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): February 25, 2015
Omnicare, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
|
| |
| |
1-8269 | 31-1001351 |
(Commission File Number) | (I.R.S. Employer Identification No.) |
|
|
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 February 25, 2015 Omnicare, Inc. issued a press release announcing its financial results for the three months and year ended December 31, 2014. 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 which will be discussed during the Company's earnings call at 9:00 a.m. Eastern Time on Wednesday, February 25, 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 February 25, 2015.
| |
99.2 | Supplemental slides provided in connection with the fourth quarter 2014 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.
|
| | |
| By: | /s/ Robert O. Kraft |
| Name: Title:
| Robert O. Kraft Senior Vice President and Chief Financial Officer |
Dated: February 25, 2015
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
99.1 Press Release of Omnicare, Inc., dated February 25, 2015.
99.2 Supplemental slides provided in connection with the fourth quarter 2014 earnings
call of Omnicare, Inc.
Exhibit 99.1
news release
Omnicare Reports Fourth-Quarter and Full-Year 2014 Financial Results; Company Provides Full-Year 2015 Guidance
CINCINNATI, February 25, 2015 - Omnicare, Inc. (NYSE:OCR) reported today financial results for its fourth quarter and full year ended December 31, 2014.
Fourth-Quarter Highlights:
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• | Net sales increase of 6.0% to $1.63 billion |
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• | Adjusted operating income of $158 million; 9.2% increase from comparable prior-year period |
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• | Adjusted cash earnings per diluted share from continuing operations increased 10.3% to $0.96; GAAP (loss) per diluted share of $(0.09) |
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• | Cash flows from continuing operations up significantly to $137 million |
Full-Year Highlights:
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• | Net sales increase of 6.7% to $6.42 billion |
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• | Adjusted operating income increased 7.8% to $609 million |
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• | GAAP earnings per diluted share from continuing operations was $1.74 versus $0.78 |
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• | Adjusted cash earnings per diluted share from continuing operations increased 8.5% to $3.72 |
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• | Cash flows from continuing operations of $492 million, including previously disclosed settlement payments of $120 million |
“Throughout 2014, we successfully executed our plan to become a more diversified healthcare services company,” said Nitin Sahney, Omnicare's President and Chief Executive Officer. “We are pleased with the success of our initiatives, which enabled us to deliver a strong year with solid financial results. Among our many accomplishments for the year, we recorded revenue growth in our Long-Term Care Group, maintained our double-digit growth in our Specialty Care Group, generated record cash flows before settlement payments, and returned more than 50% of our operating cash flows to shareholders for a third consecutive year. We look forward to maintaining our positive momentum and continuing to deliver value to shareholders in 2015 and beyond."
Fourth-Quarter Results
Financial results from continuing operations for the quarter ended December 31, 2014, as compared with the same prior-year period, were as follows:
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• | Net sales were $1.63 billion versus $1.54 billion |
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• | Gross profit was $354 million versus $360 million |
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• | Adjusted cash earnings per diluted share from continuing operations was $0.96 versus $0.87 |
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• | Adjusted EBITDA from continuing operations was $184 million versus $172 million |
Cash flows from continuing operations for the quarter ended December 31, 2014 were $137 million versus $24 million in the comparable prior-year quarter. The year-over-year increase was largely attributable to adjusted earnings growth and improvements in working capital management.
“Our solid fourth quarter results reflect the progress we are making to enhance the effectiveness of our operations while strategically capitalizing on our scale position in two attractive areas within the healthcare sector," said Mr. Sahney. "The fourth quarter marked the fourth consecutive quarter of revenue growth within our Long-Term Care business, and our Specialty Care business continues to deliver strong results as our value proposition is clearly resonating with our biopharma clients. During the period, we also completed a number of key actions such as the finalization of our new sourcing strategy and the implementation of additional operating initiatives, which when combined with the underlying health of our business, position Omnicare for continued shareholder value creation."
Financial Position
Omnicare concluded the fourth quarter of 2014 with no borrowings outstanding on its revolving credit facility and $154 million in cash on its balance sheet.
In the fourth quarter, Omnicare repurchased approximately $75 million of its common stock. As of December 31, 2014, the Company had $265 million of availability under its current share repurchase program.
"During the fourth quarter, we increased our quarterly cash dividend by 10%, marking the fifth consecutive annual increase," said Rocky Kraft, Omnicare's Chief Financial Officer. "We also took steps to realign our capital structure with our long-term growth strategy through debt retirement and new issuances that provide for increased predictability and flexibility in our ongoing efforts to redeploy capital for the benefit of our shareholders."
Full-Year Results
Financial results from continuing operations for the year ended December 31, 2014, as compared with the same prior-year period, were as follows:
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• | Net sales were $6.42 billion versus $6.01 billion |
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• | Gross profit was $1.42 billion versus $1.42 billion |
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• | GAAP earnings per diluted share from continuing operations was $1.74 versus $0.78 |
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• | Adjusted cash earnings per diluted share from continuing operations was $3.72 versus $3.43 |
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• | Adjusted EBITDA from continuing operations was $718 million versus $674 million |
Cash flows from continuing operations for the twelve months ended December 31, 2014 were $492 million versus $480 million in the comparable prior period, and included settlement payments of $120 million and $20 million for 2014 and 2013, respectively.
Segment Information
Financial results for the Long-Term Care Group for the fourth quarter ended December 31, 2014 were as follows:
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• | Net sales of $1,185 million were 1.4% higher than $1,169 million in the same prior-year period |
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• | Adjusted operating income of $151 million decreased (5.7)% from $160 million in the same prior-year period |
Financial results for the Specialty Care Group for the fourth quarter ended December 31, 2014 were as follows:
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• | Net sales of $443 million were 20.7% higher than $367 million in the same prior-year period |
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• | Adjusted operating income of $40 million increased 27.7% from $31 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 fourth-quarters and full-years ended December 31, 2014 and 2013 include the impact of special items and cash EPS adjustments as follows:
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| | | | | | | | |
| Three months ended
December 31, | Year ended
December 31, |
| 2014 | 2013 | 2014 | 2013 |
| After-tax impact | Per diluted share | After-tax impact | Per diluted share | After-tax impact | Per diluted share | After-tax impact | Per diluted share |
Special Items Adj. | $89.2M | $0.85 | $14.6M | $0.13 | $131.0M | $1.23 | $204.6M | $1.87 |
Cash EPS Adj. | $20.7M | $0.20 | $21.0M | $0.19 | $80.2M | $0.75 | $85.9M | $0.78 |
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
For the full-year 2015, Omnicare expects the following results from continuing operations:
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| | | |
| 2014 Results | FY2015 Guidance | % Change |
Revenue | $6.4B | $6.5B to $6.7B | 2% to 5% |
Adjusted cash earnings per diluted share (excluding special items) | $3.72 | $4.08 to $4.16 | 10% to 12% |
Cash flows from operations (2015 guidance excludes settlement payments) | $492M* | $525M to $625M | 7% to 27% |
*exclusive of discontinued operations and after settlement payments of $120 million
"Our double-digit EPS growth expectations are a reflection of the progress we have made as an organization,” said Mr. Sahney. "With strong underlying trends in our business, a methodical focus on operating efficiencies, and an opportunity to expand our reach by further penetrating new markets in the senior care continuum and by introducing new innovative solutions within our specialty care business, we believe we are well-positioned for growth in 2015."
Webcast Today
Omnicare will hold a conference call to discuss its fourth-quarter and full-year 2014 financial results today, February 25, 2015, 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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• | Cowen and Company 35th Annual Health Care Conference on Wednesday, March 4th at 8:00 a.m. ET in Boston, MA |
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• | Barclays Global Healthcare Conference on Wednesday, March 11th at 8:30 a.m. ET in Miami, FL |
At these events, Omnicare executives will discuss the Company's recent financial performance and strategies for continued growth. Additional details and a link to the live webcast of each event will be accessible from the Investor Relations section of Omnicare's website at http://ir.omnicare.com. Following the live presentations, archived versions of the webcasts will be available.
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 key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group. For more information, visit www.omnicare.com.
Forward-looking Statements
In addition to historical information, this report contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current expectations regarding the matters discussed or incorporated by reference in this document (including statements as to “beliefs,” “expectations,” “anticipations,” “intentions” or similar words) and all statements which are not statements of historical fact. Such forward-looking statements, together with other statements that are not historical, are based on management's current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in the Company's Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: overall economic, financial, political and business conditions; trends in the long-term healthcare and pharmaceutical industries; the ability to attract new clients and service contracts and retain existing clients and service contracts; the ability to identify, finance and consummate acquisitions on favorable terms or at all; trends for the continued growth of the Company's businesses; changes in drug pricing; delays and reductions in reimbursement by the government and other payors to customers and to the Company; the overall financial condition of the Company's customers and the ability of the Company to assess and react to such financial condition of its customers; the ability and willingness of vendors and business partners to continue to provide products and services to the Company; the successful integration of acquired companies and realization of contemplated synergies; the continued availability of suitable acquisition candidates; the ability to attract and retain skilled management; competition for qualified staff in the healthcare industry; variations in demand for the Company's products and services; variations in costs or expenses; the ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits; the potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, its implementing regulations and any subregulatory guidance; reimbursement and drug pricing policies and changes in the interpretation and application of such policies, including changes in calculation of average wholesale price; discontinuation of reporting average wholesale price and/or implementation of new pricing benchmarks; legislative and regulatory changes impacting long-term care pharmacies or specialty pharmacies; government budgetary pressures and changes, including federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of the Company's contracts with pharmaceutical benefit managers, Medicare Part D Plan sponsors and/or commercial health insurers or changes in the proportion of the Company's business covered by specific contracts; the outcome of pending and future legal or contractual disputes; potential liability for losses not covered by, or in excess of, insurance; the impact of executive separations; the impact of benefit plan terminations; the impact of differences in actuarial assumptions and estimates as compared to eventual outcomes; events or
circumstances that could result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; the ability to successfully complete planned divestitures; market conditions; the outcome of audit, compliance, administrative, regulatory, or investigatory reviews; volatility in the market for the Company's stock and in the financial markets generally; timing of conversions of convertible debt securities; access to adequate capital and financing on acceptable terms; changes in the Company’s 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 the Company's 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, the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as otherwise required by law, the Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
# # #
Contact:
Patrick C. Lee
(513) 719-1507
patrick.lee@omnicare.com
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income (Loss), GAAP Basis
($000s, except per share amounts)
Unaudited
|
| | | | | | | | | | | | | | | |
| Three months ended | | Year ended |
| December 31, 2014 | | December 31, 2013 | | December 31, 2014 | | December 31, 2013 |
Net sales | $ | 1,627,938 |
| | $ | 1,536,169 |
| | $ | 6,417,615 |
| | $ | 6,013,398 |
|
Cost of sales | 1,273,538 |
| | 1,176,497 |
| | 4,999,071 |
| | 4,592,536 |
|
Gross profit | 354,400 |
| | 359,672 |
| | 1,418,544 |
| | 1,420,862 |
|
Selling, general and administrative expenses | 174,884 |
| | 190,904 |
| | 724,700 |
| | 756,180 |
|
Provision for doubtful accounts | 21,898 |
| | 24,448 |
| | 84,460 |
| | 99,561 |
|
Settlement, litigation and other related (credits) charges | 15,351 |
| | (2,150 | ) | | 42,818 |
| | 167,465 |
|
Other charges | 113,694 |
| | 2,896 |
| | 139,253 |
| | 99,802 |
|
Operating income | 28,573 |
| | 143,574 |
| | 427,313 |
| | 297,854 |
|
Interest expense, net of investment income | (41,809 | ) | | (29,859 | ) | | (129,947 | ) | | (123,870 | ) |
(Loss) income from continuing operations before income taxes | (13,236 | ) | | 113,715 |
| | 297,366 |
| | 173,984 |
|
Income tax provision | (4,487 | ) | | 55,088 |
| | 113,154 |
| | 89,092 |
|
(Loss) income from continuing operations | (8,749 | ) | | 58,627 |
| | 184,212 |
| | 84,892 |
|
Income (loss) from discontinued operations | 2,700 |
| | (142,323 | ) | | (39,685 | ) | | (128,324 | ) |
Net (loss) income | (6,049 | ) | | (83,696 | ) | | 144,527 |
| | (43,432 | ) |
| | | | | | | |
Earnings (loss) per common share - Diluted: | | | | | | | |
Continuing Operations | $ | (0.09 | ) | | $ | 0.54 |
| | $ | 1.74 |
| | $ | 0.78 |
|
Discontinued Operations | 0.03 |
| | (1.31 | ) | | (0.37 | ) | | (1.17 | ) |
Net (loss) income | (0.06 | ) | | (0.77 | ) | | 1.36 |
| | (0.39 | ) |
| | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | |
Diluted | 97,538 |
| | 108,980 |
| | 106,228 |
| | 109,449 |
|
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
|
| | | | | | | |
| December 31,
2014 | | December 31,
2013 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 153,799 |
| | $ | 356,001 |
|
Accounts receivable, less allowances | 578,761 |
| | 695,684 |
|
Inventories | 519,584 |
| | 512,418 |
|
Deferred income tax benefits | 59,200 |
| | 135,094 |
|
Other current assets | 287,560 |
| | 265,536 |
|
Current assets of discontinued operations | — |
| | 49,995 |
|
Total current assets | 1,598,904 |
| | 2,014,728 |
|
Properties and equipment, at cost less accumulated depreciation | 267,753 |
| | 305,888 |
|
Goodwill | 4,061,806 |
| | 4,057,456 |
|
Identifiable intangible assets, less accumulated amortization | 98,942 |
| | 129,974 |
|
Other noncurrent assets | 80,385 |
| | 96,722 |
|
Noncurrent assets of discontinued operations | — |
| | 87,078 |
|
Total noncurrent assets | 4,508,886 |
| | 4,677,118 |
|
Total assets | $ | 6,107,790 |
| | $ | 6,691,846 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | |
|
Current liabilities: | |
| | |
|
Accounts payable | $ | 219,358 |
| | $ | 181,022 |
|
Accrued employee compensation | 46,830 |
| | 50,240 |
|
Current debt | 446,717 |
| | 527,204 |
|
Other current liabilities | 154,726 |
| | 355,845 |
|
Current liabilities of discontinued operations | — |
|
| 18,846 |
|
Total current liabilities | 867,631 |
| | 1,133,157 |
|
Long-term debt, notes and convertible debentures | 1,517,559 |
| | 1,418,819 |
|
Deferred income tax liabilities | 936,247 |
| | 1,012,733 |
|
Other noncurrent liabilities | 45,926 |
| | 53,835 |
|
Noncurrent liabilities of discontinued operations | — |
| | 1,398 |
|
Total noncurrent liabilities | 2,499,732 |
| | 2,486,785 |
|
Total liabilities | 3,367,363 |
| | 3,619,942 |
|
Convertible debt | 151,706 |
| | 331,101 |
|
Stockholders' equity | 2,588,721 |
| | 2,740,803 |
|
Total liabilities and stockholders' equity | $ | 6,107,790 |
| | $ | 6,691,846 |
|
The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.
Omnicare, Inc and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
(000s)
Unaudited
|
| | | | | | | |
| December 31, 2014 |
| Three months ended | | Year ended |
Cash flows from operating activities: | | | |
Net (loss) income | $ | (6,049 | ) | | $ | 144,527 |
|
(Income) loss from discontinued operations | (2,700 | ) | | 39,685 |
|
Adjustments to reconcile net income to net cash flows from operating activities: | | | |
|
Depreciation | 15,026 |
| | 58,036 |
|
Amortization | 16,839 |
| | 74,258 |
|
Asset impairment charges | 60,211 |
| | 60,211 |
|
Disposition of business, net | — |
| | 805 |
|
Loss on debt extinguishment | 60,962 |
| | 69,381 |
|
Deferred tax provision | (6,240 | ) | | 92,700 |
|
Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses: | | | |
Accounts receivable, net of provision for doubtful accounts | 42,837 |
| | 58,685 |
|
Inventories | (24,808 | ) | | (7,001 | ) |
Current and noncurrent assets | 10,736 |
| | (10,117 | ) |
Accounts payable | (6,110 | ) | | 52,289 |
|
Accrued employee compensation | (8,801 | ) | | (2,412 | ) |
Gale/Silver settlement payments, net | — |
| | (120,000 | ) |
Current and noncurrent liabilities | (14,730 | ) | | (19,320 | ) |
Net cash flows from operating activities of continuing operations | 137,173 |
| | 491,727 |
|
Net cash flows used in operating activities of discontinued operations | — |
| | 863 |
|
Net cash flows from operating activities | 137,173 |
| | 492,590 |
|
Cash flows from investing activities: | | | |
Acquisition of businesses, net of cash received | (1,613 | ) | | (1,613 | ) |
Divestiture of businesses, net | — |
| | 71,194 |
|
Capital expenditures | (14,660 | ) | | (82,531 | ) |
Marketable securities | 25,395 |
| | 25,377 |
|
Net cash flows used in investing activities of continuing operations | 9,122 |
| | 12,427 |
|
Net cash flows used in investing activities of discontinued operations | — |
| | (863 | ) |
Net cash flows from investing activities | 9,122 |
| | 11,564 |
|
Cash flows from financing activities: | |
| | |
|
Payments on term loans | (5,000 | ) | | (20,938 | ) |
Proceeds from long-term borrowings and obligations | 717,500 |
| | 717,500 |
|
Payments on long-term borrowings and obligations | (890,724 | ) | | (1,067,707 | ) |
Fees paid for financing activities | (8,913 | ) | | (8,913 | ) |
Increase in cash overdraft balance | 3,426 |
| | (16,360 | ) |
Payments for Omnicare common stock repurchases | (75,000 | ) | | (235,438 | ) |
Payments for stock awards and exercise of stock options, net of stock tendered in payment | (1,958 | ) | | (2,251 | ) |
Dividends paid | (21,879 | ) | | (80,298 | ) |
Other | 3,109 |
| | 8,049 |
|
Net cash flows used in financing activities of continuing operations | (279,439 | ) | | (706,356 | ) |
Net cash flows from financing activities of discontinued operations | — |
| | — |
|
Net cash flows used in financing activities | (279,439 | ) | | (706,356 | ) |
Net decrease in cash and cash equivalents | (133,144 | ) | | (202,202 | ) |
Less increase in cash and cash equivalents of discontinued operations | — |
| | — |
|
Decrease in cash and cash equivalents of continuing operations | (133,144 | ) | | (202,202 | ) |
Cash and cash equivalents at beginning of year | $ | 286,943 |
| | $ | 356,001 |
|
Cash and cash equivalents at end of year | 153,799 |
| | 153,799 |
|
| | | |
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 | | Fiscal year ended |
| December 31, 2014 | | December 31, 2013 | | December 31, 2014 | | December 31, 2013 |
Adjusted earnings per share ("EPS") from continuing operations: | | | | | | | |
Diluted earnings per share from continuing operations | $ | (0.09 | ) | | $ | 0.54 |
| | $ | 1.74 |
| | $ | 0.78 |
|
Amount related to adjusted diluted shares | 0.01 |
| | — |
| | — |
| | — |
|
| | | | | | | |
Special items: (a) | | | | | | | |
Settlement, litigation and other related charges | 0.09 |
| | 0.08 |
| | 0.22 |
| | 1.11 |
|
Other charges | 0.66 |
| | 0.02 |
| | 0.80 |
| | 0.59 |
|
Amortization of discount on convertible notes | 0.03 |
| | 0.04 |
| | 0.14 |
| | 0.14 |
|
Debt redemption costs | 0.07 |
| | — |
| | 0.07 |
| | 0.03 |
|
Total special items | 0.85 |
| | 0.13 |
| | 1.23 |
| | 1.87 |
|
Cash EPS Adjustments | 0.20 |
| | 0.19 |
| | 0.75 |
| | 0.78 |
|
Adjusted cash earnings per diluted share from continuing operations | $ | 0.96 |
| | $ | 0.87 |
| | $ | 3.72 |
| | $ | 3.43 |
|
| | | | | | | |
Adjusted earnings before interest, income taxes ("EBIT", "Operating income"), depreciation and amortization ("EBITDA") from continuing operations: | | | | | | | |
EBIT from continuing operations | $ | 28,573 |
| | $ | 143,574 |
| | 427,313 |
| | $ | 297,854 |
|
Depreciation and amortization | 31,865 |
| | 33,433 |
| | 132,294 |
| | 132,960 |
|
Amortization of discount on convertible notes | (5,067 | ) | | (6,093 | ) | | (23,551 | ) | | (24,567 | ) |
EBITDA from continuing operations | 55,371 |
| | 170,914 |
| | 536,056 |
| | 406,247 |
|
Special items (a) | 129,045 |
| | 746 |
| | 182,071 |
| | 267,267 |
|
Adjusted EBITDA from continuing operations | 184,416 |
| | 171,660 |
| | 718,127 |
| | 673,514 |
|
| | | | | | | |
EBITDA from continuing operations to net cash flows from operating activities: | | | | | | | |
EBITDA from continuing operations | 55,371 |
| | 170,914 |
| | 536,056 |
| | 406,247 |
|
(Subtract)/Add: | | | | | | | |
Interest expense, net of investment income and amortization of discount on convertible notes | (36,742 | ) | | (23,766 | ) | | (106,396 | ) | | (99,303 | ) |
Income tax provision | 4,487 |
| | (55,088 | ) | | (113,154 | ) | | (89,092 | ) |
Gale/Silver settlement payments, net | — |
| | — |
| | (120,000 | ) | | — |
|
Asset impairment charge | 60,211 |
| | — |
| | 60,211 |
| | — |
|
Loss on disposition | — |
| | 3,183 |
| | 805 |
| | 39,245 |
|
Loss on debt extinguishment - net | 60,962 |
| | 628 |
| | 69,381 |
| | 56,280 |
|
Deferred tax provision | (6,240 | ) | | (255 | ) | | 92,700 |
| | 61,932 |
|
Changes in certain assets and liabilities, net of effects from acquisition and
divestitures of businesses | (876 | ) | | (72,088 | ) | | 72,124 |
| | 104,205 |
|
Net cash flows from operating activities of continuing operations | $ | 137,173 |
| | $ | 23,528 |
| | $ | 491,727 |
| | $ | 479,514 |
|
| | | | | | | |
Adjusted cash flows from from continuing operations: | | | | | | | |
Cash flows from continuing operations | | | | | $ | 491,727 |
| | $ | 479,514 |
|
Settlement payments | | | | | 120,000 |
| | 20,000 |
|
Adjusted cash flows from continuing operations | | | | | $ | 611,727 |
| | $ | 499,514 |
|
| | | | | | | |
Segment reconciliations - Long-Term Care Group ("LTC") | | | | | | | |
Adjusted operating income - LTC: | | | | | | | |
Operating income from continuing operations | $ | 71,684 |
| | $ | 160,693 |
| | $ | 516,086 |
| | $ | 420,646 |
|
Special items (a) | 79,615 |
| | (265 | ) | | 116,066 |
| | 213,415 |
|
Adjusted operating income from continuing operations - LTC | $ | 151,299 |
| | $ | 160,428 |
| | $ | 632,152 |
| | $ | 634,061 |
|
| | | | | | | |
Segment reconciliations - Specialty Care Group ("SCG") | | | | | | | |
Adjusted operating income - SCG: | | | | | | | |
Operating income from continuing operations | $ | 39,316 |
| | $ | 31,238 |
| | $ | 136,373 |
| | $ | 113,243 |
|
Special items (a) | 566 |
| | — |
| | 566 |
| | — |
|
Adjusted operating income from continuing operations - SCG | $ | 39,882 |
| | $ | 31,238 |
| | $ | 136,939 |
| | $ | 113,243 |
|
| | | | | | | |
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 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: |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Q4 2014 | | YTD 2014 | | Q4 2013 | | YTD 2013 |
| | Pretax | After Tax (11) | | Pretax | After Tax (11) | | Pretax | After Tax (11) | | Pretax | After Tax (11) |
EBIT: | | | | | | | | | | | | |
Settlement, litigation and other related (credits) charges (1) | | $ | 15,351 |
| $ | 9,219 |
| | $ | 42,818 |
| $ | 23,559 |
| | $ | (2,150 | ) | $ | 8,596 |
| | $ | 167,465 |
| $ | 121,756 |
|
| | | | | | | | | | | | |
Other charges | | | | | | | | | | | | |
Acquisition and other related costs (2) | | — |
| — |
| | — |
| — |
| | — |
| — |
| | 2,300 |
| 1,416 |
|
Disposition of businesses (3) | | — |
| — |
| | 805 |
| 494 |
| | 343 |
| 429 |
| | 39,245 |
| 27,541 |
|
Separation costs (4) | | 4,053 |
| 2,551 |
| | 20,975 |
| 12,933 |
| | 1,924 |
| 1,194 |
| | 6,760 |
| 4,156 |
|
Restructuring (5) | | 566 |
| 346 |
| | 566 |
| 346 |
| | — |
| — |
| | — |
| — |
|
Loss on debt repurchase (6) | | 48,864 |
| 29,860 |
| | 56,696 |
| 34,665 |
| | 629 |
| 553 |
| | 51,497 |
| 31,691 |
|
Impairment charge (7) | | 60,211 |
| 36,813 |
| | 60,211 |
| 36,813 |
| | — |
| — |
| | — |
| — |
|
Subtotal - Other charges | | 113,694 |
| 69,570 |
| | 139,253 |
| 85,251 |
| | 2,896 |
| 2,176 |
| | 99,802 |
| 64,804 |
|
Subtotal - EBIT special items | | 129,045 |
| 78,789 |
| | 182,071 |
| 108,810 |
| | 746 |
| 10,772 |
| | 267,267 |
| 186,560 |
|
| | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | |
Amortization of discount on convertible notes (8) | | 5,067 |
| 3,060 |
| | 23,551 |
| 14,400 |
| | 6,093 |
| 3,822 |
| | 24,567 |
| 15,134 |
|
Debt redemption costs (6) | | 12,095 |
| 7,392 |
| | 12,742 |
| 7,789 |
| | — |
| — |
| | 4,784 |
| 2,929 |
|
Subtotal - Interest expense special items | | 17,162 |
| 10,452 |
| | 36,293 |
| 22,189 |
| | 6,093 |
| 3,822 |
| | 29,351 |
| 18,063 |
|
Subtotal - Special Items | | 146,207 |
| 89,241 |
| | 218,364 |
| 130,999 |
| | 6,839 |
| 14,594 |
| | 296,618 |
| 204,623 |
|
| | | | | | | | | | | | |
Cash EPS Items: | | | | | | | | | | | | |
Amortization of intangibles | | 7,700 |
| 4,459 |
| | 31,249 |
| 18,906 |
| | 7,933 |
| 4,969 |
| | 32,987 |
| 20,293 |
|
Goodwill amortization tax deduction (9) | |
|
| 7,832 |
| |
|
| 28,938 |
| | — |
| 8,492 |
| | — |
| 36,529 |
|
Convertible debt tax deduction (10) | |
|
| 8,398 |
| |
|
| 32,319 |
| | — |
| 7,557 |
| | — |
| 29,038 |
|
Subtotal - Cash EPS items | | 7,700 |
| 20,689 |
| | 31,249 |
| 80,163 |
| | 7,933 |
| 21,018 |
| | 32,987 |
| 85,860 |
|
| | | | | | | | | | | | |
Grand Total - Special items | | $ | 153,907 |
| $ | 109,930 |
| | $ | 249,613 |
| $ | 211,162 |
| | $ | 14,772 |
| $ | 35,612 |
| | $ | 329,605 |
| $ | 290,483 |
|
| |
(1) | Operating income includes settlement, litigation and other related (credits) 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. |
The year ended December 31, 2013 include a settlement charge of $120 million, plus attorneys' fees related to an agreement in principle for a voluntary civil settlement dismissing a qui tam civil suit filed in 2010.
| |
(2) | Operating income (loss) includes acquisition and other related costs primarily related to professional fees and acquisition related restructuring costs for acquisitions. |
| |
(3) | In 2013, the Company completed the disposition of certain assets, primarily in its medical supply services business, which was not considered significant to the operations of Omnicare. |
| |
(4) | Operating income includes separation related costs and accelerated stock-based compensation for certain former employees. |
| |
(5) | Operating income includes restructuring and other related charges primarily related to lease termination costs. |
| |
(6) | Operating income and interest expense includes charges for debt redemption losses and costs related to the Company’s previously announced refinancing transactions. |
| |
(7) | In the quarter ended December 31, 2014, a loss was recorded related to the abandonment of the implementation of new pharmacy dispensing systems. |
| |
(8) | The Company recorded non-cash interest expense from the amortization of debt discount on its convertible notes. |
| |
(9) | The tax benefit of being able to deduct goodwill amortization. |
| |
(10) | The tax benefit of being able to deduct higher interest expense on our convertible debt than what is actually paid. |
| |
(11) | The tax effect was calculated by multiplying the tax-deductible pretax amounts by the appropriate effective tax rate. |
Discontinued Operations:
During the fourth quarter of 2013, the Company's end-of-life hospice pharmacy business ("Hospice") as well as certain retail operations ("Retail") qualified for discontinued operations treatment. Each of these businesses was disposed of in 2014. As such, the results of continuing operations for all periods presented have been revised to reflect the results of Hospice and Retail as discontinued operations, including certain expenses of the Company related to the classification as discontinued operations.
Fourth-Quarter & Full Year 2014 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 Fourth-Quarter 2014 Highlights……………………………………………… Fourth-Quarter 2014 Segment Highlights………………………………….. Gross Profit & Adjusted Operating Income…………………………………. Adjusted Net Income & Cash EPS…………………………………………... Adjusted Operating Income by Segment……………………………………. Cash Flows……………………………………………………………………... Cash Deployment……………………………………………………………… Operating Metrics – Script Data……………………………………………… Full-Year 2015 Guidance……………………………………………………… Forward-Looking Major Financial Drivers…………………………………… Appendix Capital Structure……………………………………………………………….. Working Capital Management………………………………………………... Selected Branded Drug Patent Expirations………………………............... Table of Contents 4 12 5 6 7 8 9 10 11 17 15 16 13
Continuing Operations Fourth-Quarter 2014 Highlights Adjusted Cash-Based Earnings per Diluted Share(1) 4 Full Year 2014 Q4 2014 Discontinued Operations(2) Total $0.96 $0.00 $0.96 $3.72 $0.04 $3.77 Revenue of $1,628M 6.0% 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 reported as discontinued operations. 3. Cash flows from continuing operations of $491.7M in 2014, including $120M settlement payments relating to Gale case (which was recorded in 2013). Adjusted diluted cash EPS of $0.96(1) 10.3% increase y/y Adjusted Operating Income(1) of $158M 9.2% increase y/y CFFO of $137M (FY2014 CFFO a record $612M(3) before settlement payments)
Fourth-Quarter 2014 Segment Highlights(1) 5 Long-Term Care Group Specialty Care Group ■ 4Q14 Revenue of $1,185.0M up 1.4% from the prior year quarter - 4Q14 marked the fourth consecutive quarter of year-over-year revenue growth - Scripts from net new business added throughout 2014 up 52% in 4Q14 vs. 4Q13 ■ Adjusted operating income(1) of $151.3M in 4Q14 lower by 5.7% - General pricing adjustments with PDPs and other payers, lower prescription volumes were key drivers for decline ■ Revenue in 4Q14 increased 20.7% year-over-year to $442.8M - Average patient counts were up 13% from 4Q13 - 20% growth in brand support services billable hours (represents continued momentum in commercialization services platforms) ■ 4Q14 Adjusted operating income(1) of $39.9M; 27.9% higher than 4Q13 - Specialty sourcing strategies key driver for improved performance - Fee-for-service platforms increased double digits from the comparable prior-year quarter 1. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the most comparable GAAP measures has been attached to our press release and is also available on our website under ‘Supplemental Financial Data’ from the ‘Investors’ page.
Prior Year In millions, except per share data and % 4Q 2014 3Q 2014 Increase / (Decrease) 4Q 2013 Increase / (Decrease) Net sales 1,627.9$ 1,608.1$ 1.2% 1,536.2$ 6.0% Cost of sales 1,273.5 1,256.6 1.3% 1,176.5 8.2% Gross profit 354.4$ 351.5$ 0.8% 359.7$ (1.5%) Rate 21.77% 21.86% (9 bps) 23.41% (164 bps) SG&A expenses 174.9 178.9 (2.2%) 190.9 (8.4%) Provision for doubtful accounts 21.9 19.9 10.1% 24.4 (10.2%) Adjusted operating income from continuing operations(3) 157.6$ 152.6$ 3.3% 144.3$ 9.2% Sequential Gross Profit & Adjusted Operating Income(1)(2) 6 Net sales increased 6.0% year-over-year to $1,628M 4Q14 gross profit of $354M decreased 1.5% from 4Q13, relatively stable 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 - Sequential stabilization of gross margin reflects strong performance in SCG SG&A expenses of $175M declined 8.4% from 4Q13; 169 basis points lower as a percentage of net sales due to a continued focus on operating efficiency and other standardization initiatives Adjusted operating income increased 9.2% over 4Q13 to $158M 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 7.4% year-over-year Fourth-quarter cash EPS adjustments decreased modestly from prior year to $21M Adjusted cash earnings per diluted share from continuing operations of $0.96 increased 10.3% over 4Q13 Prior Year In millions, except per share data and % 4Q 2014 3Q 2014 Increase / (Decrease) 4Q 2013 Increase / (Decrease) Adjusted operating income from continuing operations 157.6$ 152.6$ 3.3% 144.3$ 9.2% Adjusted interest expense, net of investment income (24.6) (22.6) 8.8% (23.8) 3.4% Adjusted income before income taxes 133.0 130.0 2.3% 120.6 10.3% Income taxes (52.5) (50.4) 4.2% (47.3) 11.0% Income from continuing operations 80.5$ 79.6$ 1.1% 73.2$ 10.0% Income from discontinued operations - 0.7 (100.0%) 2.7 (100.0%) Net income 80.5 80.3 0.2% 75.9 6.1% Intangible asset amortization - after tax 4.5 4.7 (4.3%) 5.0 (10.0%) Goodwill amortization - tax deduction 7.8 7.1 9.9% 8.5 (8.2%) Contingent convertible debenture interest - tax deduction 8.4 7.9 6.3% 7.6 10.5% Adjusted cash earnings from continuing operations 101.2$ 99.3$ 1.9% 94.3$ 7.3% Adjusted weighted average diluted shares outstanding 105.6 105.5 0.1% 109.0 (3.1%) Adjusted cash earnings per diluted share from continuing operations 0.96$ 0.94$ 2.1% 0.87$ 10.3% Adjusted cash earnings per diluted share from discontinued operations -$ 0.01$ (100.0%) 0.03$ (100.0%) Adjusted cash earnings per diluted share 0.96$ 0.95$ 1.1% 0.90$ 6.7% Adjusted operating income from continuing operations 157.6$ 152.6$ 3.3% 144.3$ 9.2% Adjusted depreciation and amortization 26.8 27.2 (1.5%) 27.4 (2.2%) Adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") from continuing operations 184.4$ 179.8$ 2.6% 171.7$ 7.4% Sequential
Adjusted Operating Income by Segment(1) 8 Full-year 2014 Long-Term Care adjusted operating income was consistent with prior year at $632.2M as efficiency benefits offset volume decreases Specialty Care Group 2014 adjusted operating income growth of 20.9% to $136.9M was driven by strong organic growth across all platforms and branded drug price inflation within our specialty pharmacy platform Adjusted operating loss for Corporate/Other segment in 2014 was $159.7M 1. Each amount is reported independently. The sum of the individual amounts may not equal the separately presented amounts due to rounding. 2. Each adjusted item excludes special items and discontinued operations. A reconciliation of non-GAAP information to the comparable GAAP measures has been attached to our press release and is available on our website under ‘Supplemental Financial Information’ at http://ir.omnicare.com. 4Q 2014 4Q 2013 Increase / (Decrease) Full Year 2014 Full Year 2013 Increase / (Decrease) In millions, except % Long-Term Care Group Net sales 1,185.0$ 1,169.1$ 1.4% 4,750.1$ 4,627.9$ 2.6% Adjusted operating income(2) 151.3 160.4 (5.7%) 632.2 634.1 (0.3%) Rate 12.77% 13.72% (95 bps) 13.31% 13.70% (39 bps) In whole numbers Per script data: Net sales / script 43.32$ 41.88$ 3.4% 42.67$ 41.15$ 3.6% Adjusted operating income / script (2) 5.53$ 5.75$ (3.8%) 5.68$ 5.64$ 0.7% In millions, except % Specialty Care Group Net sales 442.8$ 366.9$ 20.7% 1,667.2$ 1,384.0$ 20.5% Adjusted operating income(2) 39.9 31.2 27.9% 136.9 113.2 20.9% Rate 9.01% 8.51% 50 bps 8.21% 8.18% 3 bps
Prior Year In millions, except % 4Q 2014 3Q 2014 Increase / (Decrease) 4Q 2013 Increase / (Decrease)(3) Net income / (Loss) (6.0)$ 64.8$ (109.3%) (83.7)$ 92.8% (Income) / Loss from discontinued operations (2.7)$ 3.2$ (184.4%) 142.3$ (101.9%) Adjustments to reconcile net income to net cash flows from operating activities: Depreciation expense 15.0 14.7 2.0% 14.4 4.2% Amortization expense 16.8 18.6 (9.7%) 19.1 (12.0%) Loss from disposition - 0.3 3.2 (100.0%) Loss on debt extinguishment 61.0 0.0 100.0% 0.6 NM Deferred tax provision (6.2) 52.2 (111.9%) (0.3) NM Asset Impairment Charges 60.2 - 100.0% - 100.0% Litigation settlement payments - (120.0) (100.0%) - 0.0% Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses (0.9) (69.6) 98.7% (72.1) 98.8% Net cash flows from (used in) operating activities of continuing operations 137.2$ (35.7)$ 484.3% 23.5$ 483.8% Net cash flows from (used in) operating activities of discontinued operations - (5.3) 100.0% (11.1) 100.0% Net cash flows from (used in) operating activities 137.2 (41.0) 434.6% 12.4 1006.5% Capital expenditures 14.7 19.8 (25.8%) 21.7 (32.3%) Dividends paid 21.9 19.4 12.9% 19.9 10.1% Free cash flow from (used in) continuing operations (2) 100.6$ (74.9)$ 234.3% (18.1)$ 655.8% 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. Fourth-quarter operating cash flows of $137M affected by capital restructuring charges, one-time asset impairment charge, and improvements in working capital management - Full-year 2014 operating cash flows of $492M; adding back settlement payments of $120M would equate to a record $612M in total
Cash Deployment 10 Repurchased 850 thousand shares for an aggregate amount of $60 million in 4Q14 Additional $15 million was paid up front for an Accelerated Share Repurchase (ASR) program; remaining shares delivered in 1Q15 Increased quarterly dividend 10% to $0.22 per share, marking the fifth consecutive annual increase since 2010 More than $1 billion of capital has been returned to shareholders over the last three years representing 69% of cash flows from operating activities of continuing operations As of December 31, 2014, Omnicare had $265 million of share repurchase authorization remaining 1. Each period presented included required quarterly repayment of the term loan. In 4Q14, Omnicare repurchased $400 million in principal amount of 7.75% senior subordinated notes due 2020. In addition, $103 million principal amount of 3.75% convertible senior subordinated notes due 2042 were repurchased and $287 million in principal amount were presented for conversion. 2. Cumulative % Returned = (Dividends Paid + Share Repurchases) / Average Market Capitalization FY2014. Average Market Capitalization = Avg. Share Price FY2014 * Diluted Average Shares Outstanding FY2014. 3. NM = Not meaningful. 0% 2% 4% 6% 8% $- $75 $150 $225 $300 $375 $450 $525 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 Capital Returned to Stockholders (2) (In millions, except %s) Dividends Paid Share Repurchases % Returned In millions, except % 4Q 2014 4Q 2013 Increase / (Decrease)(3) FY 12/31/14 FY 12/31/13 Increase / (Decrease) Net cash flows from operating activities of continuing operations (reported) 137.2$ 23.5$ 483.8% 491.7$ 479.5$ 2.5% Capital expenditures 14.7 21.7 (32.3%) 82.5 95.0 (13.2%) Acquisitions 1.6 0.1 NM 1.6 3.9 (59.0%) Net debt and long term borrowings and repayment (1) 178.2 7.2 NM 371.1 213.6 73.7% apital returned: Dividends paid 21.9$ 19.9$ 10.1% 80.3$ 62.9$ 27.7% Share repurchases, net(2) 75.0 129.7 (42.2%) 235.4 221.0 6.5% Total capital returned 96.9$ 149.6$ (35.2%) 315.7$ 283.9$ 11.2% % of net cash flows from operating activities of continuing operations 70.6% 636.6% NM 64.2% 59.2% 500 bps
Prior Year In thousands, except % 4Q 2014 3Q 2014 Increase / (Decrease) 4Q 2013 Increase / (Decrease) Long-Term Care Group Scripts: Generic scripts dispensed 20,204 20,506 (1.5%) 20,404 (1.0%) Branded scripts dispensed 3,895 3,892 0.1% 4,215 (7.6%) Over-the-counter scripts dispensed 3,256 3,301 (1.4%) 3,294 (1.2%) Total LTC Group scripts 27,355 27,699 (1.2%) 27,913 (2.0%) Calendar days 92 92 0.0% 92 0.0% LTC scripts per calendar day 297 301 (1.3%) 303 (2.0%) Generic dispensing rate(1) 83.8% 84.0% (21 bps) 82.9% 96 bps Sequential Operating Metrics Script Data 82.9% 83.8% 82.5% 83.0% 83.5% 84.0% 84.5% Generic Dispensing Rate(1) 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, reflecting continued elevated uncontrollable losses and lower utilization levels LTC scripts were 2.0% lower year-over-year as a result of lower utilization and census activity Generic dispensing rate increased 96 bps year-over- year to 83.8% as a result of a few generic introductions, but was down 21 bps from 3Q14 due to an increase in flu-related scripts
Full-Year 2015 Guidance 1. Guidance provided on February 25, 2015. 2. 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 3. FY14 results exclude discontinued operations and include settlement payments of $120 million. 2015 guidance excludes the impact of settlement payments. 12 Net sales FY14 Results Adjusted cash earnings per diluted share from continuing operations(2) Cash flow from continuing operations(3) $6.4B $3.72 $492M Anticipate double-digit revenue, operating income growth from Specialty Care Group Considers $4M-$5M year-over-year decline in after-tax cash-based adjustments Considers assumption for capital allocation, increased dilution from convertible bonds FY15 Guidance(1) % Change $6.5B to $6.7B $4.08 to $4.16 $525M to $625M 2% to 5% 10% to 12% 7% to 27%
Forward-Looking Major Financial Drivers(1) 13 1. Information on this slide is not intended to represent the company’s financial guidance for 2015 and 2016. Volume growth – Long-Term Care 2014 Brand-to-generic Payer pricing 2015 2016 Key Drivers Volume growth – Specialty Care Brand drug price inflation Operating efficiencies Dilution from convertible debentures Cash-based EPS adjustments Capital deployment Negative Neutral Negative Positive Positive Positive Negative Neutral Positive Negative Positive Negative Positive Positive Positive Negative Negative Positive Positive Positive Negative Positive Positive Positive Negative Neutral Positive
Appendix
Capital Structure 4Q14 Initiatives Have Created More Predictable Debt Structure $252M $20M $20M $20M $315M $241M $400M $300M $80M $307M $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 15 Before After 32% 68% Floating Rate Fixed Rate 17% 83% Floating Rate Fixed Rate Before After 1. Includes $20 million of Term Loan A, $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) 40.1 32.9 29.5 36.2 37.5 41.7 43.3 39.2 37.3 32.7 25 30 35 40 45 50 55 60 65 70 75 5 10 15 20 25 30 35 40 45 4Q13 1Q14 2Q14 3Q14 4Q14 Days of Inventory On Hand (DOH) Days Sales Outstanding (DSO) 16 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).
1. All generic launches are subject to change due to litigation or pediatric exclusivity. 17 2015 2016 Selected Branded Drug Patent Expirations(1) 1Q15 - Launched 2Q15 3Q15 4Q15 Androgel Clobex Spray Colcrys Focalin XR Lamictal ODT Stromectol (Tab) Zyvox IV Abilify Actonel Fazaclo ODT Oxytrol Renagel Renvela Welchol Zyvox Nexium Aggrenox Invega ER Namenda IR Avodart Copaxone (20MG) Patanol Advair Diskus Azor Benicar Benicar HCT Crestor Enablex Gleevec Nuvigil Seroquel XR Zetia
Fourth-Quarter & Full Year 2014 Financial Results Supplemental Slides