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Omnicare Reports Fourth-Quarter and Full-Year 2013 Financial Results; Company Provides Full-Year 2014 Guidance


February 19, 2014 - London

CINCINNATI, February 19, 2014 - Omnicare, Inc. (NYSE:OCR) reported today financial results for its fourth quarter and full year ended December 31, 2013.

Fourth-Quarter Highlights:

 

  • Net sales increase of 5.1% to $1.54 billion  

  • Adjusted EBITDA from continuing operations increased 12.3% to $172 million  

  • Adjusted cash earnings per diluted share from continuing operations increased 8.8% to $0.87; GAAP earnings per share of $0.54  

  • End-of-life hospice pharmacy and certain retail operations qualify as discontinued operations 

Full-Year Highlights:

 

  • Net sales increase of 2.3% to $6.01 billion  

  • Adjusted EBITDA from continuing operations increased 6.9% to $674 million  

  • Adjusted cash earnings per diluted share from continuing operations increased 10% to $3.43; GAAP earnings per share of $0.78  

  • Cash flows from continuing operations of $480 million, including settlement payments of $20 million

"We are pleased to have completed another successful year and to have generated another quarter of solid financial results," said John L. Workman, Omnicare's Chief Executive Officer.  "During 2013, we achieved a number of significant milestones, including attaining full-year net organic bed growth in our Long-Term Care Group, generating strong double-digit growth in our Specialty Care Group and returning over 50% of our operating cash flows to shareholders through share repurchases and dividends for a second consecutive year."

Fourth-Quarter Results

Financial results from continuing operations for the quarter ended December 31, 2013, as compared with the same prior-year period, were as follows:

  • Net sales were $1.54 billion versus $1.46 billion  

  • Gross profit was $360 million versus $355 million  

  • GAAP earnings per diluted share from continuing operations was $0.54 versus $0.48  

  • Adjusted cash earnings per diluted share from continuing operations was $0.87 versus $0.80  

  • Adjusted EBITDA from continuing operations was $172 million versus $153 million  

Cash flows from continuing operations for the quarter ended December 31, 2013 were $24 million versus $119 million in the comparable prior-year quarter.  The year-over-year decline was largely attributable to increased inventory levels that is a timing issue and expected to substantially reverse in the first quarter of 2014.

"We are very pleased with our quarterly performance, which reflects the continued strength of our operations and the benefits of our ongoing operating plan," said Nitin Sahney, Omnicare's President and Chief Operating Officer. "During the fourth quarter, we captured opportunities to operate more efficiently within our long-term care business, expanding the segment's adjusted gross margin rate, while also generating revenue growth from all four platforms within our Specialty Care Group. We intend to build on this momentum to generate continued growth across our business in 2014 and beyond."

Financial Position

Omnicare concluded the fourth quarter of 2013 with no borrowings outstanding on its revolving credit facility and $356 million in cash on its balance sheet.

In the fourth quarter, Omnicare repurchased approximately $130 million in common shares for an average of $56.25 per share.  As of December 31, 2013, the Company had $500 million of availability under its current share repurchase authorization.

"While fourth quarter operating cash flows were impacted by increased inventory purchases, we returned nearly $150 million to our stockholders through share repurchases and dividends," said Rocky Kraft, Omnicare's Chief Financial Officer. "During the quarter we announced a record $500 million share repurchase authorization while also increasing the dividend by 43%.  We believe these actions provide for increased flexibility in our efforts to optimally redeploy our robust cash flows to the benefit of our shareholders."

Full-Year Results

Financial results from continuing operations for the year ended December 31, 2013, as compared with the same prior-year period, were as follows:

  • Net sales were $6.01 billion versus $5.88 billion  

  • Gross profit was $1.42 billion versus $1.40 billion  

  • GAAP earnings per diluted share from continuing operations was $0.78 versus $1.52  

  • Adjusted cash earnings per diluted share from continuing operations was $3.43 versus $3.12  

  • Adjusted EBITDA from continuing operations was $674 million versus $630 million  

Cash flows from continuing operations for the twelve months ended December 31, 2013 were $480 million versus $535 million in the comparable prior period.  Excluding settlement payments, adjusted cash flows from continuing operations were $500 million and $585 million for 2013 and 2012, respectively.

To facilitate comparisons and to enhance the understanding of core operating performance, discussions in this news release include financial measures that are adjusted from the comparable amounts under GAAP to exclude the impact of the special items discussed elsewhere herein, and to present results on a continuing operations basis.  For a detailed presentation of reconciling items and related definitions and components, please refer to the attached schedules or to reconciliation schedules posted at the Investor Relations section of Omnicare's website at http://ir.omnicare.com.  Additionally, the Company will make supplemental slides available in the same section on its website today that will include the number of scripts dispensed, and other information relevant to Omnicare's operations.

Segment Information

Financial results for the Long-Term Care Group for the fourth quarter ended December 31, 2013 were as follows:

  • Net sales of $1,169 million were 0.1% less than $1,170 million in the same prior-year period 

  • Adjusted operating income of $160.4 million increased 3.5% from $155.0 million in the same prior-year period 

Financial results for the Specialty Care Group for the fourth quarter ended December 31, 2013 were as follows:

  • Net sales of $367 million were 26% higher than $292 million in the same prior-year period 

  • Adjusted operating income of $31.2 million increased 16% from $27.0 million in the same prior-year period 

Discontinued Operations

During the fourth quarter of 2013, the Company's end-of-life hospice pharmacy business ("Hospice") as well as certain retail operations ("Retail") qualified for discontinued operations treatment.  As such, the results from operations for all periods presented have been revised to reflect the results of Hospice and Retail as discontinued operations, including an associated impairment loss and related expenses.

Special Items

The results for the fourth-quarter and full-years ended December 31, 2013 and 2012 include the impact of special items and cash EPS adjustments as follows:

Three months ended
December 31,
Year ended
December 31,
2013 2012 2013 2012
After-tax impact Per diluted share After-tax impact Per diluted share After-tax impact Per diluted share After-tax impact Per diluted share
Special Items Adj. $14.6M $0.13 $12.1M $0.11 $204.6M $1.87 $91.7M $0.81
Cash EPS Adj. $21.0M $0.19 $22.9M $0.21 $85.9M $0.78 $88.4M $0.78

All special items and cash EPS adjustments have been described in further detail in the "Footnotes and Definitions to Financial Information" section elsewhere herein.

Outlook

For the full-year 2014, Omnicare expects the following results from continuing operations:

2013 Results FY2014 Guidance % Change
Revenue $6.0B $6.3B to $6.4B 5.0% to 6.7%
Adjusted cash earnings per diluted share (excluding special items) $3.43 $3.64 to $3.72 6.1% to 8.5%
Cash flows from operations
(2014 guidance excludes settlement payments)
$480M* $475M to $550M -1.0% to 14.6%

*after settlement payments of $20 million

 

The Company's full-year 2014 guidance is exclusive of its discontinued operations, which generated adjusted cash earnings of $19.3 million in 2013, and also assumes a year-over-year decline between $3 million and $4 million in cash EPS adjustments.

Mr. Workman continued, "Our growth expectations for the underlying business are strong due to the continued benefits of our restructured operations.  We believe our ability to sustain organic growth across our platforms will become even more compelling in the future, especially as we move into 2015, which presents a more attractive year in terms of low-cost generic drug introductions.  We believe our organization is well positioned for continued growth."

Webcast Today

Omnicare will hold a conference call to discuss its fourth-quarter and full-year 2013 financial results today, February 19, 2014, at 9:00 a.m. ET.  A live webcast of the conference call and supplemental slides will be accessible from the Investor Relations section of Omnicare's website at http://ir.omnicare.com.  An archived replay will be made available on the website following the conclusion of the conference call.

Upcoming Investor Events

  • RBC Capital Markets 2014 Global Healthcare Conference on Tuesday, February 25th at 2:05 p.m. ET in New York, NY 

  • Cowen and Company 34th Annual Health Care Conference on Monday, March 3rd at 1:30 p.m. ET in Boston, MA 

  • Barclays Global Healthcare Conference on Tuesday, March 11th at 1:30 p.m. ET in Miami, FL 

At these events, Omnicare executives will discuss the company's recent financial performance and strategies for continued growth.  Additional details and a link to the live webcast of each event will be accessible from the Investor Relations section of Omnicare's website at http://ir.omnicare.com.  Following the live presentations, archived versions of the webcasts will be available.

About Omnicare

Omnicare, Inc., a Fortune 500 company based in Cincinnati, Ohio, provides comprehensive pharmaceutical services to patients and providers across the United States.  As the market-leader in professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other chronic care institutions, Omnicare leverages its unparalleled clinical insight into the geriatric market along with some of the industry's most innovative technological capabilities to the benefit of its long-term care customers.  Omnicare also provides key commercialization services for the bio-pharmaceutical industry through its Specialty Care Group.  For more information, visit www.omnicare.com.

Forward-looking Statements

In addition to historical information, this report contains certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, all statements regarding the intent, belief or current expectations regarding the matters discussed or incorporated by reference in this document (including statements as to "beliefs," "expectations," "anticipations," "intentions" or similar words) and all statements which are not statements of historical fact. Such forward-looking statements, together with other statements that are not historical, are based on management's current expectations and involve known and unknown risks, uncertainties, contingencies and other factors that could cause results, performance or achievements to differ materially from those stated. The most significant of these risks and uncertainties are described in the Company's Form 10-K, Form 10-Q and Form 8-K reports filed with the Securities and Exchange Commission and include, but are not limited to: overall economic, financial, political and business conditions; trends in the long-term healthcare and pharmaceutical industries; the ability to attract new clients and service contracts and retain existing clients and service contracts; the ability to consummate pending acquisitions on favorable terms or at all; trends for the continued growth of the Company's businesses; trends in drug pricing; delays and reductions in reimbursement by the government and other payors to customers and to the Company; the overall financial condition of the Company's customers and the ability of the Company to assess and react to such financial condition of its customers; the ability of vendors and business partners to continue to provide products and services to the Company; the successful integration of acquired companies and realization of contemplated synergies; the continued availability of suitable acquisition candidates; the ability to attract and retain needed management; competition for qualified staff in the healthcare industry; variations in demand for the Company's products and services; variations in costs or expenses; the ability to implement productivity, consolidation and cost reduction efforts and to realize anticipated benefits; the potential impact of legislation, government regulations, and other government action and/or executive orders, including those relating to Medicare Part D, including its implementing regulations and any subregulatory guidance, reimbursement and drug pricing policies and changes in the interpretation and application of such policies, including changes in calculation of average wholesale price; discontinuation of reporting average wholesale price, and/or implementation of new pricing benchmarks; legislative and regulatory changes impacting long term care pharmacies; government budgetary pressures and shifting priorities; federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of the Company's contracts with pharmaceutical benefit managers, Medicare Part D Plan sponsors and/or commercial health insurers or to the proportion of the Company's business covered by specific contracts; the outcome of disputes and litigation; potential liability for losses not covered by, or in excess of, insurance; the impact of executive separations; the impact of benefit plan terminations; the impact of differences in actuarial assumptions and estimates as compared to eventual outcomes; events or circumstances which result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; the final outcome of divestiture activities; market conditions; the outcome of audit, compliance, administrative, regulatory, or investigatory reviews; volatility in the market for the Company's stock and in the financial markets generally; access to adequate capital and financing; changes in tax laws and regulations; changes in accounting rules and standards; the impacts of potential cybersecurity risks and/or incidents; and costs to comply with the Company's Corporate Integrity Agreement. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, the Company's actual results, performance or achievements could differ materially from those expressed in, or implied by, such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as otherwise required by law, the Company does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

# # #

Contact:
Patrick C. Lee
(513) 719-1507
patrick.lee@omnicare.com

Omnicare, Inc. and Subsidiary Companies
Summary Consolidated Statements of Income (Loss), GAAP Basis
($000s, except per share amounts)
Unaudited

Three months ended Year ended
December 31, 2013 December 31, 2012 December 31, 2013 December 31, 2012
Net sales $ 1,536,169 $ 1,462,198 $ 6,013,398 $ 5,878,464
Cost of sales 1,176,497 1,106,722 4,592,536 4,483,042
Gross profit 359,672 355,476 1,420,862 1,395,422
Selling, general and administrative expenses 190,904 202,639 756,180 772,004
Provision for doubtful accounts 24,448 26,511 99,561 97,995
Settlement, litigation and other related (credits) charges (2,150 ) 11,148 167,465 49,375
Other charges 2,896 2,046 99,802 65,713
Operating income 143,574 113,132 297,854 410,335
Interest expense, net of investment income (29,859 ) (29,659 ) (123,870 ) (135,103 )
Income from continuing operations before income taxes 113,715 83,473 173,984 275,232
Income tax provision 55,088 30,304 89,092 103,289
Income from continuing operations 58,627 53,169 84,892 171,943
Income (loss) from discontinued operations (142,323 ) 5,849 (128,324 ) 22,931
Net income (loss) (83,696 ) 59,018 (43,432 ) 194,874
Earnings (loss) per common share - Diluted:
Continuing Operations $ 0.54 $ 0.48 $ 0.78 $ 1.52
Discontinued Operations (1.31 ) 0.05 (1.17 ) 0.20
Net Income (loss) (0.77 ) 0.54 (0.39 ) 1.73
Weighted average number of common shares outstanding:
Diluted 108,980 110,074 109,449 112,988

The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

Omnicare, Inc and Subsidiary Companies
Consolidated Balance Sheets
(000s)
Unaudited

December 31,
2013
December 31,
2012
ASSETS
Current assets:
Cash and cash equivalents $ 356,001 $ 444,620
Restricted cash 5 1,066
Accounts receivable, less allowances 695,684 822,055
Inventories 512,418 374,620
Deferred income tax benefits 135,094 136,186
Other current assets 265,531 252,498
Current assets of discontinued operations 49,995 57,814
Total current assets 2,014,728 2,088,859
Properties and equipment, at cost less accumulated depreciation 305,888 272,860
Goodwill 4,057,456 4,061,303
Identifiable intangible assets, less accumulated amortization 129,974 165,099
Other noncurrent assets 96,722 163,264
Noncurrent assets of discontinued operations 87,078 237,879
Total noncurrent assets 4,677,118 4,900,405
Total assets $ 6,691,846 $ 6,989,264
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 181,022 $ 192,080
Accrued employee compensation 50,240 71,401
Current debt 527,204 27,713
Other current liabilities 355,845 174,057
Current liabilities of discontinued operations 18,846 16,763
Total current liabilities 1,133,157 482,014
Long-term debt, notes and convertible debentures 1,418,819 2,030,030
Deferred income tax liabilities 1,012,733 914,660
Other noncurrent liabilities 53,835 53,874
Noncurrent liabilities of discontinued operations 1,398 2,974
Total noncurrent liabilities 2,486,785 3,001,538
Total liabilities 3,619,942 3,483,552
Convertible Debt 331,101 -
Stockholders' equity 2,740,803 3,505,712
Total liabilities and stockholders' equity $ 6,691,846 $ 6,989,264

The footnotes and definitions presented at the separate "Footnotes and Definitions to Financial Information" pages are an integral part of this financial information.

Omnicare, Inc and Subsidiary Companies
Condensed Consolidated Statements of Cash Flows, GAAP Basis
(000s)
Unaudited

December 31, 2013
Three months ended Year ended
Cash flows from operating activities:
Net income (loss) $ (83,696 ) $ (43,432 )
Loss from discontinued operations 142,323 128,324
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation 14,370 56,013
Amortization 19,063 76,947
Write off of debt issuance costs - 4,784
Debt redemption loss 628 51,496
Disposition of business, net 3,183 39,245
Deferred tax provision (255 ) 61,932
Changes in certain assets and liabilities, net of effects from acquisition and divestiture of businesses:
Accounts receivable, net of provision for doubtful accounts 7,334 77,441
Inventories (100,455 ) (138,028 )
Current and noncurrent assets 59,241 65,138
Accounts payable (34,366 ) (11,649 )
Accrued employee compensation (2,660 ) (19,856 )
Current and noncurrent liabilities (1,182 ) 131,159
Net cash flows from operating activities of continuing operations 23,528 479,514
Net cash flows used in operating activities of discontinued operations (11,133 ) (12,454 )
Net cash flows from operating activities 12,395 467,060
Cash flows from investing activities:
Acquisition of businesses, net of cash received (97 ) (3,895 )
Divestiture of businesses, net 575 11,658
Marketable Securities 255 (365 )
Capital expenditures (21,736 ) (95,015 )
Other - 1,061
Net cash flows used in investing activities of continuing operations (21,003 ) (86,556 )
Net cash flows used in investing activities of discontinued operations (159 ) (1,007 )
Net cash flows used in Investings activities (21,162 ) (87,563 )
Cash flows from financing activities:
Payments on term loans (5,312 ) (21,250 )
Payments on long-term borrowings and obligations (1,919 ) (192,322 )
Fees paid for financing activities (809 ) (5,660 )
Increase in cash overdraft balance 11,963 473
Payments for Omnicare common stock repurchases (129,712 ) (220,971 )
Proceeds (payments) for stock awards and exercise of stock options, net of stock tendered in payment (2,115 ) 15,819
Dividends paid (19,917 ) (62,928 )
Other 3,034 5,262
Net cash flows used in financing activities of continuing operations (144,787 ) (481,577 )
Net cash flows from financing activities of discontinued operations 3,868 3,868
Net cash flows used in financing activities (140,919 ) (477,709 )
Net increase (decrease) in cash and cash equivalents (149,686 ) (98,212

Thomson Reuters

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