<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
Commission File Number 1-8269
OMNICARE, INC.
--------------
Incorporated under the laws of I.R.S. Employer Identification
State of Delaware No. 31-1001351
2800 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202-4728
- ---------------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (513) 762-6666
- -------------------------------------------------------------------
Indicate by check mark whether the registrant:
1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports) and
2) has been subject to such filing requirement for the past 90
days.
Yes x No
----- -----
COMMON STOCK OUTSTANDING
- ------------------------
<TABLE>
<CAPTION>
Number of
Shares Date
------ ----
<S> <C> <C>
Common Stock, $1 par value 65,533,796 June 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 -
June 30, 1996 and December 31, 1995 3
Consolidated Statement of Income -
Three and six months ended -
June 30, 1996 and 1995 4
Consolidated Statement of Cash Flow -
Six months ended -
June 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 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
-2-
<PAGE> 3
Item 1. Financial Statements
--------------------
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
UNAUDITED
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
--------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $302,996 $ 40,137
Accounts receivable, less allowances
of $5,368 (1995-$4,761) 89,364 80,247
Inventories 36,617 28,841
Deferred income tax benefits 6,614 6,600
Other current assets 8,194 5,247
-------- --------
Total current assets 443,785 161,072
Properties and equipment, at cost
less accumulated depreciation of
$22,751 (1995-$15,248) 40,661 32,458
Goodwill, less accumulated amortization
of $12,627 (1995-$10,448) 168,955 157,843
Other assets 10,268 9,463
-------- --------
Total assets $663,669 $360,836
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,286 $ 22,020
Amounts payable pursuant to acquisition agreements 1,813 13,642
Current portion of long-term debt 1,101 1,051
Income taxes payable 1,117 -
Accrued employee compensation 5,574 5,338
Liabilities relating to discontinued operations 1,090 1,547
Other current liabilities 13,162 11,090
--------- --------
Total current liabilities 49,143 54,688
Long-term debt 78,071 82,692
Deferred income taxes 3,339 2,621
Amounts payable pursuant to acquisition agreements 3,243 1,418
Other noncurrent liabilities 6,120 4,656
-------- --------
Total liabilities 139,916 146,075
-------- --------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 110,000,000 shares
$1 par; 65,595,496 shares issued
(1995-26,344,508 pre stock split shares) 65,595 26,345
Paid-in capital 360,578 99,686
Retained earnings 110,355 93,598
-------- --------
536,528 219,629
Treasury stock, at cost-61,700 shares
(1995-24,268 pre stock split shares) (810) (482)
Deferred compensation (10,005) (2,126)
Unallocated stock of ESOP (1,960) (2,260)
-------- --------
Total stockholders' equity 523,753 214,761
-------- --------
Total liabilities and stockholders' equity $663,669 $360,836
======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-3-
<PAGE> 4
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Income
(in thousands except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $121,833 $97,125 $239,018 $187,652
Cost of sales 86,738 70,168 170,291 136,047
-------- ------- -------- --------
Gross profit 35,095 26,957 68,727 51,605
Selling, general and administrative expenses 20,639 16,549 40,072 31,962
Acquisition expenses-pooling-of-interests - 1,292 - 1,292
-------- ------- -------- --------
Operating income 14,456 9,116 28,655 18,351
Investment income 4,018 985 4,578 2,081
Interest expense (1,215) (1,576) (2,535) (3,207)
-------- ------- -------- --------
Income before income taxes 17,259 8,525 30,698 17,225
Income taxes 6,863 3,629 12,173 7,078
-------- ------- -------- --------
Net income $ 10,396 $ 4,896 $ 18,525 $ 10,147
======== ======= ======== ========
Earnings per share(A):
Primary $ .15 $ .09 $ .30 $ .19
Fully diluted $ .14 $ .09 $ .28 $ .18
Dividends paid per share(A) $ .015 $ .013 $ .03 $ .025
Weighted average number of
common shares outstanding(A):
Primary 67,341 52,460 61,595 52,200
======== ======= ======== ========
Fully diluted 77,825 65,012 72,462 64,780
======== ======= ======== ========
<FN>
(A) Adjusted for two-for-one stock split distributed June 27, 1996.
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-4-
<PAGE> 5
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Statement of Cash Flow
UNAUDITED
<TABLE>
<CAPTION>
(in thousands) Six Months Ended
June 30,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 18,525 $ 10,147
Adjustments to reconcile net income
to net cash flow from operating activities:
Depreciation and amortization 6,416 4,936
Provision for doubtful accounts 2,009 1,351
Deferred tax provision 811 368
Changes in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (9,954) (7,467)
Inventories (6,288) (2,906)
Current and noncurrent assets (3,097) (1,080)
Income taxes payable 1,117 (1,557)
Payables and accrued liabilities 3,357 1,423
Current and noncurrent liabilities 4,541 1,418
-------- --------
Net cash flow from operating activities 17,437 6,633
-------- --------
Cash flow from investing activities:
Acquisition of businesses (19,819) (16,774)
Capital expenditures (10,631) (6,718)
Marketable securities - 19,240
Proceeds from sale of properties and equipment 94 187
Cash flow from discontinued operations (457) (410)
-------- --------
Net cash flow from investing activities (30,813) (4,475)
-------- --------
Cash flow from financing activities:
Net borrowings (repayments) on line-of-credit - (3,670)
Proceeds from long-term borrowings - 856
Principal payments on long-term obligations (318) (4,448)
Net proceeds from stock offering 279,159 -
Exercise of stock options and warrants, net (838) (84)
Dividends paid (1,768) (1,275)
-------- --------
Net cash flow from financing activities 276,235 (8,621)
-------- --------
Net increase (decrease) in cash and cash equivalents 262,859 (6,463)
Cash and cash equivalents at beginning of period 40,137 34,553
-------- --------
Cash and cash equivalents at end of period $302,996 $ 28,090
======== ========
Supplemental disclosures of cash flow information
Income taxes paid $ 8,530 $ 6,603
Interest paid 2,590 2,937
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
-5-
<PAGE> 6
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Notes to Consolidated Financial Statements
1. The interim financial data are unaudited; however, in the opinion of the
management of Omnicare, Inc., the interim data include all adjustments (which
include only normal adjustments) considered necessary for a fair presentation of
the consolidated financial position, results of operations and cash flow of
Omnicare, Inc. and its consolidated subsidiaries ("Company").
2. Since January 1, 1996, the Company has completed five 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, and Prometheus Pharmacy Company, Inc. Newington, Connecticut,
in June. 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. Additional 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.
-6-
<PAGE> 7
Item 2. Management's Discussion and Analysis of Results
-----------------------------------------------
of Operations and Financial Condition.
--------------------------------------
Results of Operations
Net income for the second quarter ended June 30, 1996 rose 112% to
$10,396,000 from the $4,896,000 earned in the second quarter of 1995. Primary
earnings per share rose 67% to $.15 from the $.09 earned in the same period of
1995. Fully diluted earnings per share increased 56% to $.14 versus the $.09
earned a year ago. The average number of shares outstanding rose 28%, on a
primary basis, and 20%, on a fully diluted basis, over the comparable prior-year
period. Earnings for the second quarter of 1995 included a charge of $1,292,000
before taxes and $989,000 after taxes ($.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, earnings in the second quarter of 1996 rose 77%.
Primary earnings per share, on this basis, rose 36%, while fully diluted
earnings per share increased 40%. Sales for the second quarter increased 25% to
$121,833,000 versus the $97,125,000 recorded a year ago.
For the first six months of 1996, net income increased 83% to $18,525,000
over the $10,147,000 earned for the six months ended June 30, 1995. Primary
earnings per share rose 58% to $.30 from the $.19 earned for the same period a
year ago, while fully diluted earnings per share increased 56% to $.28 from the
$.18 earned a year ago. Excluding the aforementioned charge for acquisition
expenses, earnings for the first six months of 1996 rose 66%. Primary earnings
per share, on this basis, increased 43% and fully diluted earnings rose 40%.
Sales for the first six months of 1996 grew 27% to $239,018,000 from the
$187,652,000 in the first half of 1995.
The Company's sales and earnings momentum was attributed to its continued
focus on acquisitions of institutional pharmacy providers,
-7-
<PAGE> 8
strong internal growth and further success in developing innovative geriatric
pharmaceutical care programs.
During the second quarter of 1996, one acquisition was completed, and,
since June 30, 1996, one additional acquisition has been completed. Together,
these acquisitions have added more than 15,500 new nursing facility residents to
those already served by the Company. The June acquisition of Prometheus Pharmacy
Company, Inc., based in Newington, Connecticut, added approximately 3,000
long-term care facility residents in Connecticut. Also, during August, the
Company completed the acquisition of Pompton Nursing Home Suppliers, based in
Pompton Plains, New Jersey, which serves over 12,500 residents of nursing homes
and other long-term care facilities in New Jersey and New York. These
acquisitions, combined with internal growth, bring the total number of nursing
facility residents served to 250,000, up 31% over the number served one year ago
and a gain of 9% since March 31, 1996.
Also contributing to the Company's growth were higher acuity levels among
nursing facility residents, the further expansion of infusion therapy services,
and continued progress at Heartland Healthcare Services, a 50/50 partnership
with Health Care and Retirement Corporation.
Investment income, net of interest expense, of $2,803,000 and $2,043,000,
for the three and six month periods ended June 30, 1996, respectively, increased
by $3,394,000 and $3,169,000, 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 six month periods ended June 30, 1996, the effective
tax rates of 39.8% and 39.7%, respectively, decreased 2.8 and 1.4 percentage
points, respectively, over the comparable prior year periods. These 1996
decreases were caused by the unfavorable impact on last year's tax rates of the
nondeductibility of a portion
-8-
<PAGE> 9
of the expenses related to the Specialized acquisition. Had these acquisition
expenses not been incurred in 1995, the effective tax rates for the three and
six month periods ended June 30, 1995 would have been 40.1% and 39.9%,
respectively, which are comparable to the 1996 rates.
Liquidity and Capital Resources
Cash and cash equivalents at June 30, 1996 increased by $262,859,000 to
$302,996,000 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. In the first half of 1996, the Company made five
acquisitions for an aggregate capital investment of approximately $19 million.
Such acquisitions were financed from cash and cash equivalents and the issuance
of 210,588 shares of common stock with a market value of approximately $5.7
million. There are no material commitments outstanding at June 30, 1996 other
than acquisition-related payments which may be made contingent on the
performance of businesses acquired.
The Company has a $135 million revolving credit facility with a consortium
of six banks. No amounts were outstanding at June 30, 1996 under the credit
facility. The Company's current ratio at June 30, 1996 and December 31, 1995 was
9.0 to 1 and 2.9 to 1, respectively.
Dividends of $1,768,000 were paid during the six months ended June 30,
1996 versus the $1,275,000 paid in the prior year period.
The Company believes its sources of capital are adequate for its needs.
-9-
<PAGE> 10
PART II. -- OTHER INFORMATION
-----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) Omnicare held its Annual Meeting of Stockholders on May 20,
1996.
(b) The names of each director elected at this Annual Meeting
are as follows:
Edward L. Hutton Patrick E. Keefe
Joel F. Gemunder Sandra E. Laney
Ronald K. Baur Andrea R. Lindell
Kenneth W. Chesterman Sheldon Margen, M.D.
Charles H. Erhart, Jr. Kevin J. McNamara
Mary Lou Fox John A. Mount
Cheryl D. Hodges Timothy S. O'Toole
Thomas C. Hutton D. Walter Robbins
(c) The Stockholders then approved the adoption of the Company's Annual
Incentive Plan for Senior Executive Officers. 26,035,893 votes were cast
in favor of the proposal, 720,745 votes were cast against it and 114,587
votes abstained.
(d) The Stockholders then approved the adoption of the amendment to the
Company's Certificate of Incorporation increasing the number of authorized
shares of Common Stock from 44,000,000 to 110,000,000. 20,278,006 votes
were cast in favor of the proposal, 6,547,234 votes were cast against it,
45,985 votes abstained and 5,280,976 were broker non-votes.
(e) The Stockholders then ratified the selection by the Board of Directors of
Price Waterhouse LLP as independent accountants for the Company and its
consolidated subsidiaries for the year 1996. 26,819,720 votes were cast in
favor of the proposal, 20,079 votes were cast against it and 31,426 votes
abstained.
With respect to the election of directors, the number of votes cast for
each nominee was as follows:
<TABLE>
<CAPTION>
Votes Broker
Votes For Withheld Non-Votes
--------- -------- ---------
<S> <C> <C> <C>
E. L. Hutton 24,901,394 406,798 -0-
J. F. Gemunder 24,909,240 398,952 -0-
R. K. Baur 24,912,689 395,503 -0-
K. W. Chesterman 25,030,126 278,066 -0-
C. H. Erhart, Jr. 25,179,929 128,263 -0-
M. L. Fox 24,908,488 399,704 -0-
C. D. Hodges 24,911,226 396,966 -0-
T. C. Hutton 24,912,100 396,092 -0-
P. E. Keefe 24,912,362 395,830 -0-
S. E. Laney 24,911,992 396,200 -0-
A. R. Lindell 25,306,426 1,766 -0-
S. Margen 25,297,236 10,956 -0-
K. J. McNamara 24,908,908 399,284 -0-
J. A. Mount 25,305,741 2,451 -0-
T. S. O'Toole 24,912,181 396,011 -0-
D. W. Robbins 25,295,657 12,535 -0-
</TABLE>
-10-
<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit
Number Exhibit
------ -------
10 Material Contracts:
Omnicare, Inc. Annual Incentive Plan for Senior
Executive Officers was filed as an exhibit to its
Proxy Statement for its 1996 Annual Meeting of
Stockholders and is incorporated herein by
reference.
11 Computation of Earnings per Share
(b) Reports on Form 8-K - On May 15, 1996, a Form 8-K was filed to report
the government investigation of the Company's institutional pharmacy
subsidiary in Belleville, Illinois, Home Pharmacy Services, Inc.
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 August 13, 1996 By /s/ Joel F. Gemunder
--------------------------- -------------------------------------
President
(Principal Executive Officer)
Date August 13, 1996 By /s/ David W. Froesel, Jr.
--------------------------- -------------------------------------
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
-11-
<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 Six Months Ended
June 30, June 30,
------------------------ ----------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings
Net income $10,396 $ 4,896 $18,525 $10,147
Aftertax expense related to preferred
stock dividend payable to minority
interest in subsidiary 2 3 5 6
Minority interest in net income of
subsidiary (24) (6) (33) (10)
------- ------- ------- -------
Net income as adjusted $10,374 $ 4,893 $18,497 $10,143
======= ======= ======= =======
Shares
Weighted average number of common
shares outstanding 65,123 52,460 59,425 52,200
Additional shares assuming conversion of:
Stock options and stock warrants 2,218 1,220 2,170 1,244
------- ------- ------- -------
Average common shares outstanding and
equivalent as adjusted 67,341 53,680 61,595 53,444
======= ======= ======= =======
Primary earnings per common share $ 0.15 $ 0.09 $ 0.30 $ 0.19
======= ======= ======= =======
Fully Diluted Earnings
Net income $10,396 $ 4,896 $18,525 $10,147
Aftertax expense related to preferred stock
dividend payable to minority interest in
subsidiary 2 3 5 6
Minority interest in net income of
subsidiary (24) (6) (33) (10)
Aftertax interest expense related to 5 3/4%
convertible subordinated debentures 755 802 1,553 1,605
------- ------- ------- -------
Net income as adjusted $11,129 $ 5,695 $20,050 $11,748
======= ======= ======= =======
Shares
Weighted average number of common
shares outstanding 65,123 52,460 59,425 52,200
Additional shares assuming conversion of:
Stock options and stock warrants 2,218 1,402 2,239 1,430
Convertible subordinated debentures 10,484 11,150 10,798 11,150
------- ------- ------- -------
Average common shares outstanding and
equivalents as adjusted 77,825 65,012 72,462 64,780
======= ======= ======= =======
Fully diluted earnings per common share $ 0.14 $ 0.09 $ 0.28 $ 0.18
======= ======= ======= =======
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353230
<NAME> OMNICARE INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 302,996
<SECURITIES> 0
<RECEIVABLES> 94,732
<ALLOWANCES> 5,368
<INVENTORY> 36,617
<CURRENT-ASSETS> 443,785
<PP&E> 63,412
<DEPRECIATION> 22,751
<TOTAL-ASSETS> 663,669
<CURRENT-LIABILITIES> 49,143
<BONDS> 78,071
<COMMON> 65,595
0
0
<OTHER-SE> 458,158
<TOTAL-LIABILITY-AND-EQUITY> 523,753
<SALES> 239,018
<TOTAL-REVENUES> 239,018
<CGS> 170,291
<TOTAL-COSTS> 170,291
<OTHER-EXPENSES> 40,072
<LOSS-PROVISION> 2,009
<INTEREST-EXPENSE> 2,535
<INCOME-PRETAX> 30,698
<INCOME-TAX> 12,173
<INCOME-CONTINUING> 18,525
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,525
<EPS-PRIMARY> .30
<EPS-DILUTED> .28
</TABLE>
