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Omnicare Inc. (OCR)

Q4 2011 Earnings Call

February 23, 2012 8:00 a.m. ET


Patrick Lee – VP, IR

John Figueroa – CEO

John Workman – President and CFO


Adam Feinstein – Barclays Capital

Glen Santangelo – Credit Suisse

Jason Gurda – Leerink Swann

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Good morning. My name is Holly and I will be your conference operator today. At this time, I would like to welcome everyone to Omnicare’s Fourth Quarter 2011 Year End Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions).

I would now like to turn today’s conference over to Patrick Lee, Omnicare’s Vice President of Investor Relations. Mr. Lee, you may begin your conference.

Patrick Lee

Thanks, Holly. Good morning, ladies and gentlemen, and thank you for joining us today. With me on the call today are, John Figueroa, Chief Executive Officer and John Workman, President and Chief Financial Officer.

Before we begin, let me remind you that during this call, we will make remarks that constitute forward-looking STATements. Actual results may differ as a result of a variety of factors including those identified in our earnings release and our various filings with the SEC. You are also cautioned that any forward-looking statements reflect management’s current views only, and that the company undertakes no obligation to revise or update such statements in the future.

For simplicity sake and the focus on what we believe are the best indicators of our operating performance, we will discuss results from continuing operations and we’ll also exclude special items for all periods in our discussion today.

A reconciliation of this non-GAAP information has been attached to our earnings release and is also available on our newly redesigned website. Also on our website, you will find fourth quarter supplemental slides and the historical data behind our cash based EPS reporting methodology, which we will follow when we report our first quarter results.

Before turning the call over to John, I would like to remind analysts to limit themselves to one question and one follow-up during our question-and-answer session so others may ask their questions.

With that, it is my pleasure to turn the call over to John Figueroa.

John Figueroa

Thanks Patrick. Good morning everyone, and thank you for joining us. Before we provide our perspective on our strong fourth quarter results and 2012 outlook, I’d like to briefly discuss our decision to allow a tender offer to acquire PharMerica to expire. Following our remarks, we’ll be happy to answer your questions.

In respect to PharMerica, while we strongly disagree with the FDCs decision to seek to block the proposed transaction, I believe we made the right decision to avoid investing significant time and money in a lawsuit to allow our tender offer to purchase all outstanding shares of PharMerica to expire.

While we believe the FDC failed to recognize the tremendous value, the combined entity would have offered the healthcare supply train, Omnicare’s business is performing well, and I believe we are well positioned to effect such change organically.

With such unique developments as OmniviewDr, which offers the first electronic prescribing solution for controlled substances in institutional settings, and Omnicare’s Proprietary Automation, which succeeds Six Sigma quality and prescription dispensing, I believe Omnicare’s actively revolutionized in quality and innovation in our industry.

One of our core operating objectives is to create more standardization across our organization in an effort to benefit both Omnicare and its customers. And with the inherent demand within our industry, due to the aging population, I believe our operationally driven orientation positions us well to accelerate the efficiency of our industry while improving health outcomes for our residents.

I believe we offer investors many important values and value drivers, including our industry-leading long-term care business, a rapidly growing specialty care group, and our strong cash flow characteristics which support our ability to fund acquisitions, invest in our underlining operations, and return capital to investors.

We intend to remain opportunistic, yet disciplined about the many opportunities in front of us in order to maintain our long-term focus on value creation for our investors. We thank the many Omnicare and PharMerica shareholders who supported our proposal as well as our employees who remained focused on executing our business objectives throughout the process.

Turning now to the quarter, we are very pleased with our solid fourth quarter results, which validates the progress our organization has made in becoming more operationally driven and customer focused. We exited the year a much stronger company, and we are now realizing the benefits in the investments we made throughout 2011.

As we look to 2012 and beyond, we believe Omnicare is well positioned to generate long-term profitability growth in both core businesses; long-term care and specialty care, while positively affecting the many stakeholders on behave of whom we run our business.

For the quarter, we generated adjusted EPS of $0.58 which represents a sequential increase of 7% and a 14% improvement over the fourth quarter of 2010. This solid quarterly performance brought our full-year 2011 adjusted EPS to $2.13, which is toward the high-end of the financial guidance we provided a year ago.

Our fourth quarter results was driven largely by a 69 basis point sequential expansion in gross margin as we leveraged a modest increase in sales to the gross profit line. As reflected in our gross margin expansion, the wave of important generic drugs with patent exclusivity has begun to take form, and we remain very excited about the opportunity generic drug introductions represent for both Omnicare and its customers.

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