Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. OMNICARE INC (353230) 10-Q published on Jul 24, 2015 at 8:07 am
Reporting Period: Jun 29, 2015
On May 20, 2015, the Company, CVS Pharmacy, Inc., a Rhode Island corporation and subsidiary of CVS Health Corporation (“CVS Health” and, such subsidiary, “CVS Pharmacy”), and Tree Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CVS Pharmacy (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of CVS Pharmacy. The Merger Agreement provides, among other things, that, on the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, each share of the Company’s common stock issued and outstanding immediately prior to the Merger will be automatically canceled and converted into the right to receive $98.00 in cash, without interest and less any applicable withholding taxes. The completion of the Merger is subject to adoption of the Merger Agreement by the Company's stockholders and certain regulatory approvals and other customary closing conditions. The completion of the Merger is expected prior to the end of 2015.
Following announcement of the Merger, two putative class action complaints styled Elow v. Omnicare, Inc., et al., Civil Action No. 11093-VCG (the “Elow Action”) and Electrical Workers Pension Trust Fund of IBEW Local Union No. 58 v. CVS Health Corp., et al., Civil Action No. 11131-VCG (the “IBEW Action”) were filed in the Court of Chancery of the State of Delaware on behalf of purported stockholders of Omnicare. The complaints name as defendants various combinations of Omnicare, the members of the Omnicare Board of Directors, CVS Health, CVS Pharmacy and Merger Sub. The complaints generally allege that the members of the Omnicare Board of Directors breached their fiduciary duties to Omnicare’s stockholders during Merger negotiations by entering into the Merger Agreement and approving the Merger, and that CVS Health, CVS Pharmacy and Merger Sub aided and abetted such breaches of fiduciary duties. The complaints further allege that, among other things, (i) the Merger consideration undervalues Omnicare, (ii) the sales process leading up to the Merger was flawed due to the conflicts of interest of members of the Omnicare Board of Directors, members of Omnicare management, and Omnicare’s financial advisors, (iii) certain provisions of the Merger Agreement inappropriately favor CVS Pharmacy and inhibit competing bids and (iv) Omnicare’s preliminary proxy statement filed with the SEC on June 26, 2015 omitted material facts, including material information regarding the process leading up to the Merger, the financial analyses of Omnicare’s financial advisors and certain prospective financial information described in the proxy statement. The complaints seek, among other things, (i) a declaration that the Merger was entered into in breach of the defendants’ fiduciary duties and is therefore unenforceable, (ii) injunctive relief enjoining the Merger unless and until Omnicare implements a process that will yield a Merger Agreement providing fair terms to Omnicare’s stockholders, (iii) rescission of the Merger Agreement to the extent already implemented and granting rescissory damages, (iv) an accounting of all damages suffered as a result of the alleged wrongdoing and (v) reimbursement of costs. On July 20, 2015, the Elow Action and the IBEW Action were consolidated for all purposes under the caption In re Omnicare, Inc. Shareholder Litigation, Consolidated Civil Action No. 11093-VCG. The defendants believe that the claims asserted against them in the complaints are without merit and intend to defend the litigation vigorously.
v. Abbott Laboratories, Inc., Omnicare, Inc., and PharMerica Corp., No. 1:07-cv-00006 and United States, et al., ex rel. McCoyd v. Abbott Laboratories, Omnicare, Inc., PharMerica Corp., and Miles White, No. 1:07-cv-00081, alleging civil violations of the False Claims Act in connection with the manufacturer agreements described above. On July 7, 2015, the parties filed a Joint Motion to Stay the Litigation stating that the parties have reached a proposed resolution of the monetary terms of a potential settlement agreement. Resolution of the matter is subject to various contingencies, including approval by authorized officials at the Department of Justice, negotiation of the terms of a settlement agreement, approval and releases from the National Association of Medicaid Fraud Control Units, and coordination with discussions with the United States regarding other ongoing matters. The Company has recorded a provision equal to the proposed settlement amount. While the Company believes that a final settlement will be reached, there can be no assurance that any final settlement agreement will be reached or as to the final terms of such settlement.
Net cash used in financing activities was $187 million for the six months ended June 30, 2015 as compared to $391 million for the prior year period. In the fourth quarter of 2013, holders presented for conversion approximately $37 million of the Series B PIERS and approximately $1 million of the Series A PIERS (and the underlying 4.00% Junior Subordinated Convertible Debentures due 2033 (the “2033 Debentures”)). The conversions settled in the first quarter of 2014, which increased our payments on long-term borrowings and obligations for the six months ended June 30, 2014. Additionally, in the second quarter of 2014, through privately negotiated transactions, we repurchased approximately $52 million in aggregate principal amount of our outstanding 3.75% Convertible Senior Subordinated Notes due 2025 (the "2025 Notes") for approximately $134 million in cash. We recognized an aggregate loss on the repurchases of approximately $8 million, including a reduction of debt issuance costs of approximately $1 million in the three and six months ended June 30, 2014, which were reflected in "Other charges" and "Interest Expense" on the Consolidated Statements of Comprehensive Income, respectively.
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 our 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: the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, including a termination under circumstances that could require Omnicare to pay a termination fee; the inability to complete the Merger due to the failure to obtain stockholder approval or the failure to satisfy (or to have waived) other conditions to completion of the Merger, including receipt of required regulatory approvals; the failure of the Merger to close for any other reason; risks that the Merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger; diversion of management’s attention from ongoing business concerns as a result of the Merger; the effect of the announcement of the Merger on our business relationships, operating results and business generally; the amount of the costs, fees, expenses and charges related to the Merger; uncertainties as to the timing of the closing
of the Merger; risks that Omnicare’s business will have been adversely impacted during the pendency of the Merger; the effects of disruption from the Merger making it more difficult to hire key personnel and maintain relationships with customers, suppliers, vendors, licensors, licensees and other business partners; the risk that competing offers to the Merger will be made; the fact that, as a result of the Merger, our stockholders would forgo the opportunity to realize the potential long-term value of the successful execution of our current strategy as an independent company; overall economic, financial, political and business conditions; trends in the long-term healthcare and pharmaceutical industries; our ability to attract and retain new and existing clients and service contracts; our ability to identify, finance and consummate acquisitions on favorable terms or at all; trends for the continued growth of our businesses; changes in drug pricing; delays in payment and reductions in reimbursement by the government and other payors to Omnicare and our customers; the overall financial condition of our customers and our ability to assess and react to such financial condition; the ability and willingness of our vendors and business partners to continue to provide products and services to Omnicare; the successful integration of acquired companies and realization of contemplated synergies; the ability to attract and retain skilled management; competition for qualified staff in the healthcare industry; variations in demand for our products and services; variations in costs or expenses; our 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, 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 or specialty pharmacies; government budgetary pressures and changes, including federal and state budget shortfalls; efforts by payors to control costs; changes to or termination of our contracts with pharmaceutical benefit managers, Medicare Part D Plan sponsors and/or commercial health insurers or changes in the proportion of our business covered by specific contracts; the outcome of pending and future legal or contractual disputes, including any legal proceedings related to the proposed Merger; 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 that could result in an impairment of assets, including but not limited to, goodwill and identifiable intangible assets; our ability to successfully complete planned divestitures; market conditions; the outcome of audit, compliance, administrative, regulatory, or investigatory reviews; volatility in the market for our stock and in the financial markets generally; timing of conversions of our convertible debt securities; access to adequate capital and financing on acceptable terms; changes in our credit ratings given by rating agencies; changes in tax laws and regulations; changes in accounting rules and standards; the impact of potential cybersecurity risks and/or incidents; costs to comply with our Corporate Integrity Agreement; and unexpected costs or business interruptions from information technology projects. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, our 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, we do 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.