 million in standby letters of credit, and $322 million in cash on its balance sheet.
In the first quarter, Omnicare repurchased 1.8 million shares for an aggregate amount of $125 million. As of March 31, 2015, the Company had approximately $140 million of availability under its current share repurchase authorization.
“Our disciplined working capital management and earnings growth, combined with the impact of our new wholesaler agreement, enabled us to generate a record $336 million of operating cash flows in the first quarter,” said Rocky Kraft, Omnicare’s Chief Financial Officer. “Leveraging our strong cash flow performance, we returned approximately $146 million to shareholders through share repurchases and dividends, while also investing in the growth of our business.
Segment Information
Financial results for the Long-Term Care Group for the first quarter ended March 31, 2015 were as follows:
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• | Net sales of $1,195 million were 0.3% higher than $1,191 million in the same prior-year period |
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• | Adjusted operating income of $163 million increased 0.5% versus the prior-year first quarter of $162 million. |
Financial results for the Specialty Care Group for the first quarter ended March 31, 2015 were as follows:
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• | Net sales of $465 million were 22.5% higher than $380 million in the same prior-year period |
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• | Adjusted operating income of $39 million increased 22.9% from $32 million in the same prior-year period |
To facilitate comparisons and to enhance the understanding of core operating performance, discussions in this news release include financial measures that are adjusted from the comparable amounts under GAAP to exclude the impact of the special items discussed elsewhere herein, and to present results on a continuing operations basis. For a detailed presentation of reconciling items and related definitions and components, please refer to the attached schedules or to reconciliation schedules
posted at the Investor Relations section of Omnicare’s website at http://ir.omnicare.com. Additionally, the Company will make supplemental slides available in the same section on its website today that will include the number of scripts dispensed and other information relevant to Omnicare’s operations.
Special Items
The results for the first-quarters ended March 31, 2015 and 2014 include the impact of special items and cash EPS adjustments as follows:
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| | | | |
| Three Months Ended
March 31, |
| 2015 | 2014 |
| After-tax impact | Per diluted share | After-tax impact | Per diluted share |
Special Items Adj. | $9.4M | $0.09 | $14.4M | $0.13 |
Cash EPS Adj. | $18.8M | $0.18 | $20.0M | $0.19 |
All special items and cash EPS adjustments have been described in further detail in the “Footnotes and Definitions to Financial Information” section elsewhere herein.
Outlook
Based upon its solid first quarter results, Omnicare increased the lower end of its expectations for cash flows from operations and reaffirmed other elements of its full-year 2015 guidance to reflect the following:
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| Previous Guidance | Current Guidance |
Revenue | $6.5B to $6.7B | $6.5 to $6.7B |
Adjusted cash earnings per diluted share (excluding special items) | $4.08 to $4.16 | $4.08 to $4.16 |
Cash flows from operations | $525M to $625M | $550M to $625M |
Webcast Today
Omnicare will hold a conference call to discuss its first-quarter 2015 financial results today, Wednesday, April 29, at 9:00 a.m. ET. A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations section of Omnicare’s website at http://ir.omnicare.com. An archived replay will be made available on the website following the conclusion of the conference call.
Upcoming Investor Events
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• | Bank of America Merrill Lynch 2015 Health Care Conference on Tuesday, May 12th at 4:40 p.m. ET in Las Vegas, NV |
About Omnicare
Omnicare, Inc., a Fortune 500 company based in Cincinnati, Ohio, provides comprehensive pharmaceutical services to patients and providers across the United States. As the market-leader in professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other chronic care institutions, Omnicare leverages its unparalleled clinical insight into the geriatric market along with some of the industry’s most innovative technological capabilities to the benefit of its long-term care customers. Omnicare also provides specialty pharmacy and key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group. For more information, visit www.omnicare.com.
Forward-looking Statements
In addition to historical information, this report contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current expectations regarding the matters discussed or incorporated by reference in this document (including statements as to “beliefs,” “expectations,” “anticipations,” “intentions” or similar words) and all statements which are not statements of historical fact. Such forward-looking statements, together with other statements that are not historical, are based on management’s current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in our Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: overall economic, financial, political and business conditions; trends in the long-term healthcare and pharmaceutical industries; our ability to attract and retain new and existing clients and service contracts; our ability to identify, finance and consummate acquisitions on favorable terms or at all; trends for the continued growth of our businesses; changes in drug pricing; delays in payment and reductions in reimbursement by the government and other payors to Omnicare and our customers; the overall financial condition of our customers and our ability to assess and react to such financial condition; the ability and willingness of our vendors and business partners to continue to provide products and services to Omnicare; the successful integration of acquired companies and realization of contemplated synergies; the ability to attract and retain skilled management; competition for qualified staff in the healthcare industry; variations in demand for our products and services; variations in costs or expenses; our ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits; the potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, its implementing regulations and any subregulatory guidance; reimbursement and drug pricing policies and changes in the interpretation and application of such policies, including changes in calculation of average wholesale price; discontinuation of reporting average wholesale price and/or implementation of new pricing benchmarks; legislative and regulatory changes impacting long-term care pharmacies or specialty
pharmacies; government budgetary pressures and changes, including federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of our contracts with pharmaceutical benefit managers, Medicare Part D Plan sponsors and/or commercial health insurers or changes in the proportion of our business covered by specific contracts; the outcome of pending and future legal or contractual disputes; potential liability for losses not covered by, or in excess of, insurance; the impact of executive separations; the impact of benefit plan terminations; the impact of differences in actuarial assumptions and estimates as compared to eventual outcomes; events or circumstances that could result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; our ability to successfully complete planned divestitures; market conditions; the outcome of audit, compliance, administrative, regulatory, or investigatory reviews; volatility in the market for our stock and in the financial markets generally; timing of conversions of our convertible debt securities; access to adequate capital and financing on acceptable terms; changes in our credit ratings given by rating agencies; changes in tax laws and regulations; changes in accounting rules and standards; the impact of potential cybersecurity risks and/or incidents; costs to comply with our Corporate Integrity Agreement; and unexpected costs or business interruptions from information technology projects. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, our actual results, performance or achievements could differ materially from those expressed in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as otherwise required by law, we do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
# # #
Contact:
Patrick C. Lee
(513) 719-1507
patrick.lee@omnicare.com
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income, GAAP Basis
($000s, except per share amounts)
Unaudited
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| | | | | | | |
| Three months ended |
| March 31, 2015 | | March 31, 2014 |
Net sales | $ | 1,659,842 |
| | $ | 1,571,038 |
|
Cost of sales | 1,310,379 |
| | 1,212,584 |
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Gross profit | 349,463 |
| | 358,454 |
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Selling, general and administrative expenses | 167,423 |
| | 186,813 |
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Provision for doubtful accounts | 19,191 |
| | 21,561 |
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Settlement, litigation and other related charges | 9,820 |
| | 7,052 |
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Other charges | 1,049 |
| | 10,276 |
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Operating income | 151,980 |
| | 132,752 |
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Interest expense, net of investment income | (27,649 | ) | | (29,441 | ) |
Income from continuing operations before income taxes | 124,331 |
| | 103,311 |
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Income tax expense | 46,942 |
| | 39,673 |
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Income from continuing operations | 77,389 |
| | 63,638 |
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Income from discontinued operations | — |
| | 136 |
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Net income | $ | 77,389 |
| | $ | 63,774 |
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| | | |
Earnings per common share - Diluted: | | | |
Continuing operations | $ | 0.75 |
| | $ | 0.59 |
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Discontinued Operations | — |
| | — |
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Net Income | $ | 0.75 |
| | $ | 0.59 |
|
| | | |
Weighted average number of common shares outstanding: | | | |
Diluted | $ | 103,195 |
| | $ | 107,767 |
|
The footnotes and definitions presented at the separate “Footnotes and Definitions to Financial Information” pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Consolidated Balance Sheets
($000s)
Unaudited
|
| | | | | | | |
| March 31,
2015 | | December 31,
2014 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 322,493 |
| | $ | 153,799 |
|
Accounts receivable, less allowances | 632,606 |
| | 578,761 |
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Inventories | 463,912 |
| | 519,584 |
|
Deferred income tax benefits | 60,227 |
| | 59,200 |
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Other current assets | 201,684 |
| | 287,560 |
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Total current assets | 1,680,922 |
| | 1,598,904 |
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Properties and equipment, at cost less accumulated depreciation | 268,827 |
| | 267,753 |
|
Goodwill | 4,064,951 |
| | 4,061,806 |
|
Identifiable intangible assets, less accumulated amortization | 97,090 |
| | 98,942 |
|
Other noncurrent assets | 74,847 |
| | 80,385 |
|
Total noncurrent assets | 4,505,715 |
| | 4,508,886 |
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Total assets | $ | 6,186,637 |
| | $ | 6,107,790 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
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Current liabilities: | |
| | |
|
Accounts payable | $ | 327,842 |
| | $ | 219,358 |
|
Accrued employee compensation | 38,557 |
| | 46,830 |
|
Current debt | 448,754 |
| | 446,717 |
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Other current liabilities | 198,246 |
| | 154,726 |
|
Total current liabilities | 1,013,399 |
| | 867,631 |
|
Long-term debt, notes and convertible debentures | 1,512,316 |
| | 1,517,559 |
|
Deferred income tax liabilities | 943,262 |
| | 936,247 |
|
Other noncurrent liabilities | 44,111 |
| | 45,926 |
|
Total noncurrent liabilities | 2,499,689 |
| | 2,499,732 |
|
Total liabilities | 3,513,088 |
| | 3,367,363 |
|
| | | |
Convertible debt | 148,334 |
| | 151,706 |
|
| | | |
Stockholders’ equity | 2,525,215 |
| | 2,588,721 |
|
Total liabilities and stockholders’ equity | $ | 6,186,637 |
| | $ | 6,107,790 |
|
The footnotes and definitions presented at the separate “Footnotes and Definitions to Financial Information” pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
($000s)
Unaudited
|
| | | |
| Three Months Ended |
| March 31, 2015 |
Cash flows from operating activities: | |
Net income | $ | 77,389 |
|
Loss from discontinued operations | — |
|
Adjustments to reconcile net income to net cash flows from operating activities: | |
Depreciation | 14,697 |
|
Amortization | 16,666 |
|
Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses: | |
Accounts receivable, net of provision for doubtful accounts | (63,352 | ) |
Inventories | 56,000 |
|
Current and noncurrent assets | 101,418 |
|
Accounts payable | 94,298 |
|
Accrued employee compensation | (8,478 | ) |
Current and noncurrent liabilities | 47,618 |
|
Net cash flows from operating activities | 336,256 |
|
Cash flows used in investing activities: | |
Acquisition of businesses, net of cash received | (9,328 | ) |
Capital expenditures | (13,473 | ) |
Net cash flows used in investing activities | (22,801 | ) |
Cash flows used in financing activities: | |
|
Payments on term loans | (5,000 | ) |
Payments on long-term borrowings and obligations | (2,385 | ) |
Fees paid for financing activities | (1,977 | ) |
Increase in cash overdraft balance | 13,734 |
|
Payments for Omnicare common stock repurchases | (125,000 | ) |
Proceeds for stock awards and exercise of stock options and related withholding taxes, net | (6,512 | ) |
Dividends paid | (21,171 | ) |
Other | 3,550 |
|
Net cash flows used in financing activities | (144,761 | ) |
Net increase in cash and cash equivalents | 168,694 |
|
Cash and cash equivalents at beginning of period | 153,799 |
|
Cash and cash equivalents at end of period | $ | 322,493 |
|
| |
The footnotes and definitions presented at the separate “Footnotes and Definitions to Financial Information” pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Reconciliation Statement and Definitions, Non-GAAP Basis
($000s, except per share amounts)
Unaudited
|
| | | | | | | |
| Three months ended |
| March 31, 2015 | | March 31, 2014 |
Adjusted earnings per share ("EPS") from continuing operations: | | | |
Diluted earnings per share from continuing operations | $ | 0.75 |
| | $ | 0.59 |
|
| | | |
Special Items: (a) | | | |
Settlement, litigation and other related charges | 0.06 |
| | 0.04 |
|
Other charges | 0.01 |
| | 0.06 |
|
Amortization of discount on convertible notes | 0.03 |
| | 0.03 |
|
Total Special items | 0.09 |
| | 0.13 |
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Cash EPS Adjustments | 0.18 |
| | 0.19 |
|
Adjusted cash earnings per diluted share from continuing operations | $ | 1.02 |
| | $ | 0.91 |
|
| | | |
Adjusted earnings before interest, income taxes ("EBIT", "Operating income"), depreciation and amortization ("EBITDA") from continuing operations: | | | |
EBIT from continuing operations | $ | 151,980 |
| | $ | 132,752 |
|
Depreciation and amortization | 31,363 |
| | 33,736 |
|
Amortization of discount on convertible notes | (4,326 | ) | | (6,131 | ) |
EBITDA from continuing operations | 179,017 |
| | 160,357 |
|
Special items (a) | 10,869 |
| | 17,328 |
|
Adjusted EBITDA from continuing operations | 189,886 |
| | 177,685 |
|
| | | |
EBITDA from continuing operations to net cash flows from operating activities: | | | |
EBITDA from continuing operations | 179,017 |
| | 160,357 |
|
(Subtract)/Add: | | | |
Interest expense, net of investment income and amortization of discount on convertible notes | (23,323 | ) | | (23,310 | ) |
Income tax provision | (46,942 | ) | | (39,673 | ) |
Changes in certain assets and liabilities, net of effects from acquisition and
divestitures of businesses | 227,504 |
| | 74,212 |
|
Net cash flows from operating activities of continuing operations | $ | 336,256 |
| | $ | 171,586 |
|
| | | |
Segment Reconciliations - Long-Term Care Group ("LTC") | | | |
Adjusted Operating Income - LTC: | | | |
Operating income from continuing operations | 151,703 |
| | 152,584 |
|
Special items (a) | 11,211 |
| | 9,563 |
|
Adjusted operating income from continuing operations - LTC | 162,914 |
| | 162,147 |
|
| | | |
The footnotes and definitions presented at the separate “Footnotes and Definitions to Financial Information” pages are an integral part of this financial information.
Omnicare, Inc. and Subsidiary Companies
Footnotes and Definitions to Financial Information
($000s, except per share amounts and unless otherwise stated)
Unaudited
Footnotes:
Non-GAAP Information:
Omnicare, Inc. (“Omnicare” or the “Company”) management believes that presenting certain non-GAAP financial measures, which exclude items not considered part of the core operating results of the Company and certain non-cash charges and also include certain tax deduction amounts (“Special Items”), enhances investors’ understanding of how Omnicare management assesses the performance of the Company’s business. Omnicare’s management uses non-GAAP measures for budgeting purposes, measuring actual results, allocating resources and in determining employee incentive compensation. Omnicare’s method of calculating non-GAAP financial results may differ from those used by other companies and, therefore, comparability may be limited.
| |
(a) | Financial results included Special Items and Cash EPS adjustments as described below: |
|
| | | | | | | | | | | | | | | |
| | Q1 2015 | | Q1 2014 | |
| | Pretax | After Tax (7) | | Pretax | After Tax (7) | |
EBIT: | | | | | | | |
Settlement, litigation and other related charges (1) | | $ | 9,820 |
| $ | 6,045 |
| | $ | 7,052 |
| $ | 4,321 |
| |
| | | | | | | |
Other charges | | | | | | | |
Acquisition and other related costs (2) | | 478 |
| 294 |
| | — |
| — |
| |
Separation costs (3) | | 571 |
| 351 |
| | 10,276 |
| 6,298 |
| |
Subtotal - Other charges | | 1,049 |
| 645 |
| | 10,276 |
| 6,298 |
| |
Subtotal - EBIT Special Items | | 10,869 |
| 6,690 |
| | 17,328 |
| 10,619 |
| |
| | | | | | | |
Interest expense: | | | | | | | |
Amortization of discount on convertible notes (4) | | 4,326 |
| 2,663 |
| | 6,131 |
| 3,757 |
| |
Subtotal - Interest expense Special Items | | 4,326 |
| 2,663 |
| | 6,131 |
| 3,757 |
| |
Subtotal - Special Items | | 15,195 |
| 9,353 |
| | 23,459 |
| 14,376 |
| |
| | | | | | | |
Cash EPS Items: | | | | | | | |
Amortization of intangibles | | 7,702 |
| 4,741 |
| | 7,917 |
| 4,852 |
| |
Goodwill amortization tax deduction (5) | | — |
| 6,804 |
| | — |
| 7,046 |
| |
Convertible debt tax deduction (6) | | — |
| 7,220 |
| | — |
| 8,074 |
| |
Subtotal - Cash EPS Items | | 7,702 |
| 18,765 |
| | 7,917 |
| 19,972 |
| |
| | | | | | | |
Grand Total - Special Items | | $ | 22,897 |
| $ | 28,118 |
| | $ | 31,376 |
| $ | 34,348 |
| |
| |
(1) | Operating income includes settlement, litigation and other related charges for resolution of certain large customer disputes, regulatory matters with various states and regulatory agencies, qui tam lawsuits and purported class and derivative actions against the Company. Additionally, Omnicare has made, and will continue to make, disclosures to the applicable governmental agencies of amounts, if any, determined to represent overpayments from the respective programs and, where applicable, those amounts, as well as any amounts relating to certain inspections, audits, inquiries and investigations activity are included in the pretax Special item reflected in the table. |
| |
(2) | Operating income includes acquisition and other related costs primarily related to professional fees and acquisition related restructuring costs for acquisitions. |
| |
(3) | Operating income includes separation related costs and accelerated stock-based compensation expense for certain employees. |
| |
(4) | The Company recorded non-cash interest expense from the amortization of debt discount on its convertible notes. |
| |
(5) | The tax benefit of being able to deduct goodwill amortization. |
| |
(6) | The tax benefit of being able to deduct higher interest expense on the Company’s convertible debt than what is actually paid. |
| |
(7) | The tax effect was calculated by multiplying the tax-deductible pretax amounts by the appropriate effective tax rate. |
First-Quarter 2015 Financial Results Supplemental Slides
Certain of the statements made today and listed within the following presentation slides are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current expectations regarding the matters discussed in this presentation. Such forward-looking statements are based on management’s current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in the Company’s Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission. Investors are cautioned that such statements are only predictions and that actual events or results may differ materially. These forward-looking statements speak only as of the date this presentation was originally given. We undertake no obligation to publicly release the results of any revisions to the forward-looking statements made today, to reflect events or circumstances after today or to reflect the occurrence of unanticipated events. To facilitate comparisons and enhance understanding of core operating performance, certain financial measures have been adjusted from the comparable amount under Generally Accepted Accounting Principles (GAAP). A detailed reconciliation of adjusted numbers to the most comparable GAAP numbers is attached to our press release and posted under “Supplemental Financial Data” in the Investors section of our website at http://ir.omnicare.com. Additionally, all amounts are presented on a continuing operations basis, unless otherwise stated. 2 Forward-Looking Statements
3 Table of Contents First-Quarter 2015 Highlights……………………………………………… First-Quarter 2015 Segment Highlights………………………………….. Gross Profit & Adjusted Operating Income…………………………………. Adjusted Net Income & Cash EPS…………………………………………... Adjusted Operating Income by Segment……………………………………. Cash Flows……………………………………………………………………... Capital Deployment……………………………………………………………… Operating Metrics – Script Data……………………………………………… Full-Year 2015 Guidance……………………………………………………… Appendix Capital Structure……………………………………………………………….. Working Capital Management………………………………………………... Selected Branded Drug Patent Expirations………………………............... Table of Contents 4 12 5 6 7 8 9 10 11 16 14 15
Continuing Operations First-Quarter 2015 Highlights Adjusted Cash-Based Earnings per Diluted Share(1) 4 Q1 2014 Q1 2015 Discontinued Operations(2) Total $1.02 $0.00 $1.02 $0.91 $0.01 $0.92 Revenue of $1,660M 5.7% increase y/y 1. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the most comparable GAAP measures has been attached to our press release and is also available on our website under ‘Supplemental Financial Data’ from the ‘Investors’ page. 2. Hospice pharmacy business and certain retail operations were divested in 2014 and reported as discontinued operations in Q1 2014. Adjusted diluted cash EPS of $1.02(1) 12.1% increase y/y Adjusted Operating Income(1) of $163M 8.5% increase y/y CFFO of $336M a record quarter for the Company
First-Quarter 2015 Segment Highlights(1) 5 Long-Term Care Group Specialty Care Group ■ 1Q15 Revenue of $1,194.5M up 0.3% from the prior year quarter - Fifth consecutive quarter of year-over-year revenue growth - Scripts per calendar day increased 1.0% from prior quarter ■ Adjusted operating income(1) of $162.9M or 13.6% of revenue, an improvement of 87 bps from the prior quarter and consistent with the comparable quarter in the prior year - Reimbursement pressure and volume declines were offset by inflation and operating efficiency initiatives (including the company’s new sourcing strategy) ■ Revenue in 1Q15 increased 22.5% year-over-year to $465.3M - Average patient counts were up 14% from 1Q14 in specialty pharmacy - Continued momentum in commercialization services platform with 19% improvement in brand support services billable hours ■ 1Q15 Adjusted operating income(1) of $39.0M; 23.0% higher than 1Q14 - Double-digit growth in fee-for-service platforms - High demand for services with first-quarter proposals 39% higher on a year-over-year basis 1. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the most comparable GAAP measures has been attached to our press release and is also available on our website under ‘Supplemental Financial Data’ from the ‘Investors’ page.
Prior Year In millions, except per share data and % 1Q 2015 4Q 2014 Increase / (Decrease) 1Q 2014 Increase / (Decrease) Net sales 1,659.8$ 1,627.9$ 2.0% 1,571.0$ 5.7% Cost of sales 1,310.4 1,273.5 2.9% 1,212.6 8.1% Gross profit 349.5$ 354.4$ (1.4%) 358.5$ (2.5%) Rate 21.05% 21.77% (72 bps) 22.82% (177 bps) SG&A expenses 167.4 174.9 (4.3%) 186.8 (10.4%) Provision for doubtful accounts 19.2 21.9 (12.3%) 21.6 (11.1%) Adjusted operating income from continuing operations(3) 162.8$ 157.6$ 3.3% 150.1 8.5% Sequential Gross Profit & Adjusted Operating Income(1)(2) 6 Net sales increased 5.7% year-over-year to $1,660M 1Q15 gross profit of $350M decreased 2.5% from 1Q14 and 1.4% sequentially - Gross margin rate adversely affected by lower script volumes, general pricing adjustments with PDPs and other payers, and a mix shift towards the SCG business SG&A expenses of $167M declined 10.4% from 1Q14; 180 basis points lower as a percentage of net sales due to a continued focus on optimizing our operating effectiveness Adjusted operating income increased 8.5% over 1Q14 to $163M; 9.8% of net sales representing the highest rate in the last four years 1. Each amount is reported independently. The sum of the individual amounts may not equal the separately presented amounts due to rounding. 2. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the most comparable GAAP measures has been attached to our press release and is available on our website under ‘Supplemental Financial Information’ at http://ir.omnicare.com. 3. Does not include cash-based EPS adjustment for amortization of intangibles.
Adjusted Net Income & Cash EPS(1)(2) 7 1. Each amount is reported independently. The sum of the individual amounts may not equal the separately presented amounts due to rounding. 2. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the comparable GAAP measures has been attached to our press release and is available on our website under ‘Supplemental Financial Information’ at http://ir.omnicare.com. Adjusted EBITDA from continuing operations increased 6.9% year-over-year First-quarter cash EPS adjustments decreased from prior year and sequentially 6.0% and 9.2%, respectively Adjusted cash earnings per diluted share from continuing operations of $1.02 increased 12.1% over 1Q14 Prior Year In millions, except per share data and % 1Q 2015 4Q 2014 Increase / (Decrease) 1Q 2014 Increase / (Decrease) Adjusted operating income from continuing operations 162.8$ 157.6$ 3.3% 150.1$ 8.5% Adjusted interest expense, net of investment income (23.3) (24.6) (5.3%) (23.3) 0.0% Adjusted income before income taxes 139.5 133.0 4.9% 126.8 10.0% Income taxes (52.8) (52.5) 0.6% (48.8) 8.2% Income from continuing operations 86.7$ 80.5$ 7.7% 78.0$ 11.2% Income from discontinued operations - - 1.0 (100.0%) Net income 86.7 80.5 7.7% 79.0 9.7% Intangible asset amortization - after tax 4.7 4.5 4.4% 4.9 (4.1%) Goodwill amortization - tax deduction 6.8 7.8 (12.8%) 7.0 (2.9%) Contingent convertible debenture interest - tax deduction 7.2 8.4 (14.3%) 8.1 (11.1%) Adjusted cash earnings from continuing operations 105.5$ 101.2$ 4.2% 98.0$ 7.7% Adjusted weighted average diluted shares outstanding 103.2 105.6 (2.3%) 107.7 (4.2%) Adjusted cash earnings per diluted share from continuing operations 1.02$ 0.96$ 6.3% 0.91$ 12.1% Adjusted cash earnings per diluted share from discontinued operations -$ -$ 0.01$ (100.0%) Adjusted cash earnings per diluted share 1.02$ 0.96$ 6.3% 0.92$ 10.9% Adjusted operating income from continuing operations 162.8$ 157.6$ 3.3% 150.1$ 8.5% Adjusted depreciation and amortization 27.0 26.8 0.7% 27.6 (2.2%) Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations 189.9$ 184.4$ 3.0% 177.7$ 6.9% Sequential
Adjusted Operating Income by Segment(1) 8 Sequential and year-over-year growth in revenue and adjusted operating income in the Long-Term Care business Specialty Care Group first-quarter adjusted operating income growth of 23% to $39M was driven by strong organic growth across all platforms and the benefit of certain sourcing strategies Adjusted operating loss for Corporate/Other segment in first-quarter 2015 was $39.1M 1. Each amount is reported independently. The sum of the individual amounts may not equal the separately presented amounts due to rounding. 2. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the comparable GAAP measures has been attached to our press release and is available on our website under ‘Supplemental Financial Information’ at http://ir.omnicare.com. Prior Year 1Q 2015 4Q 2014 Increase / (Decrease) 1Q 2014 Increase / (Decrease) In millions, except % Long-Term Care Group Net sales 1,194.5$ 1,185.0$ 0.8% 1,191.3$ 0.3% Adjusted operating income(2) 162.9 151.3 7.7% 162.1 0.5% Rate 13.64% 12.77% 87 bps 13.61% 3 bps In whole numbers Per script data: Net sales / script 44.21$ 43.32$ 2.1% 42.09$ 5.0% Adjusted operating income / script (2) 6.03$ 5.53$ 9.0% 5.73$ 5.3% In millions, except % Specialty Care Group Net sales 465.3$ 442.8$ 5.1% 379.7$ 22.5% Adjusted operating income(2) 39.0 39.9 (2.3%) 31.7 23.0% Rate 8.38% 9.01% (63 bps) 8.35% 3 bps Sequential
Prior Year In millions, except % 1Q 2015 4Q 2014 Increase / (Decrease)(3) 1Q 2014 Increase / (Decrease)(3) Net income / (Loss) 77.4$ (6.0)$ NM 63.8$ 21.3% (Income) from discontinued operations -$ (2.7)$ 100.0% (0.1)$ 100.0% Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 14.7 15.0 (2.0%) 13.9 5.8% Amortization expense 16.7 16.8 (0.6%) 19.8 (15.7%) Loss on debt extinguishment - 61.0 (100.0%) - 0.0% Deferred tax provision 5.9 (6.2) 195.2% 19.0 (68.9%) Asset impairment charges - 60.2 (100.0%) - 0.0% Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses 221.6 (0.9) NM 55.2 NM Net cash flows from operating activities of continuing operations 336.3$ 137.2$ 145.1% 171.6$ 96.0% Net cash flows from operating activities of discontinued operations - - 0.0% 5.9 (100.0%) Net cash flows from operating activities 336.3 137.2 145.1% 177.5 89.5% Capital expenditures 13.5 14.7 (8.2%) 26.2 (48.5%) Dividends paid 21.2 21.9 (3.2%) 19.6 8.2% Free cash flow from (used in) continuing operations (2) 301.6$ 100.6$ 199.8% 125.8$ 139.7% Sequential Cash Flows(1) 9 1. Each amount is reported independently. The sum of the individual amounts may not equal the separately presented amounts due to rounding. 2. Free cash flow from continuing operations does not fully reflect the ability to freely deploy cash as it does not reflect required payments on indebtedness and other obligations. 3. NM = Not Meaningful A record $336 million in operating cash flows in the first quarter of 2015 driven by improved working capital management, which included benefits from our new sourcing agreement, and 21.3% growth in earnings
Cash Deployment 10 Repurchased 1.8 million shares of common stock for an aggregate amount of $125 million in 1Q15 Between dividends paid and shares repurchased, returned $146 million of operating cash flows to shareholders As of March 31, 2015, Omnicare had $140 million of share repurchase authorization remaining 1. Each period presented included required quarterly repayment of the term loan. 2. Cumulative % Returned = (Dividends Paid + Share Repurchases) / Average Market Capitalization 1Q 2015. Average Market Capitalization = Avg. Share Price 1Q 2015 * Diluted Average Shares Outstanding 1Q 2015. 3. NM = Not meaningful. In millions, except % 1Q 2015 4Q 2014 Increase / (Decrease)(3) 1Q 2014 Increase / (Decrease)(3) Net cash flows from operating activities of continuing operations (reported) 336.3$ 137.2$ 145.1% 171.6$ 96.0% Capital expenditures 13.5 14.7 (8.2%) 26.2 (48.5%) Acquisitions 9.3 1.6 NM - 100.0% Net debt and long term borrowings and repayment (1) 7.4 178.2 (95.8%) 44.3 (83.3%) apital returned: Dividends paid 21.2$ 21.9$ (3.2%) 19.6$ 8.2% Share repurchases, net 125.0 75.0 66.7% 95.4 31.0% Total capital returned 146.2$ 96.9$ 50.9% 115.0$ 27.1% % of net cash flows from operating activities of continuing operations 43.5% 70.6% NM 67.0% NM 0.0% 0.5% 1.0% 1.5% 2.0% $- $50 $100 $150 $200 1Q 2014 1Q 2015 Capital Returned to Stockholders (2) (In millions, except %s) Dividends Paid Share Repurchases % Returned
Prior Year In thousands, except % 1Q 2015 4Q 2014 Increase / (Decrease) 1Q 2014 Increase / (Decrease) Long-Term Care Group Scripts: Generic scripts dispensed 19,997 20,204 (1.0%) 20,853 (4.1%) Branded scripts dispensed 3,828 3,895 (1.7%) 4,107 (6.8%) Over-the-counter scripts dispensed 3,194 3,256 (1.9%) 3,346 (4.5%) Total LTC Group scripts 27,018 27,355 (1.2%) 28,306 (4.6%) Calendar days 90 92 (2.2%) 90 0.0% LTC scripts per calendar day 300 297 1.0% 315 (4.8%) Generic dispensing rate(1) 83.9% 83.8% 10 bps 83.6% 29 bps Sequential Operating Metrics Script Data 11 1. Generic prescriptions dispensed as a percentage of Long-Term Care segment scripts excludes all over-the-counter (OTC) scripts, including generic OTC medications. LTC scripts were 1.2% lower sequentially due to reduced calendar days in the first quarter of 2015 (scripts were higher on a per day basis) LTC scripts were 4.6% lower year-over-year largely due to steps taken to improve the company’s customer quality mix Generic dispensing rate increased 29 bps year-over- year to 83.9% as a result of a few generic introductions 83.6% 83.9% 83.0% 83.2% 83.4% 83.6% 83.8% 84.0% 84.2% 84.4% Generic Dispensing Rate(1)
Full-Year 2015 Guidance 1. Guidance provided on February 25, 2015 2. Guidance provided on April 29, 2015 3. FY14 results exclude discontinued operations and include settlement payments of $120 million. 2015 guidance excludes the impact of settlement payments. 12 Net sales Previous Guidance(1) Adjusted cash earnings per diluted share from continuing operations(3) Cash flow from continuing operations(3) $6.5B to $6.7B $4.08 to $4.16 $525M to $625M Current Guidance(2) Year-over- Year $6.5B to $6.7B $4.08 to $4.16 $550M to $625M 2% to 5% 10% to 12% 12% to 27% 2014 Results $6.4B $3.72 $492M
Appendix
Capital Structure Initiatives Have Created More Predictable Debt Structure $252M $20M $20M $20M $315M $241M $400M $300M $80M $306M $424M $0M $200M $400M $600M 2015 2016 2017 2018 2019 2020 2021 2022 2024 2025 2033 2042 2044 Previous Maturity Schedule Current Maturity Schedule Composition of Debt: Convertibles (1) (2) Maturity Schedule Composition of Debt: Floating Rate 68% 32% Convertible Non-Convertible 53% 47% Convertible Non-Convertible 14 Before After 32% 68% Floating Rate Fixed Rate 17% 83% Floating Rate Fixed Rate Before After 1. Includes $20 million of Term Loan A - $5M of which was paid in 1Q15, $186 million of 2035 convertible debentures, and $46 million of tax recapture. 2. Reflects deferral of put on the 2035 exchange notes.
Working Capital Management Five Quarter Trend(1) 15 Efficiency initiatives have driven working capital improvements 1. DOH = Ending Inventory / (Quarterly Cost of Sales / Days in Quarter); DSO = Ending Account Receivable / (Quarterly Sales / Days in Quarter). 32.9 29.5 36.2 37.5 31.9 43.3 39.2 37.3 32.7 34.3 25 30 35 40 45 50 55 60 65 70 75 5 10 15 20 25 30 35 40 45 1Q14 2Q14 3Q14 4Q14 1Q15 Days of Inventory On Hand (DOH) Days Sales Outstanding (DSO)
1. All generic launches are subject to change due to litigation or pediatric exclusivity. 16 2015 2016 Selected Branded Drug Patent Expirations(1) 1Q15 - Launched 2Q15 3Q15 4Q15 Androgel Clobex Spray Colcrys Focalin XR Lamictal ODT Nexium Oxycontin (Limited) Stromectol (Tab) Zyvox IV Abilify Fazaclo ODT Lamictal ODT Oxytrol Zyvox Actonel Aggrenox Exelon Patch Namenda IR Welchol Avodart Copaxone (20MG) Invega ER Patanol Renagel Renvela Advair Diskus Azor Benicar Benicar HCT Crestor Enablex Gleevec Nuvigil Seroquel XR Zetia
First-Quarter 2015 Financial Results Supplemental Slides
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