<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
Commission File Number 1-8269
OMNICARE, INC.
--------------
Incorporated under the laws of I.R.S. Employer Identification
State of Delaware No. 31-1001351
2800 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202-4728
- ---------------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (513) 762-6666
- -------------------------------------------------------------------
Indicate by check mark whether the registrant:
1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports) and
2) has been subject to such filing requirement for the past 90
days.
Yes x No
--- ---
COMMON STOCK OUTSTANDING
- ------------------------
<TABLE>
<CAPTION>
Number
of
Shares Date
------ ----
<S> <C> <C>
Common Stock, $1 par value 26,315,076 September 30, 1995
</TABLE>
<PAGE> 2
OMNICARE, INC. AND
------------------
SUBSIDIARY COMPANIES
--------------------
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994 3
Consolidated Statement of Income -
Three and nine months ended -
September 30, 1995 and 1994 4
Consolidated Statement of Cash Flow -
Nine months ended -
September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
-2-
<PAGE> 3
Item 1. Financial Statements
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
UNAUDITED
(in thousands except share data)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,120 $ 34,553
Marketable securities 26,444 45,245
Accounts receivable, less allowances 68,857 60,083
Inventories 26,804 21,116
Deferred income tax benefits 7,261 5,818
Other current assets 5,132 3,445
--------- ---------
Total current assets 151,618 170,260
Properties and equipment, at cost
less accumulated depreciation 30,688 23,452
Intangible assets, less accumulated amortization 150,917 117,832
Other assets 6,190 5,661
--------- ---------
Total assets $ 339,413 $ 317,205
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 12,636 $ 17,666
Amounts payable pursuant to acquisition agreements 5,660 4,576
Current portion of long-term debt 1,035 5,549
Income taxes payable 2,298 1,875
Accrued employee compensation 4,578 3,230
Liabilities relating to discontinued operations 1,736 2,399
Other current liabilities 9,188 9,415
--------- ---------
Total current liabilities 37,131 44,710
Long-term debt 87,844 85,323
Deferred income taxes 2,325 1,616
Amounts payable pursuant to acquisition agreements 1,799 2,910
Other noncurrent liabilities 3,019 2,542
--------- ---------
Total liabilities 132,118 137,101
--------- ---------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 44,000,000 shares
$1 par; 26,343,762 shares issued
(1994-30,672,051 shares)(a) 26,344 15,336
Paid-in capital 99,542 129,971
Retained earnings 86,575 71,475
--------- ---------
212,461 216,782
Treasury stock, at cost-28,686 shares
(1994-4,976,548 shares)(a) (530) (33,060)
Deferred compensation (2,251) (858)
Unallocated stock of ESOP (2,385) (2,760)
--------- ---------
Total stockholders' equity 207,295 180,104
--------- ---------
Total liabilities and stockholders' equity $ 339,413 $ 317,205
========= =========
</TABLE>
(a) Adjusted for two-for-one stock split distributed on June 21, 1995.
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-3-
<PAGE> 4
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Income
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1995 1994(a) 1995 1994(a)
---- ------- ---- -------
<S> <C> <C> <C> <C>
Sales $ 102,145 $ 79,832 $ 289,797 $ 221,948
Cost of sales 73,198 58,924 209,245 164,750
--------- --------- --------- ---------
Gross profit 28,947 20,908 80,552 57,198
Selling, general and administrative expenses 16,789 13,173 48,751 35,682
Acquisition expenses -- 2,380 1,292 2,380
--------- --------- --------- ---------
Operating income 12,158 5,355 30,509 19,136
Investment income 713 290 2,794 1,072
Interest expense (1,351) (1,627) (4,558) (4,944)
--------- --------- --------- ---------
Income before income taxes 11,520 4,018 28,745 15,264
Income taxes 4,585 1,956 11,663 6,230
--------- --------- --------- ---------
Net income $ 6,935 $ 2,062 $ 17,082 $ 9,034
========= ========= ========= =========
Earnings per share(b):
Primary $ .26 $ .09 $ .65 $ .41
Fully diluted $ .24 $ .09 $ .60 $ .41
Dividends paid per share(b) $ .025 $ .023 $ .075 $ .068
Weighted average number of
common shares outstanding(b):
Primary 26,273 22,241 26,158 22,139
--------- --------- --------- ---------
Fully diluted 32,830 28,223 32,537 28,079
========= ========= ========= =========
<FN>
(a) Restated for the June 30, 1995 acquisition of Specialized Pharmacy
Services, Inc. in a pooling of interests transaction.
(b) Adjusted for two-for-one stock split distributed June 21, 1995.
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-4-
<PAGE> 5
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Cash Flow
UNAUDITED
<TABLE>
<CAPTION>
(in thousands) Nine Months Ended
September 30,
-----------------------
1995 1994
-------- -------
<S> <C> <C>
Cash flow from operating activities:
Net income $17,082 $ 9,034
Adjustments to reconcile net income
to net cash flow from operating activities:
Depreciation and amortization 7,728 6,075
Provision for doubtful accounts 2,383 1,542
Deferred tax provision (397) 850
Change in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (8,581) (9,672)
Inventory (3,374) (1,618)
Current and noncurrent assets (1,293) (531)
Income taxes payable 1,381 (453)
Payables and accruals (4,438) 2,480
Current and noncurrent liabilities 362 2,708
-------- -------
Net cash flow from operating activities 10,853 10,415
-------- -------
Cash flow from investing activities:
Acquisition of businesses (32,187) (38,960)
Capital expenditures (10,633) (7,511)
Marketable securities 18,801 --
Proceeds from sale of properties 209 433
Cash flow from discontinued operations (663) (601)
-------- -------
Net cash flow from investing activities (24,473) (46,639)
-------- -------
Cash flow from financing activities:
Proceeds from long-term borrowings and revolving lines of credit 5,856 255
Principal payments on revolving lines of credit
and long-term obligations (7,497) (3,203)
Exercise of stock options and warrants, net of
stock tendered in payment (246) 342
Dividends paid (1,926) (2,266)
-------- -------
Net cash flow from financing activities (3,813) (4,872)
-------- -------
Net decrease in cash and cash equivalents (17,433) (41,096)
Cash and cash equivalents at beginning of period 34,553 63,422
-------- -------
Cash and cash equivalents at end of period $ 17,120 $22,326
======== =======
Supplemental disclosures of cash flow information
Income taxes paid $ 9,344 $ 4,736
Interest paid 4,933 3,265
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-5-
<PAGE> 6
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
1. The interim financial data are unaudited; however, in the opinion of the
management of Omnicare, Inc., the interim data include all adjustments (which
include only normal recurring adjustments) considered necessary for a fair
presentation of the consolidated financial position, results of operations and
cash flow of Omnicare, Inc. and its consolidated subsidiaries ("Company").
2. During the period January 1, 1995 to September 30, 1995, the Company has
completed nine acquisitions including Shore Pharmaceutical Providers, Inc.
("Shore"), in Westbury, New York, in January, North Shore Pharmacy Services,
Inc. ("North Shore"), in Boston, Massachusetts, Genrex Nursing Home Pharmacy
Division of Genovese Drug Stores, Inc. ("Genrex"), in Melville, New York,
Consulting and Pharmaceutical Services, Inc. ("CAPS"), in Yakima, Washington,
all in March, Pioneer I.V., Ltd. ("Pioneer") in Moline, Illinois, in May,
Specialized Pharmacy Services, Inc. ("Specialized"), in Livonia, Michigan in
June, CPM Datascript, Corp. ("Datascript"), in Hollis, New York, in July, the
nursing home pharmacy business of Rite Aid Corp. ("Rite Aid"), and the Dynatran
Computer Systems Division of Health Spectrum, Inc. ("Dynatran"), in Portland,
Oregon, both in September. The Shore, North Shore, Genrex, CAPS, Pioneer,
Datascript, Rite Aid and Dynatran acquisitions have been accounted for as
purchase transactions and, accordingly, the purchase price paid for each
-6-
<PAGE> 7
has been allocated to the fair value of the assets acquired and liabilities
assumed.
The Company acquired all the outstanding stock of Specialized on June 30,
1995 for 403,185 shares of the Company's common stock, $1 par value, in a
pooling of interests transaction, and, accordingly, the consolidated financial
statements have been restated for all periods prior to the acquisition to
include the historical results of operations, financial position and cash flow
of Specialized.
Summarized results of operations of the Company and Specialized for the
period from January 1, 1995 through June 30, 1995, the date of acquisition, are
as follows (in thousands):
<TABLE>
<CAPTION>
Omnicare Specialized
-------- -----------
<S> <C> <C>
Three months ended June 30, 1995:
Sales $ 88,738 $ 8,387
Net income 4,674 222
Three months ended June 30, 1994:
Sales $ 66,089 $ 7,812
Net income 3,536 27
Six months ended June 30, 1995:
Sales $171,211 $ 16,441
Net income 9,861 286
Six months ended June 30, 1994:
Sales $126,786 $ 15,330
Net income 6,918 54
</TABLE>
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<PAGE> 8
3. On May 15, 1995, the Board of Directors declared a two-for-one split of the
Company's $1 par value common stock effective June 21, 1995. As a result of the
split, 12,944,180 additional shares were issued including 2,514,994 from
treasury stock. Additional paid-in capital and treasury stock were reduced by
$45,524,000 and $35,095,000, respectively. All references in the accompanying
financial statements to the number of common shares and per share amounts for
1994 have been restated to reflect the stock split.
-8-
<PAGE> 9
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition.
Results of Operations
On June 30, 1995, the Company issued 403,185 shares of its common stock for
all the outstanding common stock of Specialized Pharmacy Services, Inc.
("Specialized"). On September 30, 1994, the Company issued 2,222,644 shares of
its common stock (adjusted for the June 1995 stock-split) for all the
outstanding common stock of Kirkland, Washington-based Evergreen
Pharmaceutical, Inc., and an affiliated company (collectively, "Evergreen").
These acquisitions were accounted for as poolings of interests and,
accordingly, the Company's consolidated financial statements have been restated
for all periods presented herein to include the results of operations,
financial position and cash flows of Specialized and Evergreen. In accordance
with accounting rules for pooling of interests transactions, charges to
operating income for acquisition-related expenses were recorded in the quarter
in which each of these acquisitions was completed. The 1995 nine-month period
included a charge of $1,292,000, or $989,000 after taxes, for expenses required
for the acquisition of Specialized. Both the three month and nine month periods
ended September 30, 1994 included acquisition expenses of $2,380,000, or
$1,860,000 after taxes, for the acquisition of Evergreen.
The following table presents the Company's consolidated results
of operations excluding the effect of acquisition expenses (in thousands except
per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income, as reported $ 6,935 $ 2,062 $17,082 $ 9,034
Acquisition expenses, net of taxes -- 1,860 989 1,860
------- ------- ------- -------
Pro forma net income $ 6,935 $ 3,922 $18,071 $10,894
======= ======= ======= =======
Pro forma earnings per share:
Primary $ 0.26 $ 0.18 $ 0.69 $ 0.49
======= ======= ======= =======
Fully diluted $ 0.24 $ 0.17 $ 0.63 $ 0.47
======= ======= ======= =======
</TABLE>
-9-
<PAGE> 10
Excluding the aftertax charge for acquisition expenses, net income for the
quarter ended September 30, 1995 rose 77% to $6,935,000 over net income of
$3,922,000 earned in the same period of 1994, while earnings per share, on a
primary basis, increased 44% to $0.26 and, on a fully diluted basis, were up
41% to $0.24 versus the $0.18 and $0.17 earned on a primary and fully diluted
basis, respectively, in the third quarter of 1994. Net income, including
acquisition expenses, for the quarter ended September 30, 1995 was $6,935,000
versus $2,062,000 for the 1994 period and earnings per share for the 1995
quarter were $0.26 on a primary basis and $0.24 fully diluted versus $0.09 on
both a primary and fully diluted basis in the 1994 quarter. The average number
of shares outstanding was higher by 18%, on a primary basis, and 16%, on a
fully diluted basis, over the prior year quarter.
Sales for the third quarter of 1995 of $102,145,000 were 28% higher than
the $79,832,000 recorded in the comparable 1994 period. Excluding acquisition
expenses, operating income of $12,158,000 for the 1995 quarter was 57% higher
than in the prior year quarter.
Excluding the acquisition expenses from the results for the first nine
months of both periods, net income increased 66% to $18,071,000 over the
$10,894,000 earned in the comparable 1994 period. Primary earnings per share, on
this basis, of $0.69 were up 41% over the $0.49 earned in the first nine months
of 1994 and fully diluted earnings per share of $0.63 were up 34% over the $0.47
earned in the 1994 period. Net income, including acquisition expenses, for the
1995 nine-month period was $17,082,000 versus $9,034,000 for the 1994 period and
earnings per share for the 1995 period were $0.65 on a primary basis and $0.60
fully diluted versus $0.41 on both a primary and fully diluted basis in the
first nine months of 1994.
-10-
<PAGE> 11
Sales for the nine months ended September 30, 1995 were $289,797,000, up
31% over the $221,948,000 earned in the first nine months of 1994. Operating
income of $31,801,000 for the 1995 period, excluding acquisition expenses, was
48% higher than in the 1994 period.
The increases in quarterly and year-to-date sales over comparable prior
year periods are due to the Company's continued focus on advancing its growth
strategy in the long-term care pharmacy market. The year-to-date results have
benefitted from the contribution of acquisitions made to date in 1995, as well
as internal growth. During the quarter, three acquisitions were completed (See
Note 2 to the Consolidated Financial Statements). The September acquisition of
the nursing home pharmacy business of Rite Aid Corp., based in Camp Hill,
Pennsylvania, added approximately 15,000 new nursing facility residents (subject
to post-closing adjustment) and the July acquisition of CPM Datascript, Corp.,
based in Hollis, New York, added over 3,400 residents on Long Island and in New
York City. Furthermore, the third quarter acquisition of Dynatran Computer
Systems, a Portland, Oregon-based software company specializing in resident
assessment and care planning systems, provides the Company both growth prospects
as a care planning software developer and the systems capability to access and
analyze data related to patient diagnosis, treatment plans and health outcomes.
The Company's existing pharmacy operations continued to generate solid
growth through the addition of new clients, increases in drug utilization
reflecting higher acuity levels of nursing home residents, and the rapid
expansion of infusion therapy services.
-11-
<PAGE> 12
As a result of both acquisition activity and internal growth, the total
number of nursing facility residents served by the Company as of September 30,
1995 rose to approximately 212,200, up 47% over the number served one year ago.
Interest expense, net of investment income, of $638,000 and $1,764,000, for
the three and nine month periods ended September 30, 1995, respectively,
decreased by $699,000 and $2,108,000, respectively, over the same periods of
1994 due to an increase in the invested cash balance, owing primarily to the
receipt of $59.2 million in net proceeds from a stock offering in November 1994.
During the three and nine month periods ended September 30, 1995, the
effective tax rates of 39.8% and 40.6%, respectively, decreased 8.9 and 0.2
percentage points, respectively, over the comparable prior year periods. The
decrease in the 1995 third quarter rate versus the prior year is primarily due
to the nondeductibility for income tax purposes of a portion of the expenses
related to the 1994 Evergreen acquisition.
Liquidity and Capital Resources
Cash and cash equivalents and marketable securities at September 30, 1995
decreased $36,234,000 to $43,564,000 from the $79,798,000 at December 31, 1994.
The Company's capital requirements are primarily related to its acquisition
program. In the first nine months of 1995, the Company made nine acquisitions
for an aggregate capital investment of approximately $42 million. Such
acquisitions were financed from cash and cash equivalents and a total of 835,673
shares of the Company's common stock (adjusted for the June 1995 stock split).
There are no material commitments outstanding at September 30, 1995
-12-
<PAGE> 13
other than acquisition-related payments which may be made contingent on the
performance of businesses acquired.
In April 1995 the Company increased its revolving line of credit from $50
million to $135 million at significantly more favorable terms. The Company's
current ratio at September 30, 1995 and December 31, 1994 was 4.1 to 1 and 3.8
to 1, respectively.
On February 1, 1995, the Company's Board of Directors increased the
quarterly cash dividend by 11% to 2.5 cents per share, as adjusted for a
two-for-one stock split effective June 21, 1995, for an indicated annual rate of
10 cents per share in 1995.
Dividends paid consisted of (in thousands):
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------
1995 1994
------ ------
<S> <C> <C>
Omnicare, Inc. quarterly dividend of 2.5 cents
and 2.3 cents per share in 1995 and 1994, respectively $1,926 $1,269
Dividends paid to former Lo-Med owners (a) -- 402
Dividends paid to former Evergreen owners (a) -- 595
------ ------
Total $1,926 $2,266
====== ======
</TABLE>
(a) Lo-Med and Evergreen were acquired in pooling of interests transactions on
June 30, 1994 and September 30,1994, respectively.
The Company believes its sources of capital are adequate for its needs.
-13-
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
------- -------
11 Computation of Earnings per Share
(b) Reports on Form 8-K - On August 23, 1995, a Form 8-K dated July 31,
1995 was filed to report the Company's consolidated net sales and net
income for the month of July 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Omnicare, Inc.
(Registrant)
Date November 14, 1995 By /s/ Joel F. Gemunder
-----------------------------
Joel F. Gemunder
President
(Principal Executive Officer)
Date November 14, 1995 By /s/ Thomas R. Marsh
-----------------------------
Thomas R. Marsh
Vice President Controller
and Acting Treasurer
(Principal Financial and
Accounting Officer)
-14-
<PAGE> 1
Exhibit 11 Omnicare, Inc. and Subsidiary Companies
Computation of Earnings Per Common Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary Earnings*
Net income $ 6,935 $ 2,062 $ 17,082 $ 9,034
Aftertax expense related to preferred
stock dividend payable to minority
interest in wholly-owned subsidiary 1 -- 7 --
Minority interest in net income of subsidiary (18) -- (28) --
-------- -------- -------- --------
Net income as adjusted $ 6,918 $ 2,062 $ 17,061 $ 9,034
======== ======== ======== ========
Shares
Weighted average number of common
shares outstanding 26,273 22,241 26,158 22,139
Additional shares assuming conversion of:
Stock options and stock warrants 847 398 697 350
-------- -------- -------- --------
Average common shares outstanding and
equivalent as adjusted 27,120 22,639 26,855 22,489
======== ======== ======== ========
Primary earnings per common share $ 0.26 $ 0.09 $ 0.64 $ 0.40
======== ======== ======== ========
Fully Diluted Earnings
Net income $ 6,935 $ 2,062 $ 17,082 $ 9,034
Aftertax expense related to preferred stock
dividend payable to minority interest in
subsidiary 1 -- 7 --
Minority interest in net income of subsidiary (18) -- (28) --
Aftertax interest expense related to 5 3/4%
convertible subordinated debentures 802 794 2,407 2,415
-------- -------- -------- --------
Net income as adjusted $ 7,720 $ 2,856 $ 19,468 $ 11,449
======== ======== ======== ========
Shares
Weighted average number of common
shares outstanding 26,273 22,241 26,158 22,139
Additional shares assuming conversion of:
Stock options and stock warrants 985 406 807 364
Convertible subordinated debentures 5,572 5,576 5,572 5,576
-------- -------- -------- --------
Average common shares outstanding and
equivalents as adjusted 32,830 28,223 32,537 28,079
======== ======== ======== ========
Fully diluted earnings per common share $ 0.24 $ 0.10 $ 0.60 $ 0.41
-------- -------- -------- --------
</TABLE>
* This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 if it results in dilution of less than 3% or is
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353230
<NAME> OMNICARE INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 17,120
<SECURITIES> 26,444
<RECEIVABLES> 72,812
<ALLOWANCES> 3,955
<INVENTORY> 26,804
<CURRENT-ASSETS> 151,618
<PP&E> 49,932
<DEPRECIATION> 19,244
<TOTAL-ASSETS> 339,413
<CURRENT-LIABILITIES> 37,131
<BONDS> 87,844
<COMMON> 26,344
0
0
<OTHER-SE> 180,951
<TOTAL-LIABILITY-AND-EQUITY> 339,413
<SALES> 289,797
<TOTAL-REVENUES> 289,797
<CGS> 209,245
<TOTAL-COSTS> 209,245
<OTHER-EXPENSES> 50,043
<LOSS-PROVISION> 2,383
<INTEREST-EXPENSE> 4,558
<INCOME-PRETAX> 28,745
<INCOME-TAX> 11,663
<INCOME-CONTINUING> 17,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,082
<EPS-PRIMARY> .65
<EPS-DILUTED> .60
</TABLE>
