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[LETTERHEAD OF OMNICARE]
OMNICARE NEWS RELEASE
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FOR IMMEDIATE RELEASE
CONTACT:
Cheryl D. Hodges
(859) 392-3331
OMNICARE ANNOUNCES PRELIMINARY
SECOND QUARTER 2000 RESULTS
COVINGTON, KENTUCKY, June 26, 2000. . . . Omnicare, Inc.
(NYSE:OCR) today announced that, based upon a review of its recent operating
results, the Company expects to report earnings per diluted share of $0.15 to
$0.18 for the second quarter ending June 30, 2000 as compared with consensus
analysts' estimates of $0.22. Final results for the quarter are scheduled to be
reported July 27, 2000.
The expected shortfall in earnings results primarily from
lower-than-anticipated revenues in the Company's institutional pharmacy business
as well as in its contract research organization ("CRO"). Total sales for the
Company are expected to be in the range of $475 million to $490 million.
Joel F. Gemunder, President of Omnicare, explained, "In
analyzing our most recent operating results, it has become increasingly apparent
that the cumulative impact of the implementation of the Prospective Payment
System ("PPS") for Medicare residents in skilled nursing facilities has
continued to weaken the financial condition of many skilled nursing facilities.
Lower reimbursement levels under PPS have, since implementation, resulted in
lower occupancy and acuity levels. Congress attempted to remedy this situation
by enacting the Balanced Budget Refinement Act ("BBRA") which was intended to
provide a temporary increase in reimbursement rates, particularly for higher
acuity residents, to be effective April 1, 2000. However, many of our customers
report that payments at these new rates have been delayed. We have observed a
churning of accounts as some skilled nursing facilities with severe cash flow
problems attempt to move to new pharmacy providers to indirectly obtain vendor
financing. It has therefore been necessary to apply more stringent standards in
accepting new business, and to continue aggressively withdrawing from uneconomic
accounts and those with an unstable financial condition. These factors, taken
together, have had a dampening effect on net new account additions that we had
expected for the quarter.
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OMNICARE ANNOUNCES PRELIMINARY SECOND QUARTER 2000 RESULTS
JUNE 26, 2000
"Additionally, in looking at most recent operating trends, we
have seen that while the level of occupancy in the skilled nursing facilities we
serve has remained relatively stable - albeit at its lowest level in some years
- lower drug utilization in these facilities in the second quarter versus the
first has resulted in a decline in the number of prescriptions filled per
resident. We believe this lower utilization is a function of a more pronounced
than expected impact of seasonality on the business. As well, there has been no
appreciable increase in admissions of higher acuity residents among our
customers which we view as directly related to the delays in BBRA reimbursement
increases and uncertainty over payment rates and methodology over the near term.
Accordingly, nursing facilities have continued to favor admission of residents
with lower drug needs.
"On the plus side, we are pleased to report that our
productivity and consolidation initiatives are on track and the significantly
reduced costs resulting from these programs are mitigating the impact of the
unfavorable sales trend for the quarter," Mr. Gemunder added.
As announced previously, Omnicare has embarked on a strategic
initiative to streamline operations, reduce costs and increase the efficiency of
its operating units by standardizing around best practices. This initiative is
expected to generate pre-tax cost savings of $46 million ($29 million after tax
or $0.32 per share) on an annualized basis by the end of 2000.
"Upon completion of two-thirds of this initiative, we remain
on track to achieve our projected savings," Gemunder said. "At the end of May,
we had merged or closed 50 pharmacy locations and four CRO and software offices
as well as opened 8 new pharmacies, reflecting 84% of our planned net reduction
in facilities. Additionally, we have implemented productivity programs in many
pharmacies, and have achieved 86% of targeted headcount reductions."
Continuing, he said, "Looking at our CRO business, Omnicare
Clinical Research, revenues for the second quarter will be softer than expected.
Like many others in the industry, we continue to be impacted by delays in
decision-making by pharmaceutical manufacturers in commencing clinical studies,
related in part to merger activities, and to the cancellation of planned
projects prior to commencement. While reported revenues for the quarter will be
below the first quarter 2000 level, we are heartened by a solid increase in the
backlog of projects since March 2000, reflecting new business wins during the
second quarter, and a high level of bid proposals outstanding. During the
quarter, we have also moved to fully integrate our CRO operations globally which
should enhance business development and customer service while lowering our
overall cost structure."
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OMNICARE ANNOUNCES PRELIMINARY SECOND QUARTER 2000 RESULTS
JUNE 26, 2000
Commenting on the outlook for Omnicare, Mr. Gemunder said, "We
are disturbed that the financial difficulties of the skilled nursing facility
market are being prolonged and that needed relief is being delayed to these
providers of vital health care services to the frail elderly in the U.S. We,
nevertheless, must react to what we hope is a short-term dislocation in this
market. It is anticipated that the full relief offered through the BBRA will be
forthcoming and, longer term, that new permanent changes to PPS recently
proposed by the Health Care Financing Administration will be enacted. Moreover,
Congress has recently indicated that it intends to enact legislation providing
further financial relief. These actions, taken together, should restore
financial health and more normalized operating trends to the long-term care
industry.
"Meanwhile, lowering our operating cost structure and
increasing the efficiency of our operations has been our highest priority.
Although we have not yet completed our consolidation initiative, the majority of
this plan has been accomplished and the targeted cost savings appear achievable.
Also, as we have progressed through this program, we have identified additional
opportunities for lowering costs which we have begun to implement. With this
very important initiative moving toward completion, we are turning our full
attention to building sales which will leverage significantly our newly lowered
cost structure. In addition to new beds added, for which we currently have a
backlog, we see major opportunities in disease management and on-site dialysis.
Also, important to future growth are our new clinical programs for the
broader-based senior marketplace, such as the recently announced program with
GTE Corporation. We will also continue to lower costs and increase efficiency in
our CRO business and to aggressively pursue new preferred provider
relationships, such as our new agreement with Eli Lilly & Co., opportunities for
geriatric research for which we are uniquely qualified, and other opportunities
for top-line growth."
Concluding, he said, "In summary, while we are concerned about
the government reimbursement pressures being placed on health care providers in
the short-run, we nonetheless remain convinced of the soundness of the
underlying fundamentals of our businesses and the value we bring to long-term
care facilities and the residents they serve, payors and pharmaceutical
manufacturers. The U.S. population continues to age and pharmaceuticals are the
most cost-effective means of treating the elderly. Our pharmaceutical
distribution and clinical services are in line with the need to lower health
care costs and are vital to appropriate and cost-effective care of America's
senior population. The acceleration of new drug discovery will drive continued
outsourcing of research and development services which bodes well long-term for
the CRO business. As we navigate through the current environment, we will remain
focused on maintaining positive cash flow, improving growth and profitability
and enhancing shareholder value."
Omnicare, based in Covington, Kentucky, is a leading geriatric
pharmaceutical care company. Omnicare is the nation's largest provider of
professional pharmacy, related consulting and data management services for
skilled nursing, assisted living and other institutional health care providers.
Omnicare also provides comprehensive clinical research services for the
pharmaceutical and biotechnology industries in 23 countries worldwide.
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OMNICARE ANNOUNCES PRELIMINARY SECOND QUARTER 2000 RESULTS
JUNE 26, 2000
Statements in this press release concerning Omnicare's
business outlook or position or future economic performance, including
expectations concerning second quarter earnings and revenues; the impact of PPS
on nursing home admissions and census; the impact of the financial condition of
skilled nursing facilities on Omnicare's performance; the impact of reported
delays in the implementation of higher reimbursement rates; expectations
concerning Omnicare's productivity and consolidation initiatives; the impact of
delayed decision-making and project cancellation by pharmaceutical
manufacturers; the impact of the integration of Omnicare's CRO operations; the
potential impact of HCFA proposed changes to PPS and other legislative relief;
the impact of Omnicare's clinical programs; opportunities for growth; together
with other statements that are not historical, are forward-looking statements
that are estimates reflecting the best judgment of Omnicare based on currently
available information. Such forward-looking statements involve known and unknown
risks, uncertainties, contingencies and other factors that could cause results,
performance or achievements to differ materially from those stated. Such risks,
uncertainties, contingencies and other factors, many of which are beyond the
control of Omnicare, include overall economic, financial and business
conditions; variations in Omnicare's quarterly operating results, particularly
the impact of results in May and June 2000; trends for the continued growth of
the businesses of Omnicare; Omnicare's ability to assess and react to the
financial condition of its customers; the impact of seasonality on the business
of Omnicare; the ability to implement the productivity and consolidation
initiative; the realization of anticipated revenues, profitability and costs
synergies; the continued successful integration of the CRO business and acquired
companies; pricing and other competitive factors in the industry; the effect of
new government regulations and/or legislative initiatives, including those
relating to reimbursement policies and in the interpretation and application of
such policies; the failure of Omnicare to obtain or maintain required regulatory
approvals or licenses; loss or delay of contracts pertaining to Omnicare's
contract research organization business for regulatory or other reasons; the
impact of consolidation in the pharmaceutical industry; volatility in Omnicare's
stock price; the demand for Omnicare's products and services; variations in
costs or expenses; and other risks and uncertainties described in Omnicare's
reports and filings with the Securities and Exchange Commission.
For more information on Omnicare, Inc. via the Internet,
including a full menu of news releases, visit Omnicare.com or
prnewsire.com/comp/136781.html.
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