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Omnicare Inc. (OCR - Snapshot Report), which sells drugs to long-term care facilities and nursing homes, reported first-quarter fiscal 2012 adjusted (excluding one-time expenses) earnings per share of 81 cents, beating the Zacks Consensus Estimate of 77 cents and surpassing the year-ago earnings per share of 69 cents.

Reported net income from continuing operations, for the quarter, was $55.7 million (or 48 cents per share) compared with a net income of $49.2 million (or 43 cents per share) in the year-ago quarter.

The results for the first quarter include the effect of special items amounting to about $25.1 million on a pre-tax basis compared with $14.9 million a year ago. 

Revenues

Sales were $1,593 million in the first quarter, up 4.4% year over year, sailing past the Zacks Consensus Estimate of $1,534 million. 

By segment, net sales of the Long Term Care Group were $1,296.3 million in the first quarter, up 0.5% year over year. Net sales of the Specialty Care Group were $293.3 million, up 26.8%.

Margins

Gross profit was $368.1 million in the first quarter, up 9.9% year over year. Adjusted EBITDA from continuing operations stood at $169.7 million, up 16.1% year over year. 

Balance Sheet, Cash Flow and Other

Omnicare had cash and cash equivalents of $624 million, as of March 31, 2012. Long-term debt (including notes and convertible debentures) was large at almost $2 billion, approximately flat since December 31, 2011. Total debt-to-capital ratio, as of March 31, 2012, was 34.2%, down about 30 basis points since December 31, 2011.

The company recorded $100.4 million in cash flow (from continuing operations) in the first quarter, down from $143.9 million in the year-ago quarter.

Omnicare repurchased about 0.7 million shares in the first quarter for $22 million. The company had $237 million available under its recent share repurchase authorization.

Outlook

Omnicare reiterated its guidance for fiscal 2012. It continues to anticipate revenues, for fiscal 2012, between $6.1 billion and $6.2 billion. It continues to expect adjusted earnings per share (from continuing operations) in a range of $3.10 to $3.20. The company forecasts operating cash flows (from continuing operations) in the range of $400 million to $500 million.

Omnicare is a market leader in providing pharmaceutical care for the elderly. The industry is essential to serving the needs of the long-term care population. It competes with PharMerica Corporation (PMC - Snapshot Report) in certain niche segments.

The company has cut down costs and increased efficiency through its Full Potential Plan. However, the beneficial effects are partly offset by pressure from reimbursement cuts.

Over the long term, Omnicare will be able to offset some of these reimbursement cuts through better purchasing. Generics coming to market in the next few quarters present a major profitability opportunity due to Omnicare’s greater exposure to the institutional pharmacy channel than in past years.

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