Gregory S. Weishar. Michael J. Culotta. Mark A. McCullough

Transcription

1 NYSE: PMC

2 Gregory S. Weishar Chief Executive Officer Michael J. Culotta Chief Financial Officer Mark A. McCullough Chief Operating Officer August 15,

3 Safe Harbor Statement These slides accompany an oral presentation by PharMerica, which contains forward-looking statements that are based on current expectations, estimates, our beliefs and assumptions. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," and "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a forward-looking statement in this presentation should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements. Factors which could cause our actual results to be materially different from those expressed in or implied by the forward-looking statements we make are set forth under the captions Cautionary Statements Regarding Forward-Looking Statements and Risk Factors in our registration statement on Form S-4/S-1 filed with the Securities and Exchange Commission. 3

4 The Transaction OWNERSHIP STRUCTURE Kindred Pharmacy Services (KPS) and PharMerica LTC were spun off by Kindred and AmerisourceBergen, respectively, and merged with our special purpose subsidiaries to form PharMerica Corporation. Kindred Healthcare (KND) and AmerisourceBergen (ABC) shareholders each own approximately 50% of new company, with 30 million shares outstanding. Neither KND nor ABC own any shares of our stock. TAX FREE EXCHANGE Transaction was tax free to KND and ABC shareholders. IRS private letter ruling received in December ANCILLARY AGREEMENTS Information Technology Agreement and Transitional Services Agreement with Kindred. Supply, distribution and packaging agreement with ABC. CLOSING DATE Transaction closed August 1, See KND and ABC corporate web-sites for information on cost basis allocation. 4

5 Benefits of Institutional Pharmacy Services Institutional/Long-Term Care Retail/Traditional B2B model B2C model 24x7; 365-day emergency service Limited hours of operation Prescriptions delivered daily to nursing homes and long-term care facilities Unit dose packaging to facilitate nurses administration of drugs Prescriptions dispensed at retail Traditional packaging in vials and bottles Emergency supplies maintained on site N/A Extensive clinical services to enable treatment of high acuity patients Limited clinical services Cost containment focus Retail pricing focus 5

6 Institutional Pharmacy Services 6

7 Who We Are A leading U.S. provider of institutional pharmacy services 2006 pro forma* revenues of $1.9 billion More than 120 facilities in 40 states Approximately 340,000 licensed beds under contract Approximately 5,500 employees Corporate offices in Louisville, KY Customer service center in Tampa, FL * Pro forma 12 months ended 12/31/06. 7

8 Current Locations KPS Pharmacy Locations (46) PharMerica Locations (80) Corporate Offices/Service Centers (6) As of December 31,

9 Our Business Our Clients Pharmacy Management Services Clinical Programs Skilled nursing facilities Assisted living facilities Long-term care facilities Long-term alternative-care settings Purchase, package, store, dispense and deliver prescription and non-prescription drugs 24/7 on-call pharmacist services Drug formulary and utilization management Anemia treatment Infectious diseases Wound care Nutritional support Renal dosing Therapeutic substitution Infusion therapy Monthly chart reviews 9

10 Why Invest in PharMerica? A leading U.S. provider of institutional pharmacy services Demographic and regulatory trends fuel opportunity Scale advantage to participate in a large, growing and fragmented industry segment Opportunity to drive operational efficiencies Strong financial position and access to capital Growth focused management team 10

11 Our Market and Its Drivers NYSE: PMC 11

12 $13 Billion Market $30 Billions $20 $10 $13 $20 $ High growth market: $13B to $20B+ within five years. Annualized growth of approximately 8% - 9% through Source: Knowledge Source, Inc.: Institutional Pharmacies Market Overview, Sept

13 Aging Population Drives Demand Older Population by Age: Source: U.S. Census Bureau Population ('000s) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, *Source: U.S. Administration on Aging based on data from the U.S. Census Bureau 13

14 Seniors Account for 64% of Prescriptions Retail Prescription Drugs Filled at Pharmacies (per capital by age), 2005 Age % Age % Age % The average person over age 50 takes at least four prescription medications.* Source: Kaiser Family Foundation, statehealthfacts.org / *AARP Public Policy Institute 14

15 Medicare Part D Drives Opportunity Part D expands prescription drug benefit for seniors Transformation from state-by-state to national system creates opportunities for our national platform Most competitors focus on single-state markets or regions Sub-scale pharmacies not equipped to compete Increased overhead Margin pressures Complex receivables associated with Medicare Part D Our national platform, scale and standardized operating platform position us to capitalize on the Part D opportunity. 15

16 PharMerica s Transitioning Payor Mix Pro Forma Fiscal 2005 Pro Forma Fiscal 2006 Medicaid 51% Medicaid 17% Private Payors 28% Private Payors 31% Medicare 18% Medicare 55% Medicare Prescription Drug Plans (PDPs) are largest payors. 16

17 Our Growth Opportunities NYSE: PMC 17

18 Solid Growth Strategy Participate in industry s organic growth Capitalize on favorable competitive landscape Solid Growth Strategy Expand geographies and service areas Pursue selective acquisitions 18

19 Favorable Competitive Landscape Approximate LTCP Market Share in Revenues PharMerica 15% Omnicare 50% Other 35% Ample opportunity for increased market share. Source: Knowledge Source, Inc.: Institutional Pharmacies Market Overview, Sept

20 Selective Acquisitions Target regional and local pharmacies Pursue bolt-on opportunities adjacent to existing facilities Gain geographic reach Apply disciplined financial approach 20

21 Top Regional Competitors Revenue ($MM) # of LTC Beds Ownership / Key Partner Geographic Coverage (# of states) Chem Rx $ ,000 Public 3 Aveta/Partners Healthcare (NJ, MA) N/A 30,000 Independent 5 Continuing Care Rx, Inc. N/A 35,000 Independent 17 In-House Care Solutions N/A 17,000 Independent Multiple Neil Medical Group $ ,000 Independent 4 Diamond Pharmacy Services N/A 12,000 Independent 36 Ricetta N/A 30,000 Independent 2 Thrifty $ ,000 Thrifty White Drug 2 Woodhaven Health Services $35.4 8,500 Sterling Capital Mid-Atlantic Cornerstone Pharmacy Services $35.6 7,140 Independent 3 Guardian Pharmacy, LLC N/A 5,000 Independent 5 SeniorMed Pharmacy $13.1 3,200 Independent 3 Sources: JMP Securities; Company data 21

22 Acquisition Opportunities Nursing Center Locations USA KPS Pharmacy / PharMerica Service Locations Acquisition Targets Sources: Nursing Center Locations Source: OSCAR; Acquisition Targets Source: VeriSpan 22

23 Acquisition Opportunities Acquisition Targets: 548 locations with 595,000 licensed beds KPS Pharmacy / PharMerica Locations 23

24 Financial Overview NYSE: PMC 24

25 Financial Reporting Plans PharMerica Corporation fiscal year end - December 31 Form 10-Q only for second quarter ended June 30, 2007 Q-2 Form 10-Q to include KPS financial statements only since PharMerica LTC is the acquired entity PharMerica LTC will be included in PharMerica Corporation financial statements beginning August 1, 2007 Q-3 10-Q will be filed in early November and PharMerica Corporation will hold its first earnings conference call 25

26 Historical Financial Information Pro Forma Financial data for 2006 from S1/S4 Registration Statement and from Previous Parent Company Filings Limited financial information due to separate operations of KPS and PharMerica LTC in the past Historical financials are not indicative of future results Medicare Part D changed fundamentals Results do not include merger consolidation costs or cost synergies Results not indicative of FAS 123R run-rate Historical Financials will be that of Kindred Pharmacy Services Historical Financial Results have been impacted by the Transaction PharMerica management team is committed to presenting more transparent financial information in the future 26

27 Back to the Future All Functional Areas are being Integrated Consolidation of Pharmacies System conversions LTC 400 Operating System SAP Financial System Transaction Costs Transition Costs 27

28 Pro Forma Statement of Operations 3 Mos ended Annual ($ in thousands) 3/31/ (a) Revenue $487,106 $1,852,577 Cost of goods sold (b) 419,436 1,579,031 Gross profit 67, ,546 S G & A 59, ,004 Operating income 8,395 45,542 Interest expense 4,713 19,040 Pretax income 3,682 26,502 Taxes 1,499 10,791 Net Income $2,183 $15,711 Shares O/S 30,020 30,020 Earnings per share $0.07 $0.52 EBITDA Reconciliation Net Income $2,183 $15,711 Taxes 1,499 10,791 Interest 4,713 19,040 Depreciation and Amortization 6,864 25,026 EBITDA $15,259 $70,568 (a) - 12 Months ended 12/31/2006 for KPS and 9/30/2006 for PharMerica (b) Includes certain labor costs and depreciation related to packaging and delivery of prescriptions 28

29 Pro Forma Balance Sheet ($ in thousands) 3/31/2007 Cash and equivalents $7,110 Accounts receivable 258,129 Inventories 79,030 Other current assets 42, ,183 Property and Equipment 62,339 Goodwill 226,349 Intangibles 90,635 Other long-term assets 10,332 Total assets $776,838 Accounts payable $31,676 Other accrued liabilities 49,024 Current portion of Debt ,005 Long-term Debt 275,033 Deferred taxes and Other 22,012 Equity 398,788 Total liabilities $776,838 29

30 Pro Forma Historical Information 3 Mos ended Annual 3/31/ (a) Days sales outstanding (b) Annualized Inventory turns Depreciation / Amortization as a % of Revenue 1.4% 1.4% Days payable outstanding Accrued liabilities as a % of Annualized Revenue 2.5% 2.6% Effective tax rate 40.7% 40.7% ROIC n/c 4.1% Debt/Capitalization Ratio n/c 39.2% (a) - 12 Months ended 12/31/2006 for KPS and 9/30/2006 for PharMerica (b) - Expected to increase upon conversion of Kindred revenue from intercompany 30

31 Pro Forma Historical Capex $30, % $25,000 Capital Spending Depreciation Amortization $25, % Capex as % of Revenue 1.5% $22,183 $22,396 $20,000 $18, % $ in Thousands $15,000 $15,641 $14, % 1.2% 1.2% % of Revenue $10, % $5, % $ % 31

32 Pro Forma Capital Structure ($ in thousands) 3/31/2007 Senior secured credit facility $275,000 Capital lease obligations 338 Total debt 275,338 Stockholders' equity 398,788 Total Capitalization $674,126 * Total debt facilities: $275 million senior secured Term A loan $150 million senior secured revolver 32

33 Debt Commitments Interest on Term and Revolving Facilities Term A Borrowings - $275 million Annual rate equal to: JPMCB s prime rate (or Federal Funds Rate plus 0.50%, if higher than JPMCB s prime rate) plus an applicable margin; or LIBOR plus an applicable margin Commitment fee payable on daily unused commitments Letter of Credit Fees (applicable LIBOR) Applicable margin and commitment fees based on leverage as follows: Total Leverage Ratio Commitment Fee (bps) LIBOR Spread (bps) ABR Spread (bps) >4.0x >3.5x but <4.0x > 3.0x but <3.5x >2.0x but < 3.0x >1.0x but < 2.0x <1.0x

34 Debt Covenants Leverage Ratio Prior to July to 1.00 July 2008 to December to 1.00 January 2009 to December to 1.00 January 2010 and thereafter 3.00 to 1.00 Fixed Charge Coverage Ratio Prior to December to 1.00 January 2009 to December to 1.00 January 2010 and after 2.50 to 1.00 Capital Expenditures Capital expenditures may not exceed 3% of the prior year s Consolidated Revenues. Unused capital expenditures may be carried to the next year, limited to 1.5% of the prior year s Consolidated Revenue. 34

35 Terms of the Swap Notional Amount $200 million Tenor 2 years Interest rate option 3-month LIBOR Fixed rate 5.123% Initial floating rate % Resets quarterly Management has determined that the cash-flow hedge meets the criteria of an effective hedge under the long-haul method of SFAS

36 Common Stock Share Information Common Shares Issued at Inception 30,000,000 Options Carryforward from Previous Parents 479,302 (W/A Share Price: $12.73 with a 1.37 yr avg life) Restricted Shares Carryforward from Previous Parents 55,340 (W/A Share Price: $6.66 with a 1.51 yr avg life) Recent Options Granted 1,072,696 (W/A Share Price: $16.31 with a 4 yr avg life) Recent Restricted Shares Granted 356,938 (W/A Share Price: $16.31 with a 3 yr avg life) Recent Performance Shares Granted 8,950 (W/A Share Price: $16.31 with a 3 yr avg life) 36

37 Stock Trading Statistics Date High Low Volume PMC 8/10/2007 $15.69 $ ,234,900 8/9/2007 $16.39 $ ,500 8/8/2007 $16.55 $ ,109,500 8/7/2007 $16.87 $ ,358,700 8/6/2007 $17.28 $ ,560,500 8/3/2007 $17.26 $ ,702,300 8/2/2007 $17.50 $ ,611,400 8/1/2007 $18.38 $ ,809,000 Avg $16.99 $ ,547,725 PMC - WI 7/31/2007 $17.85 $ ,481,300 7/30/2007 $18.30 $ ,900 7/27/2007 $18.00 $ ,500 7/26/2007 $18.50 $ ,000 7/25/2007 $18.80 $ ,600 7/24/2007 $18.90 $ ,900 7/23/2007 $19.00 $ ,100 7/20/2007 $19.00 $ ,400 7/19/2007 $18.75 $ ,800 7/18/2007 $23.20 $ ,600 Avg $19.03 $ ,410 37

38 Post-Merger Cost Synergies $30 million in operating synergies over first two years Rationalize operating systems to single platform Centralize core services to leverage combined scale Consolidate pharmacies Enhance dispensing and billing system automation 38

39 Long-Term Growth Revenues 5% 7% EBITDA* 15% 25% EPS* 15% 25% * Includes synergies and excludes costs of obtaining synergies 39

40 Executive Officers Name Title Years in Industry Past Experience Gregory S. Weishar Chief Executive Officer and Director 20 PharmaCare Management Services, CVS Corporation Michael J. Culotta Chief Financial Officer 30 LifePoint Hospitals, Ernst & Young LLP Health Care Practice Mark A. McCullough Chief Operating Officer 13 KPS, Omnicare Janice D. Rutkowski Chief Clinical Officer 38 PharMerica LTC, Pharmacy Corporation of America, ABC Pharmaceuticals 40

41 Board of Directors Name Gregory S. Weishar Frank E. Collins Paul J. Diaz Thomas P. Gerrity George L. James III Edward L. Kuntz Thomas P. Mac Mahon Daniel N. Mendelson Title Chief Executive Officer, PharMerica Corporation Senior Vice President, Legal and Administration, and Secretary, Sierra Health Services, Inc. Chief Executive Officer, Kindred Healthcare, Inc. Professor of Management and Dean Emeritus The Wharton School, University of Pennsylvania Adjunct Professor, Fox School of Business, Temple University Executive Chairman of the Board, Kindred Healthcare, Inc. Chairman of the Board, Laboratory Corporation of America Holdings Chief Executive Officer, Avalere Health LLC R. David Yost Chief Executive Officer, AmerisourceBergen 41

42 Why Invest in PharMerica? A leading U.S. provider of institutional pharmacy services Demographic and regulatory trends fuel opportunity Scale advantage to participate in a large, growing and fragmented industry segment Opportunity to drive operational efficiencies Strong financial position and access to capital Growth focused management team 42