<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 6, 1997
OMNICARE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware
-----------------------------------------------
(State or other jurisdiction of incorporation)
1-8269 31-1001351
------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
50 East RiverCenter Boulevard, Suite 1530, Covington, Kentucky 41011
----------------------------------------------------------------------
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (606) 655-1180
------------------------------------------------------------------
<PAGE> 2
Item 5. Other Events
------------
Omnicare, Inc. (the "Company") hereby files its audited consolidated
financial statements as of and for the three years ended December 31, 1996.
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
Exhibit Number Exhibit
-------------- -------
27 Financial Data Schedule
2
<PAGE> 3
SIGNATURE
---------
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: February 6, 1997 By: /s/ David W. Froesel, Jr.
------------------- ------------------------------
David W. Froesel, Jr.
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
3
<PAGE> 4
Report of Independent Accountants
---------------------------------
To the Stockholders and
Board of Directors of Omnicare, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, cash flows and stockholders' equity present
fairly, in all material respects, the financial position of Omnicare, Inc. and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, 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 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 provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Cincinnati, Ohio
January 29, 1997
<PAGE> 5
CONSOLIDATED STATEMENT OF INCOME
Omnicare, Inc. and Subsidiary Companies
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
----------------------------------------
<S> <C> <C> <C>
Sales $536,604 $399,636 $307,655
Cost of sales 381,768 287,715 227,533
-------- -------- --------
Gross profit 154,836 111,921 80,122
Selling, general and administrative
expenses 89,636 66,970 50,111
Acquisition expenses, pooling-
of-interests 690 1,292 2,380
-------- -------- --------
Operating income 64,510 43,659 27,631
Investment income 11,285 3,475 1,580
Interest expense (3,652) (5,954) (6,533)
-------- -------- --------
Income before income taxes 72,143 41,180 22,678
Income taxes 28,693 16,420 9,147
-------- -------- --------
Net income $ 43,450 $ 24,760 $ 13,531
======== ======== ========
Earnings per share:
Primary $ .64 $ .47 $ .30
======== ======== ========
Fully diluted $ .61 $ .43 $ .30
======== ======== ========
Weighted average number of
common shares outstanding:
Primary 67,388 52,396 44,958
======== ======== ========
Fully diluted 75,429 65,284 56,858
======== ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
2
<PAGE> 6
CONSOLIDATED BALANCE SHEET
Omnicare, Inc. and Subsidiary Companies
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $216,515 $ 40,137
Accounts receivable, less allowances
of $5,631 (1995-$4,761) 118,913 80,247
Inventories 43,585 28,841
Deferred income tax benefits 6,036 6,600
Other current assets 5,686 5,247
-------- --------
Total current assets 390,735 161,072
Properties and equipment, at cost less accumulated
depreciation of $28,415 (1995-$19,036) 56,055 32,458
Goodwill, less accumulated amortization
of $15,550 (1995-$10,448) 259,507 157,843
Other assets 15,400 9,463
-------- --------
Total assets $721,697 $360,836
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 21,432 $ 22,020
Amounts payable pursuant to acquisition agreements 11,651 13,642
Current portion of long-term debt 1,199 1,051
Accrued employee compensation 10,645 5,338
Liabilities relating to discontinued operations 806 1,547
Other current liabilities 16,000 11,090
-------- --------
Total current liabilities 61,733 54,688
Long-term debt 1,992 82,692
Deferred income taxes 4,197 2,621
Amounts payable pursuant to acquisition agreements 9,088 1,418
Other noncurrent liabilities 10,309 4,656
-------- --------
Total liabilities 87,319 146,075
-------- --------
Stockholders' equity:
Preferred stock-authorized 1,000,000 shares
without par value; none issued
Common stock-authorized 110,000,000 shares
$1 par; 77,025,661 shares issued
(1995-26,344,588 pre-1996 stock split shares) 77,026 26,345
Paid-in capital 433,117 99,686
Retained earnings 135,398 93,598
-------- --------
645,541 219,629
Treasury stock, at cost-0 shares
(1995-24,268 pre-1996 stock split shares) - (482)
Deferred compensation (9,503) (2,126)
Unallocated stock of ESOP (1,660) (2,260)
-------- --------
Total stockholders' equity 634,378 214,761
Contingencies (Note 12)
-------- --------
Total liabilities and stockholders' equity $721,697 $360,836
======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
3
<PAGE> 7
CONSOLIDATED STATEMENT OF CASH FLOWS
Omnicare, Inc. and Subsidiary Companies
<TABLE>
<CAPTION>
(In thousands) For the years ended December 31,
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 43,450 $ 24,760 $ 13,531
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 15,407 11,117 8,264
Provision for doubtful accounts 3,614 3,086 2,298
Deferred tax provision 3,083 1,750 917
Changes in assets and liabilities, net of effects
from acquisition/disposal of businesses:
Accounts receivable (31,555) (19,286) (14,192)
Inventories (8,356) (4,930) (3,652)
Current and noncurrent assets (8,625) (1,402) (443)
Payables and accrued liabilities 882 4,335 2,785
Current and noncurrent liabilities 4,783 444 3,129
--------- -------- --------
Net cash flows from operating activities 22,683 19,874 12,637
--------- -------- --------
Cash flows from investing activities:
Acquisition of businesses (96,895) (35,373) (40,084)
Capital expenditures (26,716) (13,603) (9,659)
Marketable securities - 45,245 (45,245)
Proceeds from sales of properties and equipment 199 261 606
Cash flows from discontinued operations (741) (852) (1,370)
--------- -------- --------
Net cash flows from investing activities (124,153) (4,322) (95,752)
--------- -------- --------
Cash flows from financing activities:
Net borrowings on line-of-credit - (3,670) (215)
Proceeds from long-term borrowings - 5,343 141
Principal payments on long-term obligations (470) (9,130) (3,426)
Net proceeds from stock offering 279,159 - 59,211
Proceeds from exercise of stock options and warrants,
net of stock tendered in payment 3,059 70 1,291
Dividends paid (3,900) (2,581) (2,756)
--------- -------- --------
Net cash flows from financing activities 277,848 (9,968) 54,246
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 176,378 5,584 (28,869)
Cash and cash equivalents at beginning of period 40,137 34,553 63,422
--------- -------- --------
Cash and cash equivalents at end of period $ 216,515 $ 40,137 $ 34,553
========= ======== ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
4
<PAGE> 8
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Omnicare, Inc. And Subsidiary Companies
<TABLE>
<CAPTION>
(In thousands, except per share data)
Unallocated Total
Common Paid-in Retained Treasury Deferred Stock of Stockholders'
Stock Capital Earnings Stock Compensation ESOP Equity
------- ------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $13,098 $64,556 $59,382 $(31,126) $ - $(3,160) $102,750
Pooling of interests (Note 2) 371 (341) 1,120 - - - 1,150
Net income - - 13,531 - - - 13,531
Dividends paid ($.045 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
Stock and warrants issued in connection
with acquisitions 75 3,616 - - - - 3,691
Exercise of warrants - 529 - 658 - - 1,187
Exercise of stock options 117 2,432 - (2,592) - - (43)
Stock awards, net of amortization 51 1,592 - - (858) - 785
Decrease in unallocated stock of ESOP - - - - - 400 400
------- -------- -------- -------- ------- ------- --------
Balance at December 31, 1994 15,336 129,971 71,475 (33,060) (858) (2,760) 180,104
Net income - - 24,760 - - - 24,760
Dividends paid ($.05 per share) - - (2,581) - - - (2,581)
Two-for-one stock split 10,429 (45,524) - 35,095 - - -
Conversion of subordinated debt 4 49 - - - - 53
Stock and warrants issued in connection
with acquisitions 254 10,632 - - - - 10,886
Exercise of warrants - 298 - (298) - - -
Exercise of stock options 82 1,760 - (1,902) - - (60)
Stock awards, net of amortization 52 2,636 - (317) (1,268) - 1,103
Decrease in unallocated stock of ESOP - - - - - 500 500
Other 188 (136) (56) - - - (4)
------- -------- -------- -------- ------- ------- --------
Balance at December 31, 1995 26,345 99,686 93,598 (482) (2,126) (2,260) 214,761
Pooling of interests (Note 2) 193 (1,673) 2,250 - - - 770
Net income - - 43,450 - - - 43,450
Dividends paid ($.06 per share) - - (3,900) - - - (3,900)
Stock issued in public offering 5,750 273,409 - - - - 279,159
Two-for-one stock split 32,689 (33,147) - 458 - - -
Conversion of subordinated debt 10,815 67,423 - - - - 78,238
Stock and warrants issued in connection
with acquisitions 540 16,156 - - - - 16,696
Exercise of warrants 405 2,313 - 44 - - 2,762
Exercise of stock options 97 (290) - 562 - - 369
Stock awards, net of amortization 192 9,352 - (582) (7,377) - 1,585
Decrease in unallocated stock of ESOP - - - - - 600 600
Other - (112) - - - - (112)
------- -------- -------- -------- ------- ------- --------
Balance at December 31, 1996 $77,026 $433,117 $135,398 $ - $(9,503) $(1,660) $634,378
======= ======== ======== ======== ======= ======= ========
</TABLE>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
5
<PAGE> 9
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
Omnicare, Inc. ("Omnicare" or the "Company") primarily operates in one
business segment which includes the distribution of pharmaceuticals, related
pharmacy management services and medical supplies to long-term care
institutions and their residents in the United States. The consolidated
financial statements include the accounts of the Company and all majority-owned
subsidiaries.
Cash Equivalents
Cash equivalents include all investments in highly liquid instruments with
original maturities of three months or less.
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 determined using the first-in, first-out ("FIFO") method.
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 as incurred. 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.
Goodwill, Intangibles and Other Assets
Intangible assets, comprised primarily of goodwill, arising from business
combinations accounted for as purchase transactions, 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 goodwill. The
measurement of possible impairment is based primarily on the ability to recover
the balance of the goodwill from expected future operating cash flows on an
undiscounted basis. In management's opinion, no such impairment exists as of
December 31, 1996 or 1995.
6
<PAGE> 10
Debt issuance costs as of December 31, 1995 are included in other
assets and are amortized using the straight-line method over the life of the
related debt.
Fair Value of Financial Instruments
The fair value of all financial instruments of the Company
approximates the amounts presented on the consolidated balance sheet.
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 Company accounts for income taxes using the asset and liability method
under which deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates to differences
between the tax bases of assets and liabilities and their reported amounts in
the consolidated financial statements.
Per Share Data
Primary earnings per share are computed based on the weighted average
number of shares of common stock outstanding during the period and common stock
equivalents, if material. Fully diluted earnings per share include common stock
equivalents and for the years ended December 31, 1996, 1995 and 1994, assumed
the conversion of the 5.75% Convertible Subordinated Notes due 2003 into
common stock. Additionally, for the years ended December 31, 1996, 1995 and
1994, interest expense and amortization of debt issuance costs arising from
these convertible securities were added, net of related income taxes, to income
for the purpose of calculating fully diluted earnings per share. The
Convertible Subordinated Notes were converted on October 3, 1996; accordingly,
they had no impact on the fully diluted earnings per share calculation
subsequent to that date.
7
<PAGE> 11
The Board of Directors declared a two-for-one split of the Company's $1 par
value common stock effective June 27, 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 consolidated financial statements to the number of
common shares and per share amounts have been adjusted to reflect the stock
split unless otherwise indicated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Accounting Change
Effective January 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. As permitted
by SFAS No. 123, the Company continued to follow the measurement principles
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and has disclosed the pro forma impact of using
the fair value measurement principles of SFAS No. 123 in the notes to the
consolidated financial statements.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform
with the current year presentation.
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. 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. From time to time, the Company may acquire
other businesses such as long-term care software companies, pharmacy consulting
companies and medical supply companies. To date, none of these non-pharmacy
acquisitions have been significant.
8
<PAGE> 12
During the year ended December 31, 1996, the Company completed 18
acquisitions (excluding insignificant acquisitions), including 17
institutional pharmacy businesses and a long-term care software company.
Seventeen of the acquisitions were accounted for as purchases and one as a
pooling-of-interests.
During the year ended December 31, 1995, the Company completed 10
acquisitions (excluding insignificant acquisitions), including nine
institutional pharmacy businesses and a long-term care software company. Nine
of the acquisitions were accounted for as purchases and one as a pooling-of-
interests.
During the year ended December 31, 1994, the Company completed seven
acquisitions (excluding insignificant acquisitions) of institutional pharmacy
businesses. Five of the acquisitions were accounted for as purchases and two as
poolings-of-interests.
Purchases
- ---------
For all acquisitions accounted for as purchases, including insignificant
acquisitions, the purchase price paid for each has been allocated to the fair
value of the assets acquired and liabilities assumed. Purchase price
allocations are subject to final determination within one year after the
acquisition date.
The following table summarizes the aggregate purchase price for all
businesses acquired which have been accounted for as purchases (in thousands):
<TABLE>
<CAPTION>
Businesses acquired in
---------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash $ 72 953 $21,309 $17,954
Amounts payable in the future 19,026 4,797 3,107
Common stock 13,814 10,856 2,819
Warrants 696 30 872
Assumption of indebtedness 4,831 197 2,027
-------- ------- -------
$111,320 $37,189 $26,779
======== ======= =======
</TABLE>
Cash in the above table represents payments made in the year of acquisition.
This amount differs from cash paid for the acquisition of the businesses in the
consolidated statement of cash flows due primarily to purchase price payments
made during the year pursuant to acquisition agreements entered into in prior
years.
9
<PAGE> 13
Warrants outstanding as of December 31, 1996 represent the right to purchase
905,000 shares of common stock and were issued in connection with certain
acquisitions. These warrants can be exercised at any time through 2002 at
prices ranging from $7.70 to $29.18 per share. Warrants to purchase 407,000
shares of common stock, issued in prior years, were exercised in 1996.
Amounts contingently payable totaled $19,995,000 as of December 31, 1996
and, if paid, will be recorded as additional purchase price, serving to
increase goodwill in the period in which the contingencies are resolved.
Amounts payable in the future are subject to set-off for claims of indemnity.
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 acquisition.
Unaudited pro forma combined results of operations of the Company for the
years ended December 31, 1996 and 1995, are presented below. Such pro forma
presentation has been prepared assuming that the acquisitions had been made as
of January 1, 1995 (in thousands, except per share data).
<TABLE>
<CAPTION> For the years
ended December 31,
Pro Forma 1996 1995
- ---------- ---------------------------
<S> <C> <C>
Sales $ 589,825 $ 494,185
Net income 45,228 25,702
Earnings per share:
Primary $ .67 $ .48
Fully diluted $ .63 $ .44
</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.
Pooling-Of-Interests
- --------------------
The impact of the 1996 pooling-of-interests transaction and one of the 1994
pooling-of-interests transactions on the Company's historical consolidated
financial statements were not material; consequently, prior period and
current year financial statements have not been restated for these
transactions.
On June 30, 1995, the Company issued 806,370 shares of its common stock for
all of the outstanding common stock of Specialized Pharmacy Services, Inc.
("Specialized"). On September 30, 1994, the Company issued 4,445,288 shares of
its common stock for all the outstanding common stock of Evergreen
Pharmaceutical, Inc. and Evergreen Pharmaceutical East, Inc. (collectively,
"Evergreen"). These acquisitions were accounted for as poolings-of-
interests and, accordingly, the Company's consolidated financial statements
have been restated for all periods prior to the acquisitions to include
10
<PAGE> 14
the results of operations, financial position and cash flows of Specialized and
Evergreen. Net sales and net income for Omnicare and Specialized prior to the
Specialized transaction and Omnicare and Evergreen prior to the Evergreen
transaction are as follows (in thousands):
<TABLE>
<CAPTION>
Omnicare Specialized Evergreen
-------- ----------- ---------
<S> <C> <C> <C>
Six months ended June 30, 1995:
Sales $171,211 $16,441 (a)
Net Income 9,861 286 (a)
Year ended December 31, 1994:
Sales 275,663 31,992 (a)
Net income 13,406 125 (a)
Nine months ended
September 30, 1994:
Sales 172 876 23,748 $25,324
Net income 7,091 66 1,877
<FN>
(a) The results of operations of Evergreen are included in the
consolidated results of Omnicare for these periods.
</TABLE>
In accordance with accounting rules for pooling-of-interests transactions,
charges to operating income for acquisition-related expenses were recorded upon
completion of the pooling acquisitions. These acquisition-related expenses
totaled $690,000 ($534,000 aftertax) for the 1996 transactions, $1,292,000
($989,000 aftertax) for the Specialized transaction and $2,380,000 ($1,860,000
aftertax) for the Evergreen transaction.
11
<PAGE> 15
Note 3 - Cash and Cash Equivalents
A summary of cash and cash equivalents follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------------
<S> <C> <C>
Cash and cash equivalents:
Cash $ 16,108 $ 7,418
Money market funds 177 197
U.S. Treasury-backed repurchase
agreements 200,230 32,522
-------- -------
$216,515 $40,137
======== =======
</TABLE>
Repurchase agreements represent investments in U.S. Treasury
bills 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.
Note 4 - Properties and Equipment
A summary of properties and equipment follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------
<S> <C> <C>
Land $ 1,355 $ 247
Buildings 2,459 1,496
Machinery and equipment 44,930 27,487
Furniture, fixtures
and leasehold improvements 35,726 22,264
------- -------
84,470 51,494
Accumulated depreciation (28,415) (19,036)
------- -------
$56,055 $32,458
======= =======
</TABLE>
Note 5 - 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 significant contingent rentals
in the Company's operating leases.
12
<PAGE> 16
The following is a schedule of future minimum rental payments required under
operating leases that have initial or remaining noncancellable terms in excess
of one year as of December 31, 1996 (in thousands):
<TABLE>
<S> <C>
1997 $ 3,943
1998 3,446
1999 2,990
2000 2,263
2001 1,729
Later years 3,722
-------
Total minimum payments required $18,093
=======
</TABLE>
Total rent expense under operating leases for the years ended December 31,
1996, 1995 and 1994 were $5,889,000, $4,567,000 and $3,470,000, respectively.
Note 6 - Long-Term Debt
A summary of long-term debt follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------------
<S> <C> <C>
Convertible Subordinated Notes due 2003 $ - $80,445
Employee Stock Ownership Plan ("ESOP")
Loan Guarantee 1,660 2,260
Capitalized lease obligations 1,531 1,038
------- -------
3,191 83,743
Less current portion (1,199) (1,051)
------- -------
$ 1,992 $82,692
======= =======
</TABLE>
The following is a schedule by year of required long-term debt payments as
of December 31, 1996 (in thousands):
<TABLE>
<S> <C>
1997 1,199
1998 1,443
1999 387
2000 162
2001 -
Later years -
-------
$ 3,191
=======
</TABLE>
Total interest payments made for the years ended December 31, 1996, 1995
and 1994 were $4,968,000, $5,421,000 and $6,145,000, respectively.
Convertible Subordinated Notes
- ------------------------------
On October 1, 1993, the Company issued $80,500,000 principal amount of
5.75% Convertible Subordinated Notes ("Notes") due 2003. The Notes were
convertible into common stock at any time at the option of the holder at a price
of $7.22 per share. The remaining Notes were converted in October 1996 into
10,201,700 shares of common stock. Prior to the October conversion, Notes were
converted into 613,444 shares of common stock during 1996. In connection with
the Notes conversions, the Company recorded the $1.9 million in unamortized
deferred debt issuance costs against the paid-in capital balance for the common
13
<PAGE> 17
stock issued. The Company amortized $220,000 of deferred debt issuance costs in
1996 (prior to the final Notes conversion) and $310,000 in 1995.
ESOP Loan Guarantee
- -------------------
In 1988, the Company established an Employee Stock Ownership Plan ("ESOP")
which currently covers certain acquired entities' employees and corporate
headquarters employees. The ESOP used proceeds from a $4 million bank loan to
purchase 1,973,748 shares of the Company's common stock on the open market at
prices ranging from $1.94 to $2.13 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 and 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 $18,515,000 and $18,230,000 as of December 31, 1996 and
1995, respectively.
The Company funds ESOP expense as accrued. The components of total ESOP
expense are as follows (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Interest expense $ 145 $ 182 $ 214
Principal payments 600 500 400
Dividends on ESOP stock (90) (76) (70)
----- ----- -----
$ 655 $ 606 $ 544
===== ===== =====
</TABLE>
Revolving Credit Facility
- -------------------------
In October 1996, the Company negotiated a five-year, $400 million line of
credit agreement with a consortium of sixteen banks, which replaced the
existing $135 million revolving credit facility. Borrowings under this
agreement bear interest based upon LIBOR plus a spread of 25 to 60 basis
points, dependent upon the Company's Fixed Charge Coverage Ratio, or other
rates negotiated with the banks. Additionally, a commitment fee on the unused
portion of the facility ranges from 9 to 20 basis points, and is also based on
the Company's Fixed Charge Coverage Ratio. The agreement also contains debt
covenants which include the Fixed Charge Coverage Ratio and minimum
consolidated net worth. The Company is in compliance with all of the covenants
in the agreement. No amounts were outstanding under this agreement as of
December 31, 1996.
14
<PAGE> 18
Note 7 - Public Offering of Common Stock
In March 1996, the Company completed a public offering of 5,750,000 shares
(pre-1996 stock split) of common stock resulting in gross proceeds of
$298,281,000 (before underwriting discounts and expenses).
Note 8 - Stock Incentive Plans
The Company has stock incentive plans under which it may grant stock
options or stock awards to key employees at a price equal to the fair market
value at the date of grant. Under these plans, stock options become exercisable
beginning one year following the date of grant in four equal annual
installments. As of December 31, 1996, 290,084 shares were available for
granting.
Summary information for stock options relating to these plans is
presented below (in thousands, except per share data):
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- ---------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 2,242 $ 7.89 1,526 $ 4.04 1,996 $ 3.89
Options granted 508 26.36 1,058 12.19 - -
Options exercised (273) 7.03 (326) 3.65 (470) 3.41
Options forfeited (3) 26.22 (16) 12.13 - -
- ---------------------------------------------------------------------------------------------------------------
Options outstanding,
end of year 2,474 $11.76 2,242 $7.89 1,526 $4.04
- ---------------------------------------------------------------------------------------------------------------
Options exercisable,
end of year 1,083 748 726
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 19
The following summarizes information about stock options outstanding as
of December 31, 1996 (in thousands, except per share data):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------------------- --------------------------------------
Weighted-Average
Number Remaining Number
Range of Outstanding at Contractual Life Weighted-Average Exercisable at Weighted-Average
Exercise Prices 12/31/96 (in years) Exercise Price 12/31/96 Exercise Price
- ---------------------------------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.78 - $ 4.64 1,018 5.37 $ 4.09 914 $ 4.10
11.39 - 12.13 934 8.17 12.10 165 12.11
18.41 - 25.75 34 9.24 22.29 4 18.41
26.22 - 28.25 488 9.24 26.38 - -
- ---------------------------------------------------------------------------- --------------------------------------
$ 2.78 - $28.25 2,474 7.24 $11.76 1,083 $ 5.37
- ---------------------------------------------------------------------------- --------------------------------------
</TABLE>
During 1995, the Company's Board of Directors and stockholders approved
the 1995 Premium-Priced Stock Option Plan, providing options to purchase
2,520,000 shares of Company common stock available for grant at an exercise
price of 125% of the stock's fair market value at the date of grant. No options
have been granted under this plan.
Nonvested stock awards are granted to key employees at the discretion
of the Compensation Committee. Nonvested stock awards are restricted as to the
transfer of ownership and vest over 5 to 7 years. Unrestricted stock awards are
granted annually to members of the Board of Directors. The fair value of a stock
award is equal to the fair market value of a share of Company stock at the
grant date.
Summary information relating to stock award grants is presented
below:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Nonvested shares 378,092 198,944 197,312
Unrestricted shares 6,400 6,400 7,200
Weighted-average grant
date fair value $ 23.99 $ 11.68 $ 7.56
</TABLE>
16
<PAGE> 20
When granted, the cost of nonvested stock awards is deferred and
amortized over the vesting period. Unrestricted stock awards are expensed during
the year granted. During 1996, 1995 and 1994, the amount of compensation expense
related to stock awards charged against income was $937,000, $506,000 and
$277,000, respectively.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company accounts for stock options and stock awards granted
under these plans according to APB Opinion 25, "Accounting for Stock Issued to
Employees." As a result, no compensation cost has been recognized for the stock
options granted under the incentive plans. The fair value of each option at
grant date is estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995:
risk-free interest rate of 6%, volatility of 32%, dividend yield of 0.2% and
expected life of 4.2 years. The weighted average fair value at grant date
during 1996 and 1995 was $9.13 and $4.22, respectively. No options were granted
during 1994.
Unaudited pro forma data as though the Company had accounted for
stock-based compensation cost in accordance with SFAS No. 123 are as follows
(in thousands, except per share data):
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995
--------------------------------
<S> <C> <C>
Pro Forma
- ---------
Net income $ 42,269 $ 24,225
Earnings per share:
Primary $ .63 $ .46
Fully diluted $ .60 $ .42
</TABLE>
The above pro forma information includes only stock options granted in
1996 and 1995. Because it does not include stock options granted prior to 1995,
the pro forma effects are not representative of effects on net income or
earnings per share for future years.
Note 9 - Related Party Transactions
The Company contracted with a division of Chemed Corporation ("Chemed"), a
1% stockholder, to assist in the development of a new information 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
for the years ended December 31, 1996, 1995 and 1994 were $7,139,000,
$4,535,000 and $2,951,000, respectively. Net amounts owed by the Company to
Chemed as of December 31, 1996 and 1995 were $946,000 and $667,000,
respectively.
Note 10 - Employee Benefit Plans
The Company has a non-contributory, defined benefit pension plan
covering certain corporate headquarters employees and the employees of several
companies sold by the Company in 1992, for which benefits ceased accruing upon
the sale (the "Qualified Plan"). Benefits accruing under this plan to
corporate headquarters employees were fully vested and frozen as of January 1,
1994. The Company also has an excess benefits plan which provides retirement
payments to participants in amounts consistent with what they would have
received under the Qualified Plan if payments to them under the Qualified Plan
were not limited by the Internal Revenue Code and other restrictions.
Retirement benefits are based primarily on an employee's years of
service and compensation near retirement. Plan assets are invested primarily
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.
17
<PAGE> 21
Actuarial assumptions used to calculate the Accumulated Benefit Obligation
and net expenses include a 7.25% interest rate as of December 31, 1996 and 1995
(8% at December 31, 1994), an expected long-term rate of return on assets of
8% and a 6% rate of increase in compensation levels in years prior to 1994.
The Accumulated Benefit Obligation in excess of plan assets as of December
31, 1996 and 1995 was $7,422,000 and $3,188,000, respectively. The net
expenses relating to the Company's defined contribution and defined benefit
plans (including the ESOP described in Note 6) for the years ended December 31,
1996, 1995 and 1994 were $1,907,000, $1,663,000 and $1,481,000, respectively.
Note 11 - Income Taxes
The provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
For the years
ended December 31,
1996 1995 1994
---------------------------
<S> <C> <C> <C>
Current:
Federal $21,917 $13,197 $7,158
State and local 3,693 1,473 1,072
------- ------- ------
25,610 14,670 8,230
------- ------- ------
Deferred:
Federal 2,993 1,272 802
State 90 478 115
------- ------- ------
3,083 1,750 917
------- ------- ------
Income taxes $28,693 $16,420 $9,147
======= ======= ======
</TABLE>
Tax benefits related to the exercise of stock options and stock awards have
been credited to paid-in capital in amounts of $2,243,000, $1,357,000 and
$947,000 for 1996, 1995 and 1994, respectively.
18
<PAGE> 22
The difference between the Company's reported income tax expense and the
federal income tax expense computed at the statutory rate of 35% is explained
in the following table (in thousands):
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
----------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax at the
statutory rate $25,250 35.0% $14,413 35.0% $7,937 35.0%
State and local income taxes,
net of federal income tax benefit 2,459 3.4 1,268 3.1 772 3.4
Amortization of nondeductible
intangible assets 448 0.6 408 1.0 372 1.6
Other 536 0.8 331 0.8 66 0.3
------- ---- ------- ---- ------ ----
Income taxes $28,693 39.8% $16,420 39.9% $9,147 40.3%
======= ==== ======= ==== ====== ====
</TABLE>
Income tax payments made in 1996, 1995 and 1994 amounted to
$19,749,000, $14,014,000 and $5,569,000, respectively.
A summary of deferred tax assets and liabilities follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1996 1995
------ ------
<S> <C> <C>
Accounts receivable reserves $3,912 $4,469
Accrued liabilities 3,841 4,929
Other 106 104
------ ------
Gross deferred tax assets $7,859 $9,502
====== ======
Fixed assets and depreciation methods $ 945 $ 973
Amortization of intangibles 4,046 3,798
Other 1,029 752
------ ------
Gross deferred tax liabilities $6,020 $5,523
====== ======
</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.
19
<PAGE> 23
Note 12 - Contingencies
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 four percent of Omnicare's total sales and
earnings in 1996. 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.
Note 13 - Summary of Quarterly Results (Unaudited)
The following table presents the Company's quarterly financial
information for 1996 and 1995 (in thousands, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
------------------------------------------------------------------------
1996
<S> <C> <C> <C> <C> <C>
Sales $117,185 $121,833 $140,733 $156,853 $536,604
Cost of sales 83,553 86,738 100,111 111,366 381,768
-------- -------- -------- -------- --------
Gross profit 33,632 35,095 40,622 45,487 154,836
Selling, general and
administrative expenses 19,433 20,639 23,213 26,351 89,636
Acquisition expenses, pooling-
of-interests - - - 690(b) 690(b)
-------- -------- -------- -------- --------
Operating income 14,199 14,456 17,409 18,446(b) 64,510(b)
Investment income, net of
interest (expense) (760) 2,803 2,512 3,078 7,633
-------- -------- -------- -------- --------
Income before income taxes 13,439 17,259 19,921 21,524(b) 72,143(b)
Income taxes 5,310 6,863 8,108 8,412 28,693
-------- -------- -------- -------- --------
Net income $ 8,129 $ 10,396 $ 11,813 $ 13,112(b) 43,450(b)
======== ======== ======== ======== ========
Earnings per share (a):
Primary $ .15 $ .15 $ .17 $ .17(b) $ .64(b)
======== ======== ======== ======== ========
Fully diluted $ .13 $ .14 $ .16 $ .17(b) $ .61(b)
======== ======== ======== ======== ========
1995
Sales $ 90,527 $ 97,125 $102,145 $109,839 $399,636
Cost of sales 65,879 70,168 73,198 78,470 287,715
-------- -------- -------- -------- --------
Gross profit 24,648 26,957 28,947 31,369 111,921
Selling, general and
administrative expenses 15,413 16,549 16,789 18,219 66,970
Acquisition expenses, pooling-
of-interests - 1,292(c) - - 1,292(c)
-------- -------- -------- -------- --------
Operating income 9,235 9,116(c) 12,158 13,150 43,659(c)
(Interest expense), net of
investment income (535) (591) (638) (715) (2,479)
-------- -------- -------- -------- --------
Income before income taxes 8,700 8,525(c) 11,520 12,435 41,180(c)
Income taxes 3,449 3,629 4,585 4,757 16,420
-------- -------- -------- -------- --------
Net income $ 5,251 $ 4,896(c) $ 6,935 $ 7,678 $ 24,760(c)
======== ======== ======== ======== ========
Earnings per share (a):
Primary $ .10 $ .09(c) $ .13 $ .14 $ .47(c)
======== ======== ======== ======== ========
Fully diluted $ .09 $ .09(c) $ .12 $ .13 $ .43(c)
======== ======== ======== ======== ========
<FN>
(a) 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.
(b) Includes acquisition-related expenses of $690,000 relating to the 1996
pooling-of-interests transaction. Such expenses, on an aftertax basis,
were $534,000. Net income, excluding these expenses, was $13,646,000
for the fourth quarter, or $.17 per share (primary and fully diluted) and
$43,984,000 for the full year 1996, or $.65 per primary share and $.61
fully diluted.
(c) Includes acquisition-related expenses of $1,292,000 relating to the 1995
pooling-of-interests transaction. Such expenses, on an aftertax basis,
were $989,000. Net income, excluding these expenses, was $5,885,000 for
the second quarter, or $.11 per share (primary and fully diluted) and
$25,749,000 for the full year 1995, or $.49 per primary share and $.44
fully diluted.
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353230
<NAME> OMNICARE, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 216,515
<SECURITIES> 0
<RECEIVABLES> 124,544
<ALLOWANCES> 5,631
<INVENTORY> 43,585
<CURRENT-ASSETS> 390,735
<PP&E> 84,470
<DEPRECIATION> 28,415
<TOTAL-ASSETS> 721,697
<CURRENT-LIABILITIES> 61,733
<BONDS> 1,992
<COMMON> 77,026
0
0
<OTHER-SE> 557,352
<TOTAL-LIABILITY-AND-EQUITY> 721,697
<SALES> 536,604
<TOTAL-REVENUES> 536,604
<CGS> 381,768
<TOTAL-COSTS> 381,768
<OTHER-EXPENSES> 90,326
<LOSS-PROVISION> 3,614
<INTEREST-EXPENSE> 3,652
<INCOME-PRETAX> 72,143
<INCOME-TAX> 28,693
<INCOME-CONTINUING> 43,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,450
<EPS-PRIMARY> .64
<EPS-DILUTED> .61
</TABLE>
