<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
Commission File Number 1-8269
OMNICARE, INC.
--------------
Incorporated under the laws of I.R.S. Employer Identification
the State of Delaware No. 31-1001351
2800 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202-4728
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(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (513) 762-6666
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Indicate by check mark whether the registrant:
1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports) and
2) has been subject to such filing requirement for the past 90
days.
Yes x No
--- ---
COMMON STOCK OUTSTANDING
- ------------------------
<TABLE>
<CAPTION>
Number of
Shares Date
------ ----
<S> <C> <C>
Common Stock, $1 par value 66,063,201 September 30, 1996
</TABLE>
<PAGE> 2
OMNICARE, INC. AND
------------------
SUBSIDIARY COMPANIES
--------------------
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
September 30, 1996 and December 31, 1995 3
Consolidated Statement of Income -
Three and nine months ended -
September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows -
Nine months ended -
September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 7
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
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<PAGE> 3
Item 1. Financial Statements
--------------------
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
(in thousands except share data)
<TABLE>
<CAPTION>
UNAUDITED
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 251,399 $ 40,137
Accounts receivable, less allowances
of $5,939 (1995-$4,761) 100,504 80,247
Inventories 39,896 28,841
Deferred income tax benefits 6,412 6,600
Other current assets 9,567 5,247
--------- ---------
Total current assets 407,778 161,072
Properties and equipment, at cost
less accumulated depreciation of
$25,848 (1995-$15,248) 49,667 32,458
Goodwill, less accumulated amortization
of $13,968 (1995-$10,448) 222,411 157,843
Other assets 14,198 9,463
--------- ---------
Total assets $ 694,054 $ 360,836
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,885 $ 22,020
Amounts payable pursuant to acquisition agreements 4,527 13,642
Current portion of long-term debt 1,151 1,051
Income taxes payable 2,359 --
Accrued employee compensation 8,323 5,338
Liabilities relating to discontinued operations 833 1,547
Other current liabilities 13,084 11,090
--------- ---------
Total current liabilities 58,162 54,688
Long-term debt 75,913 82,692
Deferred income taxes 3,771 2,621
Amounts payable pursuant to acquisition agreements 6,552 1,418
Other noncurrent liabilities 6,321 4,656
--------- ---------
Total liabilities 150,719 146,075
--------- ---------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 110,000,000 shares
$1 par; 66,130,327 shares issued
(1995-26,344,508 pre-1996 stock split shares) 66,130 26,345
Paid-in capital 368,532 99,686
Retained earnings 121,182 93,598
--------- ---------
555,844 219,629
Treasury stock, at cost-67,126 shares
(1995-24,268 pre-1996 stock split shares) (971) (482)
Deferred compensation (9,728) (2,126)
Unallocated stock of ESOP (1,810) (2,260)
--------- ---------
Total stockholders' equity 543,335 214,761
--------- ---------
Total liabilities and stockholders' equity $ 694,054 $ 360,836
========= =========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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<PAGE> 4
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Income
UNAUDITED
(In thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $140,733 $102,145 $379,751 $289,797
Cost of sales 100,111 73,198 270,402 209,245
-------- -------- -------- --------
Gross profit 40,622 28,947 109,349 80,552
Selling, general and administrative expenses 23,213 16,789 63,285 48,751
Acquisition expenses-pooling-of-interests - - - 1,292(b)
-------- -------- -------- --------
Operating income 17,409 12,158 46,064 30,509
Investment income 3,647 713 8,225 2,794
Interest expense (1,135) (1,351) (3,670) (4,558)
-------- -------- -------- --------
Income before income taxes 19,921 11,520 50,619 28,745
Income taxes 8,108 4,585 20,281 11,663
-------- -------- -------- --------
Net income $ 11,813 $ 6,935 $ 30,338 $ 17,082(b)
======== ======== ======== ========
Earnings per share(a):
Primary $ .17 $ .13 $ .48 $ .33(b)
Fully diluted $ .16 $ .12 $ .44 $ .30(b)
Dividends paid per share(a) $ .015 $ .013 $ .045 $ .038
Weighted average number of
common shares outstanding(a):
Primary 67,956 52,546 63,730 52,316
======== ======== ======== ========
Fully diluted 78,303 65,660 74,423 65,074
======== ======== ======== ========
<FN>
(a) Adjusted for two-for-one stock split distributed June 27, 1996.
(b) Acquisition expenses of $1,292,000 pretax, or $989,000 after taxes
($0.02 per primary share and $0.01 fully diluted), are included in the
1995 year-to-date period. Net income, excluding these acquisition
expenses, for the nine months ended September 30, 1995 was $18,071,000
($0.35 per primary share and $0.31 fully diluted), respectively.
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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<PAGE> 5
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Cash Flows
UNAUDITED
<TABLE>
<CAPTION>
(in thousands) Nine Months Ended
September 30,
---------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 30,338 $ 17,082
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 10,720 7,728
Provision for doubtful accounts 2,882 2,383
Deferred tax provision 2,041 (397)
Changes in assets and liabilities, net of effects
from acquisition of businesses:
Accounts receivable (16,745) (8,581)
Inventories (7,235) (3,374)
Current and noncurrent assets (5,942) (1,293)
Income taxes payable 2,340 1,381
Payables and accrued liabilities 4,189 (4,438)
Current and noncurrent liabilities 3,478 362
--------- --------
Net cash provided by operating activities 26,066 10,853
--------- --------
Cash flows from investing activities:
Acquisition of businesses (68,035) (32,187)
Capital expenditures (21,451) (10,633)
Marketable securities -- 18,801
Proceeds from sale of properties and equipment 181 209
Cash flow from discontinued operations (714) (663)
--------- --------
Net cash used by investing activities (90,019) (24,473)
--------- --------
Cash flows from financing activities:
Proceeds from long-term borrowings -- 5,856
Principal payments on long-term obligations (409) (7,497)
Net proceeds from stock offering 279,159 --
Exercise of stock options and warrants, net (781) (246)
Dividends paid (2,754) (1,926)
--------- --------
Net cash provided (used) by financing activities 275,215 (3,813)
--------- --------
Net increase (decrease) in cash and cash equivalents 211,262 (17,433)
Cash and cash equivalents at beginning of period 40,137 34,553
--------- --------
Cash and cash equivalents at end of period $ 251,399 $ 17,120
========= ========
Supplemental disclosures of cash flow information
- -------------------------------------------------
Income taxes paid $ 14,785 $ 9,344
Interest paid 4,897 4,933
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
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<PAGE> 6
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
1. The interim financial data are unaudited; however, in the opinion of the
management of Omnicare, Inc., the interim data include all adjustments (which
include only normal adjustments) considered necessary for a fair presentation of
the consolidated financial position, results of operations and cash flows of
Omnicare, Inc. and its consolidated subsidiaries (Omnicare or the Company).
2. Since January 1, 1996, the Company has completed ten acquisitions including
Medical Arts Health Care, Inc. in Conyers, Georgia, Managed Health Care in
Springfield, Missouri, and Pharmacy Care Systems Division of Big B, Inc. in
Bessemer, Alabama, all in January; Benwood Pharmacy Services, Inc., Buffalo, New
York, in February; Prometheus Pharmacy Company, Inc. Newington, Connecticut, in
June; Pompton Nursing Home Suppliers, Pompton Plains, New Jersey and Three Forks
Apothecary, Beattyville, Kentucky in August; and Long Term Care Pharmacy,
Twinsburg, Ohio, Northwest Pharmaceutical Services, Port Orchard, Washington and
Downeast Pharmacy, Bangor, Maine, all in September. All of these transactions
have been accounted for as purchase transactions and, accordingly, the purchase
price paid for each has been allocated to the fair value of the assets acquired
and liabilities assumed. The results of operations of the acquired companies
have been included in consolidated results of the Company from the effective
dates of the acquisitions.
3. On May 20, 1996, the Board of Directors declared a two-for-one split of the
Company's $1 par value common stock payable on June 27, 1996 to stockholders of
record on June 5, 1996. As a result of the split, 32,697,700 additional shares
were issued including 8,677 from treasury stock. Paid-in capital and treasury
stock were reduced by $33,147,000 and $458,000, respectively. All references
in the accompanying financial statements to the number of common shares and
per share amounts for 1995 have been restated to reflect the stock split.
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<PAGE> 7
Item 2. Management's Discussion and Analysis of Results
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of Operations and Financial Condition.
--------------------------------------
Results of Operations
Net income for the third quarter rose 70% to $11,813,000 from the
$6,935,000 earned in the same period a year ago. Fully diluted earnings per
share rose 33% to $.16 from the $.12 earned in the third quarter of 1995.
Primary earnings per share increased 31% to $.17 versus the $.13 earned a year
ago. The average number of shares outstanding rose 19% on a fully diluted basis
and 29% on a primary basis over the comparable prior year period. Sales for the
third quarter increased 38% to $140,733,000 versus the $102,145,000 recorded a
year ago.
For the first nine months of 1996, net income increased 78% to $30,338,000
over the $17,082,000 earned for the nine months ended September 30, 1995. Fully
diluted earnings per share rose 47% to $.44 from the $.30 earned for the same
period a year ago, while primary earnings per share increased 45% to $.48 from
the $.33 earned a year ago. Earnings for the 1995 nine month period included a
charge of $989,000 after taxes ($.02 per primary share and $.01 fully diluted)
for expenses related to the acquisition of Specialized Pharmacy Services, Inc.
in a pooling of interests transaction. Excluding this charge from the same
period a year ago, net income in the first nine months of 1996 rose 68%. Fully
diluted earnings per share, on this basis, rose 42%, while primary earnings per
share increased 37%. Sales for the first nine months of 1996 grew 31% to
$379,751,000 from the $289,797,000 in the same period of 1995.
Omnicare's sales and earnings performance is the result of the Company's
continued focus on several strategic avenues of growth. First, through the
Company's acquisition program, Omnicare continued to expand its network of
institutional pharmacies in key geographic regions, including New England and
the
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<PAGE> 8
Pacific Northwest. These acquisitions, coupled with internal growth, brought
the total number of nursing facility residents served to 275,600, up 30% over
the number served one year ago.
Higher acuity levels among nursing facility residents also contributed to
Omnicare's sales and earnings momentum, as these patients require more complex
levels of care. This trend, in turn, has generated greater demand for Omnicare's
expanding infusion therapy services. In addition, Heartland Healthcare Services,
a 50/50 partnership with Health Care and Retirement Corporation, contributed to
growth and expanded its operations in Florida during the quarter.
Investment income, net of interest expense, of $2,512,000 and $4,555,000,
for the three and nine month periods ended September 30, 1996, respectively,
increased by $3,150,000 and $6,319,000, respectively, over the same periods of
1995 due to an increase in the invested cash balance, owing primarily to the
receipt of $298.3 million (before underwriting discounts and expenses) in gross
proceeds from a public offering of 5,750,000 shares of common stock in March
1996.
During the three and nine month periods ended September 30, 1996, the
effective tax rates of 40.7% and 40.1%, respectively, were relatively consistent
with the comparable prior year periods.
Liquidity and Capital Resources
Cash and cash equivalents at September 30, 1996 increased by $211,262,000
to $251,399,000 from the $40,137,000 balance at December 31, 1995. In March
1996, the Company completed a public offering of 5,750,000 shares of common
stock resulting in gross proceeds of $298,281,000 (before underwriting discounts
and expenses). The Company's capital requirements are primarily related to its
acquisition program. During the nine months ended September 30, 1996, the
Company made ten acquisitions for an aggregate capital
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<PAGE> 9
investment of approximately $79 million. Such acquisitions were financed from
cash and cash equivalents and the issuance of approximately 328,000 shares of
common stock with a market value of approximately $12 million. There are no
material commitments outstanding at September 30, 1996 other than
acquisition-related payments which may be made contingent on the performance of
businesses acquired. The Company's current ratio at September 30, 1996 and
December 31, 1995 was 7.0 to 1 and 2.9 to 1, respectively.
As of September 30, 1996, the Company had an agreement with a consortium
of six banks for a five-year $135 million revolving line of credit. No amounts
were outstanding under this agreement. During the third quarter of 1996,
Omnicare renegotiated its $135 million revolving credit facility and obtained a
$400 million line of credit with a consortium of sixteen banks, effective
October 22, 1996.
Omnicare announced on October 10, 1996 that all of its 5-3/4% Convertible
Subordinated Notes due 2003 in the principal amount of $73.6 million that had
been called for redemption were converted into Omnicare common stock. The
conversion of the Notes will not have a dilutive impact on Omnicare's fully
diluted earnings per share, since the calculation of this item historically
assumed 100% conversion. After the conversion, Omnicare's long term debt to
total capital was approximately one percent.
Dividends of $2,754,000 were paid during the nine months ended September
30, 1996 versus the $1,926,000 paid in the comparable prior year period.
The Company believes its sources of capital are adequate for its needs.
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<PAGE> 10
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995 Regarding Forward-Looking Information
In addition to historical information, this Form 10-Q contains
forward-looking statements and performance trends which are subject to certain
risks and uncertainties that could cause actual results to differ materially
from these statements and trends. Such factors include, but are not limited to:
the continued availability of suitable acquisition candidates; changing economic
and market conditions that could impact the suitability of such candidates;
Omnicare's ability to integrate acquisitions; the effect of changes in
government regulation and reimbursement policies and in the interpretation and
application of such policies; the failure of the Company to obtain or maintain
required regulatory approvals or licenses; and other risks and uncertainties as
described in the "Risk Factors" section of the Company's Registration Statement
(No. 333-01203) dated March 19, 1996 as filed with the Securities and Exchange
Commission.
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<PAGE> 11
PART II. -- OTHER INFORMATION
-----------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
11 Computation of Earnings per Share
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K - On September 11, 1996, a Form 8-K was
filed to report the Company's intention to call for redemption
all of its outstanding 5 3/4% Convertible Subordinated Notes due
2003.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Omnicare, Inc.
---------------------------------
(Registrant)
Date November 14, 1996 By /s/ Joel F. Gemunder
----------------------- ---------------------------------
Joel F. Gemunder
President
(Principal Executive Officer)
Date November 14, 1996 By /s/ David W. Froesel, Jr.
----------------------- ---------------------------------
David W. Froesel, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
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<PAGE> 1
Exhibit 11 OMNICARE, INC. AND SUBSIDIARY COMPANIES
Computation of Earnings Per Common Share
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ----------------------
1996 1995 1996 1995
------- ------- ------- ------
<S> <C> <C> <C> <C>
Primary Earnings
Net income $11,813 $ 6,935 $30,338 $17,082
Aftertax expense related to preferred
stock dividend payable to minority
interest in subsidiary 3 1 8 7
Minority interest in net income of
subsidiary - (18) (33) (28)
------- ------- ------- -------
Net income as adjusted $11,816 $ 6,918 $30,313 $17,061
======= ======= ======= =======
Shares
Weighted average number of common
shares outstanding 65,851 52,546 61,582 52,316
Additional shares assuming conversion of:
Stock options and stock warrants 2,105 1,694 2,148 1,394
------- ------- ------- -------
Average common shares outstanding and
equivalent as adjusted 67,956 54,240 63,730 53,710
======= ======= ======= =======
Primary earnings per common share $ 0.17 $ 0.13 $ 0.48 $ 0.32*
======= ======= ======= =======
Fully Diluted Earnings
Net income $11,813 $ 6,935 $30,338 $17,082
Aftertax expense related to preferred stock
dividend payable to minority interest in
subsidiary 3 1 8 7
Minority interest in net income of
subsidiary - (18) (33) (28)
Aftertax interest expense related to 5 3/4%
convertible subordinated debentures 713 802 2,266 2,407
------- ------- ------- -------
Net income as adjusted $12,529 $ 7,720 $32,579 $19,468
======= ======= ======= =======
Shares
Weighted average number of common
shares outstanding 65,851 52,546 61,582 52,316
Additional shares assuming conversion of:
Stock options and stock warrants 2,105 1,694 2,148 1,394
Convertible subordinated debentures 10,347 11,420 10,693 11,364
------- ------- ------- -------
Average common shares outstanding and
equivalents as adjusted 78,303 65,660 74,423 65,074
======= ======= ======= =======
Fully diluted earnings per common share $ 0.16 $ 0.12 $ 0.44 $ 0.30
======= ======= ======= =======
<FN>
* This calculation is submitted in accordance with Regulation S-K Item
601(b)(11), although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 if it results in dilution of less than 3% or is
anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353230
<NAME> OMNICARE, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 251,399
<SECURITIES> 0
<RECEIVABLES> 106,443
<ALLOWANCES> 5,939
<INVENTORY> 39,896
<CURRENT-ASSETS> 407,778
<PP&E> 75,515
<DEPRECIATION> 25,848
<TOTAL-ASSETS> 694,054
<CURRENT-LIABILITIES> 58,162
<BONDS> 75,913
<COMMON> 66,130
0
0
<OTHER-SE> 477,205
<TOTAL-LIABILITY-AND-EQUITY> 694,054
<SALES> 379,751
<TOTAL-REVENUES> 379,751
<CGS> 270,402
<TOTAL-COSTS> 270,402
<OTHER-EXPENSES> 63,285
<LOSS-PROVISION> 2,882
<INTEREST-EXPENSE> 3,670
<INCOME-PRETAX> 50,619
<INCOME-TAX> 20,281
<INCOME-CONTINUING> 30,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,338
<EPS-PRIMARY> .48
<EPS-DILUTED> .44
</TABLE>
