Omnicare Reports Third-Quarter 2011 Financial Results
Third-Quarter Gross Profit of $346.1 Million; Gross Margin Expansion of 80 Basis Points Sequentially to 22.4%
Quarterly Cash Flows from Continuing Operations Increase to $167.1 Million
Adjusted Income from Continuing Operations Per Diluted Share of $0.54; 8% Growth from $0.50 in 2011 Second Quarter
Company Provides Updated Guidance
Omnicare, Inc. (NYSE:OCR) reported today financial results for its third quarter ended September 30, 2011.
"We are pleased with our solid third quarter results, which reflect the progress we are making to become a more operationally driven and customer-focused company," said John Figueroa, Omnicare's Chief Executive Officer. "We are executing on our operating objectives while establishing new ones, and we remain focused on continuing to drive enhanced value for our shareholders, customers and other important stakeholders."
Prior Year Comparison
Financial results from continuing operations for the quarter ended September 30, 2011, as compared with the same prior-year period, were as follows:
Adjusted gross profit (see discussion below and attached supplemental information) was $346.1 million as compared with $330.6 million GAAP income from continuing operations per diluted share (see "per share" discussion below and attached supplemental information) was $0.33 versus a $0.08 loss Adjusted income from continuing operations (see discussion below and attached supplemental information) per share was $0.54 versus $0.53 Adjusted EBITDA (see discussion below and attached supplemental information) from continuing operations was $157.2 million compared to $142.2 million Cash flows from continuing operations for the quarter ended September 30, 2011 was $167.1 million versus $116.3 million in the comparable prior-year quarter. Included in the third quarter of 2011 was $22.7 million related to the settlement of a receivable dispute with a large customer. Included in the third quarter of 2010 was a settlement payment of approximately $21 million as well as approximately $7 million of executive separation-related payments.
In comparison to the second quarter of 2011, financial results from continuing operations for the third quarter of 2011 were as follows:
Gross profit was $346.1 million as compared with $336.4 million GAAP income from continuing operations per share was $0.33 versus $0.32 Adjusted income from continuing operations (see discussion below and attached supplemental information) per share was $0.54 versus $0.50 Adjusted EBITDA (see discussion below and attached supplemental information) from continuing operations was $157.2 million compared to $146.3 million
"The favorable dynamics currently present in the pharmaceutical marketplace, especially the increased availability of generic drugs, improve the economics for both Omnicare and its customers," said Mr. Figueroa. "During the quarter, we realized the advantages of the rise in generic drug utilization, which, coupled with our insourcing and other efficiency improvement initiatives, more than offset a modest deceleration in industry prescription volumes. In addition, we have seen positive results from our efforts to reaccelerate growth in our Specialty Care Group."
During the third quarter of 2011, Omnicare entered into a new $750 million senior unsecured credit facility, comprised of a $300 million revolving credit facility and a $450 million Term A Loan, replacing the Company's previous $400 million senior secured revolving credit facility. Omnicare used the proceeds from the Term A Loan to redeem $25 million of its 6.125% Senior Subordinated Notes due 2013 (the "6.125% Notes) and $425 million of its Senior Subordinated Notes due 2015 (the "6.875% Notes).
Also during the three-month period, Omnicare completed its offering of an additional $150 million aggregate principal amount of its 7.75% Senior Subordinated Notes due 2020. Subsequent to the end of the quarter, Omnicare used the proceeds from the offering of 7.75% Notes to redeem the remaining $50 million principal amount on the 6.125% Notes and the remaining $100 million principal amount on the 6.875% Notes.
In connection with its offering of the additional 7.75% Notes, the Company entered into two interest rate swap agreements, under which Omnicare pays a floating rate based on the London interbank offered rate, plus a weighted average spread of 5.32%.
Omnicare concluded the third quarter of 2011 with no borrowings outstanding on its revolving credit facility and $681.6 million in cash on its balance sheet. Omnicare's total debt to total capital of 36.2% at September 30, 2011, was up approximately 60 basis points from 35.6% at December 31, 2010 due to the redemption of the remaining 6.125% Notes and 6.875% Notes taking place in the fourth quarter of 2011.
With respect to its share repurchase program, Omnicare repurchased approximately 1.8 million shares of common stock during the quarter and paid an aggregate amount of $50.1 million. As of September 30, 2011, the Company had $78.9 million of availability under its current share repurchase authorization.
"During the third quarter, we maintained a high level of cash flow efficiency and working capital management while making further steps to strengthen our capital structure," said John L. Workman, Omnicare's President and Chief Financial Officer. "Our quarterly cash flows from continuing operations of $167 million brings our nine-month total to $448 million, positioning us for a record full-year performance. This elevated level of cash flow generation has enabled us to continue redeploying capital in areas we expect will create value for our shareholders."
To facilitate comparisons and to enhance the understanding of core operating performance, the discussion which follows includes financial measures that are adjusted from the comparable amount 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 Web site at http://ir.omnicare.com. Additionally, the Company will make supplemental slides available in the same section on its Web site today that will include the number of scripts dispensed, beds served, and other information relevant to Omnicare's operations.
Financial results from continuing operations for the nine months ended September 30, 2011, as compared with the same prior-year period, were as follows:
Net sales were $4,625.8 million as compared with $4,500.0 million GAAP income from continuing operations per share was $1.07 as compared with $0.61 Adjusted income from continuing operations (see discussion below and attached supplemental information) per share was $1.55 as compared with $1.61 EBITDA from continuing operations for the first nine months of 2011, including the impact of special items and accounting changes, was $406.2 million versus $317.8 million in the comparable prior-year period. Excluding the special items, adjusted EBITDA from continuing operations in the first nine months of 2011 was $449.7 million as compared with $450.6 million in the first nine months of 2010.
Operating cash flow from continuing operations for the first nine months of 2011 totaled $447.9 million versus $269.2 million in the comparable prior-year period.
The results for the third quarter of 2011 and 2010 include the impact of special items and accounting changes totaling approximately $39.7 million pretax ($24.5 million aftertax, or approximately $0.21 per share) and $111.5 million pretax ($71.0 million aftertax, or approximately $0.61 per share), respectively.
Results for the first nine months of 2011 and 2010 include special items totaling $82.7 million pretax ($55.1 million aftertax, or approximately $0.48 per share) and $182.5 million pretax ($116.9 million aftertax, or approximately $0.99 per share), respectively.
The special items have been described in further detail in the "Footnotes and Definitions to Financial Information" section elsewhere herein.
Reflecting its more favorable outlook on cash flows as well as a narrower earnings guidance range, Omnicare now expects the following for full-year 2011:
Revenues of $6.0 billion to $6.1 billion
Income per diluted share from continuing operations of $2.09 to $2.13 (excluding special items)
Cash flow from continuing operations increased to $500 million to $525 million (from prior guidance of $400 million to $450 million)
Omnicare will hold a conference call to discuss its third-quarter 2011 financial results today, Tuesday, October 25, 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 Web site at http://ir.omnicare.com. An archived replay will be made available on the Web site following the conclusion of the conference call.
Omnicare, Inc., a Fortune 400 company based in Covington, Kentucky, provides comprehensive pharmaceutical services to patients and providers across North America. 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 and end-of-life disease management through its Specialty Care Group. For more information, visit www.omnicare.com.