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): July 24, 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.) |
|
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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 July 24, 2015, Omnicare, Inc. issued a press release announcing its financial results for the three and six months ended June 30, 2015. A copy of the release is furnished herewith as Exhibit 99.1 and incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press release of Omnicare, Inc., dated July 24, 2015.
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: July 24, 2015
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
99.1 Press release of Omnicare, Inc., dated July 24, 2015.
Exhibit 99.1
news release
Omnicare Reports Second-Quarter 2015 Financial Results
CINCINNATI, July 24, 2015 - Omnicare, Inc. (NYSE: OCR) reported today financial results for its second quarter ended June 30, 2015.
In the second quarter, Omnicare and CVS Health Corporation [NYSE: CVS] (“CVS”) announced the two companies had entered into a definitive agreement under which a subsidiary of CVS will acquire Omnicare for $98 per share in cash for a total enterprise value of approximately $12.9 billion. The transaction, which is subject to customary closing conditions, including applicable regulatory approvals and approval of the transaction by Omnicare’s stockholders, is expected to close prior to the end of 2015.
Second-Quarter Highlights:
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• | Net sales increase of 7.6% to $1.7 billion |
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• | Adjusted operating income from continuing operations increase of 11.4% to $166 million |
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• | Adjusted cash earnings per diluted share from continuing operations 12.1% higher to $1.02 (equivalent to $1.04 on an unaffected share price basis); GAAP earnings per diluted share of $0.32 |
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• | Cash flows from continuing operations of $94 million |
Second-Quarter Results
Financial results from continuing operations for the quarter ended June 30, 2015, as compared with the same prior-year period, were as follows:
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• | Net sales were $1,733 million versus $1,611 million |
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• | Gross profit was $354 million as compared with $354 million |
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• | GAAP earnings per diluted share was $0.32 versus $0.58 |
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• | Adjusted cash earnings per diluted share was $1.02 (equivalent to $1.04 on an unaffected share price basis) versus $0.91 |
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• | Adjusted EBITDA was $196 million versus $176 million |
Omnicare’s weighted average diluted shares outstanding increased sequentially by 2.0 million shares largely as a result of the rise in the Company’s stock price in connection with the proposed CVS transaction and the dilutive effect it had on the Company’s
outstanding convertible notes. This sequential increase in Omnicare’s diluted weighted average shares outstanding reduced the Company’s adjusted cash earnings per diluted share by $0.02.
Cash flows from continuing operations for the quarter ended June 30, 2015 were $94 million versus $219 million in the comparable prior-year quarter.
Financial Position
Omnicare concluded the second quarter of 2015 with no borrowings outstanding on its revolving credit facility, other than approximately $13 million in standby letters of credit, and $315 million in cash on its balance sheet.
In the first half of 2015, Omnicare repurchased 1.8 million shares for an aggregate amount of $125 million. As of June 30, 2015, the Company had approximately $140 million of availability under its current share repurchase authorization.
Year-to-Date Results
Financial results from continuing operations for the six months ended June 30, 2015, as compared with the same prior-year period, were as follows:
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• | Net sales were $3,393 million versus $3,182 million |
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• | Gross profit was $703 million as compared with $713 million |
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• | GAAP earnings per share was $1.07 versus $1.17 |
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• | Adjusted cash earnings per diluted share was $2.04 (equivalent to $2.06 on an unaffected share price basis) versus $1.82 |
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• | Adjusted EBITDA was $386 million versus $354 million |
Cash flows from continuing operations for the six months ended June 30, 2015 were $430 million versus $390 million in the comparable prior-year period.
Segment Information
Financial results for the Long-Term Care Group for the second quarter ended June 30, 2015 were as follows:
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• | Net sales of $1,159 million were 2.6% lower than $1,190 million in the same prior-year period |
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• | Adjusted operating income of $165 million increased 3.3% versus the prior-year quarter of $160 million |
Financial results for the Specialty Care Group for the second quarter ended June 30, 2015 were as follows:
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• | Net sales of $574 million were 36.7% higher than $420 million in the same prior-year period |
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• | Adjusted operating income of $40 million increased 30.0% 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.
Special Items
The results for the second-quarters ended June 30, 2015 and 2014 include the impact of special items and cash EPS adjustments as follows:
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| | | | | | | | |
| Three Months Ended
June 30, | Six Months Ended
June 30, |
| 2015 | 2014 | 2015 | 2014 |
| 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. | $54.0M | $0.51 | $15.9M | $0.15 | $63.4M | $0.61 | $30.2M | $0.28 |
Cash EPS Adj. | $19.2M | $0.18 | $19.8M | $0.19 | $38.0M | $0.36 | $39.7M | $0.37 |
All special items and cash EPS adjustments have been described in further detail in the “Footnotes and Definitions to Financial Information” section elsewhere herein.
Webcast
Given the proposed transaction with CVS, Omnicare will not hold a conference call to discuss its quarterly results.
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.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed acquisition of Omnicare, Inc. by CVS Pharmacy, Inc., a wholly owned
subsidiary of CVS Health Corporation. In connection with the proposed merger, Omnicare filed a definitive proxy statement on Schedule 14A with the SEC on July 20, 2015 and commenced the mailing of the definitive proxy statement and a proxy card to each stockholder entitled to vote at the special meeting relating to the proposed merger. Omnicare intends to file other relevant materials, if any, with the SEC. INVESTORS AND STOCKHOLDERS ARE ADVISED TO READ THESE MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders are able to obtain the proxy statement, any amendments or supplements thereto and other relevant documents (when they become available) free of charge at the SEC's web site, http://www.sec.gov. In addition, Omnicare’s investors and security holders also may obtain free copies of the documents filed with the SEC through the Investors section of Omnicare’s website, www.omnicare.com, or by contacting Omnicare’s Investor Relations Department by telephone at (513) 719-1507 or by e-mail at investor.relations@omnicare.com.
Participants in Solicitation
Omnicare and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the holders of Omnicare common stock in connection with the proposed merger. Information about the directors and executive officers of Omnicare is set forth in the proxy statement for Omnicare’s 2015 Annual Meeting of Stockholders, which was filed with the SEC on April 17, 2015. Additional information regarding potential participants in such proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, was included in the definitive proxy statement filed with the SEC on July 20, 2015.
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: the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including a termination under circumstances that could require Omnicare to pay a termination fee; the inability to complete the Merger due to the failure to obtain stockholder approval or the failure to satisfy (or to have waived) other conditions to completion of the Merger, including receipt of required
regulatory approvals; the failure of the Merger to close for any other reason; risks that the Merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger; diversion of management’s attention from ongoing business concerns as a result of the Merger; the effect of the announcement of the Merger on our business relationships, operating results and business generally; the amount of the costs, fees, expenses and charges related to the Merger; uncertainties as to the timing of the closing of the Merger; risks that Omnicare’s business will have been adversely impacted during the pendency of the Merger; the effects of disruption from the Merger making it more difficult to hire key personnel and maintain relationships with customers, suppliers, vendors, licensors, licensees and other business partners; the risk that competing offers to the Merger will be made; the fact that, as a result of the Merger, our stockholders would forgo the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company; 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, including any legal proceedings related to the proposed Merger; 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
|
| | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| June 30, 2015 | | June 30, 2014 | | June 30, 2015 | | June 30, 2014 |
Net sales | $ | 1,733,317 |
| | $ | 1,610,584 |
| | $ | 3,393,159 |
| | $ | 3,181,622 |
|
Cost of sales | 1,379,386 |
| | 1,256,354 |
| | 2,689,765 |
| | 2,468,938 |
|
Gross profit | 353,931 |
| | 354,230 |
| | 703,394 |
| | 712,684 |
|
Selling, general and administrative expenses | 168,710 |
| | 184,063 |
| | 336,133 |
| | 370,876 |
|
Provision for doubtful accounts | 19,184 |
| | 21,090 |
| | 38,375 |
| | 42,651 |
|
Settlement, litigation and other related charges | 57,702 |
| | 7,547 |
| | 67,522 |
| | 14,599 |
|
Other charges | 11,405 |
| | 11,284 |
| | 12,454 |
| | 21,560 |
|
Operating income | 96,930 |
| | 130,246 |
| | 248,910 |
| | 262,998 |
|
Interest expense, net of investment income | (27,378 | ) | | (29,980 | ) | | (55,027 | ) | | (59,421 | ) |
Income from continuing operations before income taxes | 69,552 |
| | 100,266 |
| | 193,883 |
| | 203,577 |
|
Income tax expense | 35,582 |
| | 39,020 |
| | 82,524 |
| | 78,693 |
|
Income from continuing operations | 33,970 |
| | 61,246 |
| | 111,359 |
| | 124,884 |
|
Income from discontinued operations | — |
| | (39,275 | ) | | — |
| | (39,139 | ) |
Net income | $ | 33,970 |
| | $ | 21,971 |
| | $ | 111,359 |
| | $ | 85,745 |
|
| | | | | | | |
Earnings per common share - Diluted: | | | | | | | |
Continuing operations | $ | 0.32 |
| | $ | 0.58 |
| | $ | 1.07 |
| | $ | 1.17 |
|
Discontinued Operations | — |
| | (0.37 | ) | | — |
| | (0.37 | ) |
Net Income | $ | 0.32 |
| | $ | 0.21 |
| | $ | 1.07 |
| | $ | 0.80 |
|
| | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | |
Diluted | $ | 105,212 |
| | $ | 106,054 |
| | $ | 104,203 |
| | $ | 106,906 |
|
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
|
| | | | | | | |
| June 30,
2015 | | December 31,
2014 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 314,708 |
| | $ | 153,799 |
|
Accounts receivable, less allowances | 616,862 |
| | 578,761 |
|
Inventories | 477,510 |
| | 519,584 |
|
Deferred income tax benefits | 77,400 |
| | 59,200 |
|
Other current assets | 187,683 |
| | 287,560 |
|
Total current assets | 1,674,163 |
| | 1,598,904 |
|
Properties and equipment, at cost less accumulated depreciation | 269,161 |
| | 267,753 |
|
Goodwill | 4,094,247 |
| | 4,061,806 |
|
Identifiable intangible assets, less accumulated amortization | 112,412 |
| | 98,942 |
|
Other noncurrent assets | 70,626 |
| | 80,385 |
|
Total noncurrent assets | 4,546,446 |
| | 4,508,886 |
|
Total assets | $ | 6,220,609 |
| | $ | 6,107,790 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
|
Current liabilities: | |
| | |
|
Accounts payable | $ | 295,953 |
| | $ | 219,358 |
|
Accrued employee compensation | 56,007 |
| | 46,830 |
|
Current debt | 451,184 |
| | 446,717 |
|
Other current liabilities | 213,638 |
| | 154,726 |
|
Total current liabilities | 1,016,782 |
| | 867,631 |
|
Long-term debt, notes and convertible debentures | 1,507,422 |
| | 1,517,559 |
|
Deferred income tax liabilities | 952,282 |
| | 936,247 |
|
Other noncurrent liabilities | 48,457 |
| | 45,926 |
|
Total noncurrent liabilities | 2,508,161 |
| | 2,499,732 |
|
Total liabilities | 3,524,943 |
| | 3,367,363 |
|
| | | |
Convertible debt | 145,034 |
| | 151,706 |
|
| | | |
Stockholders’ equity | 2,550,632 |
| | 2,588,721 |
|
Total liabilities and stockholders’ equity | $ | 6,220,609 |
| | $ | 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
|
| | | | | | | |
| June 30, 2015 |
| Three months ended | | Six months ended |
Cash flows from operating activities: | | | |
Net income | $ | 33,970 |
| | $ | 111,359 |
|
Loss from discontinued operations | — |
| | — |
|
Adjustments to reconcile net income to net cash flows from operating activities: | | | |
|
Depreciation | 14,919 |
| | 29,616 |
|
Amortization | 19,453 |
| | 36,119 |
|
Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses: | | | |
Accounts receivable, net of provision for doubtful accounts | 14,739 |
| | (48,613 | ) |
Inventories | (13,331 | ) | | 42,669 |
|
Current and noncurrent assets | 19,958 |
| | 121,376 |
|
Accounts payable | (20,206 | ) | | 74,092 |
|
Accrued employee compensation | 17,911 |
| | 9,433 |
|
Current and noncurrent liabilities | 6,676 |
| | 54,294 |
|
Net cash flows from operating activities | 94,089 |
| | 430,345 |
|
Cash flows used in investing activities: | | | |
Acquisition of businesses, net of cash received | (45,474 | ) | | (54,802 | ) |
Capital expenditures | (14,191 | ) | | (27,664 | ) |
Net cash flows used in investing activities | (59,665 | ) | | (82,466 | ) |
Cash flows used in financing activities: | |
| | |
|
Payments on term loans | (5,000 | ) | | (10,000 | ) |
Payments on long-term borrowings and obligations | (3,614 | ) | | (5,999 | ) |
Fees paid for financing activities | (262 | ) | | (2,239 | ) |
(Decrease) increase in cash overdraft balance | (12,442 | ) | | 1,292 |
|
Payments for Omnicare common stock repurchases | — |
| | (125,000 | ) |
Proceeds for stock awards and exercise of stock options and related withholding taxes, net | (1,712 | ) | | (8,224 | ) |
Dividends paid | (21,191 | ) | | (42,362 | ) |
Other | 2,012 |
| | 5,562 |
|
Net cash flows used in financing activities | (42,209 | ) | | (186,970 | ) |
Net increase in cash and cash equivalents | (7,785 | ) | | 160,909 |
|
Cash and cash equivalents at beginning of period | 322,493 |
| | 153,799 |
|
Cash and cash equivalents at end of period | $ | 314,708 |
| | $ | 314,708 |
|
| | | |
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 | | Six months ended |
| June 30, 2015 | | June 30, 2014 | | June 30, 2015 | | June 30, 2014 |
Adjusted earnings per share ("EPS") from continuing operations: | | | | | | | |
Diluted earnings per share from continuing operations | $ | 0.32 |
| | $ | 0.58 |
| | $ | 1.07 |
| | $ | 1.17 |
|
| | | | | | | |
Special Items: (a) | | | | | | | |
Settlement, litigation and other related charges | 0.40 |
| | 0.04 |
| | 0.46 |
| | 0.08 |
|
Other charges | 0.09 |
| | 0.07 |
| | 0.10 |
| | 0.12 |
|
Amortization of discount on convertible notes | 0.03 |
| | 0.04 |
| | 0.05 |
| | 0.07 |
|
Total Special items | 0.51 |
| | 0.15 |
| | 0.61 |
| | 0.28 |
|
Cash EPS Adjustments | 0.18 |
| | 0.19 |
| | 0.36 |
| | 0.37 |
|
Adjusted cash earnings per diluted share from continuing operations | $ | 1.02 |
| | $ | 0.91 |
| | $ | 2.04 |
| | $ | 1.82 |
|
Impact of share price increase | 0.02 |
| | — |
| | 0.02 |
| | — |
|
Adjusted cash earnings per diluted share from continuing operations adjusted for share price increase | $ | 1.04 |
| | $ | 0.91 |
| | $ | 2.06 |
| | $ | 1.82 |
|
| | | | | | | |
Adjusted earnings before interest, income taxes ("EBIT", "Operating income"), depreciation and amortization ("EBITDA") from continuing operations: | | | | | | | |
EBIT from continuing operations | $ | 96,930 |
| | $ | 130,246 |
| | 248,910 |
| | $ | 262,998 |
|
Depreciation and amortization | 34,372 |
| | 33,361 |
| | 65,735 |
| | 67,097 |
|
Amortization of discount on convertible notes | (4,396 | ) | | (6,214 | ) | | (8,722 | ) | | (12,345 | ) |
EBITDA from continuing operations | 126,906 |
| | 157,393 |
| | 305,923 |
| | 317,750 |
|
Special items (a) | 69,107 |
| | 18,831 |
| | 79,976 |
| | 36,159 |
|
Adjusted EBITDA from continuing operations | 196,013 |
| | 176,224 |
| | 385,899 |
| | 353,909 |
|
| | | | | | | |
EBITDA from continuing operations to net cash flows from operating activities: | | | | | | | |
EBITDA from continuing operations | 126,906 |
| | 157,393 |
| | 305,923 |
| | 317,750 |
|
(Subtract)/Add: | | | | | | | |
Interest expense, net of investment income and amortization of discount on convertible notes | (22,982 | ) | | (23,766 | ) | | (46,305 | ) | | (47,076 | ) |
Income tax provision | (35,582 | ) | | (39,020 | ) | | (82,524 | ) | | (78,693 | ) |
Other operating activities (including debt redemption costs) | — |
| | 8,414 |
| | — |
| | 8,414 |
|
Disposition of business, net | — |
| | 520 |
| | — |
| | 520 |
|
Changes in certain assets and liabilities, net of effects from acquisition and
divestitures of businesses | 25,747 |
| | 115,093 |
| | 253,251 |
| | 189,305 |
|
Net cash flows from operating activities of continuing operations | $ | 94,089 |
| | $ | 218,634 |
| | $ | 430,345 |
| | $ | 390,220 |
|
| | | | | | | |
Segment Reconciliations - Long-Term Care Group ("LTC") | | | | | | | |
Adjusted Operating Income - LTC: | | | | | | | |
Operating income from continuing operations | 104,025 |
| | 149,533 |
| | 255,728 |
| | 302,117 |
|
Special items (a) | 61,334 |
| | 10,467 |
| | 72,545 |
| | 20,030 |
|
Adjusted operating income from continuing operations - LTC | 165,359 |
| | 160,000 |
| | 328,273 |
| | 322,147 |
|
| | | | | | | |
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.
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(a) | Financial results included Special Items and Cash EPS adjustments as described below: |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Q2 2015 | | YTD 2015 | | Q2 2014 | | YTD 2014 |
| | Pretax | After Tax (9) | | Pretax | After Tax (9) | | Pretax | After Tax (9) | | Pretax | After Tax (9) |
EBIT: | | | | | | | | | | | | |
Settlement, litigation and other related charges (1) | | $ | 57,702 |
| $ | 41,741 |
| | $ | 67,522 |
| $ | 47,786 |
| | $ | 7,547 |
| $ | 4,659 |
| | $ | 14,599 |
| $ | 8,980 |
|
| | | | | | | | | | | | |
Other charges | | | | | | | | | | | | |
Acquisition and other costs (2) | | 3,522 |
| 2,871 |
| | 4,000 |
| 3,165 |
| | — |
| — |
| | — |
| — |
|
Disposition of businesses (3) | | — |
| — |
| | — |
| — |
| | 520 |
| 320 |
| | 520 |
| 320 |
|
Separation costs (3) | | 2,597 |
| 1,595 |
| | 3,168 |
| 1,946 |
| | 3,004 |
| 1,871 |
| | 13,280 |
| 8,169 |
|
Merger related costs (4) | | 5,286 |
| 5,127 |
| | 5,286 |
| 5,127 |
| | — |
| — |
| | — |
| — |
|
Loss on debt repurchase (5) | | — |
| — |
| | — |
| — |
| | 7,760 |
| 4,773 |
| | 7,760 |
| 4,773 |
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Subtotal - Other charges | | 11,405 |
| 9,593 |
| | 12,454 |
| 10,238 |
| | 11,284 |
| 6,964 |
| | 21,560 |
| 13,262 |
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Subtotal - EBIT Special Items | | 69,107 |
| 51,334 |
| | 79,976 |
| 58,024 |
| | 18,831 |
| 11,623 |
| | 36,159 |
| 22,242 |
|
| | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | |
Amortization of discount on convertible notes (6) | | 4,396 |
| 2,695 |
| | 8,722 |
| 5,358 |
| | 6,214 |
| 3,836 |
| | 12,345 |
| 7,593 |
|
Debt redemption costs (5) | | — |
| — |
| | — |
| — |
| | 647 |
| 398 |
| | 647 |
| 398 |
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Subtotal - Interest expense Special Items | | 4,396 |
| 2,695 |
| | 8,722 |
| 5,358 |
| | 6,861 |
| 4,234 |
| | 12,992 |
| 7,991 |
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Subtotal - Special Items | | 73,503 |
| 54,029 |
| | 88,698 |
| 63,382 |
| | 25,692 |
| 15,857 |
| | 49,151 |
| 30,233 |
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| | | | | | | | | | | | |
Cash EPS Items: | | | | | | | | | | | | |
Amortization of intangibles | | 8,270 |
| 5,066 |
| | 15,972 |
| 9,807 |
| | 7,885 |
| 4,868 |
| | 15,802 |
| 9,720 |
|
Goodwill amortization tax deduction (7) | | — |
| 6,860 |
| | — |
| 13,664 |
| | — |
| 6,962 |
| | — |
| 14,008 |
|
Convertible debt tax deduction (8) | | — |
| 7,280 |
| | — |
| 14,500 |
| | — |
| 7,946 |
| | — |
| 16,020 |
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Subtotal - Cash EPS Items | | 8,270 |
| 19,206 |
| | 15,972 |
| 37,971 |
| | 7,885 |
| 19,776 |
| | 15,802 |
| 39,748 |
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| | | | | | | | | | | | |
Grand Total - Special Items | | $ | 81,773 |
| $ | 73,235 |
| | $ | 104,670 |
| $ | 101,353 |
| | $ | 33,577 |
| $ | 35,633 |
| | $ | 64,953 |
| $ | 69,981 |
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(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. |
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(2) | Operating income includes acquisition and other related costs primarily related to professional fees and acquisition related restructuring costs. |
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(3) | Operating income includes separation related costs and accelerated stock-based compensation expense for certain employees. |
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(4) | As previously disclosed, in the second quarter of 2015, the Company entered into a merger agreement with CVS. In connection with the merger agreement and the proposed merger, the Company incurred professional fees and other related costs. |
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(5) | Operating income (loss) and interest expense include charges for debt redemption losses and costs related to refinancing transactions. |
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(6) | The Company recorded non-cash interest expense from the amortization of debt discount on its convertible notes. |
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(7) | The tax benefit of being able to deduct goodwill amortization. |
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(8) | The tax benefit of being able to deduct higher interest expense on the Company’s convertible debt than what is actually paid. |
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(9) | The tax effect was calculated by multiplying the tax-deductible pretax amounts by the appropriate effective tax rate. |