- Second Quarter Operating Earnings Rise 44% to 23 Cents Per Share
- Cash Flow From Operations (excluding pre-buys) Up 37% to $44.0 Million
- Outlook Remains Favorable for 2001
COVINGTON, Ky., Aug. 2 /PRNewswire/ -- Omnicare, Inc. (NYSE: OCR) today reported financial results for its second quarter ended June 30, 2001.
For the three months ended June 30, 2001, Omnicare earned 23 cents per diluted share, excluding the impact of a one-time item, compared with 16 cents per diluted share earned in the comparable prior-year quarter, excluding restructuring charges associated with a productivity and consolidation initiative completed in 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA), on that basis, totaled $66.3 million for the 2001 second quarter compared with EBITDA of $55.5 million a year ago. Net income, on the same basis, was $21.3 million for the 2001 quarter versus $14.6 million in the same quarter in 2000. Second quarter 2001 sales reached a record $530.1 million compared with $480.5 million recorded in the year earlier quarter.
Included in second quarter 2001 results was a one-time charge of $3.0 million pretax ($1.9 million after tax, or 2 cents per share) representing a payment in settlement with a customer of certain contractual issues relating to prior-year periods. Included in the 2000 quarter was a charge of $6.2 million pretax ($3.9 million after tax, or 4 cents per diluted share) related to the productivity and consolidation initiative underway during 2000. Including these items in both quarters, earnings per diluted share were 21 cents in 2001 versus 12 cents in 2000; EBITDA was $63.3 million versus $49.3 million, respectively; and net income was $19.4 million versus $10.7 million, respectively.
Commenting, Joel F. Gemunder, Omnicare's president and chief executive officer, said, "This period marked our fourth consecutive quarter of sequential, as well as year-over-year, growth. Our strength in the geriatric pharmaceutical marketplace, our substantially lowered cost structure and our overall financial health are contributing to our improved performance. While the operating environments for both the skilled nursing facility and contract research (CRO) markets remain challenging, they are improving.
"We continue to place a high priority on generating positive cash flow and maintaining a solid financial position. Excluding $22.1 million in purchases of pharmaceuticals in advance of price increases, or pre-buys, cash flow from operations was $44.0 million in the second quarter of 2001, up 37% from $32.2 million in the comparable quarter of 2000. After capital expenditures and cash dividends, free cash flow (excluding pre-buys) for the quarter was $35.1 million, or 37 cents per diluted share, 57% higher than the free cash flow of $22.4 million, or 24 cents per diluted share, generated in the second quarter of 2000," Gemunder added.
"Our balance sheet also continued strong, ending the quarter with cash balances of $124.0 million. With continued improvements in cash flow and liquidity, we paid down $10.0 million in debt during the quarter. At June 30, 2001 our current ratio was a healthy 3.8 to 1, with total debt to total capitalization at 41.0%, or 240 basis points lower than one year ago," Gemunder said.
Institutional Pharmacy Business
Omnicare's institutional pharmacy business recorded sales of $498.2 million for the second quarter, 10% above the comparable prior-year quarter. Operating profit in this business reached $52.3 million (excluding the previously mentioned one-time charge), 22% ahead of the prior year quarter. At June 30, 2001, Omnicare served a total of 650,100 residents versus 629,000 at June 30, 2000.
In discussing operating results for the segment, Gemunder said, "Account growth, reflecting strong new contract additions, was sufficient to more than offset continued elimination of certain high credit risk or uneconomic accounts and the typically lower acuity of the second quarter."
Gemunder added that increasing market penetration of promising new drugs targeted at the diseases of the elderly also contributed to the sales gain. He added, "While more expensive than older, less effective drug therapies due to rising research costs, these drugs are significantly more effective in curing or ameliorating illness, and in lowering overall healthcare costs by reducing hospitalizations, physician visits, nursing time and lab tests, etc."
Gemunder said, "We also are continuing to see an improving operating environment for our skilled nursing facility customers. Medicare reimbursement pressures were further eased effective April 1, 2001 with the implementation of higher reimbursements under the Benefits Improvement and Protection Act of 2000 (BIPA) with additional reimbursement increases anticipated beginning October 1, 2001.
"Occupancy rates showed gradual improvement at the facilities we serve, while acuity followed its typical seasonal pattern producing marginally lower drug utilization, including infusion therapy, versus the first quarter of 2001. Most important, the ongoing benefits of our cost reduction efforts, coupled with the sales increase, produced strong improvement in operating profit," Gemunder noted.
"Omnicare Clinical Research, our CRO business, generated revenues of $31.9 million, 16% above the prior-year quarter. Operating profit was a healthy $2.8 million, or nearly three times the year-earlier level. Backlog at June 30, 2001 was 23% ahead of the prior-year quarter and the pace of new business proposals remains brisk," Gemunder added.
"We are gratified to see significant improvement in our CRO business," Gemunder commented. "The improvement in revenues, owing to strong business gains in prior quarters and the returning health of the industry, coupled with the efforts we have made over the past year to integrate and streamline the organization, have produced substantial increases in profitability."
Six Month Results
For the six months ended June 30, 2001, diluted earnings per share were 43 cents, excluding one-time items ($3.0 million after taxes, or 3 cents per share) compared with 34 cents per diluted share in the first six months of 2000, excluding restructuring charges ($6.6 million after taxes, or 7 cents per diluted share). Net income, on that basis, was $40.4 million in the first six months of 2001 versus $31.6 million in the comparable 2000 period. EBITDA, on the same basis, was $128.7 million versus $115.1 million. Sales were $1,053.7 million in the first six months of 2001, up from $973.5 million in the prior-year period.
Including these one-time items in both six month periods, earnings per diluted share were 40 cents in 2001 versus 27 cents in 2000; EBITDA was $123.9 million versus $104.6 million, respectively; and net income was $37.4 million as compared to $25.1 million, respectively.
Cash flow from operations for the first half, excluding pre-buys of $34.2 million, was $88.2 million, up 34% over the $65.8 million generated in the year earlier period, excluding $6.1 million in pre-buys. After capital expenditures and cash dividends, free cash flow (excluding pre-buys) was $72.6 million, or 78 cents per diluted share, up 60% from the $45.5 million, or 49 cents per diluted share, generated on this basis in the first half of 2000.
Commenting on the outlook for Omnicare in 2001, Gemunder said, "The effects of fully implemented provisions of the Balanced Budget Refinement Act (BBRA) and BIPA are beginning to ripple through the skilled nursing facility market, being recognized first among those better able to adapt to and fully realize the benefits of improved reimbursement conditions, but spreading gradually to all industry participants. Over time, this is expected to lead to improvement in the financial condition of these facilities and a return to a more normalized operating environment, all of which bodes well for Omnicare. While Medicare funding for skilled nursing facilities is stabilizing, key healthcare funding issues remain, including the implementation of a Medicare drug benefit for seniors; the pressures on state Medicaid budgets arising from economic downturn coupled with the growth in enrollees as the population ages and eligibility is expanded; the escalation in drug costs owing to higher drug utilization among seniors and the introduction of new, more efficacious but also more expensive medication; and, the long-term financing of the entire Medicare program. It therefore remains difficult to predict the outcome and impact of healthcare policies as they relate to the future funding of the Medicare and Medicaid programs."
"As we monitor the direction of healthcare policy, we remain committed to those strategies and priorities that served us well in the volatile environment we have experienced over the past two years. These include managing cash flow, maintaining a strong financial condition and enhancing the efficiency of our operations. Further, with our operating cost structure now significantly lowered, our highest priority is to grow our top line and leverage our lower cost structure. Our expanded sales force and recently launched advertising campaign are beginning to generate quality new business. Further, major opportunities exist within our clinical programs, such as health management, and in on-site dialysis, as well as in our longer-term growth strategies, such as new pharmaceutical care programs for the broader-based senior marketplace.
"We are also gratified by the movement of the CRO industry toward a more normalized operating environment and the realization of the benefit of our actions to streamline functions and reduce fixed costs. We are continuing to lower costs and increase efficiency in our CRO business and we are aggressively pursuing new business and additional preferred provider relationships, such as our agreement with Eli Lilly & Co., along with seeking opportunities for geriatric research for which we are uniquely qualified," he noted.
Gemunder added, "So while we are mindful that visibility on market conditions is not yet completely clear, we anticipate a continuation of favorable top and bottom line results as we leverage our core strengths. Looking long-term, one thing is clear: appropriate pharmaceutical care improves the quality of life and treatment outcomes for the elderly in a cost-effective manner. Moreover, 13% of the U.S. population is over age 65, a percentage expected to grow to 20% over the next three decades, and consumes on a per capita basis, more than four times the pharmaceuticals as the remainder of the population. The geriatric pharmaceutical business offers a meaningful solution to containing healthcare costs while helping to ensure the well-being of the nation's growing elderly population. With our expertise in geriatric pharmaceutical care and pharmaceutical cost management, Omnicare is well positioned to benefit from these trends."
Omnicare will host a conference call to discuss second quarter results and the outlook for the company today at 11:00 a.m. EST. Those interested may access a live audio broadcast of the call via webcast. The webcast can be accessed via the Investor Relations link at www.omnicare.com . A replay of the broadcast will also be available for the next ten days.
About the Company
Omnicare, based in Covington, Kentucky, is a leading geriatric pharmaceutical care company. Omnicare is the nation's largest provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers. Omnicare also provides comprehensive clinical research services for the pharmaceutical and biotechnology industries in 26 countries worldwide.
Statements in this press release concerning Omnicare's business outlook or position or future economic performance; the financial condition of Omnicare; Omnicare's strength in the geriatric pharmaceutical marketplace; the impact of Omnicare's lowered cost structure, the operating environment in the skilled nursing facility and CRO industries; the impact of penetration of new drugs; the impact of implementation of BIPA, BBRA and additional reimbursement; trends concerning occupancy, acuity and drug utilization levels; the impact of increased backlog and new proposals in the CRO business; the impact of integration and streamlining of Omnicare's CRO operations; expectations concerning the financial condition of skilled nursing facilities; the impact of healthcare funding issues; the impact of further cost reduction and efficiency improvement efforts; expectations concerning the generation of new business; the impact of clinical programs; opportunities for growth; the impact of demographic trends; together with other statements that are not historical, are forward-looking statements that are estimates reflecting the best judgment of Omnicare based on currently available information. Such forward-looking statements involve actual known and unknown risks, uncertainties, contingencies and other factors that could cause actual results, performance or achievements to differ materially from those stated. Such risks, uncertainties, contingencies and other factors, many of which are beyond the control of Omnicare, include overall economic, financial and business conditions; trends for the continued growth of the businesses of Omnicare; delays in reimbursement by the government and other payors to customers and Omnicare; the overall financial condition of our customers; Omnicare's ability to assess and react to the financial condition of its customers; the impact of seasonality on the business of Omnicare; the ability to implement additional opportunities for lowering costs and to realize anticipated benefits; the continued successful integration of the CRO business and acquired companies; pricing and other competitive factors in the industry; the effect of new government regulations, executive orders and/or legislative initiatives, including those relating to reimbursement and drug pricing policies and in the interpretation and application of such policies; the failure of Omnicare to obtain or maintain required regulatory approvals or licenses; loss or delay of contracts pertaining to Omnicare's contract research organization business for regulatory or other reasons; the ability to attract and retain needed management; the impact and pace of technological advances; the ability to obtain or maintain rights to data, technology and other intellectual property; the impact of consolidation in the pharmaceutical and long-term care industries; volatility in Omnicare's stock price; the demand for Omnicare's products and services; variations in costs or expenses; the continued availability of suitable acquisition candidates; changes in tax law and regulation; and other risks and uncertainties described in Omnicare's reports and filings with the Securities and Exchange Commission.
For more information on Omnicare, Inc., via the Internet, including a full menu of news releases, visit www.omnicare.com or http://prnewswire.com/comp/136781.html .
Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statement of Income
(000's, except per share amounts)
Unaudited Three Months Ended Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Sales $ 530,065 $480,510 $1,053,710 $973,536
Cost of sales 388,002 353,716 771,383 714,125
Gross profit 142,063 126,794 282,327 259,411
Selling, general and
administrative expenses 94,090 90,424 190,006 183,192
Other expense 3,000(a) -- 4,817(a) --
other related charges -- 6,150(b) -- 10,428(b)
Operating income 44,973 30,220 87,504 65,791
Investment income 748 357 1,222 816
Interest expense (14,415) (13,634) (28,324) (26,799)
Income before income
taxes 31,306 16,943 60,402 39,808
Income taxes 11,910 6,267 22,962 14,739
Net income $ 19,396(a) $ 10,676(b) $ 37,440(a) $ 25,069(b)
Earnings per share: (c)
Basic $ 0.21(a) $ 0.12(b) $ 0.40(a) $ 0.27(b)
Diluted $ 0.21(a) $ 0.12(b) $ 0.40(a) $ 0.27(b)
Weighted average number
of common shares
Basic 93,198 92,155 92,812 91,877
Diluted 94,042 92,155 93,692 91,877
Supplemental Pro Forma Data:
Net income, as
reported $ 19,396 $ 10,676 $ 37,440 $ 25,069
Pro forma adjustments
(net of taxes):
Other expense 1,860(a) -- 2,987(b) --
charges -- 3,874(b) -- 6,569(b)
Pro forma net income $ 21,256 $ 14,550 $ 40,427 $ 31,638
Pro forma earnings
per share: (c)
Basic $ 0.23 $ 0.16 $ 0.44 $ 0.34
Diluted $ 0.23 $ 0.16 $ 0.43 $ 0.34
(a) Other expense of $3,000 before taxes ($1,860 after taxes, or
$0.02 per diluted share) was recorded during the second quarter
representing a settlement during June 2001 of certain contractual
issues with a customer, which issues and amount relate to prior year
periods. Other expense of $1,817 before taxes ($1,127 after taxes,
or $0.01 per diluted share) was recorded during the six months ended
June 30, 2001 relating to a repayment to the Medicare Part B program
of overpayments made to one of the Company's pharmacy units during
the period from January 1997 through April 1998.
(b) The three months ended June 30, 2000 include restructuring and other
related charges of $6,150 before taxes ($3,874 after taxes, or $0.04
per diluted share). The six month period ended June 30, 2000
includes restructuring and other related charges of $10,428 before
taxes ($6,569 after taxes, or $0.07 per diluted share).
(c) Earnings per share is calculated independently for each quarterly and
year-to-date period presented. Accordingly, the sum of the quarters
may not necessarily be equal to the corresponding year-to-date per
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Balance Sheet
June 30, December 31,
Cash and cash equivalents $ 117,703 $ 111,607
Restricted cash 6,317 2,300
Accounts receivable, net 441,196 440,785
Unbilled receivables 26,627 18,933
Inventories 134,296 129,404
Deferred income tax benefits and other
current assets 113,156 114,709
Total current assets 839,295 817,738
Properties and equipment, net 155,512 158,535
Goodwill, net 1,146,171 1,168,151
Other noncurrent assets 78,582 65,794
Total assets $ 2,219,560 $ 2,210,218
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 116,802 $ 118,941
Amounts payable pursuant to acquisition
agreements 5,723 4,372
Deferred revenue 21,099 28,333
Current debt 333 1,619
Other current liabilities 79,456 103,744
Total current liabilities 223,413 257,009
Long-term debt 50,705 435,706
5.0% convertible subordinated debentures
due 2007 345,000 345,000
8.125% senior subordinated notes due 2011 375,000 --
Amounts payable pursuant to acquisition
agreements 6,821 12,675
Deferred income taxes and other
noncurrent liabilities 109,587 91,405
Stockholders' equity 1,109,034 1,068,423
Total liabilities and stockholders'
equity $ 2,219,560 $ 2,210,218
Omnicare, Inc. and Subsidiary Companies
Condensed Consolidated Statement of Cash Flows
Three Months Six Months
Ended June 30, 2001
Cash flows from operating activities:
Net income $ 19,396 $ 37,440
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation 8,056 16,322
Amortization 10,222 20,092
Provision for doubtful accounts 6,622 13,841
Deferred tax provision 25,159 22,101
Changes in assets and liabilities,
net of effects from acquisition
of businesses (47,507) (55,740)
Net cash flows from operating
activities 21,948 54,056
Cash flows from investing activities:
Acquisition of businesses (839) (5,993)
Capital expenditures (6,796) (11,402)
Other 86 (3,724)
Net cash flows from investing activities (7,549) (21,119)
Cash flows from financing activities:
Borrowings on line of credit facilities -- 70,000
Payments on line of credit facilities (10,000) (455,000)
Proceeds from long-term obligations -- 375,000
Fees paid for financing arrangements (104) (14,418)
Proceeds from exercise of stock options,
net of stock tendered in payment 1,623 3,587
Dividends paid (2,098) (4,181)
Other (1,079) (1,429)
Net cash flows from financing activities (11,658) (26,441)
Effect of exchange rate changes on cash (304) (400)
Net increase in cash and cash equivalents 2,437 6,096
Cash and cash equivalents at beginning
of period - unrestricted 115,266 111,607
Cash and cash equivalents at end of period
- unrestricted $ 117,703 $ 117,703
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SOURCE Omnicare, Inc.
Web site: http: //www.omnicare.com
Company News On-Call: http: //www.prnewswire.com/comp/136781.html
CONTACT: Cheryl D. Hodges of Omnicare, +1-859-392-3331