<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 March 31,1997
Commission File Number 1-8269
OMNICARE, INC.
--------------
Incorporated under the laws of I.R.S. Employer Identification
State of Delaware No. 31-1001351
50 East RiverCenter Boulevard, Covington, Kentucky 41011
--------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Registrant's telephone number, including area code (606) 291-6800
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 79,497,512 March 31, 1997
</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 -
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Income -
Three months ended -
March 31, 1997 and 1996 4
Consolidated Statement of Cash Flows -
Three months ended -
March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
Part II Other Information:
Item 2. Recent Sales of Unregistered Securities 11
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE> 3
PART I. -- FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
--------------------
OMNICARE, INC. AND SUBSIDIARY COMPANIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(in thousands, except share data) UNAUDITED
March 31, December 31,
ASSETS 1997 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 129,063 $ 216,515
Accounts receivable, less allowances of
$7,038 (1996-$5,631) 141,446 118,913
Inventories 71,242 43,585
Deferred income tax benefits 6,998 6,036
Other current assets 13,110 5,686
--------- ---------
Total current assets 361,859 390,735
Properties and equipment, at cost less
accumulated depreciation of $31,892 (1996-$28,415) 63,079 56,055
Goodwill, less accumulated amortization of
$17,616 (1996-$15,550) 355,274 259,507
Other assets 16,405 15,400
--------- ---------
Total assets $ 796,617 $ 721,697
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,483 $ 21,432
Amounts payable pursuant to acquisition agreements 14,951 11,651
Current portion of long-term debt 1,547 1,199
Accrued employee compensation 10,198 10,645
Other current liabilities 15,948 16,806
--------- ---------
Total current liabilities 82,127 61,733
Long-term debt 1,383 1,992
Deferred income taxes 5,359 4,197
Amounts payable pursuant to acquisition agreements 8,858 9,088
Other noncurrent liabilities 8,278 10,309
--------- ---------
Total liabilities 106,005 87,319
--------- ---------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 110,000,000 shares
$1 par; 79,497,512 issued
(1996 - 77,025,661 shares) 79,498 77,026
Paid-in capital 482,742 433,117
Retained earnings 148,885 135,398
--------- ---------
711,125 645,541
Treasury stock, at cost - 75,824 shares
(1996 - 0 shares) (2,129) --
Deferred compensation (17,127) (9,503)
Unallocated stock of ESOP (1,257) (1,660)
--------- ---------
Total stockholders' equity 690,612 634,378
--------- ---------
Contingencies (Note 4)
Total liabilities and stockholders' equity $ 796,617 $ 721,697
========= =========
</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
UNAUDITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1997 1996
--------- ---------
<S> <C> <C>
Sales $ 181,608 $ 117,185
Cost of sales 128,903 83,553
--------- ---------
Gross profit 52,705 33,632
Selling, general and administrative expenses 30,570 19,433
Acquisition expenses-pooling-of-interests 978 --
--------- ---------
Operating income 21,157 14,199
Investment income 1,802 560
Interest expense (290) (1,320)
--------- ---------
Income before income taxes 22,669 13,439
Income taxes 9,226 5,310
--------- ---------
Net income $ 13,443 $ 8,129
========= =========
Earnings per share:
Primary $ .17 $ .15
Fully diluted $ .17 $ .13
Dividends paid per share: $ .0175 $ .015
Weighted average number of
common shares outstanding:
Primary 78,218 55,848
========= =========
Fully diluted 78,218 67,098
========= =========
</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 Flows
UNAUDITED
<TABLE>
<CAPTION>
(in thousands) Three Months Ended
March 31,
--------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,443 $ 8,129
Adjustments to reconcile net income
to net cash flows from operating activities:
Depreciation and amortization 5,155 3,183
Provision for doubtful accounts 1,360 1,279
Deferred tax provision 1,322 261
Changes in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (14,670) (3,714)
Inventories (24,649) (4,373)
Current and noncurrent assets (11,014) (672)
Payables and accrued liabilities 16,236 1,135
Current and noncurrent liabilities 2,299 462
--------- ---------
Net cash flows from operating activities (10,518) 5,690
--------- ---------
Cash flows from investing activities:
Acquisition of businesses (74,040) (12,805)
Capital expenditures (5,503) (5,813)
Other 8 (147)
--------- ---------
Net cash flows from investing activities (79,535) (18,765)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term obligations (137) (136)
Net proceeds from stock offering -- 286,529
Exercise of stock options and warrants, net 4,105 (995)
Dividends paid (1,367) (792)
--------- ---------
Net cash flows from financing activities 2,601 284,606
--------- ---------
Net increase (decrease) in cash and cash equivalents (87,452) 271,531
Cash and cash equivalents at beginning of period 216,515 40,137
--------- ---------
Cash and cash equivalents at end of period $ 129,063 $ 311,668
========= =========
Supplemental disclosures of cash flow information
- -------------------------------------------------
Income taxes paid $ 5,151 $ --
Interest paid 138 2,426
</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 flows of
Omnicare, Inc. and its consolidated subsidiaries ("Company").
2. 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. The Company's strategy includes
acquisitions of freestanding institutional pharmacy businesses as well as
pharmacy contracts and other assets, generally insignificant in size, which are
combined with existing pharmacy operations to augment their internal growth. The
Company may, from time to time, acquire certain non-pharmaceutical companies
which complement the Company's core business. To date, none of these
non-pharmacy acquisitions has been significant.
Since January 1, 1997, the Company has completed six acquisitions
(excluding insignificant purchases of pharmacy contracts and other assets) of
institutional pharmacy businesses. Five of these transactions were accounted for
as purchase transactions and one as a pooling-of-interests. These six
transactions added approximately $74 million in revenues on an annualized
basis.
Purchases
- ---------
For all acquisitions accounted for as purchases, including insignificant
purchases of pharmacy contracts and other assets, 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 the consolidated results of the Company from the effective dates of the
acquisitions.
Pooling-Of-Interests
- --------------------
The impact of the pooling-of-interests transaction on the Company's
historical consolidated financial statements was not material; consequently,
prior period and current year financial statements have not been restated for
this transaction.
6
<PAGE> 7
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 the first quarter of 1996 have been restated to
reflect the stock split.
4. In May 1996, the Company became aware of a government investigation of Home
Pharmacy Services, Inc. ("Home"), a wholly-owned subsidiary of the Company
acquired in 1992, based in Belleville, Illinois, and certain individuals at that
unit. Home accounted for less than three percent of Omnicare's total sales and
earnings in the first quarter of 1997. The Company is cooperating fully with the
government's inquiry. Home continues to provide pharmacy services without
interruption to nursing home residents in the region. The outcome of this
investigation is not currently predictable.
5. Effective October 1, 1997, the Company will adopt provisions of Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." This
statement establishes standards for computing and presenting earnings per share
(EPS). The Company expects that adoption of SFAS No. 128 will not have a
material impact on its EPS calculation.
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition.
-------------------
Results of Operations
- ---------------------
Excluding the impact of an after-tax charge of $854,000 for acquisition-
related expenses in a pooling-of-interests transaction, fully diluted earnings
per share for the quarter ended March 31, 1997 rose 38% to $.18 from the $.13
earned in the same period a year ago. Net income, on this basis, for the three
months ended March 31, 1997 increased 76% to $14,297,000 from the $8,129,000
earned in the first quarter of 1996. The average number of shares outstanding in
the first quarter of 1997 was 17% higher than in the comparable prior-year
quarter, reflecting the issuance of additional shares in connection with the
Company's public offering in March 1996. The 1997 quarter included a charge of
$978,000 before taxes and $854,000 after taxes, or $.01 per share, for
acquisition-related expenses in a pooling-of-interests transaction completed
during the three-month period. Sales for the first quarter increased 55% to
$181,608,000 versus the $117,185,000 recorded a year ago.
The increases in the Company's sales and earnings were the product of its
continued focus on acquisitions of long-term care pharmacy providers and
sustained internal growth.
During the first three months of 1997, the Company acquired six
institutional pharmacy providers (excluding insignificant purchases of pharmacy
contracts and other assets), which when combined with internal growth, brought
the total number of nursing facility residents served to 338,600 at March 31,
1997, up 47% over the number served one year ago. These six transactions added
approximatley $74 million in revenues on an annualized basis.
Internal growth resulted from an increase in acuity levels of residents in
client facilities, expansion of services such as infusion therapy, efforts of
the Company's National Sales and Marketing Group and pharmacy staff in
developing and purchasing new pharmacy contracts, and drug price inflation.
Investment income, net of interest expense, of $1,512,000 for the three
months ended March 31, 1997, increased by $2,272,000 over the same period of
1996 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 the public offering of 11,500,000 shares of common stock in March
1996.
8
<PAGE> 9
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents at March 31, 1997 were $129.1 million versus
$216.5 million at December 31, 1996. The reduction in cash balances of $87.4
million is primarily attributable to payments made during the quarter for the
acquisition of businesses of $74.0 million (including amounts payable pursuant
to acquisition agreements relating to pre-1997 acquisitions). Additionally, the
decrease in net cash flow from operating activities is primarily related to an
increase in inventories associated with a change in pricing and payment terms
with the Company's primary supplier of pharmaceuticals from four weeks to one
week and the purchase of inventories in advance of pharmaceutical price
increases from manufacturers.
The Company's capital requirements are primarily related to its acquisition
program. In the first quarter of 1997, the Company made six acquisitions
(excluding insignificant purchases of pharmacy contracts and other assets) for
an aggregate capital investment of approximately $94.5 million. Such
acquisitions were financed from cash and cash equivalents and the issuance of
1.1 million shares of common stock. There are no material commitments
outstanding at March 31, 1997, other than estimated future acquisition-related
payments to be made in accordance with purchase agreements.
In October 1996, the Company entered into an agreement with a consortium of
sixteen banks for a $400 million revolving credit facility replacing the prior
$135 million facility. Interest rates and commitment fees for this new facility
are based on the Company's level of performance under certain debt covenants. No
amounts were outstanding at March 31, 1997 under the credit facility. The
Company's current ratio at March 31, 1997 and December 31, 1996 was 4.4 to 1.0
and 6.3 to 1.0, respectively.
On February 5, 1997, the Company's Board of Directors increased the
quarterly cash dividend by 17% to 1.75 cents per share for an indicated annual
rate of 7 cents per share in 1997. Dividends of $1,367,000 were paid in March
1997 versus the $792,000 paid in March 1996.
The Company believes its sources of liquidity and capital are adequate for
its operating needs. If needed, other external sources of financing are readily
available to the Company.
9
<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 Company's 1996 Report on Form 10-K for the year ended December
31, 1996.
10
<PAGE> 11
PART II. -- OTHER INFORMATION
-----------------------------
Item 2. Recent Sales of Unregistered Securities
---------------------------------------
The Company, as part of its ongoing acquisition program, issues its common
shares and warrants ("Securities") from time to time in private transactions in
connection with the purchase of the assets or stock of businesses acquired.
During the quarter ended March 31, 1997, the Company completed four transactions
involving Securities. In connection with these transactions, a total of 530,442
shares of common stock and 40,000 warrants were issued. No underwriters were
involved in these acquisition transactions.
The Securities were issued in reliance on the exemption from registration
contained at Section 4(2) of the Securities Act of 1933. See Note 2 to the
Consolidated Financial Statements for additional information regarding the 1997
acquisition transactions.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
11 Computation of Earnings per Common Share
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K - On February 6, 1997, a Form 8-K was filed to
report the audited financial statements as of and for the three years ended
December 31, 1996. Further, on February 21, 1997, a Form 8-K was filed to report
the sales and earnings of the Company for the month ended January 31, 1997.
11
<PAGE> 12
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 May 15, 1997 By /s/ Joel F. Gemunder
--------------------- ---------------------
Joel F. Gemunder
President
(Principal Executive Officer)
Date May 15, 1997 By /s/ David W. Froesel, Jr.
--------------------- --------------------------
David W. Froesel, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<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
March 31,
1997 1996
------- --------
<S> <C> <C>
Primary Earnings
Net income $13,443 $ 8,129
Other 4 (6)
------- --------
Net income as adjusted $13,447 $ 8,123
======= ========
Shares
Weighted average number of common
shares outstanding 78,065 53,726
Additional shares assuming conversion of
stock options and stock warrants 153 2,122
------- --------
Average common shares outstanding and
equivalent as adjusted 78,218 55,848
======= ========
Primary earnings per common share $ 0.17* $ 0.15
======= ========
Fully Diluted Earnings
Net income $13,443 $ 8,129
Aftertax interest expense related to 5 3/4%
convertible subordinated debentures -- 798
Other 4 (6)
------- --------
Net income as adjusted $13,447 $ 8,921
======= ========
Shares
Weighted average number of common
shares outstanding 78,065 53,726
Additional shares assuming conversion of:
Stock options and stock warrants 153 2,262
Convertible subordinated debentures -- 11,110
------- --------
Average common shares outstanding and
equivalents as adjusted 78,218 67,098
======= ========
Fully diluted earnings per common share $ 0.17* $ 0.13
======= ========
</TABLE>
* This calculation is submitted in accordance with Regulation S-K Item
601(b)(11), although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 if it results in dilution of less than 3% or is anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353230
<NAME> OMNICARE, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 129,063
<SECURITIES> 0
<RECEIVABLES> 148,484
<ALLOWANCES> 7,038
<INVENTORY> 71,242
<CURRENT-ASSETS> 361,859
<PP&E> 94,971
<DEPRECIATION> 31,892
<TOTAL-ASSETS> 796,617
<CURRENT-LIABILITIES> 82,127
<BONDS> 1,383
0
0
<COMMON> 79,498
<OTHER-SE> 631,627
<TOTAL-LIABILITY-AND-EQUITY> 796,617
<SALES> 181,608
<TOTAL-REVENUES> 181,608
<CGS> 128,903
<TOTAL-COSTS> 128,903
<OTHER-EXPENSES> 30,570
<LOSS-PROVISION> 1,360
<INTEREST-EXPENSE> 290
<INCOME-PRETAX> 22,669
<INCOME-TAX> 9,226
<INCOME-CONTINUING> 13,443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,443
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
