<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-K
(Mark One) Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 (Fee
/X/ Required)
For the fiscal year ended December 31, 1994
OR
Transition Report Pursuant to Section 13 or 15(d)
/ / of the Securities Exchange Act of 1934 (No Fee
Required)
For the Transition period from __________ to __________.
Commission file number 1-8269
OMNICARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 31-1001351
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
OMNICARE, INC.
2800 CHEMED CENTER, 255 E. FIFTH STREET
CINCINNATI, OHIO 45202-4728
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 513-762-6666
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
--------------------------- -----------------------
Common Stock ($1 Par Value) New York Stock Exchange
5-3/4% Convertible Subordinated
Notes Due 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 requirements for the past 90 days. Yes x No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
Aggregate market value of the Registrant's voting stock held by
non-affiliates, based upon the closing price of said stock on the New York
Stock Exchange-Composite Transaction Listing on February 28, 1995 ($45.625 per
share): $571,922,287
As of February 28, 1995, 12,747,050 shares of the Common Stock, $1.00 par
value, of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1995 Annual
Meeting of Stockholders to be held May 15, 1995, are incorporated by reference
into Part III of this report. Definitive copies of the 1995 Proxy Statement
will be filed with the Securities and Exchange Commission within 120 days of
the end of the Company's fiscal year.
<PAGE> 2
OMNICARE, INC.
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART I
Page
Item 1. Business . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . 10
Executive Officers of the Company . . . . 11
PART II
Item 5. Market for the Company's Common Stock
and Related Stockholder Matters . . . . 11
Item 6. Selected Financial Data . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of
Results of Operations and
Financial Condition . . . . . . . . . . 14
Item 8. Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . 18
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . 38
PART III
Item 10. Directors and Executive Officers of
the Company . . . . . . . . . . . . . . 38
Item 11. Executive Compensation . . . . . . . . . . 38
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . 38
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . 38
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . 38
</TABLE>
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PART I
ITEM 1 - BUSINESS
BACKGROUND
Omnicare, Inc. (the "Company" or "Omnicare") was incorporated in Delaware
on May 19, 1981 to conduct certain health care businesses contributed to it by
W. R. Grace & Co. and Chemed Corporation, and in July 1981 public trading of
the Company's Common Stock commenced. As part of a multi-year restructuring
program undertaken in 1985, the Company, through a series of divestitures and
acquisitions, redeployed all of its capital in the long-term pharmacy business.
As a result, Omnicare is today a leading independent provider of pharmacy
services to long-term care institutions such as nursing homes, retirement
centers and other institutional health care facilities. The Company operates
principally in one business segment--institutional pharmacy services for the
long-term care market. At December 31, 1994, Omnicare provided these services
to approximately 147,600 residents in 1,725 nursing facilities located in the
States of Alabama, Illinois, Indiana, Kansas, Kentucky, Michigan,
Missouri, Montana, Ohio, Oklahoma, Oregon, Washington, and West Virginia. The
Company does not make any export sales.
The Company entered the long-term care pharmacy industry in December 1988
with the acquisition of its first institutional pharmacy provider. By December
31, 1994, the Company had completed a total of 24 acquisitions in the long-term
care pharmacy market at a total capital investment of approximately $213
million. In 1994, the Company acquired seven institutional pharmacy providers
at an aggregate capital cost of approximately $87 million and expended an
additional $17.6 million in cash payments relating to acquisitions completed
prior to 1994.
PHARMACY SERVICES
Omnicare purchases, repackages and dispenses prescription and
non-prescription medication in accordance with physician orders and delivers
such prescriptions at least daily to the nursing facility for administration to
individual patients by the facility's nursing staff. Omnicare typically
services nursing homes within a 150-mile radius of its pharmacy locations.
Omnicare maintains a 24-hour, on-call pharmacist service 365 days per year for
emergency dispensing and delivery or for consultation with the facility's staff
or attending physician.
Upon receipt of a prescription, the relevant patient information is
entered into Omnicare's computerized dispensing and billing systems. At that
time, the dispensing system will check the prescription for any potentially
adverse drug interactions or patient sensitivity. When required and/or
specifically requested by the physician or patient, branded drugs are
dispensed; generic drugs are substituted in accordance with applicable state
and federal laws and as requested by the physician or patient. The Company
also provides therapeutic interchange, with physician approval, in accordance
with the Company's pharmaceutical care guidelines. See "Omnicare Guidelines"
below.
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Omnicare provides a "unit dose" distribution system. Most of its
prescriptions are filled utilizing specialized unit-of-use packaging and
delivery systems. Maintenance medications are typically provided in 30-day
supplies utilizing either a box unit dose system or unit dose punch card
system. The unit dose system, preferred over the bulk delivery systems
employed by retail pharmacies, improves control over drugs in the nursing
facility and improves patient compliance with drug therapy by increasing the
accuracy and timeliness of drug administration.
Integral to Omnicare's drug distribution system is its computerized
medical records and documentation system. Omnicare provides to the facility
computerized medication administration records, physician's order sheets and
treatment records for each patient. Data extracted from these computerized
records are also formulated into monthly management reports on patient care and
quality assurance. The computerized documentation system in combination with
the unit dose drug delivery system results in greater efficiency in nursing
time, improved control, reduced drug waste in the facility and lower error
rates in both dispensing and administration. These benefits improve drug
efficacy and result in fewer drug-related hospitalizations.
CONSULTANT PHARMACIST SERVICES
Federal and state regulations mandate that nursing facilities, in addition
to providing a source of pharmaceuticals, retain consultant pharmacist services
to monitor and report on prescription drug therapy in order to maintain and
improve the quality of patient care. The Omnibus Budget Reconciliation Act
("OBRA") implemented in 1990 seeks to further upgrade and standardize care by
setting forth more stringent standards relating to planning, monitoring and
reporting on the progress of prescription drug therapy as well as facility-wide
drug usage.
Omnicare provides consultant pharmacist services which help clients comply
with such federal and state regulations applicable to nursing homes. The
services offered by Omnicare's consultant pharmacists include: (i)
comprehensive, monthly drug regimen reviews for each patient in the facility to
assess the appropriateness and efficacy of drug therapies, including a review
of the patient's medical records, monitoring drug reactions to other drugs or
food, monitoring lab results and recommending alternate therapies or
discontinuing unnecessary drugs; (ii) participation on the Pharmacy and
Therapeutics, Quality Assurance and other committees of client nursing
facilities as well as periodic involvement in staff meetings; (iii) monthly
inspection of medication carts and storage rooms; (iv) monitoring and monthly
reporting on facility-wide drug usage and drug administration systems and
practices; (v) development and maintenance of pharmaceutical policy and
procedures manuals; and (vi) assistance to the nursing facility in complying
with state and federal regulations as they pertain to patient care.
Additionally, Omnicare offers a specialized line of consulting services
which help nursing facilities to enhance care and reduce and contain costs as
well as to comply with state and federal regulations. Under this service line,
Omnicare provides: (i) data required for OBRA and other regulatory purposes,
including reports on psychotropic drug usage (chemical restraints), antibiotic
usage (infection control) and other drug usage; (ii) Plan of Care programs
which assess each patient's state of
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health upon admission and monitor progress and outcomes using data on drug
usage as well as dietary, physical therapy and social service inputs; (iii)
counseling related to appropriate drug usage and implementation of drug
protocols; (iv) on-site educational seminars for the nursing facility staff
on topics such as drug information relating to clinical indications, adverse
drug reactions, drug protocols and special geriatric considerations in drug
therapy, and information and training on intravenous drug therapy and updates
on OBRA and other regulatory compliance issues; (v) mock regulatory reviews for
nursing staffs; and (vi) nurse consultant services and consulting for dietary,
social services and medical records.
OMNICARE GUIDELINES
In June 1994, to enhance the pharmaceutical care management services that
it offers, Omnicare introduced to its client nursing facilities and their
attending physicians the Omnicare GERIATRIC PHARMACEUTICAL CARE GUIDELINES(TM)
(THE OMNICARE GUIDELINES(TM)) which it believes is the first clinically-based
formulary for the elderly residing in long-term care institutions. THE
OMNICARE GUIDELINES presents an analysis ranking specific drugs in therapeutic
classes as Preferred, Acceptable or Unacceptable based solely on their
disease-specific clinical effectiveness in treating the elderly in nursing
facilities. The formulary takes into account such factors as pharmacacology,
safety and toxicity, efficacy, drug administration, quality of life and other
considerations specific to the frail elderly population residing in nursing
facilities. The clinical evaluations and rankings were developed exclusively
for the Company by the Philadelphia College of Pharmacy and Science, an
academic institution recognized for its expertise in geriatric long-term care.
In addition, THE OMNICARE GUIDELINES provides relative cost information
comparing the prices of the drugs to patients, their insurers or other payors
of the pharmacy bill.
As THE OMNICARE GUIDELINES focuses on health benefits, rather than solely
on cost, in assigning rankings the Company believes that use of THE OMNICARE
GUIDELINES will assist physicians in making the best clinical choices of drug
therapy for the patient at the lowest cost to the payor of the pharmacy bill.
The Company also believes that the development of and subsequent compliance
with THE OMNICARE GUIDELINES will lower costs for the patients it serves and
strengthen the Company's purchasing power with pharmaceutical manufacturers.
ANCILLARY SERVICES
Omnicare provides the following ancillary products and services to nursing
facilities:
INFUSION THERAPY PRODUCTS AND SERVICES. With cost containment pressures in
health care, nursing facilities are increasingly providing subacute care as a
means of treating moderately acute but stabilized patients more cost-
effectively than hospitals, provided that the nursing staff and pharmacy are
capable of supporting higher degrees of acuity. Omnicare provides infusion
therapy support services for such residents in its client nursing facilities
and, to a lesser extent, hospice and home care patients. Infusion therapy
consists of the product (a nutrient, antibiotic, chemotherapy or other drugs in
solution) and the intravenous administration of the product.
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Omnicare prepares the product to be administered using proper equipment in
a sterile environment and then delivers the product to the nursing home for
administration by the nursing staff. Proper administration of intravenous
("IV") drug therapy requires a highly trained nursing staff. Omnicare's
consultant pharmacists and nurse consultants operate an education and
certification program on IV therapy to assure proper staff training and
compliance with regulatory requirements in client facilities offering an IV
program.
By providing an infusion therapy program, Omnicare enables its client
nursing facilities to admit and retain patients who otherwise would need to be
cared for in an acute-care facility. The Company believes that by providing
these high acuity pharmacy services it has a competitive advantage over other
pharmacy providers. The most common infusion therapies Omnicare provides are
total parenteral nutrition, antibiotic therapy, chemotherapy, pain management
and hydration.
WHOLESALE MEDICAL SUPPLIES/MEDICARE PART-B BILLING. Omnicare distributes
disposable medical supplies, including urological, ostomy, nutritional support
and wound care products and other disposables needed in the nursing home
environment. In addition, Omnicare provides direct Medicare billing services
for certain of these product lines for patients eligible under the Medicare
Part B program. As part of this service, Omnicare determines patient
eligibility, obtains certifications, orders products and maintains inventory on
behalf of the nursing facility. Omnicare also contracts to act as billing
agent for certain nursing homes that supply these products directly to the
patient.
OTHER SERVICES. Omnicare also provides respiratory therapy products and
durable medical equipment for its clients in certain of its market areas.
Omnicare continues to review the expansion of these as well as other products
and services that may further enhance the ability of its client nursing
facilities to care for their residents in a cost-effective manner.
PRODUCT AND MARKET DEVELOPMENT
Omnicare's pharmacy business engages in a continuing program for the
development of new services and the marketing thereof. While new service and
new market development are important factors for the growth of this business,
Omnicare does not expect that any new service or marketing effort, including
those in the developmental stage, will require the investment of a material
portion of Omnicare's assets.
MATERIALS/SUPPLY
Omnicare purchases pharmaceuticals through a wholesale distributor with
whom it has a prime vendor contract and, on an increasing basis, under
contracts negotiated directly with pharmaceutical manufacturers. The Company
also is a member of industry buying groups which contract with manufacturers
for discounted prices based on volume which are passed through to the Company
by its wholesale distributor. The Company has numerous sources of supply
available to it and has not experienced any difficulty in obtaining
pharmaceuticals or other products and supplies used in the conduct of its
business.
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PATENTS, TRADEMARKS AND LICENSES
Omnicare's business operations are not dependent upon any material
patents, trademarks or licenses.
INVENTORIES
Omnicare's pharmacies maintain adequate onsite inventories of
pharmaceuticals and supplies to ensure prompt delivery service to its
customers. Inventories on hand are not considered to be high by industry
standards. The Company's primary wholesale distributor also maintains local
warehousing in most major geographic markets in which the Company operates.
COMPETITION
By its nature, the long-term care pharmacy business is highly regionalized
and, within a given geographic region of operations, highly competitive. In
the geographic regions it serves, Omnicare competes with numerous local retail
pharmacies, local and regional institutional pharmacies and pharmacies owned by
long-term care facilities. Omnicare competes in this market on the basis of
quality, cost-effectiveness and the increasingly comprehensive and specialized
nature of its services along with the pharmaceutical technology and
professional support it offers.
In its program of acquiring institutional pharmacy providers, the Company
competes with several other companies with similar acquisition strategies, some
of which may have greater resources than the Company.
No individual customer or market group is critical to the total sales of
the Company's long-term care pharmacy business.
GOVERNMENT REGULATION
The health care industry in which the Company operates is subject to
government regulation on the federal and state levels. Omnicare continuously
monitors the effects of such regulatory activity on its operations. The
nursing home pharmacy business has long operated under regulatory cost
containment pressures from both state and federal legislation primarily through
Medicaid and, to a lesser extent, Medicare. Approximately one-half of the
Company's revenues are derived from Medicaid and Medicare programs. Medicaid
has long-established programs for reimbursement which have over time been
revised and refined and have not had a material adverse effect on the pricing
policies or receivables collection for nursing home pharmacy services. Any
future changes in such reimbursement programs or in regulations relating
thereto, such as reductions in the allowable reimbursement levels or the timing
of processing of payments, could adversely affect the Company's business.
Over the past two years, numerous plans for federally-mandated health care
reform have been proposed, but none of these proposals has been adopted. While
the processes by which federal or state governments may pursue alternative
proposals for reform of the health care system are uncertain, market forces in
the form of managed care continue to challenge health care providers to provide
high quality care while reducing or
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containing costs. Management believes that the need to lower health care costs
will drive further industry consolidation which may be beneficial to the
Company's acquisition program. In addition, the Company's development of
significant regional market positions provides opportunities for economies of
scale to lower overall costs.
Pharmaceutical therapy is generally considered the most cost-effective
form of treatment for chronic ailments afflicting the elderly and, as such, is
an essential part of long-term care. Omnicare believes that it is
well-positioned to be an integral part of national and state initiatives to
address escalating health care costs among the elderly through the Company's
careful product selection (including drug formulary management and the provision
of pharmacy consulting services), cost-effective drug purchasing and efficient
delivery systems. Nevertheless, the Company continues to carefully monitor
national and state healthcare reform issues as they evolve and will make
refinements to its business strategies or practices which may become necessary
or desirable in view of any significant changes in government regulations or
reimbursement policies.
Institutional pharmacies as well as the long-term care facilities they
serve are subject to extensive federal, state and local regulation. These
regulations cover required qualifications, day-to-day operations and the
documentation of activities. All of the Company's pharmacies are licensed in
the states in which they operate and are registered with the appropriate
federal authorities pursuant to the regulation of controlled substances.
Client nursing facilities are also separately required to be licensed in the
states in which they are operating and, if serving Medicaid or Medicare
patients, must be certified by the federal government.
Client nursing facilities are also subject to the Omnibus Budget
Reconciliation Act of 1987 ("OBRA") which has been in the process of
implementation since 1990. Under OBRA, more stringent requirements have been
set forth for nursing homes to qualify for federal funding which impose new,
higher quality standards for nursing home operations. While the future impact
of the continued implementation of this legislation cannot be predicted, the
Company believes the legislation has benefitted specialized providers of
professional services to nursing homes, such as institutional pharmacy services
providers, which can offer higher quality, more sophisticated services in a
cost-effective manner along with assistance in compliance with these
regulations.
ENVIRONMENTAL MATTERS
In operating its facilities, Omnicare makes every effort to comply with
pollution control laws. No major difficulties have been encountered in
effecting compliance. No material capital expenditures for environmental
control facilities are expected. While Omnicare cannot predict the effect
which any future legislation, regulations, or interpretations may have upon its
operations, it does not anticipate any changes that would have a material
adverse impact on its operations.
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EMPLOYEES
At December 31, 1994, Omnicare employed a total of 2,466 persons
(including 538 part-time employees), all of whom were located within the United
States.
<TABLE>
ITEM 2 - PROPERTIES
Omnicare has offices and distribution centers in various locations in the
United States. A list of the major facilities operated by Omnicare follows.
The "owned" property is held in fee and is not subject to any material
encumbrance. Omnicare considers all of these facilities to be in good
operating condition and generally to be adequate for present and anticipated
needs.
<CAPTION>
Leased
Owned --------------------------
Location Type Area Area Expiration Date
-------- ---- ----- ---- ---------------
<S> <C> <C> <C> <C>
Cincinnati, Offices and -- 24,375 sq. ft. July 1,
Ohio distribution 1999
center
Dayton, Offices and -- 18,000 sq. ft. January 31,
Ohio distribution 1998
center
Prattville, Offices and -- 4,331 sq. ft. August 29,
Alabama distribution 2001
center
Louisville, Offices and -- 37,400 sq. ft. September 30,
Kentucky distribution 1996
center
Oklahoma City, Offices and -- 28,000 sq. ft. September 30,
Oklahoma distribution 1998
center
St. Louis, Offices and -- 20,000 sq. ft. March 31,
Missouri distribution 1996
center
Belleville, Offices and -- 8,300 sq. ft. March 31,
Illinois distribution 1995
center
Deerfield, Offices and -- 4,200 sq. ft. Month to month
Illinois distribution
center
Indianapolis, Offices and -- 4,640 sq. ft. December 31,
Indiana distribution 1999
center
Griffith, Offices and -- 10,600 sq. ft. March 31,
Indiana distribution 2000
center
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<CAPTION>
Leased
Owned --------------------------
Location Type Area Area Expiration Date
-------- ---- ----- ---- ---------------
<S> <C> <C> <C> <C>
Perrysburg, Offices and 23,712 sq. ft. -- --
Ohio distribution
center
Overland Park, Offices and -- 13,647 sq. ft. March 1,
Kansas distribution 1998
center
Decatur, Offices and 23,000 sq. ft. -- --
Illinois distribution
center
Skokie, Offices and -- 30,000 sq. ft. September 1,
Illinois distribution 1998
center
Dover, Offices and -- 12,000 sq. ft. December 31,
Ohio distribution 2008
center
Wadsworth, Offices and 21,000 sq. ft. June 1,
Ohio distribution -- 2004
center
Kirkland, Offices and -- 43,107 sq. ft. April 5,
Washington distribution 2003
center
</TABLE>
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business, to which Omnicare or any of its
subsidiaries is a party or of which any of their property is the subject, and
no such proceedings are known to be contemplated by governmental authorities.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ADDITIONAL ITEM - EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
The executive officers of the Company as of March 24, 1995 are as follows:
<CAPTION>
Name Age Office First Elected
---- --- ------ -------------
<S> <C> <C> <C>
Edward L. Hutton 75 Chairman May 20, 1981
Joel F. Gemunder 55 President May 20, 1981
Kenneth W. Chesterman 54 Executive Vice August 2, 1984
President
Cheryl D. Hodges 43 Senior Vice President August 4, 1982
and Secretary
Patrick E. Keefe 49 Senior Vice President- April 11, 1993
Operations
Kurt H. Stump 45 Senior Vice President March 2, 1994
and Chief Financial
Officer
Thomas R. Marsh 48 Vice President, March 5, 1987
Controller and
Acting Treasurer
</TABLE>
All of the executive officers listed above have been actively engaged in
the business of the Company or its predecessors for the past five years, with
the exception of Mr. Keefe and Mr. Stump. Mr. Keefe served as Vice President
of Diagnostek, Inc. from April 1992 to April 1993. From September 1990 to
April 1992, he was President of HPI Health Care Services, Inc. ("HPI"), a
subsidiary of Diagnostek which it acquired from Omnicare in August 1989. He
served as Executive Vice President of HPI from August 1984 until September
1990. Mr. Stump was Vice President-Finance and Chief Financial Officer of 84
Lumber Company from July 1990 to December 1993. From March 1987 to July 1990,
he was Senior Vice President and Controller of Coastal Mart, Inc., a
wholly-owned subsidiary of the Coastal Corporation.
Executive officers are elected for one-year terms at the annual
organizational meeting of the Board of Directors which follows the annual
meeting of stockholders each year.
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK; HOLDERS OF RECORD
The Company's Common Stock is listed on the New York Stock Exchange. The
following table sets forth the ranges of high and low closing prices
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for the Common Stock on the New York Stock Exchange during each of the calendar
quarters of 1994 and 1993.
<TABLE>
<CAPTION>
1994 1993
--------------- --------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $35.00 $29.00 $31.00 $17.38
Second Quarter 34.13 27.00 19.38 14.00
Third Quarter 40.13 33.63 24.13 18.00
Fourth Quarter 45.13 36.50 32.13 22.13
</TABLE>
The number of holders of record of Omnicare Common Stock on February 28,
1995 was 1,754. This figure does not include stockholders with shares held
under beneficial ownership in nominee name or within clearinghouse positions
of brokerage houses and banks.
DIVIDENDS
Reflecting the Company's financial position and operating performance, on
February 3, 1993 and on February 8, 1994 the Board of Directors elected to
increase the quarterly cash dividend by $.005 to $.04 and $.045 per share,
respectively, for an indicated annual rate of $.16 and $.18, respectively. On
February 1, 1995, the quarterly cash dividend was increased to $.05 per share,
for an indicated annual rate of $.20 per share in 1995. It is presently
intended that cash dividends will continue to be paid on a quarterly basis;
however, future dividends are necessarily dependent upon the Company's earnings
and financial condition and other factors not currently determinable.
ITEM 6 - SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data, which
should be read in conjunction with the Company's Consolidated Financial
Statements and related Notes and "Management's Discussion and Analysis of
Operations and Financial Condition" included elsewhere herein.
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FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(in thousands except per share data)
<TABLE>
<CAPTION>
For the years ended and at December 31,
1994 1993 1992 1991 1990
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA: (a)(b)
Sales $275,663 $193,704 $131,867 $ 60,396 $38,807
======== ======== ======== ======== =======
Income from continuing
operations $ 13,406(c) $ 11,111(d) $ 5,250(e) $ 2,273 $ 639
Discontinued operations (a) - - 8,710(f) 3,238 674(g)
Cumulative effect of
accounting change - 280(h) - - -
-------- -------- -------- -------- -------
Net income $ 13,406(c) $ 11,391(d) $ 13,960(e) $ 5,511 $ 1,313
======== ======== ======== ======== =======
Earnings per share data
Primary:
Continuing operations $ 1.21(c) $ 1.06(d) $ .51(e) $ .23 $ .06
Discontinued operations (a) - - .85(f) .32 .07(g)
Cumulative effect of
accounting change - .03(h) - - -
-------- -------- -------- -------- -------
Net income $ 1.21(c) $ 1.09(d) $ 1.36(e) $ .55 $ .13
======== ======== ======== ======== =======
Fully diluted:
Continuing operations 1.19(c) $ 1.06(d) $ .51(e) $ .23 $ .06
Discontinued operations (a) - - .85(f) .32 .07(g)
Cumulative effect of
accounting change - .03(h) - - -
-------- -------- -------- -------- -------
Net income $ 1.19(c) $ 1.09(d) $ 1.36(e) $ .55 $ .13
======== ======== ======== ======== =======
Dividends per share $ 0.18 $ .16 $ .14 $ .12 $ .10
======== ======== ======== ======== =======
BALANCE SHEET DATA:
Working capital $125,076 $ 79,713 $ 23,794 $ 34,507 $44,661
Total assets 305,803 231,005 142,327 115,364 94,359
Long-term debt (i) 82,961 84,041 4,243 7,616 4,971
Stockholders' equity (j) 178,859 101,630 93,072 77,168 70,458
<FN>
(a) As a result of the December 1992 sale of the Veratex Group and the March
1990 divestiture of the Bunn/Xorbox Group results have been restated to
include these entities' results of operations as well as any gain or loss on
dispositions as "discontinued operations."
(b) The Company has had an active acquisition program in effect since 1989.
See Note 2 of the Notes to Consolidated Financial Statements in Item 8
herein, for information concerning these acquisitions.
(c) Includes nonrecurring acquisition-related expenses of $2,380,000. Such
expenses, on an aftertax basis, were $1,860,000, or $.17 per primary share
($.13 per share fully diluted). Net income, excluding nonrecurring
acquisition-related expenses, was $15,266,000, or $1.38 per primary share
($1.32 per share fully diluted).
(d) Includes a one-time cumulative tax benefit of $450,000, or $.04 per share,
arising from a change in tax laws enacted in August of 1993 relating to the
amortization of intangibles.
(e) Includes a nonrecurring charge for writeoff of investment in Datacare, Inc.
of $368,000 after taxes or $.04 per share.
(f) Includes aftertax gain of $5,198,000, or $.51 per share, related to the
sale of Veratex.
(g) Includes aftertax loss of $2,478,000, or $.25 per share, related to the
divestiture of Bunn/Xorbox.
(h) Aftertax gain representing the cumulative effect of a change in accounting
for income taxes.
(i) In 1993, the Company issued $80.5 million of Convertible Subordinated Notes
due 2003 (see Note 7 in Notes to Consolidated Financial Statements in Item
8 herein).
(j) In 1994, the Company sold 1,623,741 shares of common stock, in a public
offering, resulting in net proceeds of $59,211,000 (see Note 8 in Notes to
Consolidated Financial Statements in Item 8 herein).
</TABLE>
13
<PAGE> 14
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
On September 30, 1994, the Company issued 1,111,322 shares of its common
stock for all the outstanding common stock of Kirkland, Washington-based
Evergreen Pharmaceutical, Inc., and an affiliated company (collectively,
"Evergreen"). Evergreen is a leading provider of institutional pharmacy
services for long-term care facilities in the Pacific Northwest with $34
million in sales for the year ended December 31, 1993. The acquisition was
accounted for as a pooling 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 flow
of Evergreen (See Note 2 to the Consolidated Financial Statements). In
accordance with accounting rules for pooling of interests transactions, a
nonrecurring charge to operating income for acquisition-related expenses was
recorded in 1994.
<TABLE>
The following table presents the Company's results of operations excluding
the effect of several nonrecurring items and discontinued operations (in
thousands except per share amounts):
<CAPTION>
For the years ended
December 31,
1994 1993 1992
------ ------ -----
<S> <C> <C>
Net income, as reported $13,406 $11,391 $13,960
Nonrecurring items, net of taxes 1,860 (450) 368
Cumulative effect of accounting
change - (280) -
Discontinued operations - - (8,710)
------- ------- -------
Pro forma net income $15,266 $10,661 $ 5,618
======= ======= =======
Pro forma earnings per share:
Net income, as reported $ 1.21 $ 1.09 $ 1.36
Nonrecurring items, net of taxes 0.17 (0.04) 0.04
Cumulative effect of accounting
change - (0.03) -
Discontinued operations - - (0.85)
------- ------- -------
Primary $ 1.38 $ 1.02 $ 0.55
======= ======= =======
Fully diluted $ 1.32 $ 1.02 $ 0.55
======= ======= =======
</TABLE>
Income from continuing operations, excluding the impact of nonrecurring
items, for the year ended December 31, 1994 increased 43% to $15,266,000, or
$1.38 per share ($1.32 fully diluted), from $10,661,000, or $1.02 per share,
for the year ended December 31, 1993. For the year ended December 31, 1993,
income from continuing operations, excluding nonrecurring items, increased 90%
to $10,661,000, or $1.02 per share, from the $5,618,000, or $.55 per share,
earned in 1992. The results for 1994 include a nonrecurring charge to
operating income of $2,380,000, or $1,860,000 after taxes ($.17 per primary
14
<PAGE> 15
share), for acquisition-related expenses recorded in the third quarter of 1994
in connection with the Company's acquisition of Evergreen.
In 1993, the Company recorded one-time favorable cumulative tax
adjustments of $730,000, or $.07 per share, consisting of $450,000, or $.04 per
share, arising from a change in tax laws related to the amortization of
intangibles as well as $280,000, or $.03 per share, related to the change in
accounting for income taxes. Additionally, net income and earnings per share
from continuing operations for 1992 include an aftertax charge of $368,000, or
$.04 per share, related to the write-off of Omnicare's minority interest in
Datacare, Inc., a privately-held hospital computer systems company, which filed
bankruptcy in 1992. The investment in Datacare was a passive investment held
since 1983 and was unrelated to Omnicare's current operations.
In total, including nonrecurring items, discontinued operations, and the
effect of the accounting change, net income for 1994 was $13,406,000, or $1.21
per share ($1.19 fully diluted), while 1993 net income was $11,391,000, or
$1.09 per share, and 1992 net income was $13,960,000, or $1.36 per share.
Sales for 1994 of $275,663,000 were 42% higher than the $193,704,000
recorded in 1993. For 1993, sales of $193,704,000 were 47% higher than the
$131,867,000 recorded in 1992. Omnicare entered the long-term pharmacy
business with its first acquisition of an institutional pharmacy provider in
December 1988. Since that date, Omnicare has completed twenty-three additional
acquisitions - two in 1990, three in 1991, seven in 1992, four in 1993 and
seven in 1994. Except for the acquisitions of Evergreen and Lo-Med
Prescription Services, Inc. ("Lo-Med"), purchase accounting was used to record
the acquisitions. The acquisition of Evergreen in 1994 is included in the
financial results of all years presented as this acquisition was accounted for
as a pooling of interests. The acquisition of Lo-Med was also accounted for as
a pooling of interests; however, its operations were immaterial to the
Company's results of operations prior to 1994 and, therefore, prior year
financial statements were not restated for this business combination. These
acquisitions (described in detail in Note 2 of the Notes to Consolidated
Financial Statements) coupled with the internal growth of the businesses
previously acquired led to the significant sales increases.
Increases in gross profit over the three-year period have generally
remained in line with sales, with margins fluctuating between 27.4% and 28.6%
during the three-year period. Such fluctuations generally reflect the changes
in sales mix resulting from acquisition activity. However, after excluding
nonrecurring items, operating income as a percent of sales has increased
significantly over the period from 8.9% to 9.7% to 10.6% in 1992, 1993 and
1994, respectively. While sales and gross profit have grown significantly over
the three-year period, corporate and operating expenses have grown at a much
smaller pace resulting in a general decline in selling, general and
administrative expenses as a percentage of sales over this period, which
reflects the Company's substantial operating leverage.
Over the past two years, numerous plans for federally-mandated health
care reform have been proposed, but none of these proposals has been adopted.
While the processes by which the federal or state governments may pursue
alternate proposals for reform of the health care system are uncertain, market
forces in the form of managed care continue to challenge health care providers
to provide high quality care while reducing or containing costs. Management
believes that the need to lower health care costs will drive further industry
15
<PAGE> 16
consolidation which should add impetus to the Company's acquisition program.
In addition, the Company's development of significant regional market positions
provides opportunities for economies of scale to lower overall costs.
Moreover, demographic trends indicate that demand for long-term care
will increase well into the middle of the next century. Pharmaceutical therapy
is generally the most cost-effective form of treatment for chronic ailments
afflicting the elderly and, as such, is an essential part of long-term care.
Omnicare believes that it is well-positioned to be an integral part of the
solution to escalating health care costs among the elderly through careful
product selection (including drug formulary management), cost-effective drug
purchasing and efficient delivery systems. This, coupled with Omnicare's
pharmacy consulting services for nursing homes which identify, resolve and
prevent drug therapy related problems, reduces costs to the health care system
while also promoting optimal patient outcomes. Thus, Omnicare should continue
to show solid growth in sales and earnings in 1995, benefiting from a full
year's contribution from businesses acquired in 1994, from internal growth and
from the completion of additional acquisitions.
NON-OPERATING INCOME AND EXPENSE
Investment income increased by 149% to $1,580,000 in 1994 as the Company
received the benefit of a significant invested cash balance for all of 1994 due
to the receipt of the cash proceeds from the offering of $80.5 million in 5.75%
Convertible Subordinated Notes due 2003 ("Notes") in October 1993 and the
receipt of $59.2 million of proceeds from the November 1994 stock offering.
Investment income nearly tripled in 1993 to $635,000 as the Company's invested
cash balances grew in the fourth quarter owing to the receipt of proceeds from
the sale of the Notes.
Interest expense increased by $3,473,000 in 1994 as a result of a full
year's interest on the Notes as compared with only three months in 1993.
Interest expense remained relatively stable in 1993 when compared with 1992
levels.
INCOME TAXES
The Company's effective tax rates for 1992, 1993 and 1994 were 42.0%,
35.1% and 40.3%, respectively. All years were favorably impacted due to income
generated by Evergreen Pharmaceutical East, Inc., an S corporation, which was
not subject to tax. The 1994 effective tax rate is slightly higher than
statutory rates primarily due to the nondeductibility of certain acquisition
expenses. As a result of the Omnibus Budget Reconciliation Act of 1993, the
Company was permitted to deduct from taxable income amortization of intangibles
arising from certain business acquisitions retroactive to July 1991.
Accordingly, the Company's effective tax rate in 1993 was favorably impacted by
the tax benefit of amortization of intangibles. The effective tax rate of
42.0% in 1992 was higher than statutory rates, primarily because of the
nondeductibility of the amortization of intangibles during that period.
DISCONTINUED OPERATIONS
Significant financial data related to the December 1992 sale of the
Veratex Group of businesses are set forth in Note 3 of the Notes to
Consolidated Financial Statements.
16
<PAGE> 17
IMPACT OF INFLATION
Inflation has not materially affected Omnicare's profitability inasmuch as
price increases have generally been obtained to cover inflationary drug cost
increases.
LIQUIDITY AND CAPITAL RESOURCES
In November 1994, the Company completed a public offering of 1,623,741
shares of common stock, resulting in net proceeds of $59,211,000.
In line with Omnicare's plan to redeploy capital into the long-term care
pharmacy market, seven acquisitions were completed during 1994 requiring an
aggregate capital investment of approximately $87 million. Such acquisitions
were primarily financed from cash and cash equivalents on hand, except with
respect to the acquisitions of Evergreen, Lo-Med Prescription Services, Inc.
and UniCare, Inc., for which the Company issued 1,111,322, 370,932 and 75,378
shares of common stock, respectively. Additionally, $17.6 million of other
acquisition-related payments were made during 1994 related to businesses
acquired prior to 1994. Additional amounts totalling $16.6 million may become
payable through 1998 pursuant to the terms of various acquisition agreements.
The 1994 acquisition-related cash outlays have been funded primarily through
proceeds from the issuance of the $80.5 million in Notes in 1993. Omnicare
ended the year with $79,596,000 in cash and cash equivalents and marketable
securities as compared to $63,276,000 at year-end 1993. At December 31, 1994,
the Company had invested $31,260,000 in U.S. Treasury-backed repurchase
agreements which represent investments under agreements to resell, usually
overnight, but in no case longer than thirty days. The Company has a
collateralized interest in the underlying securities which are segrated in the
accounts of the counterparty bank. Management believes these investments do
not create any exposure to the Company's liquidity. Omnicare's current ratio
increased substantially to 4.4 to 1 at December 31, 1994 from 3.0 to 1 at
December 31, 1993, and working capital at December 31, 1994 increased to
$125,076,000 from year-end 1993 working capital of $79,713,000. This increase
is primarily attributable to the proceeds from the public stock offering. Book
value per common share increased to $14.14 per share as of December 31, 1994
from $9.75 per share at the prior year-end, primarily attributable to the
public stock offering proceeds and also secondarily, due to the increase in
equity resulting from the growth in net income less dividends paid.
On February 1, 1995, Omnicare's Board of Directors elected to increase the
quarterly cash dividend by 11% to 5 cents per share for an indicated annual
rate of 20 cents per share for 1995.
In February 1995, the Company reached an agreement with a consortium of
six banks to replace its current $50 million revolving credit facility with a
new, five-year $135 million revolving credit facility. Interest rates and
commitment fees for this new facility are based on the Company's level of
performance under certain debt covenants and are expected to result in
significantly lower fees and borrowing costs as compared with the former
agreement. No amounts were outstanding at December 31, 1994 under the credit
facility.
Management believes that Omnicare's capital requirements can be met with
the proceeds of the 1994 public stock offering, the currently unused $135
million revolving credit facility and the cash flow from existing as well as
acquired businesses. If needed, other external sources of financing are
17
<PAGE> 18
readily available to the Company. There are no material commitments
outstanding at December 31, 1994 other than the acquisition-related payments
which may be made contingent on the performance of businesses acquired (see
Note 2 of the Notes to Consolidated Financial Statements).
<TABLE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants 19
Consolidated Statement of Income 20
Consolidated Balance Sheet 21
Consolidated Statement of Cash Flow 22
Consolidated Statement of Stockholders'
Equity 23
Notes to Consolidated Financial
Statements 24
Note 13 - Summary of Quarterly Results
(unaudited) 37
</TABLE>
18
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Stockholders and
Board of Directors of Omnicare, Inc.
In our opinion, based on our audits and the report of other auditors with
respect to 1993 and 1992, the accompanying consolidated balance sheet and the
related consolidated statements of income, cash flow and stockholders' equity
present fairly, in all material respects, the financial position of Omnicare,
Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flow for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the combined financial
statements of Evergreen Pharmaceutical, Inc. and Evergreen Pharmaceutical East,
Inc. (collectively, "Evergreen") as of December 31, 1993 and for the years
ended December 31, 1993 and 1992, which statements reflect total assets of
$12,210,000 at December 31, 1993 and total revenues of $34,130,000 and
$28,873,000 for the years ended December 31, 1993 and 1992, respectively.
Those statements were audited by other auditors whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
1993 and 1992 amounts included for Evergreen, is based solely on the report of
the other auditors. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for the opinion expressed above.
As discussed in Note 12 to the financial statements, the Company changed
its method of accounting for income taxes in 1993.
Price Waterhouse LLP
Cincinnati, Ohio
February 1, 1995
19
<PAGE> 20
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
Omnicare, Inc. and Subsidiary Companies
(In thousands except per share data)
<CAPTION>
For the years ended December 31,
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Sales $275,663 $193,704 $131,867
Cost of sales 200,193 140,357 94,151
-------- -------- --------
Gross profit 75,470 53,347 37,716
Selling, general and administrative
expenses 46,362 34,494 25,966
Nonrecurring acquisition expenses 2,380 - -
-------- -------- --------
Operating income 26,728 18,853 11,750
Investment income 1,580 635 220
Loss on long-term investment - - (558)
Interest expense (5,847) (2,374) (2,367)
-------- -------- --------
Income from continuing
operations before income taxes and
cumulative effect of accounting change 22,461 17,114 9,045
Income taxes 9,055 6,003 3,795
-------- -------- --------
Income from continuing
operations 13,406 11,111 5,250
Discontinued operations - - 8,710
-------- -------- --------
Income before cumulative effect of
accounting change 13,406 11,111 13,960
Cumulative effect of accounting change - 280 -
-------- -------- --------
Net income $ 13,406 $ 11,391 $ 13,960
======== ======== ========
Earnings per share data
Primary:
Continuing operations $ 1.21 $ 1.06 $ .51
Discontinued operations - - .85
Cumulative effect of
accounting change - .03 -
-------- -------- --------
Net income $ 1.21 $ 1.09 $ 1.36
======== ======== ========
Fully diluted:
Continuing operations $ 1.19 $ 1.06 $ .51
Discontinued operations - - .85
Cumulative effect of
accounting change - .03 -
-------- -------- --------
Net income $ 1.19 $ 1.09 $ 1.36
======== ======== ========
Weighted average number of
common shares outstanding:
Primary 11,038 10,425 10,250
======== ======== ========
Fully diluted 14,013 11,229 10,250
======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements
are an integral part of this statement.
20
<PAGE> 21
<TABLE>
CONSOLIDATED BALANCE SHEET
Omnicare, Inc. and Subsidiary Companies
(In thousands except share data)
<CAPTION>
December 31,
ASSETS 1994 1993
--------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 34,351 $ 63,276
Marketable securities 45,245 -
Accounts receivable, less allowances of
$3,127 (1993-$2,612) 54,792 36,958
Inventories 18,976 12,530
Deferred income tax benefits 5,619 5,297
Other current assets 3,256 2,451
-------- --------
Total current assets 162,239 120,512
Properties and equipment, at cost
less accumulated depreciation 20,496 14,323
Intangible assets, less accumulated amortization of
$7,236 (1993-$4,249) 117,822 89,974
Other assets 5,246 6,196
-------- --------
Total assets $305,803 $231,005
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,558 $ 10,928
Amounts payable pursuant to acquisition agreements 4,576 12,707
Current portion of long-term debt 641 4,112
Income taxes payable 1,839 1,622
Accrued employee compensation 3,023 2,500
Liabilities relating to discontinued operations 2,399 3,800
Other current liabilities 9,127 5,130
-------- --------
Total current liabilities 37,163 40,799
Long-term debt 82,961 84,041
Deferred income taxes 1,368 89
Amounts payable pursuant to acquisition agreements 2,910 1,921
Other noncurrent liabilities 2,542 2,525
-------- --------
Total liabilities 126,944 129,375
-------- --------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 22,000,000 shares
$1 par; 15,134,433 shares issued
(1993-12,895,716 shares) 15,134 12,896
Paid-in capital 130,165 64,750
Retained earnings 70,238 58,270
-------- --------
215,537 135,916
Treasury stock, at cost-2,488,274 shares
(1993-2,467,128 shares) (33,060) (31,126)
Deferred Compensation (858) -
Unallocated stock of ESOP (2,760) (3,160)
-------- --------
Total stockholders' equity 178,859 101,630
-------- --------
Total liabilities and stockholders' equity $305,803 $231,005
======== ========
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of this statement.
21
<PAGE> 22
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOW
Omnicare, Inc. and Subsidiary Companies
<CAPTION>
(in thousands) For the years ended December 31,
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Income from continuing operations $ 13,406 $ 11,111 $ 5,250
Adjustments to reconcile income from
continuing operations to net cash flow
from operating activities:
Depreciation and amortization 7,407 5,231 3,527
Provision for doubtful accounts 1,969 1,780 1,693
Deferred tax provision 906 837 349
Cumulative effect of a change in accounting principle - 280 -
Loss on long-term investment - - 558
Changes in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (13,601) (9,740) (10,141)
Inventories (3,450) 602 (2,231)
Current and noncurrent assets (247) (4,108) 2,269
Income taxes payable 217 (6,645) (1,624)
Payables and accrued liabilities 3,236 2,002 2,291
Current and noncurrent liabilities 2,656 (277) 697
-------- -------- --------
Net cash provided by continuing
operations 12,499 1,073 2,638
Net cash provided by discontinued operations - - 1,781
-------- -------- --------
Net cash flow from operating activities 12,499 1,073 4,419
-------- -------- --------
Cash flow from investing activities:
Acquisition of businesses (40,084) (24,656) (51,190)
Capital expenditures (8,640) (4,787) (3,186)
Marketable securities (45,245) - -
Proceeds and cash flow from discontinued operations (1,370) (11) 60,881
Proceeds from sales of properties 501 120 119
-------- -------- --------
Net cash flow from investing activities (94,838) (29,334) 6,624
-------- -------- --------
Cash flow from financing activities:
Proceeds from long-term borrowings - 92,590 47,733
Principal payments on revolving line of credit
and long-term obligations (4,332) (11,678) (50,394)
Net proceeds from stock offering 59,211 - -
Proceeds from exercise of stock options and warrants
net of stock tendered in payment 1,291 (7) 3,051
Dividends paid (2,756) (2,928) (1,327)
-------- -------- --------
Net cash flow from financing activities 53,414 77,977 (937)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (28,925) 49,716 10,106
Cash and cash equivalents at beginning of period 63,276 13,560 3,454
-------- -------- --------
Cash and cash equivalents at end of period $ 34,351 $ 63,276 $ 13,560
======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
22
<PAGE> 23
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Omnicare, Inc. and Subsidiary Companies
(In thousands except per share data)
<CAPTION>
Total
Common Paid-in Retained Treasury Deferred Unallocated Stockholders'
Stock Capital Earnings Stock Compensation Stock of ESOP Equity
------- ------- -------- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991
As previously reported $11,222 $ 56,697 $34,812 $(24,474) $ - $(3,680) $ 74,577
Evergreen pooling of
interests (Note 2) 1,111 (1,080) 2,560 - - - 2,591
------- -------- ------- -------- ----- ------- --------
Balance as restated 12,333 55,617 37,372 (24,474) - (3,680) 77,168
Net income - - 13,960 - - - 13,960
Dividends paid ($.14
per share) - - (1,257) - - - (1,257)
Dividends to former owners
of Evergreen - - (70) - - - (70)
Exercise of stock options 449 6,535 - (5,603) - - 1,381
Stock awards 61 1,609 - - - - 1,670
Decrease in unallocated
stock of ESOP - - - - - 220 220
------- -------- ------- -------- ----- ------- --------
BALANCE AT DECEMBER 31, 1992 12,843 63,761 50,005 (30,077) - (3,460) 93,072
Net income - - 11,391 - - - 11,391
Dividends paid ($.16 per
share) - - (1,472) - - - (1,472)
Dividends to former owners
of Evergreen - - (1,654) - - - (1,654)
Exercise of stock options 51 902 - (1,049) - - (96)
Stock awards 2 87 - - - - 89
Decrease in unallocated
stock of ESOP - - - - - 300 300
------- -------- ------- -------- ----- ------- --------
BALANCE AT DECEMBER 31, 1993 12,896 64,750 58,270 (31,126) - (3,160) 101,630
Lo-Med pooling of interests
(Note 2) 371 (341) 1,120 - - - 1,150
Net income - - 13,406 - - - 13,406
Dividends paid ($.18 per
share) - - (1,759) - - - (1,759)
Dividends to former owners
of Evergreen - - (397) - - - (397)
Dividends to former owners
of Lo-Med - - (402) - - - (402)
Stock issued in public
offering 1,624 57,587 - - - - 59,211
Warrants issued and/or
exercised - 1,401 - 658 - - 2,059
Stock issued in connection
with acquisition 75 2,744 - - - - 2,819
Exercise of stock options 117 2,432 - (2,592) - - (43)
Stock awards 51 1,592 - - (858) - 785
Decrease in unallocated
stock of ESOP - - - - - 400 400
------- -------- ------- -------- ----- ------- --------
BALANCE AT DECEMBER 31, 1994 $15,134 $130,165 $70,238 $(33,060) $(858) $(2,760) $178,859
======= ======== ======= ======== ===== ======= ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
23
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
Omnicare, Inc. ("Company") operates in one business segment which
includes the distribution of pharmaceuticals, related pharmacy management
services and medical supplies for long-term care institutions and their
residents. The consolidated financial statements include the accounts of the
Company and all majority-owned subsidiaries as well as 50% of the accounts of
Heartland Healthcare Services, a 50/50 partnership between the Company and
Health Care and Retirement Corporation which began operations in 1994. All
significant intercompany transactions are eliminated.
CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company considers all investments in highly liquid instruments with
maturities of three months or less at the date purchased to be cash
equivalents. Investments in cash equivalents are carried at cost which
approximates market with any associated purchase discount or premium amortized
over the period to maturity.
Marketable securities consist of U.S. Treasury obligations maturing in
1995 and are stated at cost, which approximates fair value. The fair values
are based on quoted market prices. Effective January 1, 1994, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". Under the
new rules, debt securities that the Company has both the intent and ability to
hold to maturity are carried at amortized cost. Debt securities that the
Company does not have the intent and ability to hold to maturity are classified
either as "available-for-sale" or as "trading" and are carried at fair value.
At December 31, 1994, the Company had no investments that qualified as
available-for-sale or trading.
INVENTORIES
Inventories consist primarily of purchased pharmaceuticals and medical
supplies held for sale to customers and are stated at the lower of cost or
market. Cost is generally determined using the average cost and first-in,
first-out methods.
PROPERTIES AND EQUIPMENT
Properties and equipment are stated at cost. Expenditures for
maintenance, repairs, renewals and betterments that do not materially prolong
the useful lives of the assets are charged to expense. Depreciation of
properties and equipment is computed using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized
over the lesser of the lease terms, including renewal options, or their useful
lives.
24
<PAGE> 25
INTANGIBLE AND OTHER ASSETS
Intangible assets arise from business combinations accounted for as
purchase transactions and are amortized using the straight-line method over
their estimated useful lives, not in excess of forty years.
On an annual basis, the Company reviews the recoverability of the
intangible assets. The measurement of possible impairment is based primarily
on the ability to recover the balance of the intangible assets from expected
future operating cash flow on an undiscounted basis. In management's opinion,
no such impairment exists at December 31, 1994.
Debt issuance costs are included in other assets and are amortized on the
straight-line method over the life of the related debt.
REVENUE RECOGNITION
Revenue is recognized when products or services are provided to the
customer. A significant portion of the Company's revenues from sales of
pharmaceutical and medical products are reimbursable from Medicaid and Medicare
programs. The Company monitors its receivables from these reimbursement
sources under policies established by management and reports such revenues at
the net realizable amount expected to be received from these third-party
payors.
INCOME TAXES
The provision for income taxes includes federal, state and local income
taxes currently payable and those deferred because of differences between
income for financial reporting and income for tax purposes.
Effective January 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes," on a prospective basis; SFAS No. 109 requires the use of an
asset and liability method of accounting for deferred income taxes.
PER SHARE DATA
Primary earnings per share are computed based on the weighted average
number of shares of common stock outstanding during the period. Common stock
equivalents are not material. Fully diluted earnings per share include common
stock equivalents and assume the conversion of the 5.75% Convertible
Subordinated Notes due 2003 into common stock. Additionally, interest expense
and amortization of debt issuance costs arising from convertible securities are
added, net of related income taxes, to income for the purpose of calculating
fully diluted earnings per share.
RECLASSIFICATIONS
Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
25
<PAGE> 26
NOTE 2 - ACQUISITIONS
Since 1989, the Company has been involved in a program to acquire
providers of pharmaceutical and related pharmacy management services and
medical supplies to long-term care facilities and their residents.
<TABLE>
On September 30, 1994, the Company issued 1,111,322 shares of its common
stock for all of the outstanding common stock of Evergreen Pharmaceutical, Inc.
and Evergreen Pharmaceutical East, Inc. ("EPE") (collectively, "Evergreen").
The acquisition was accounted for as a pooling of interests and, accordingly,
the Company's consolidated financial statements have been restated for all
periods prior to the acquisition to include the results of operations,
financial position, and cash flow of Evergreen. In accordance with accounting
rules for pooling of interests transactions, a nonrecurring charge to operating
income for acquisition-related expenses was recorded in the third quarter of
1994. Net sales and net income for the individual entities are as follows (in
thousands):
<CAPTION>
Omnicare, Inc. Evergreen
-------------- ---------
<S> <C> <C>
Nine months ended
September 30, 1994:
Sales $172,876 $25,324
Income from continuing
operations 7,091(a) 1,877
Net income 7,091(a) 1,877
Year ended December 31, 1993:
Sales $159,574 $34,130
Income from continuing
operations 8,734 2,377
Net income 9,014 2,377
Year ended December 31, 1992:
Sales $102,994 $28,873
Income from continuing
operations 3,448 1,802
Net income 12,158 1,802
<FN>
(a) Includes nonrecurring acquisition-related expenses of $2,380,000
($1,860,000 after taxes). Net income, excluding the nonrecurring
acquisition-related expenses, was $8,951,000 for the nine months ended
September 30, 1994.
</TABLE>
During 1994, the Company completed seven acquisitions including Care
Pharmaceutical Services, Inc. in Griffith, Indiana and Schaufler Prescription
Pharmacy in Belleville, Illinois, in March; Weber Medical Systems, Inc. in
Skokie, Illinois and Lo-Med Prescription Services, Inc. (Lo-Med) in Wadsworth,
Ohio, in June; UniCare, Inc. in Montgomery, Alabama, in August; and Lawrence
Medical Supply, Inc. in Deerfield, Illinois and Evergreen in Kirkland,
Washington, in September. Lo-Med was acquired in a pooling of interests
transaction for 370,932 shares of common stock and accordingly, the
consolidated financial statements include the results of Lo-Med effective
January 1, 1994. The impact of the Lo-Med transaction on the Company's
historical financial statements is not significant; consequently, prior-year
financial statements have not been restated for this transaction.
During 1993, the Company completed four acquisitions including Freed's
Pharmacy, Inc. in Overland Park, Kansas, in March and Kansas City
26
<PAGE> 27
Nursing Services, Inc. in Kansas City, Kansas, Enloe Drugs, Inc., in Decatur,
Illinois, and Anderson Medical Services, Inc., in Dover, Ohio, all in the
fourth quarter.
During 1992, the Company completed seven acquisitions including Westhaven
Services Co. in Toledo, Ohio, in October; Pharmacare, Inc., and an affiliated
company in Louisville, Kentucky, in April and five other nursing home pharmacy
providers in the second and third quarters: PRN Pharmaceutical Services, Inc.,
in Indianapolis, Indiana; Home Pharmacy Services, Inc., in Belleville,
Illinois; Ross Drug, Inc., in Tulsa, Oklahoma; Interlock Pharmacy Systems in
St. Louis, Missouri; and Crystal Care Corporation in Ashland, Kentucky.
<TABLE>
Except for Evergreen and Lo-Med, each of the foregoing acquisitions was
accounted for as a purchase. The purchase prices have been allocated to the
estimated fair value of the tangible and intangible net assets acquired. The
following table summarizes the aggregate purchase price for all businesses
acquired which have been accounted for under the purchase method (in
thousands):
<CAPTION>
Businesses acquired in
---------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash $17,954 $16,100 $41,900
Amounts payable in the future
(through 1996) 3,107 10,900 6,200
Common stock 2,819 - -
Warrants 872 - -
Assumption of indebtedness 2,027 600 1,700
------- ------- -------
$26,779 $27,600 $49,800
======= ======= =======
Amounts contingently payable
based on future growth $ 4,809 $ 6,900 $ 8,100
======= ======= =======
</TABLE>
Amounts payable in the future are subject to set-off for claims of
indemnity. Payments contingent on future growth totalled $16.6 million at
December 31, 1994, and will be recorded as additional purchase price, serving
to increase intangible assets in the period in which the contingencies are
resolved. The 1994 acquisitions carry certain pre-acquisition contingencies
which will be resolved within one year of the transaction and which aggregate
$1.3 million at December 31, 1994. The excess of purchase price over the fair
value of the net tangible and intangible assets acquired is being amortized
over periods not in excess of forty years.
Warrants outstanding at December 31, 1994 represent the rights to purchase
270,000 shares of common stock and were issued in connection with certain
acquisitions. These warrants can be exercised at anytime through 1997 at
prices ranging from $26.86 to $33.15 per share. Warrants to purchase 50,000
shares of common stock, issued in prior years, were exercised in 1994.
<TABLE>
The results of operations of the companies acquired in purchase
transactions have been included in the consolidated results of operations of
the Company from the dates of acquisitions. Unaudited pro forma data (net of
the cost of capital related to the cash purchase prices) as though the Company
had acquired these businesses at the beginning of each of the
27
<PAGE> 28
years are set forth below and include the pooling transactions with Evergreen
and Lo-Med (in thousands except per share data):
<CAPTION>
For the years ended December 31,
1994 1993 1992(a)
--------------------------------------
<S> <C> <C> <C>
PRO FORMA
---------
Sales $293,619 $240,242 $189,322
Income from continuing operations 14,149(b) 12,903 7,095
Net income 14,149(b) 13,183 15,805
Earnings per share:
Primary:
Continuing operations $ 1.28(b) $ 1.19 $ .69
Net income 1.28(b) 1.21 1.54
Fully diluted:
Continuing operations $ 1.24(b) $ 1.19 $ .69
Net income 1.24(b) 1.21 1.54
<FN>
(a) Pro forma data do not include any businesses acquired in 1994 and,
therefore, are not comparable to the 1994 and 1993 pro forma data.
(b) Includes nonrecurring acquisition-related expenses of $2,380,000
($1,860,000 on an aftertax basis). Pro forma net income, excluding
nonrecurring acquisition-related expenses, was $16,009,000, or $1.44 per
primary share ($1.37 per share on a fully diluted basis).
</TABLE>
The pro forma information does not purport to be indicative of operating
results which would have occurred had the acquisitions been made at the
beginning of the respective periods or of results which may occur in the
future.
NOTE 3 - DISCONTINUED OPERATIONS
On December 21, 1992, the Company sold the stock of its Veratex Group of
businesses, excluding Labtronics, Inc., to Chemed Corporation ("Chemed"), then
a 27% stockholder, for $63,650,000 in cash. As a result of this sale, the
Company decided to divest Labtronics, Inc., a bio-medical engineering business,
and completed that disposition in 1993. These operations comprised the entire
medical and dental products segment of the Company's business. The $5.2
million gain on these divestitures is net of taxes and expenses associated with
the transaction and the write-down of the assets of Labtronics, Inc. to their
estimated net realizable values.
The financial statements reflect the operating results of these
businesses along with the net gain arising from their disposition as
discontinued operations. Significant financial data for the year ended
28
<PAGE> 29
<TABLE>
December 31, 1992 related to the discontinued operations prior to
divestiture follows (in thousands):
<S> <C>
Sales $86,257
=======
Income from operations $ 5,498
Income taxes 1,986
-------
Income from operations, less
applicable income taxes $ 3,512
=======
Gain on divestiture $ 9,311
Income taxes 4,113
-------
Gain on divestiture, less
applicable income taxes $ 5,198
=======
</TABLE>
Liabilities relating to discontinued operations of $2,399,000 and
$3,800,000 at December 31, 1994 and 1993, respectively, remain to cover
expenses associated with these transactions and obligations and other
liabilities retained by the Company subsequent to the dispositions.
<TABLE>
NOTE 4 - CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES
A summary of cash and cash equivalents and marketable securities follows
(in thousands):
<CAPTION>
December 31,
1994 1993
-----------------
<S> <C> <C>
Cash and cash equivalents
Cash $ 2,840 $ 1,262
Money market funds 251 53,014
U.S. Treasury-backed repurchase
agreements 31,260 9,000
------- -------
$34,351 $63,276
======= =======
Marketable securities $45,245 $ -
======= =======
</TABLE>
Repurchase agreements represent investments in U.S. Treasury obligations
under agreements to resell, usually overnight, but in no case longer than 30
days. The Company has a collateralized interest in the underlying securities,
which are segregated in the accounts of the bank counterparty. At December 31,
1994, Fifth Third Bank of Cincinnati, Ohio was the counterparty for $19,446,000
of the repurchase agreements, which matured on January 3, 1995.
29
<PAGE> 30
<TABLE>
NOTE 5 - PROPERTIES AND EQUIPMENT
A summary of properties and equipment follows (in thousands):
<CAPTION>
December 31,
1994 1993
--------------------
<S> <C> <C>
Land $ 245 $ 249
Buildings 1,351 1,317
Machinery and equipment 16,350 12,216
Furniture, fixtures
and leasehold improvements 14,251 8,138
-------- --------
32,197 21,920
Accumulated depreciation (11,701) (7,597)
-------- --------
$ 20,496 $ 14,323
======== ========
</TABLE>
NOTE 6 - LEASING ARRANGEMENTS
The Company has operating leases which cover various real and personal
property. In most cases, the Company expects that these leases will be renewed
or replaced by other leases in the normal course of business. There are no
contingent rentals in the Company's operating leases.
<TABLE>
The following is a schedule by calendar year of future minimum rental
payments required under operating leases that have initial or remaining
noncancellable terms in excess of one year at December 31, 1994 (in thousands):
<S> <C>
1995 $2,403
1996 2,087
1997 1,701
1998 1,372
1999 1,002
Later years 2,635
-------
Total minimum
payments required $11,200
=======
</TABLE>
<TABLE>
Total rent expense under operating leases follows (in thousands):
For the years ended December 31,
<S> <C>
1992 $1,792
1993 2,461
1994 2,902
</TABLE>
30
<PAGE> 31
<TABLE>
NOTE 7 - LONG-TERM DEBT
A summary of long-term debt follows (in thousands):
<CAPTION>
December 31,
1994 1993
--------------------------
<S> <C> <C>
Convertible Subordinated Notes due 2003 $80,500 $80,500
Employee Stock Ownership Plan
Loan Guarantee 2,760 3,160
Line of credit (Evergreen) - 2,074
Other notes payable (Evergreen) - 2,032
Capitalized lease obligations 342 387
------- -------
83,602 88,153
Less current portion (641) (4,112)
------- -------
$82,961 $84,041
======= =======
</TABLE>
On October 1, 1993, the Company issued $80,500,000 principal amount of
5.75% Convertible Subordinated Notes ("Notes") due 2003. The Notes are
convertible into common stock at any time at the option of the holder at a
price of $28.875 per share. The Notes are redeemable at the option of the
Company beginning in October 1996, at redemption prices ranging from 103.83% of
the principal amount in 1996 to 100.64% in 2001 and 100% thereafter. Absent
conversion of the Notes into common stock or redemption by the Company at its
election as described above, the Notes are due on October 1, 2003. Interest on
the notes is payable semiannually, due in October and April of each year, until
conversion or redemption. Debt issuance costs are included in other assets and
amortized using the straight-line method over the ten-year life of the Notes.
The Company amortized $310,000 and $77,000 of deferred debt issuance costs in
1994 and 1993, respectively. Based on the market value of the Notes in the
last over-the-counter trade prior to year-end, the estimated fair value of the
Notes at December 31, 1994 is $125,000,000. The fair value of all other
financial instruments of the Company approximates the amounts presented on the
consolidated balance sheet.
In 1988, the Company established an Employee Stock Ownership Plan
("ESOP") which currently covers certain acquired entities' employees and all of
the corporate headquarters employees. The ESOP used proceeds from a $4 million
bank loan to purchase 493,437 shares of the Company's common stock on the open
market at prices ranging from $7.75 to $8.50 per share. Inasmuch as the
Company has guaranteed the repayment of this obligation, it has recorded the
ESOP's bank debt as long-term debt and also as a reduction of stockholders'
equity in the accompanying consolidated balance sheet.
The ESOP services its debt with Company contributions, which were
previously made to the Company's Employee Savings & Investment Plan, and
dividends received on shares held by the ESOP. Principal and interest payments
on the bank debt are made in increasing quarterly installments over a ten-year
period, the final payment being due on December 31, 1998. The loan bears
interest at the per annum rate of 7% and is secured by the unallocated shares
of common stock held by the ESOP trust. These unallocated shares had a fair
market value equal to $11,301,412 at December 31, 1994.
31
<PAGE> 32
<TABLE>
The Company funds ESOP expense as accrued. The components of total ESOP
expense (including amounts related to discontinued operations) are as follows
(in thousands):
<CAPTION>
For the years ended December 31,
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Interest expense $214 $238 $242
Principal payments 400 300 220
Dividends on ESOP stock (70) (64) (67)
---- ---- ----
$544 $474 $395
==== ==== ====
</TABLE>
At December 31, 1993, $2,074,000 was outstanding and $1,453,000 was
available for borrowing under the Evergreen line of credit. The interest rate
charged equaled 1/2 of 1% over the bank's prime rate (6.5% at December 31,
1993). Amounts outstanding under the line of credit were repaid and the line
was closed during 1994.
Other notes payable represented various obligations incurred specific to
Evergreen operations. The weighted average interest rate on the notes
approximated 8.6% for the periods presented. Included in other notes payable
are notes due to the former owners of Evergreen for $871,000 as of December 31,
1993. These obligations were repaid in 1994.
At December 31, 1994, the Company had a $50 million unsecured revolving
credit agreement with two banks which expires on January 1, 1996. No amounts
were outstanding under this agreement at December 31, 1994 and 1993.
Borrowings under this agreement bear interest based upon the bank's cost of
funds plus a spread of 1/2 of 1% on the first $25 million of borrowings and a
spread of 3/4 of 1% on the second $25 million of borrowings, or the prime rate.
The average daily borrowings outstanding during 1993 were $4.9 million, at a
weighted average annual interest rate of 3.9%. The Company was required to pay
a commitment fee of 1/4 of 1% per annum on the unused portion of the facility.
In February 1995, the Company reached an agreement with a consortium of six
banks for a new, five-year $135 million revolving line of credit. Borrowings
under this agreement bear interest based upon the bank's cost of funds plus a
spread of 1/4 of 1% to 3/4 of 1%, dependent upon the Company's performance
under certain debt covenants, or the prime rate. Additionally, a commitment
fee on the unused portion of the facility is required which ranges from 1/10 of
1% to 1/4 of 1% also based upon the Company's performance under certain debt
covenants.
<TABLE>
The following is a schedule by year of required long-term debt payments
as of December 31, 1994 (in thousands):
<S> <C>
1995 $ 641
1996 790
1997 731
1998 940
1999 -
Later years 80,500
-------
Total $83,602
=======
</TABLE>
32
<PAGE> 33
Total interest payments made in 1994, 1993 and 1992 amounted to
$5,457,000, $1,234,000 and $1,943,000, respectively.
NOTE 8 - PUBLIC OFFERING OF COMMON STOCK
In November 1994, the Company completed a public offering of 4,140,000
shares of common stock of which 1,623,741 shares were sold by the Company
resulting in net proceeds of $59,211,000 after deducting issuance costs.
NOTE 9 - STOCK INCENTIVE PLANS
The Company has stock incentive plans under which it may grant stock
awards or options to purchase its common stock. Options are granted at a price
equal to the market value at the date of grant and become exercisable beginning
one year following the date of grant in four approximately equal annual
installments.
<TABLE>
The changes in stock options outstanding relating to these plans are
summarized below:
<CAPTION>
Number of Average
Shares Price
--------- -------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1991 639,345 $10.43
Options granted 349,000 18.56
Options exercised (448,849) 10.14
Options terminated or cancelled (54,000) 18.56
--------
BALANCE AT DECEMBER 31, 1992 485,496 15.64
Options granted 108,500 16.27
Options exercised (50,740) 15.24
Options terminated or cancelled (44,250) 18.37
--------
BALANCE AT DECEMBER 31, 1993 499,006 15.58
Options granted - -
Options exercised (117,538) 13.64
Options terminated or cancelled - -
-------
BALANCE AT DECEMBER 31, 1994 381,468 16.17
=======
</TABLE>
At December 31, 1994, options for 181,593 shares (1993-212,256;
1992-190,496) were exercisable and 2,712 shares (1993-53,840; 1992-119,411)
were available for granting of additional stock options and awards.
In 1994 and 1992, the Company granted restricted stock awards to certain
key employees covering 49,328 and 58,662 shares, respectively, of common stock.
No such stock awards were granted in 1993. These shares vest over a three to
five year period and are restricted as to the transfer of ownership.
In 1994, 1993 and 1992, the Company granted unrestricted stock awards
covering 1,800, 2,100 and 2,000 shares, respectively, of its common stock to
members of the Board of Directors of the Company.
33
<PAGE> 34
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company contracted with a division of Chemed, a 6% stockholder, to
assist in the development of a new data processing system to integrate and
standardize all operational and financial reporting functions. The Company
also subleases its corporate offices from Chemed and is charged for the
occasional use of Chemed's corporate aviation department and other incidental
expenses based on Chemed's cost. The Company believes that the method by which
such charges are determined is reasonable and that the charges are essentially
equal to that which would have been incurred if the Company had operated as an
unaffiliated entity. Charges to the Company for these services were
$2,951,000, $1,624,000 and $764,000 in 1994, 1993 and 1992, respectively.
Included in accounts receivable are amounts due from other companies
affiliated with the former owners of Evergreen. These amounts, net of
payables, totalled $850,000 and $894,000 at December 31, 1994 and 1993,
respectively.
Included in other assets as of December 31, 1993 are advances to a
company affiliated with the former owners of Evergreen of $421,000. These
advances were paid in 1994.
Effective May 1, 1993, Evergreen leased one of its facilities from a
partnership, a partner of which is a former owner of Evergreen. Rent expense
of $569,000 was paid under this lease in 1994, (1993-$437,000).
NOTE 11 - EMPLOYEE BENEFIT PLANS
The Company has a non-contributory, defined benefit pension plan covering
certain corporate headquarters employees and the employees of the Veratex Group
of businesses (through the December, 1992 sale of Veratex). Benefits accruing
to Veratex employees ceased upon the sale of Veratex. Benefits accruing under
this plan to corporate headquarters employees were fully vested and frozen as
of January 1, 1994.
Retirement benefits are based primarily on an employee's years of service
and compensation near retirement. Plan assets are invested in U.S. Treasury
obligations. The Company's policy is to fund pension costs in accordance with
the funding provisions of the Employee Retirement Income Security Act.
<TABLE>
The funded status of the plan was as follows (in thousands):
<CAPTION>
December 31,
Actuarial present value of: 1994 1993
----------------
<S> <C> <C>
Unvested benefit obligation $ 5 $ 8
Vested benefit obligation 1,385 1,409
------ ------
Accumulated benefit obligation 1,390 1,417
Effect of projected future
salary increases - 461
------ ------
Projected benefit obligation 1,390 1,878
Plan assets at fair market value 1,762 1,853
------ ------
Plan assets (greater) less than
projected benefit obligation (372) 25
Unrecognized net gain 262 90
------ ------
Accrued/(prepaid) pension $ (110) $ 115
====== ======
</TABLE>
34
<PAGE> 35
<TABLE>
The components of the Company's pension cost follow (in thousands):
<CAPTION>
For the years ended
December 31,
1994 1993 1992
----------------------
<S> <C> <C> <C>
Service costs - benefits earned
during the period, net $ - $ 81 $ 291
Interest cost on projected benefit
obligation and service costs 103 133 188
Expected return on plan assets (158) (104) (94)
----- ----- -----
$ (55) $ 110 $ 385
===== ===== =====
</TABLE>
Pension costs were determined based on the projected unit credit
actuarial cost method using an assumed 8% discount rate and expected long-term
rate of return on assets. A 6% rate of increase in compensation levels was
assumed in years prior to 1994.
A gain of $170,000 was recognized in 1994 as a result of the freezing of
the plan benefits. The gain on the sale of the Veratex Group recorded in 1992
and discussed in Note 3 of the Notes to Consolidated Financial Statements
included income of $1,045,000 related to the curtailment of the benefits
attributable to the Veratex employees in the pension plan.
Expenses relating to the Company's defined contribution and other similar
plans (including the ESOP described in Note 7 and including amounts charged to
discontinued operations) were $1,381,000, $824,000 and $593,000 in 1994, 1993
and 1992, respectively.
In 1994, the Company adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits". The adoption did not have a material impact on the
Company's financial position or results of operations.
NOTE 12 - INCOME TAXES
<TABLE>
The provision for income taxes is comprised of the following (in
thousands):
<CAPTION>
For the years
ended December 31,
1994 1993 1992
---------------------------
<S> <C> <C> <C>
Current:
Federal $7,077 $4,246 $ 2,765
State and local 1,072 920 681
------ ------ -------
8,149 5,166 3,446
------ ------ -------
Deferred:
Federal 791 1,135 349
State 115 (298) -
------ ------ ------
906 837 349
------ ------ ------
Income taxes $9,055 $6,003 $3,795
====== ====== ======
</TABLE>
In 1994, tax benefits of $947,000 related to the exercise of stock options
have been credited to paid-in capital. In 1992, deferred state income taxes
were not provided because they were not material.
35
<PAGE> 36
<TABLE>
The difference between the Company's reported income tax expense and the
federal income tax expense computed at the statutory rates of 35% for 1994 and
34% for 1993 and 1992 is explained in the following table (in thousands):
<CAPTION>
For the years
ended December 31,
1994 1993 1992
----------------------------
<S> <C> <C> <C>
Federal income tax at the
statutory rate $7,861 $5,819 $3,076
Amortization of nondeductible
intangible assets 372 42 493
State and local income taxes,
net of federal income tax benefit 772 412 450
Tax effect of EPE S Corporation
income (345) (280) (224)
Other 395 10 -
------ ------ ------
Taxes on income $9,055 $6,003 $3,795
====== ====== ======
</TABLE>
The Omnibus Budget Reconciliation Act of 1993 permitted the Company to
deduct from taxable income the amortization of intangibles arising from certain
business acquisitions occurring subsequent to July 1991. The effect of this
change in tax law was to reduce 1993 income tax expense by $310,000 for the
period July 1991 through December 31, 1992 and by an additional $140,000 for the
portion of 1993 prior to enactment of the law.
Effective January 1, 1993, the Company adopted SFAS No. 109, which
requires the use of an asset and liability method of accounting for income
taxes. The cumulative effect of this adoption resulted in a gain of $280,000
($.03 per share) and was otherwise not material to the Company's financial
position or results of operations, on a historical or pro forma basis.
Income tax payments made in 1994, 1993 and 1992 amounted to $5,723,000,
$10,892,000 and $2,335,000, respectively.
<TABLE>
A summary of deferred tax assets and liabilities follows (in thousands):
<CAPTION>
December 31,
1994 1993
------ ------
<S> <C> <C>
Accounts receivable reserves $3,011 $2,431
Accrued liabilities 3,917 4,266
Other 5 67
------ ------
Gross deferred tax assets $6,933 $6,764
====== ======
Fixed assets and depreciation methods $ 345 $ 266
Amortization of intangibles 1,972 917
Other 365 195
------ ------
Gross deferred tax liabilities $2,682 $1,378
====== ======
</TABLE>
The Company has evaluated its net deferred tax asset position and has
concluded that a valuation allowance is not required as these net assets are
more likely than not to be realized.
36
<PAGE> 37
NOTE 13 - SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
The following table presents the Company's quarterly financial information
for 1994 and 1993 (in thousands except per share data):
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales $60,697 $66,089 $71,414 $77,463 $275,663
Cost of sales 44,532 48,067 51,726 55,868 200,193
------- ------- ------- ------- --------
Gross profit 16,165 18,022 19,688 21,595 75,470
Selling, general and
administrative expenses 9,683 11,120 12,165 13,394 46,362
Nonrecurring acquisition
expenses - - 2,380 - 2,380
------- ------- ------- ------- --------
Operating income 6,482 6,902 5,143(a) 8,201 26,728(a)
Interest expense, net of
investment income (1,087) (1,145) (1,146) (889) (4,267)
------- ------- ------- ------- --------
Income before income taxes 5,395 5,757 3,997(a) 7,312 22,461(a)
Income taxes 2,013 2,221 1,947 2,874 9,055
------- -------- ------- ------- --------
Net income $ 3,382 $ 3,536 $ 2,050(a) $ 4,438 $ 13,406(a)
======= ======= ======= ======= ========
Earnings per share data:
Primary $ 0.31 $ 0.33 $ 0.19(a) $ 0.38 $ 1.21(a)(c)
======= ======= ======= ======= ========
Fully diluted $ 0.31 $ 0.31 $ 0.19(a) $ 0.36 $ 1.19(a)(c)
======= ======= ======= ======= ========
1993
Sales $43,105 $46,581 $48,918 $55,100 $193,704
Cost of sales 31,359 33,540 35,606 39,852 140,357
------- ------- ------- ------- --------
Gross profit 11,746 13,041 13,312 15,248 53,347
Selling, general and
administrative expenses 7,678 8,469 8,552 9,795 34,494
------- ------- ------- ------- --------
Operating income 4,068 4,572 4,760 5,453 18,853
Interest expense, net of
investment income (199) (271) (329) (940) (1,739)
------- ------- ------ ------- --------
Income before income taxes
and accounting change 3,869 4,301 4,431 4,513 17,114
Income taxes 1,544 1,768 1,234(b) 1,457 6,003(b)
------- ------- ------- ------- --------
Income before accounting change 2,325 2,533 3,197(b) 3,056 11,111(b)
Cumulative effect of
accounting change 280 - - - 280
------- ------- ------- ------- --------
Net income $ 2,605 $ 2,533 $ 3,197(b) $ 3,056 $ 11,391(b)
======= ======= ======= ======= ========
Earnings per share data
Primary:
Income before accounting
change $ .22 $ .24 $ .31(b) $ .29 $ 1.06(b)
Cumulative effect of
accounting change .03 - - - .03
------- ------- ------- ------- --------
Net income $ .25 $ .24 $ .31(b) $ .29 $ 1.09(b)
======= ======= ======= ======= ========
Fully diluted:
Income before accounting
change $ .22 $ .24 $ .31(b) $ .29 $ 1.06(b)
Cumulative effect of
accounting change .03 - - - .03
------- ------- ------- ------- --------
Net income $ .25 $ .24 $ .31(b) $ .29 $ 1.09(b)
======= ======= ======= ======= ========
<FN>
(a) Includes nonrecurring acquisition-related expenses of $2,380,000. Such
expenses, on an aftertax basis, were $1,860,000, or $.17 per primary
share. Net income, excluding nonrecurring acquisition-related expenses
for the third quarter, was $3,910,000, or $.36 per primary share ($.34
per share on a fully diluted basis) and for the year was $15,266,000, or
$1.38 per primary share ($1.32 per share on a fully diluted basis).
(b) Includes a one-time cumulative tax benefit of $450,000, or $.04 per
share, arising from a change in tax laws enacted in August of 1993
relating to amortization of intangibles. Income before accounting
change, excluding, the one-time cumulative tax benefit in the third
quarter, was $2,747,000, or $.27 per primary share $.27 (primary and
fully diluted) and for the year was $10,661,000, or $1.02 per primary
share (primary and fully diluted).
(c) Earnings per share is calculated independently for each quarter and the
sum of the quarters may not necessarily be equal to the full year
earnings per share amount.
</TABLE>
37
<PAGE> 38
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Except for information regarding the Company's executive officers included
in Part I of this Form 10-K, the information required under this Item is set
forth in the Company's 1995 Proxy Statement which is incorporated herein by
reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information required under this Item is set forth in the Company's 1995 Proxy
Statement which is incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this Item is set forth in the Company's 1995
Proxy Statement which is incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required under this Item is set forth in the Company's 1995
Proxy Statement which is incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
(a)(1) Financial Statements
The 1994 Consolidated Financial Statements of Omnicare are included in
Part II, Item 8.
(a)(2) Financial Statement Schedules
<CAPTION>
Schedule Page
Number Description Number
-------- ----------- ------
<S> <C> <C>
Report of Independent
Accountants on Financial
Statement Schedule S-1
VIII Valuation and Qualifying
Accounts S-2
</TABLE>
38
<PAGE> 39
All other financial statement schedules are omitted because they are not
applicable or because the required information is shown in the Consolidated
Financial Statements and Notes in Item 8 of this Form 10-K.
(a)(3) Exhibits
See Index to Exhibits at page E-1 of this Report.
(b) Reports on Form 8-K
During the quarter ended December 31, 1994, the Company filed the following
reports on Form 8-K:
(1) On October 11, 1994, a Form 8-K dated September 30, 1994 was filed to
present the combined financial statements of Evergreen Pharmaceutical, Inc. and
an affiliated company ("Evergreen") and to present the unaudited pro forma
financial statements combining the operations of Omnicare, Inc. and Evergreen.
(2) On October 25, 1994, a Form 8-K dated October 25, 1994 was filed to restate
Omnicare, Inc.'s 1993 Consolidated Financial Statements and Notes thereto
appearing in the Company's 1993 Annual Report to Stockholders and Management's
Discussion and Analysis of Results of Operations and Financial Condition which
were incorporated by reference to Item 8 and Item 7, respectively, of the 1993
Form 10-K, for the pooling of interests transaction between Omnicare and
Evergreen.
(3) On November 18, 1994, a Form 8-K dated October 31, 1994 was filed to report
the Company's consolidated net sales and net income for the month of October
1994.
39
<PAGE> 40
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, on this 24th day of
March 1995.
<TABLE>
<S> <C>
OMNICARE, INC.
March 24, 1995 /s/Joel F. Gemunder
----------------------------
Joel F. Gemunder, President
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
--
/s/Edward L. Hutton Chairman and Director |
---------------------- (Principal Executive Officer) |
Edward L. Hutton |
|
/s/Joel F. Gemunder President and Director |
---------------------- (Principal Executive Officer) |
Joel F. Gemunder |
|
/s/Kurt H. Stump Senior Vice President and |
---------------------- Chief Financial Officer |
Kurt H. Stump (Principal Financial Officer) |
|
|
/s/Thomas R. Marsh Vice President and Controller |
---------------------- (Principal Accounting Officer) |
Thomas R. Marsh |
-- |
Ronald K. Baur, Director* | |
Kenneth W. Chesterman, Director* | |
Charles H. Erhart, Jr., Director* | |
Mary Lou Fox, Director* | |
J. Peter Grace, Director* | March 24, 1995
Thomas C. Hutton, Director* | |
Patrick E. Keefe, Director* | |
Sandra E. Laney, Director* | |
Andrea R. Lindell, Director* | |
Sheldon Margen, M.D., Director* | |
Kevin J. McNamara, Director* | |
Timothy S. O'Toole, Director* | |
John M. Mount, Director* | |
D. Walter Robbins, Jr., Director* | |
-- --
<FN>
* Cheryl D. Hodges, by signing her name hereto, signs this document on
behalf of herself as a director and on behalf of each person indicated above
pursuant to a power of attorney duly executed by such person and filed with the
Securities and Exchange Commission.
</TABLE>
/s/ Cheryl D. Hodges
------------------------------
Cheryl D. Hodges
(Attorney-in-Fact)
40
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS ON
------------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Board of Directors of Omnicare, Inc.
Our audits of the consolidated financial statements referred to in
our report dated February 1, 1995, appearing on page 19 of this Form 10-K also
included an audit of the Financial Statement Schedule listed in Item 14 of this
Form 10-K. In our opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
Cincinnati, Ohio
February 1, 1995
S-1
<PAGE> 42
Schedule VIII
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged Write-offs Balance
beginning of to cost Acquisitions/ net of at end
period and expenses Divestitures Adjustments recoveries of period
----------- ------------ ------------ ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Allowance for
uncollectible
accounts receivable
Year ended
December 31,
1994 $2,612 $1,969 $ 722 $ - $(2,176) $3,127
1993 3,622 1,780 283 - (3,073) 2,612
1992 1,762 1,693 1,462 (419)(a) (876) 3,622
Allowance for
uncollectible accounts
receivable of
discontinued operations
Year ended
December 31,
1994 $ 288 $ - $ - $ - $ (6) $ 282
1993 481 - - - (193) 288
1992 2,719 360 (314) 419 (a) (2,703) 481
<FN>
(a) Transfer of allowance for uncollectible notes and accounts receivable of
discontinued operations.
</TABLE>
S-2
<PAGE> 43
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Previous Document
or Location Herein
--------------------------------
Number Under Item 601
Exhibit Regulation S-K and Type of Filing Previous Exhibit
Number Description of Exhibit and Filing Date Page Number
------- ----------------------------- --------------- ----------------
<S> <C> <C> <C>
1 ( 3) Certificate of Incorpor- Form 10-K E-2 - E-6
ation of Omnicare, Inc., March 28, 1984
as amended
2 ( 3) Amendment to Certificate Form 10-Q E-1 - E-3
of Incorporation of August 14, 1987
Omnicare, Inc., as amended
3 ( 3) By-Laws of Omnicare, Inc., Form 10-K E-4 - E-13
as amended March 26, 1993
4 ( 4) Indenture dated as of Form 8-K E-1 - E-95
October 1, 1993 between October 20, 1993
between Omnicare, Inc.
and NBD Bank, N.A.,
Trustee, as amended
October 20, 1993, for
the 5-3/4% Convertible
Subordinated Notes
due 2003.
5 (10) Executive Salary Protec- Form S-1 10.1
tion Plan, as amended May 22, 1981
6 (10) 1981 Stock Incentive Plan, Form 10-K E-3 - E-14
as amended March 25, 1988
7 (10) 1989 Stock Incentive Plan Proxy Statement A-1 - A-6
for 1989 Annual
Meeting of Stock-
holders dated
April 10, 1989
8 (10) 1992 Long-Term Stock Proxy Statement A-1 - A-9
Incentive Plan for 1992 Annual
Meeting of Stock-
holders dated
April 6, 1992
9 (10) Excess Benefits Plan Form 10-K E-22 - E-32
March 25, 1988
10 (10) Asset Purchase Agreement Form 8-K E-1 - E-68
dated as of March 18, April 7, 1993
1993 between Omnicare, Inc.
and Clar-Ron, Inc.
11 (10) Asset Purchase Agreement Form 8-K E-1 - E-87
dated as of September 2, September 2, 1994
1994 between Omnicare, Inc.
and Evergreen Pharmaceu-
tical, Inc.
</TABLE>
E-1
<PAGE> 44
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Previous Document
or Location Herein
--------------------------------
Number Under Item 601
Exhibit Regulation S-K and Type of Filing Previous Exhibit
Number Description of Exhibit and Filing Date Page Number
------- ----------------------------- --------------- ----------------
<S> <C>
12 (10) Form of Indemnification Proxy Statement A-1 - A-4
Agreement with Directors for 1987 Annual
and Officers Meeting of Stock-
holders dated
April 14, 1987
13 (10) Employment Agreements Form 10-K E-83 - E-126
with J. F. Gemunder and March 29, 1989
C. D. Hodges dated
August 4, 1988
14 (10) Amendment to Employment Form 10-K E-32 - E-35
Agreements with J. F. March 25, 1994
Gemunder and C. D. Hodges
dated May 17, 1993
15 (10) Employment Agreement Form 10-K E-36 - E-52
with T. R. Marsh dated March 25, 1994
August 4, 1988 and Amendment
dated May 17, 1993
16 (10) Employment Agreement 10-K E-4 - E-18
with P. E. Keefe dated March 25, 1994
March 4, 1993
17 (10) Employment Agreement Form 10-K E-19 - E-31
with K. W. Chesterman March 25, 1994
May 17, 1993
18 (10) Amendment to Employment E-3 - E-7
Agreements with J. F. Gemunder,
K. W. Chesterman, P. E. Keefe,
C. D. Hodges and T. R. Marsh
dated March 16, 1994.
19 (11) Statement re: Computation E-8
of Earnings per Common Share
20 (21) Subsidiaries of Omnicare, E-9
Inc.
21 (23) Consent of Independent E-10
Accountants
22 (24) Powers of Attorney E-11 - E-24
23 (27) Financial Data Schedule E-25
</TABLE>
E-2
<PAGE> 1
Exhibit 15
SEVENTH
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
JOEL F. GEMUNDER of Cincinnati, Ohio ("Employee"), and
OMNICARE MANAGEMENT COMPANY, a Delaware corporation with its principal place of
business in Cincinnati, Ohio (the "Company"), hereby agree as follows:
1. Recitals
--------
(a) The Company is an indirect subsidiary of Omnicare, Inc.
as a result of a corporate restructuring of Omnicare, Inc. and its affiliates.
(b) In connection with such restructuring certain assets and
liabilities of Omnicare, Inc. were transferred to the Company effective
December 31, 1988, including an Employment Agreement between Omnicare, Inc. and
Employee dated August 4, 1988 (the "Employment Agreement").
(c) The Company, as assignee, and Employee amended the
Employment Agreement by mutual written agreement on December 31, 1988, May 23,
1989, May 22, 1990, May 21, 1991, May 19, 1992 and May 17, 1993 (the "Prior
Amendments").
2. Amendments
----------
(a) Section 1.2 of the Employment Agreement is amended by
deleting the year "1998" from the third line of Section 1.2 and substituting
the year "1999" therefor.
(b) Section 2.1 of the Employment Agreement is amended by
deleting "$309,350" from the second line thereof and substituting "$342,500"
therefor.
3. General
-------
Except as previously changed by the Prior Amendments and as
specifically amended herein, the Employment Agreement will remain in full force
and effect in accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of May 16, 1994.
OMNICARE MANAGEMENT COMPANY
/s/ Joel F. Gemunder By: /s/ Cheryl D. Hodges
------------------------ ---------------------------
JOEL F. GEMUNDER
E - 3
<PAGE> 2
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
KENNETH W. CHESTERMAN of Cincinnati Ohio ("Employee") and OMNICARE MANAGEMENT
COMPANY, a Delaware corporation with its principal place of business in
Cincinnati, Ohio (the "Company"), hereby agree as follows:
1. Recitals
--------
(a) The Company is an indirect subsidiary of Omnicare, Inc.
as a result of a corporate restructuring of Omnicare, Inc. and its affiliates.
(b) In connection with such restructuring certain assets and
liabilities of Omnicare, Inc. were transferred to the Company effective
December 31, 1988. The Employment Agreement between Omnicare, Inc. and
Employee dated May 17, 1993 (the "Employment Agreement") was transferred
pursuant to the Assignment and Assumption Agreement dated May 16, 1994 among
the company, Employee and Omnicare, Inc. (the "Assignment and Assumption
Agreement").
2. Amendments
----------
(a) Section 1.2 of the Employment Agreement is hereby amended
by deleting the year "1998" from the third line of Section 1.2 and substituting
the year "1999" therefor.
(b) Section 2.1 of the Employment Agreement is hereby amended
by deleting "$163,630" from the second line thereof and substituting $176,800"
therefor.
3. General
-------
Except as specifically amended herein the Employment Agreement
will remain in full force and effect in accordance with its original terms,
conditions and provisions and those of the Assignment and Assumption Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of May 16, 1994.
OMNICARE MANAGEMENT COMPANY
/s/ Kenneth W. Chesterman By: /s/ Joel F. Gemunder
---------------------------- ----------------------
KENNETH W. CHESTERMAN
E - 4
<PAGE> 3
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
PATRICK E. KEEFE of Cincinnati Ohio ("Employee") and OMNICARE
MANAGEMENT COMPANY, a Delaware corporation with its principal place of business
in Cincinnati, Ohio (the "Company"), hereby agree as follows:
1. Recitals
--------
(a) The Company is an indirect subsidiary of Omnicare, Inc.
as a result of a corporate restructuring of Omnicare, Inc. and its affiliates.
(b) In connection with such restructuring certain assets and
liabilities of Omnicare, Inc. were transferred to the Company effective
December 31, 1988. The Employment Agreement between Omnicare, Inc. and
Employee dated March 4, 1993 (the "Employment Agreement") was transferred
pursuant to the Assignment and Assumption Agreement dated May 16, 1994 among
the company, Employee and Omnicare, Inc. (the "Assignment and Assumption
Agreement").
2. Amendment
---------
Section 1.2 of the Employment Agreement is hereby amended by
deleting the year "1998" from the third line of Section 1.2 and substituting
the year "1999" therefor.
3. General
-------
Except as specifically amended herein the Employment Agreement
will remain in full force and effect in accordance with its original terms,
conditions and provisions and those of the Assignment and Assumption Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of May 16, 1994.
OMNICARE MANAGEMENT COMPANY
/s/ Patrick E. Keefe By: /s/ Joel F. Gemunder
----------------------- ----------------------
PATRICK E. KEEFE
E - 5
<PAGE> 4
SEVENTH
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
CHERYL D. HODGES of Cincinnati, Ohio ("Employee"), and
OMNICARE MANAGEMENT COMPANY, a Delaware corporation with its principal place of
business in Cincinnati, Ohio (the "Company"), hereby agree as follows:
1. Recitals
--------
(a) The Company is an indirect subsidiary of Omnicare, Inc.
as a result of a corporate restructuring of Omnicare, Inc. and its affiliates.
(b) In connection with such restructuring certain assets and
liabilities of Omnicare, Inc. were transferred to the Company effective
December 31, 1988, including an Employment Agreement between Omnicare, Inc. and
Employee dated August 4, 1988 (the "Employment Agreement").
(c) The Company, as assignee, and Employee amended the
Employment Agreement by mutual written agreement on December 31, 1988, May 23,
1989, May 22, 1990, May 21, 1991, May 19, 1992 and May 17, 1993 (the "Prior
Amendments").
2. Amendments
----------
(a) Section 1.2 of the Employment Agreement is amended by
deleting the year "1998" from the third line of Section 1.2 and substituting
the year "1999" therefor.
(b) Section 2.1 of the Employment Agreement is amended by
deleting "$96,560" from the second line thereof and substituting "$112,050"
therefor.
3. General
-------
Except as previously changed by the Prior Amendments and as
specifically amended herein, the Employment Agreement will remain in full force
and effect in accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of May 16, 1994.
OMNICARE MANAGEMENT COMPANY
/s/ Cheryl D. Hodges By: /s/ Joel F. Gemunder
------------------------ ----------------------
CHERYL D. HODGES
E - 6
<PAGE> 5
SEVENTH
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THOMAS R. MARSH of Cincinnati, Ohio ("Employee"), and OMNICARE
MANAGEMENT COMPANY, a Delaware corporation with its principal place of business
in Cincinnati, Ohio (the "Company"), hereby agree as follows:
1. Recitals
--------
(a) The Company is an indirect subsidiary of Omnicare, Inc.
as a result of a corporate restructuring of Omnicare, Inc. and its affiliates.
(b) In connection with such restructuring certain assets and
liabilities of Omnicare, Inc. were transferred to the Company effective
December 31, 1988, including an Employment Agreement between Omnicare, Inc. and
Employee dated August 4, 1988 (the "Employment Agreement").
(c) The Company, as assignee, and Employee amended the
Employment Agreement by mutual written agreement on December 31, 1988, May 23,
1989, May 22, 1990, May 21, 1991, May 19, 1992 and May 17, 1993 (the "Prior
Amendments").
2. Amendments
----------
(a) Section 1.2 of the Employment Agreement is amended by
deleting the year "1996" from the third line of Section 1.2 and substituting
the year "1997" therefor.
(b) Section 2.1 of the Employment Agreement is amended by
deleting "$63,100" from the second line thereof and substituting "$75,030"
therefor.
3. General
-------
Except as previously changed by the Prior Amendments and as
specifically amended herein, the Employment Agreement will remain in full force
and effect in accordance with its original terms, conditions and provisions.
IN WITNESS WHEREOF, the parties have duly executed this
amendatory agreement as of May 16, 1994.
OMNICARE MANAGEMENT COMPANY
/s/ Thomas R. Marsh By: /s/ Joel F. Gemunder
------------------------ ----------------------
THOMAS R.MARSH
E - 7
<PAGE> 1
Exhibit 16
Exhibit 11 Omnicare, Inc. and Subsidiary Companies
Computation of Earnings Per Common Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the years ended December 31,
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
PRIMARY EARNINGS*
Income from continuing operations $13,406 $11,111 $ 5,250
Income from discontinued operations - - 8,710
Cumulative effect of accounting change - 280 -
------- ------- -------
Net income applicable to common stock $13,406 $11,391 $13,960
======= ======= =======
Shares
Weighted average number of common
shares outstanding 11,038 10,425 10,250
Additional shares assuming conversion of:
Stock options and stock warrants 172 90 122
------- ------- -------
Average common shares outstanding and
equivalents as adjusted 11,210 10,515 10,372
======= ======= =======
Primary earnings per common share:
Continuing operations $ 1.20 $ 1.06 $ 0.51
Discontinued operations - - 0.84
Accounting change - 0.02 -
------- ------- -------
Net income $ 1.20 $ 1.08 $ 1.35
======= ======= =======
FULLY DILUTED EARNINGS*
Income from continuing operations $13,406 $11,111 $ 5,250
Aftertax interest expense related to
5-3/4% convertible subordinated debentures 3,218 756 -
------- ------- -------
Income from continuing operations as adjusted 16,624 11,867 5,250
Income from discontinued operations - - 8,710
Cumulative effect of accounting change - 280 -
------- ------- -------
Net income as adjusted $16,624 $12,147 $13,960
======= ======= =======
Shares
Weighted average number of common
shares outstanding 11,038 10,425 10,250
Additional shares assuming conversion of:
Stock options and stock warrants 187 90 122
Convertible subordinated debentures 2,788 714 -
------- ------- -------
Average common shares outstanding and
equivalents as adjusted 14,013 11,229 10,372
======= ======= =======
Fully diluted earnings per common share:
Continuing operations $ 1.19 $ 1.06 $ 0.51
Discontinued operations - - 0.84
Accounting change - 0.02 -
------- ------- -------
Net income as adjusted $ 1.19 $ 1.08 $ 1.35
======= ======= =======
<FN>
*This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not required by APB Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
E-8
<PAGE> 1
Exhibit 17
Subsidiaries of Omnicare, Inc.
-----------------------------
The following is a list of subsidiaries of the Company as of December 31,
1994. Other subsidiaries which have been omitted from the list would not, when
considered in the aggregate, constitute a significant subsidiary. Each of the
companies is incorporated under the laws of the state following its name.
All of the companies listed below are included in the consolidated
financial statements of the Company as of December 31, 1994 and were 100% owned
at December 31, 1994.
Anderson Medical Services, Inc. (Delaware, 100%)
Beeber Pharmacies, Inc. (Ohio, 100%)
Care Pharmaceutical Services, Inc. (Delaware, 100%)
D&R Pharmaceutical Services, Inc. (Kentucky, 100%)
Enloe Drugs, Inc. (Delaware, 100%)
Evergreen Pharmaceutical East, Inc. (Washington, 100%)
Evergreen Pharmaceutical, Inc. (Washington 100%)
Evergreen Pharmaceutical Supply, Inc. (Washington, 100%)
Freed's Pharmacy, Inc. (Delaware, 100%)
Home Care Pharmacy, Inc. (Delaware, 100%)
Home Pharmacy Services, Inc. (Missouri, 100%)
Interlock Pharmacy Systems, Inc. (Missouri, 100%)
Langsam Health Services, Inc. (DBA Sequoia
Health Services) (Delaware, 100%)
Langsam Medical Products, Inc. (DBA Sequoia
Medical Products) (Delaware, 100%)
Lawrence Medical Supply, Inc. (Delaware, 100%)
LoMed Prescription Services, Inc. (Ohio, 100%)
OCR Services Corporation (Delaware, 100%)
Omnicare Holding Company (Delaware, 100%)
Omnicare Management Company (Delaware, 100%)
PRN Pharmaceutical Services, Inc. (Delaware, 100%)
UC Acquisition Corp. (DBA UniCare, Inc.) (Delaware, 100%)
Weber Medical Systems, Inc. (Delaware, 100%)
Westhaven Services Co. (Ohio, 100%)
E-9
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (Nos. 2-78161,
33-34635, 33-48209 and 33-88856) and Form S-3 (Nos. 33-81644 and 33-83752) of
Omnicare, Inc. of our report dated February 1, 1995 appearing on page 19 of
this Form 10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on page S-1 of this
Form 10-K.
PRICE WATERHOUSE LLP
Cincinnati, Ohio
March 24, 1995
E-10
<PAGE> 1
Exhibit 19
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 22 , 1995
----
/s/ Ronald K. Baur
------------------
Ronald K. Baur
E - 11
<PAGE> 2
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 21 , 1995
----
/s/ Kenneth W. Chesterman
-------------------------
Kenneth W. Chesterman
E - 12
<PAGE> 3
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 23 , 1995
----
/s/ Charles H. Erhart
---------------------
Charles H. Erhart
E - 13
<PAGE> 4
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 24 , 1995
----
/s/ Mary Lou Fox
----------------
Mary Lou Fox
E - 14
<PAGE> 5
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ J. Peter Grace
------------------
J. Peter Grace
E - 15
<PAGE> 6
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ Thomas C. Hutton
--------------------
Thomas C. Hutton
E - 16
<PAGE> 7
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 24 , 1995
----
/s/ Patrick E. Keefe
--------------------
Patrick E. Keefe
E - 17
<PAGE> 8
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ Sandra E. Laney
-------------------
Sandra E. Laney
E - 18
<PAGE> 9
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ Andrea R. Lindell
---------------------
Andrea R. Lindell
E - 19
<PAGE> 10
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 21 , 1995
----
/s/ Sheldon Margen
------------------
Sheldon Margen
E - 20
<PAGE> 11
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 24 , 1995
----
/s/ Kevin J. McNamara
---------------------
Kevin J. McNamara
E - 21
<PAGE> 12
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 24 , 1995
----
/s/ John M. Mount
-----------------
John M. Mount
E - 22
<PAGE> 13
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ Timothy S. O'Toole
----------------------
Timothy S. O'Toole
E - 23
<PAGE> 14
POWER OF ATTORNEY
-----------------
The undersigned director of OMNICARE, INC. ("Company") hereby appoints
EDWARD L. HUTTON, JOEL F. GEMUNDER and CHERYL D. HODGES as his true and lawful
attorneys-in-fact for the purpose of signing the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, and all amendments thereto, to
be filed with the Securities and Exchange Commission. Each of such
attorneys-in-fact is appointed with full power to act without the other.
Dated: March 20 , 1995
----
/s/ D. Walter Robbins, Jr.
--------------------------
D. Walter Robbins, Jr.
E - 24
<TABLE> <S> <C>
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<NAME> OMNICARE, INC.
<S> <C>
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0
0
<OTHER-SE> 163,725
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