Omnicare's CEO Hosts Analyst Day Conference Call (Transcript)

| About: Omnicare Inc. (OCR)

Omnicare, Inc. (NYSE:OCR)

Analyst Day Conference Call

December 07, 2012 8:00 AM ET


Patrick Lee - Vice President, Investor Relations

John Workman - Chief Executive Officer

Nitin Sahney - President and Chief Operating Officer

Rocky Kraft - Chief Financial Officer

Gary Erwin – Chief Clinical Officer

Amit Jain - Senior Vice President, Sales and Marketing

David Hileman - Senior Vice President, Specialty Care Group Operations

Denise Von Dohren - Vice President, Access Solutions

Bob Dries - Senior Vice President, Operations Finance

Tim Hopkins - Senior Vice President, Trade Relations

Dan Maloney - Senior Vice President, Purchasing

Randy Carpenter - Chief Information Officer

Al Kayne - Senior Vice President, Secretary and General Counsel


Brendan Strong - Barclays Capital

Bob Jones - Goldman Sachs

Charles Rhyee - Cowen & Co.

Glen Santangelo - Credit Suisse

Steven Valiquette - UBS

Patrick Lee

Okay, we're going to go ahead and get started now. Good morning everyone, I am Patrick Lee, Vice President of Investor Relations for Omnicare. I welcome you to Omnicare's 2012 Analyst Day. We have an exciting event planned, featuring a series of presentations, in addition to a roundtable lunch discussion.

Presentation portion of the event will be available on our website at, where you can also find a copy of our slides. Before we begin I'd like to note that 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 various filings with the SEC. You're also cautioned that any forward-looking statements reflect management current views only and that the company undertakes no obligation to update such statements in the future.

With that I'd like to introduce John Workman, Omnicare's Chief Executive Officer.

John Workman

Thanks, Patrick, and I also want to offer my thanks everyone for joining us here today in Boston, we thought we would try Boston having done in New York last year.

You're going to hear from a lot of management presenters today, obviously myself, Nitin Sahney, who is our President and Chief Operating Officer; Rocky Kraft, our Chief Financial Officer; Gary Erwin who is our Chief Clinical Officer; Amit Jain, who is our Senior Vice President moved over to help the Sales Group and Long-Term Care after having run the Specialty Care Sales Group for a while; David Hileman, who is also in the Specialty Care; Denise Von Dohren, who is our Sales Executive in the Specialty Care Group.

We're also pleased, we have one of our Board Members; Sam Leno, Sam is down here on the right, Sam happens to live in Boston and was able to join us today, so we thank him also for joining us. Today, the objectives are to – of the meeting today to intend to provide insight into what Omnicare is doing a strategic directive in our operating objectives, we'll do that over the next few hours.

Just to walk you through those objectives, I'm going to start by talking about the strategic overview of the company, I want to give you some insight into the expected development within healthcare, which is a fairly volatile area right now as well as how Omnicare fits into that and how - why we think that Omnicare can play a key role. We're also going to discuss our three operating priorities for next 12 months.

Nitin then is going to provide an update on the two operating businesses; including the plans designed to support those three operating objectives. During his presentation you're also going to hear from certain key members of the Long-Term Care Group and the Specialty Care Group. Rocky Kraft is then going to provide an overview and discuss our capital allocation strategies. I'm going to close by providing some closing comments including talking about the future and our outlook for the business. Then will open up with the Q&A followed by a luncheon and during the luncheon we have some other executives, I'm going to introduce later from the company they're here and they will be also with the roundtables, you'll have a chance to meet some of them and have a chance to talk to them about the business and I think you hopefully you'll be able to stay around for that.

We're focused on creating value our shareholders that's our goal at Omnicare and we all recognize that. If you think about the way that we look at Omnicare, Omnicare has number of different ways to create value, first as we have a unique collection of assets that are differentiated in the market. I think you're well aware of those clearly and long-term care, we hold a large market position, and we have this great asset in the specialty care growth, which is growing very significantly.

We possess a great deal of scale especially in comparison to our competitors. We have some attractive developments within our core markets that we think also support to underlying business; I'm going to hit on a few of those. And lastly we generate a lot of cash and using that cash effectively and it's been a focus and how we redeploy that cash that Omnicare generates in terms of its operations.

So first I want to talk about, what's going on in healthcare and how we see that great deal of change occurring how we see Omnicare position well to capitalize on some of those changes that are taking place, or that are about to take place.

First is the aging of population, this is not news to anybody, we all know that the population in United States is growing significantly and then especially that age category, we like to focus not only on the over 65 but also that over 85 population, which has a higher growth rate. Because those people are much more likely be in some kind of assisted-living facility, or skilled nursing facility, so it's more relevant to some of our businesses.

The other thing that we want to comment on is regarding the geriatric market that it's important to note that seniors utilize more than three times more pharmaceuticals than the general population, so that's an also important sweet spot in terms of where Omnicare is positioned.

If you look at the overall healthcare trends in the country, obviously with increased utilization, we all realize that costs are also expected to rise rapidly obviously we've got a discussion going on [relative] to that matter right now in Washington DC. Overall we also understand the projected cost is not sustainable, if you – in comparison the economic growth expectations for our country, we realized that's going to pressure on the system.

What we want to talk to you little bit, why we think Omnicare again is positioned even in that environment to flourish. We believe that companies with scale are going to be successful and are going to thrive in the future environment. And again Omnicare is one with a significant amount of scale. We also believe that volume and efficiency, realizations are going to be key to building sustainable growth, for most healthcare industries including ours.

Companies that improve patient outcomes, we think, will see a bigger piece of the reimbursement picture moving forward. And we believe Omnicare is well-positioned in all of those fronts. I mean one of the things you're going to hear today is Gary Erwin, our Chief Clinical Officer is going to talk about that aspect too and I think you'll gain a better appreciation for Omnicare's depth relative to clinical matters.

As CMS and other government entities, demand more connectivity. We believe that we also have the interfaces to drive greater compatibility with our customers. Also as different healthcare providers create network designed to improve coordination, national footprint position, our national footprint positions us well across the country.

As the government also looks to seek more outcome based reimbursement policies, we think our clinical expertise again helps to support those efforts. So again, that we think that even in the changing healthcare landscape, we think Omnicare is well-positioned and that's what our focus is that to make certain that we keep that position and improve upon as we move forward and you'll hear more about those comments as the day progresses.

The other thing obviously is generics, we're a large dispenser of generic drugs, we think that's another element that is consistent with lowering healthcare cost overall, a particularly relating to the pharmaceutical industry that we serve. To put this in perspective the generics that were launched in 2011, have saved Omnicare customers over $450 million in 2012. That's both our skilled nursing facilities, Part D plans and other providers. We believe we're differentiated in the long-term care industry because our skill allows us to buy direct, hence lowering the cost from an Omnicare perspective.

We also have invested in a central distribution network that further benefits our direct purchase of generics, we also have our own repackaging facility. This allows Omnicare to convert generics faster, and as you can see from the chart in the yellow bar looks at the industry average, the blue bar is the Omnicare opportunity to convert generics and you can see we do this very quickly. And by doing that we're able to capture more of the profit in the early stages, where reimbursement is still relatively robust in that generic cycle. So again we think that's a large competitive advantage but it's one that we have developed over number of years in terms of building the infrastructure to support that and to be able to execute on that so quickly.

The generic wave is expected to continue, even though 2012, we will admit remains a largest year in a number of years in terms of the number of generics launched. One of the things that we want to comment on though is that based on the launches of generics in 2012, there is a significant carryover impacting the 2013 that will benefit Omnicare. So I know there's been a lot of discussion about the generic cliff, and the fact that that generics are going to cause a big negative headwind if you will in 2013. That's really not the situation as we look at 2013 right now, we see maybe a slight negative but again [buttress might] effect that we have a lot of introductions of generics in 2012 that will have a carryover impact into 2013.

One other comment because we do hear this from others, when Omnicare looks at our generic dispensing rate, we exclude the over-the-counter drugs. So if you put those in that portfolio, would add about another 200 basis points to our generic dispensing rate.

As a reminder during a multi source period we always have made more profit on the generic drug and we do this throughout the product lifecycle compared to the branded equivalent. This allows us to be fully aligned with our customers and again with the idea of lowering overall healthcare costs. You can see that even after five years, which is what this chart is intended to demonstrate. That Omnicare continues to make more gross profit dollars than it does on the branded equivalent even though you can tell obviously by the slope of the graph. So there is going to be some decline in the rate but overall that still make more gross profit dollars.

Also this is a differentiator to us and some of the competition, it's because we buy direct and you're going to hear from our director of purchasing, who's able to chase down that cost curve if you will, that allows us to maintain us over five years, whereas another competitor that might have to go out and buy from a wholesaler is going to dip down after a period of time and the branded equivalent would have been higher gross profit dollars again a competitive advantage for Omnicare.

In terms of the overall market, the – within the senior care settings, occupancy is nearly recovered from the 2008, fall off in assisted-living and independent living, and you can see that from the chart that's represented in the yellow and green bars. And you can see those peaked ahead a trough and of starting to decline. Skilled nursing hasn't yet made that similar recovery and you can see that is demonstrated in the blue bar on the chart.

Instead what skilled nursing facilities are more focused on is changing the mix of their business to a – to one that say more clinically complex patient that has a benefit to Omnicare, because those patients - since they're more clinically complex are going to typically have higher acuity and as a consequence the number of prescriptions that they need are also going to be higher.

A more and more the skilled nursing facilities are playing in this higher acuity level, a lot of it's in the rehabilitation sector, and they're taking a bigger role with acute care facilities and are trying to become discharge partners in this changing landscape that we face in healthcare.

If you look at again the overall market and talking about the skilled nursing facilities, we think Omnicare's is well-positioned to serve skilled nursing facilities, also to help them meet the expectation of their hospital partners with the more clinically complex patients.

Omnicare's customer facing technology, better prepares skilled nursing facilities at the point of admission, the automation that we have drives faster and more accurate dispensing. The clinical programs and the expertise that we provide improves the quality of patient care, especially in the more complicated circumstances of these higher acuity patients may have.

And lastly our IV programs that we're continuing to expand improve the skilled nursing facilities treatment capabilities, again being aligned with our customer base. If you look at the assisted-living market, it's a little bit different than the skilled nursing facilities. It's also becoming a little bit more acute as patients are as payers are looking for that lower cost structure they're also still driving some acuity or higher acuity in the assisted-living market.

The good news about this industry it is growing and that opportunity for Omnicare is really three pronged in that perspective. First, because the market is growing, we want to be participate and participate in that growth in the market overall. Secondly, we want to increase the number of facilities that we serve in terms of signing up new facilities and new beds. And thirdly, we want to increase the penetration, you're going to see a slide a little bit early and I think a lot of you have covered Omnicare for some time, you know our penetration rates in assisted-living facilities are lower than the skilled nursing facilities. And you're going to hear some more about some of the programs that we're doing to focus on that aspect but that's also an opportunity for us.

We're really focused on differentiating our service offering within Omnicare that deals with assisted-living facilities. One of the key issues as we talked to them the customers are part of a community and residents for example versus facilities and patients. So that's one of the nuances but we're also becoming more and more focused on how we deal with that market.

There are some places where we already have a presence in the out markets that we're doing fairly well with higher penetration rates and what we're doing under Nitin's leadership and the team he's built is to focus more on that market, so we can also see that we think that's going to be an opportunity for growth in the future.

Specialty pharmacy, as also we have favorable market trend and specialty pharmacy group which is our other large platform and one that's obviously growing the most significantly, I mean I think you've all seen our numbers in 2012, we've had phenomenal growth both on the revenue and operating profit in the Specialty Care Group. We think the market trends are also favorable. So if you look at this bar graph and you look at 2011, and look at the percent of spend in 2011 versus what projected in 2016. We see a substantial growth and specialty drugs over the next two years driven somewhat by inflation but also by utilization we also want to make sure that we capitalize on that opportunity.

If you look also at the pipeline relative to the Specialty Care Group, if you look again you can see that the number of drugs that are in the market today only 8% are specialty drugs yet if you look at the pipeline for new drugs 42% of those are in this specialty category, through our Specialty Care Group, we think Omnicare is also well-positioned to capitalize on these trends within that market.

Next I'd like to turn to our key operating priorities. We've previously laid out three clear objectives and this is the more shorter term, meaning over the next 12 months; one is consistent organic growth in long-term care, and you're going to hear some of the changes that have been made today both in the operational side and more importantly on the sales side to help us get to that point in terms of consistent growth or organic growth in long-term care segment.

Secondly, as we want to continue the momentum in the specialty care group, again we've had strong 20% plus growth in 2012, we're not same, we're going to replicate that going forward but we do see this as a nice growing business with strong double-digit growth.

And lastly because Omnicare does generate a lot of cash, efficient capital allocation is going to be a key aspect. I'm going to pause on that and just talk about a second. Today Omnicare when we look at allocating our capital and we're going to talk about returning value to shareholders, we also make conscious decisions about acquisitions. And looking at acquisitions in whether those acquisitions are more favorable versus getting the alternative to returning more by shareholders, we know both of those elements can grow growth and I'm going to elaborate on that in a few minutes, but I want you to be aware that is a conscious decision that we make, in terms of the way we look at the outlook for the company in our growth perspective.

In terms of the Omnicare's assets overall in looking at long-term care in dealing with this issue of getting net organic growth, three factors are going to drive that, one is customer growth, secondly is utilization growth and third is census growth.

If you look at two of those elements the utilization in census those are really beyond to our control, we're going to be subject to what happens relative to that industry again we've shared with you, we're trying to drive, or not we're trying to drive, there's more patients being driven in the skilled nursing facilities, which are higher acuity which should drive up utilization.

And a lot of the operators in skilled nursing facilities are turning to accommodate that more acute patient, census that varies. I am you're going to see the skilled nursing facilities, the census and the occupancy rates are going to vary little bit some of it depends upon the winter. I think the one thing that happened obviously last year, we had a very mild winter, whereas this year obviously the winter is starting be a little bit more robust in terms of the nature of it and we think that may have a beneficial impact on census but we're not sure yet.

The things that we can control relative the beds, our retention rates and the sales group and you're going to – I'm going to talk some more about that we do believe beds are the best proxy per scripts but at the end of the day one of the things that you're going to continue to us emphasize at Omnicare is scripts. We get paid on scripts and script accounts to the really the important element but we do believe that beds are a proxy for that in terms of driving more scripts and again you're going to hear some more about some the changes that we've made.

If you look in terms of leveraging, how we achieved organic, consistent organic growth in Long-Term Care Group; first regarding retention, we have made several improvements during the past few years to increase retention you've seen that go from the 80%, high 80% some - 87% up into consistent 92% to 94%. But we have some ways to go and we've got a multi-disciplined plan that we think is going to continue to improve that, Nitin Sahney is going to discuss that in detail.

The other more important element is selling [effect in those], because when you think about getting the net organic growth is really retaining the customers you have and being able to get new business. And Nitin Sahney and Amit Jain are going to talk some more about the change that we've made in transforming the sales group, which is something that was needed in Omnicare. And we're getting more competence in that in our ability to continue to add beds in terms of new sales. We think those two components will allow us to get net organic growth.

If you look at the Specialty Care Group, there's been a number of operational changes. I'm not going to read each one of those in this slide, but you can see over this continuum there's been a number of changes that have occurred, what I want to point out is Nitin Sahney took over this group in late 2010. And I think if you look at the results since that period of time, you can see that – that have demonstrated here there's been some very robust growth. And one of the things we're able to do now is with all of the areas under Nitin's responsibility, we're able to leverage some of the assets we have in the Specialty Care Group more in the people side, across long-term care and vice versa and we're seeing that to be a very positive event.

If you look at Specialty Care, our primary focus has been on fee-for-service business. We believe we have begun to resonate more with our clients and our prospects. The reason this is important again very high margin business, very high customer service orientation. We do have an integrated commercialization service offering for biopharma companies. I think you should think of us as a one-stop solution to deal with the many market challenges associated with specialty drugs, whether it'd be reimbursement, administration distribution et cetera. We believe this integrated approach will continue to position us more strategic partners with our clients and as they look to consolidate vendor relationships which is occurring in that segment of the market.

In looking at the fee-for-service in terms of the growth opportunities, like assisted-living it's a multi pronged approach, one is providing more services for the products that we currently support that we have the ability to do. Secondly is providing services for additional products among clients that we're currently serving. And lastly is increasing our client base and we're focused on all three of those relative to Specialty Care Group.

All these opportunities have the secondary benefit of increasing payer diversity, through revenues paid directly by the manufacturers. Again this helps us diversify at our portfolios who are not as directly government linked as we are in a long-term care segment.

Again continuing with the ability to leverage the assets of Omnicare, we believe having both Long-Term Care and Specialty Care Group as I mentioned under one team, allow us to recognize certain opportunities even though we will tell you they are separate businesses as we've said before. But we did have an example recently where we joined the limited distribution network for the drugs Xenazine, while also leveraging our Long-Term Care footprint to become the exclusive provider of that product in the Long-Term Care channel.

We've also began leveraging our Long-Term Care payer relationship because the payers and specialty and long-term care are many of the same players. And we've been able to identify opportunities to create private label specialty pharmacies through the Specialty Care Group.

We believe, we're still early in those efforts again the Specialty Care Group as we have it today was only formed two years ago, when we started breaking out those respective elements early in – focused on developing new solutions for our clients to better serve their needs and involving market landscape and we want to take advantage of the growth that exist and again in that market.

If you look at again turning to capital allocation, it's a key priority for Omnicare. It is become a bigger focus during the last couple of years and even more so during the last couple of months. Again no secret anybody Omnicare generates a lot of cash. And the value that brings is how efficiently we allocate that capital to the various uses.

Our focus has shift a little bit more recently in returning this capital shareholders, through the share repurchase and dividends we've recently announced and accelerated share repurchase. And also a doubling the dividend, which we think are confirmation of that direction. In fact if you look at Omnicare's historical cash flows and the current programs have been approved by Board of Directors, it would suggest we would return approximately 50% of our cash flow from operations over the next couple of years.

We still remain focused on opportunistic acquisition both in long-term care and the specialty care group, and also making some further improvements to our capital structure. We're always looking at tweaking that and Rocky is going to talk a little bit more about some of those changes.

So in finalizing on the operating side again we believe Omnicare's well positioned, we have compelling assets and we're going to use those assets as we look to drive further value creation through the coming years.

With that I'm going to turn it over to Nitin Sahney our President and Chief Operating Officer and he along with some of his colleagues are going to update you on some of the components of Long-Term Care and Specialty Care Group.

Nitin Sahney

Thank you, John, good morning and thank you for joining us today. Our objective today is to provide you first an overview of our two business platforms. Number two an operational understanding of our Long-Term Care and Specialty Care business offering and it distinct value proposition to our clients, number three, our faced operational plan for our Long-Term Care Group.

During my presentation, I will be joined by some of our team members to add additional color to different parts of elements of our operations. As you know, Omnicare has two distinct line of businesses, Long-Term Care and Specialty Care business. Businesses are very different from one another but play a critical role improving patient care.

Our Long-Term Care business is an institutional pharmacy business, catering to multiple, different kind of patient in different settings. We are clear market leader in that and as, we have about 110 million prescriptions we dispense in a year.

Our Specialty Care business is an integrated commercialization service to BioPharma. From a number's perspective, you can observe here that it's an 80%-20%, weighted towards our Long-Term Care business. Although our Specialty Care business is growing much more rapidly, capitalizing on both our market share and opportunities as that industry grows. We believable both our businesses are well positioned to benefit from the expected developments within the healthcare sector.

I'd like to first discuss our Long-Term Care business in greater detail. You will observe from my presentation that we are taking a similarly planned approach to our Long-Term Care business that we implemented in launching our Specialty Business.

We serve a broad spectrum of patients in institutional settings, two largest markets for Omnicare, our skilled nursing and assisted-living. Service offering is only slightly differentiated across these groups but therein lies the opportunity. Assisted-living in particular is an area that is growing and one where there is significant market share to be gained. We believe a differentiated operational and marketing approach they will help us better penetrate our assisted-living and some of these other markets where we have less of the presence.

There are three key areas that determine an institutional pharmacy's effectiveness. That is the clinical offering, their operations and the technology offering. From a clinical perspective there are number of key services that expected by our customers to meet the compliance requirements including consultant pharmacy services, providing chart reviews and a regular point of customer contact.

Similarly, with respect to operations, pharmacies must dispense in specialized unit dose packaging and have flexible hours to ensure the customer needs are met at all hours of the day and night. Admission schedules have changed over time at the dependency upon acute care discharges have become increasingly critical to the [swift] marketplace. Finally, most pharmacies offer technology services such as payer verification, automated refill order processing, as well as few other key areas.

We would like - now like to share with you, how Omnicare differentiates itself in the market and what advantage that brings to our customers.

Regarding clinical services, we go above and beyond the standard services by offering a broad clinical offering that is intended to improve outcomes, which is essential as healthcare continues to a quality base reimbursement environment.

I would now like to ask Gary Erwin, our SVP of Clinical Operations to add his perspective in this area. Gary has been with our organization for over 10 years and has a great clinical and academic background.

Gary Erwin

Thank you, Nitin. It's a certainly pleasure to be here. What I'd like to do today is really do three things; first is to define an operational definition of clinical services. The second thing is to really talk about what our customers see and the third is to talk about what we see as our current and future value proposition.

The clinical services is difficult to define but strategically what it really means is that once a drug is prescribed, Omnicare wants to influence which drug is actually used. And our ability to do that improves patient outcomes and it improves the cost-effectiveness of drug therapy. And by cost-effectiveness, I simply mean the value that the patient gets for the cost of the drug that the payer is paying.

We do that by using an evidence based approach in our guidelines, tasking our assets which may be our pharmacists in the facilities, our pharmacists at the point of dispensing, our pharmacists who are dealing with payers to actually implement tactical solutions such as therapeutic interchange programs and other kinds of recommendations to once again influence the choice of drug, right. That's the working definition of clinical services.

What our customers see is a toolbox and in that toolbox, they have options to pick and choose among the types of services that they want Omnicare to provide to them. A very simple approach for customers, which really is that they almost don't have to do any thing, is our success and our precision around moving from a branded drug to a generic drug at the time of that generic's drug launch. As John talked about, we are very successful at moving quickly from 100% brand to 75% to 85% to 95% generic in a period of a very few number of weeks. And John actually quantified what that value is to the customer.

As you move to a more difficult aspect, there are programs that you see the related therapeutic interchange and you see those all over to the slide. The therapeutic interchange programs really require the customer to engage with us, we have to have the physician communicating with us. We have to have the facility communicating with us, their ability and willingness to engage with us in those programs brings great value to them. In that value again getting to the core of all of this improves the quality of the drugs that are used in their facilities and increases the cost effectiveness of value of those drugs.

And then the third platform, which is really the most complicated one you see it on here is utilization is really more of a collaborative relationship with the facility, it's where we have our staff and their staff who were sitting down and looking at population based approaches to their drug therapy and implementing proactive ways that we try to reduce I'm going to coin a term here their Medicare drug a price per day for drug while maintaining the same quality, because if we do that we're helping them manage their drug cost, while at the same time presenting them high quality opportunities to provide care.

And that really then leads to what was the third point that I was going to make, which is how is it that we see our current and future value proposition; all of you're very familiar with what's happening in the healthcare setting, and you're very familiar with the growth of Accountable Care Organizations with bundled payments with all of those kind of things , so I'm not saying anything that's new; Omnicare really views itself as being positioned best in the industry to improve patient outcomes by reducing hospitalization rates, by helping facilities market their services to their customers which might be the health plans or the government or any other kind of payer in to improve their positioning within their community and weren't integral part of then being able to do that because we helped them with the quality in the spend of their drug benefit, which is a very large aspect of what they have to do.

The benefit to Omnicare as this comes back in a circle is that when we do this successfully it improves our retention rates, because they want to work with us, we're sticky with them. They don't want to lose that aspect and it also improves our sales approach to be able to use the services that we have to gain new customers all right. So our future is well positioned, in the summary as we have developed all of this expertise and Omnicare has been significantly generous over the years in its investment in the clinical platform which now serves us well for the future.

And with that I am going to stop and turn it back over to Nitin.

Nitin Sahney

Thank you, Gary. Omnicare also has a very, has also constructed a very robust operational infrastructure that offers a full complement of pharmacy services, like electronic refills and automated refill options.

Additionally, we have a pharmacy hub and spoke network that is the industry's most robust both operationally and geographically. In addition to the 32 regional pharmacy hubs and over 120 spoke pharmacy locations we have multiple mail-order facilities and patient solution centers, which we can leverage across our platforms.

As a company, we can now dispense medications and clinical services, to multiple layers of patients, on multiple therapies within 24 hours in 50 states. We believe our network enables us to be the most natural provider for large chain customers. In fact overwhelming majority of chains chose Omnicare. This platform also enables us to identify local market opportunities and redeploy resources to more effectively serve that market.

Second a standardize the number of functions through automation, centralizing and infrastructure investment. Number three it allows us to leverage our existing footprint to better integrate acquisition opportunities.

We operate a leveraged model were both volume and efficiencies drive our performance. At the same time the standardized approach drives more consistency for our customers. And as an example of that in 2012 we started implementing a new integrated IT system called OCEAN that will help Omnicare become even more efficient within the next few years. And John will mention it's a little bit more in his presentation.

Finally, technology is another differentiator for Omnicare. We offer a host of different solutions that intended to improve quality and lower costs while also increasing our own efficiencies. As an example, Omnicare has a customer facing technology platform called Omniview, classic Omniview touches our facilities, OmniviewDr. is get towards the prescribers, my Omniview is focused on the resident. This is a critical component of our value proposition and one that resonates very well with the users. And we have found that our retention rate is much higher with a heavier uses of Omniview.

Our challenge has been that we've not historically done the best job at increasingly utilization of the platform. We are working on improving this challenge. We are also conducting usability studies to further enhance experience but also making greater effort with our sales and service organizations to increase the utilization.

Omnicare has also invested in several key pilots that are focused on deployment, our customer facing technology. I think some of these pilots are still in progress and I think the next quarter or two will be able to see where the further investment is needed in this enough.

Using our value proposition as you can see that Omnicare is so different than an average institutional pharmacy business. We feel that the three pillars of Omnicare value proposition is a distinct service offering compared to our closest competitors; marketing and messaging around these three pillars, and Omnicare's differentiation in each area will be critical in driving consistent organic growth for our long-term care business.

Historically, Omnicare as you know have been, constructed through M&A in the first 20 years of its existence. And then in 2010, we started a process of becoming more operationally driven and we believe, we are now taking that a step further.

Beginning in 2010, we instituted a number of changes that began to impact the customer experience. Initial focus was in retention but we have done executive customer reviews, we've redeployed retention resources and redefined the roles of some of our executives.

The results of this initiative which started in 2011 and further enhanced beginning in Q3 – Q2 of 2012 are reflected in the reduction of service related bed losses. The response from our customer service also show similar improvements in service levels.

We've seen nice results from the initial focus on our retention level, from high 80s only a few years ago to the 92% to 94% range depending on quarter but we believe we can do much more in this area. We've remained -we've also made investments in our sales organization during the past few years but we did not see the corresponding uptick sales. We realized it was not a resource issue but rather structure issue.

As further progress needs to be made, we have entered a new area now for Omnicare and which we have focused on building a foundation from which we can achieve operational excellence. To achieve this starting in June 2012, we began to implementation of a multi-phase plan with the byproduct also being regular organic growth.

We've now put in a three-phased approach, during first phase we have identified some specific areas needing attention to drive organic growth. The first area has been operations and one of the first issues identified in Phase 1 is there a number of hubs that are underperforming and retention. You can see here out of 32 hubs, six of them account for where our bed losses have been the most. We are now fully focused on these underperforming hubs and have already started making structural changes and are monitoring the performance on a weekly basis without these six hubs our retention rate will be closer to 94%.

The second issue identified in phase 1, was underperformance of our sales organization. Organic sales, we believe, present the greatest opportunity for Omnicare in the near future. What happened is, we observed that our resource have not aligned with the opportunities for example our best resources will not necessarily in the higher potential areas that we have identified now.

Our value proposition was not been communicated consistently and our structure was not maximizing resources. And as Amit Jain will talk to you, we have a plan and we've started implementing the plan in the quarter two. Our new sales strategy is similar to what we effectively implemented for our specialty business from [instruction and approach] perspective.

I will now ask Amit Jain our Long-Term Care SVP of Sales and Marketing to give you additional insights on how we're implementing our new sales strategy. Amit by the way we pulled from our Specialty Care business in September of 2012 and he's done a very good job in Specialty and we expect the same to happen for our Long-Term Care business. Amit?

Amit jain

Thank you, Nitin and good morning, everyone. Like Nitin mentioned we are applying a sales transformation model which we successfully implemented on the Specialty Care side.

Today I will cover the key components of this transformation model, I'll speak about some high level timelines and actions we are taking. And finally end with some comments about the goals of this function.

So we have five key components of the sales transformation model. Before I talk about where exactly we are in this process of change, I think it is important to define what these components are, and more importantly for each of you to understand the importance and the interconnectivity of these components.

The first one, truly is market research and analysis. The idea here is to focus and understand our short term and long-term industry trends, we want to identify our high potential SNF and ALF as market, but more importantly also understand with a high profitably segments reside.

Once you understand these pockets of opportunities, we will move to our second component. And that truly is good sales organization, which is designed to provide maximum coverage to our high potential markets. One that capitalizes on our short-term tactical gains and at same time allows us flexibility to focus on the more strategic initiatives in the industry. Simply put this structure will allow us to optimally deploy our sales assets.

The third component is a go to market strategy, [practically] in the short term the idea is to play to our current strength, so that we can maximize our market share within the existing segments that we service today. Longer term though the idea is to allow ourselves to align to the industry trends develop new tools and services that allow us to enter into new segments which we believe could be the long term growth segments in the marketplace.

The fourth component is a good process management framework. Three key objectives one breakdown all internal barriers to enhance the turnaround time to our customers and three eventually drive productivity within our sales organization.

The fifth component is the metrics and governance structure. This really brings together the first four components together. This allows us to analyze the results on an ongoing basis, it gives us data that allows us to establish productivity benchmark. And more importantly, I also gives us consistent evaluation patterns that identifies our A-plus performers. And then allows us to keep transitioning out the underperformers in the system. The eventual goal of all these five components is to drive consistent organic growth in the system.

So where are we today, in terms of this process of change, the design aspect of all these five components has been completed. We have identified our high potential markets, we have revised our organization structure to ensure we provide maximum coverage to these high potential markets and the high profitability segments. We have completed the assessments of our current sales team and most of the – actually I would say all the underperformers have been transitioned out at this point in time. We have designed and are rolling out a robust standardized process, which truly collaborate to their customers.

And finally, we've defined our tactical strategy already and we have identified our first set of customers. All of this has been accomplished in the past two months and we are now moving into phase 2.

Phase 2, will be focused on implementing and executing these five components I spoke about earlier. We are adding new sales talent inline with our new revised organization structure. We are standardizing the sales speech and we are launching a sales training program across the organization.

We are planning an inside sales strategy and function, the key objective of which truly is to create and drive demand generation in the target segments that we want to focus on. Finally, we will be implementing our tactical go-to-market strategy with the existing sales organization that we have in place today.

Phase 3, is much more longer term and much more strategic. We expect this that we will analyze the actions that we have taken in phase 1 and in phase 2. Based upon these results we will optimize our strategy to align ourselves much more to the longer-term industry trends. John and Nitin both spoke about the ALF strategy. We are at this point in time redefining our ALF's go-to-market strategy, we're revising our operational model with the objective of not just driving more growth in this marketplace, but also increase participation within our existing and new customers within the ALF marketplace.

So as you can see, we are underweight with some of these changes. But I do want to mention transformation is a journey, and it takes time the strategy needs to be tweaked on an ongoing basis if we have to get consistent longer term results. While our near term goal is to maximize our current opportunities and immediate opportunities in the market we service are true longer goal is to enhance market share and also enter into new segments, which we feel are the eventual longer-term industry segments of growth.

Finally, I want to mention that our objective is to establish a scientific process driven metrics driven sales organization which is dependent much more upon organizational excellence as opposed to individual excellence. We believe this eventually we'll drive consistent growth in the long term.

I want to thank you for taking the time and I look forward to our interactions over the lunch with that. I will hand this back to Nitin.

Nitin Sahney

Thank you, Amit. I want to thank you for taking the time and I look forward to our interactions over the lunch with that. I will hand this back to Nitin.

Nitin Sahney

Thank you, Amit. So three multi-phased approach to our plan for the future. I'm happy to report, we're making good progress. In summary, regarding our Long-Term Care business in phase 1, we made a detailed assessment of our operating structure, sales structure, and marketing of value proposition.

Based on this assessment, we started implementing in operations driven plan that enhances our focus on retention, new sales, account management, automation and pharmacy operations. To implement this plan, we first may structural changes that included executive changes and also we enhanced the management bench a few layers. To these changes we expect to finish in phase 2, phase 3 which will begin after phase 2 in Q3, we were also began to implement refined assisted-living strategy, we believe this will be a key component of our Long-Term Care growth. We will also continue to evaluate opportunities to optimize our network that can better leverage or scale and resources to become more efficient.

As we build the right structure will be better position to implement such changes to our operations. With our multi-phase plan we have focused in confident that starting in Q3 2013 will be better position to leverage our operational structure and further enhance our value proposition to potential customers.

Now like to shift gears to discuss, our Specialty Business, which is further along with these various initiatives. Our Specialty Business that was launched at an integrated business November 2010 have shown progress. I will be joined in this presentation by two of our team members David Hileman, who runs our Specialty Care operations and Denise Von Dohren was in charge of the market access solution part of it, and also assessing our markets and helping with our business development.

For those of you, who are new to our Specialty Business, this group was formed two years ago, exactly two years ago by combination of five different entities that Omnicare had acquired over the years. One of them was PBM Plus, RxCrossroads, excelleRx, and our Specialty Pharmacy business called ACS. What we did was we integrated these five entities into five distinct platforms. You can notice these are five platforms, four of them are appointed towards biopharmaceutical services that is grand support services, supply-chain patient support services and our Specialty Pharmacy business.

Three out of five platforms are fee-for-service that we've been talking about which is very exciting for us and we feel there is a lot of opportunity in that area. In three of the five platforms the manufacture owns the product, so we do not have any inventory risk. On the other two that are focused on dispensing to the patients our Specialty Pharmacy have been growing very robustly and expect that to continue, our end-of-life care business is really our hospice business and now we're leveraging that very effectively with our Long Term care business.

With that I will ask David to come in and give some additional highlights on the operations and our business model.

David Hileman

Thank you, Nitin and good morning. This morning what I would like to talk about in the specialty market, as John shared with you, so rapidly growing segment in the industry, so within the marketplace we've talked a little bit about some the dynamics we see, how within our group on the services side we create leveraging different operational elements solutions for our partners, the manufacturing client that ultimately we lead to the commercial success.

And then finally our approach from the sale standpoint in to this marketplace. From a market dynamics challenge, we're in a bit of an interesting time right now in that specialty pharmacy and specialty products or finally taking a larger segment from a cost standpoint. So we're seeing the payers come forward with a number of initiatives to help control and contain costs in their standpoint, leveraging tool such as prior authorization in step therapies. To again contain costs and create barriers to pay access for products.

From the governmental side (inaudible) through with November elections, the patient protection and affordable care act, affectionately known as Obama care is going to come forward and create more complexity in this marketplace, challenge with how you're going to obtain insurance as well as we believe there'll be an increased in the number of underinsured individuals, creating an opportunity for us to help support these patients as they try to require this complex therapy.

And then finally just a unique nature of the products that are coming to market, whether they're co-chain limited distribution, small patient population are some of the dynamics that are in the marketplace today. Within our organization we are one of two companies in the marketplace that is able to integrate services for commercialization success partnering with the manufacturers, touching the key stakeholders along the path from patients to providers, the payers and finally ultimately through efficient and effective distribution of the product out to the end users.

As we look at integrating our service elements in our goals with manufacturers what we try to do is keep three things in mind. These three elements that were focused on; one, simplify the practitioners involvement with programs and the products, trying to make it simple for them to come in and enroll their patients, I needs that the burdens of the complexity of these products.

Secondly, we like to engage the patients in their therapies again these are complicated disease states and are challenging for the patient to be involved with. So we want to try to make certain through our solutions that we developed for these branded products that we are engaging the patients and making them involved in their therapies.

And then finally leveraging our core expertise on the distribution of products either out to the practitioners directly to the patients or by leveraging what we have in our institutional pharmacy side of our business, the footprint that we have nationally. It is through the integration of these services on behalf of the manufacturers that we look at two elements, one how do we create the access of the products and get patients on therapy. The operational works we use or listed here tools such as using reimbursement support program, hub access services to make certain that all the barriers that are put out in the marketplace that I just spoke about are eliminated or reduced. Again we're doing this on behalf of our manufacturing partners.

And then secondly on the backside we want to make certain we maintain that patient on therapy through this tool such as compliance and persistency, co-pay support programs and ultimately the distribution with the product. The end resulted we want to make certain their product, the patient remained on therapy and mitigate any of the challenges that are in the marketplace today.

One such example as you series the typical supply chain is manufacturer makes the product, so the drug wholesaler, we sells to pharmacy, who ultimately sales towards the patients, through the integration of our services we're working with manufacturers currently the shortness and condensed such as the manufacturer will produce the product. Move it in our operations and then we will shift directly to the patient, on behalf of the manufacturer.

(inaudible) service model that the manufacturer are now gain (inaudible) portion of their supply chain, providing greater consistency and efficiency for the manufacture and greater accessibility for the patient, it doesn't work for all products, it doesn't work for all patients. But it does work for segment of each product.

As we present ourselves to our partners in the manufacturing, how do we differentiate from others that are in the marketplace today? First in foremost where manufacturer centric in all of our service elements in the solutions that we build on behalf of these complex therapies. Secondly our independents, independents from being owned by PBM, independents being owned by payer, independents being owned by a whole drug wholesaler allows us to remain clearly focus on the manufacturer success, couple that with our adaptability and integration of our service. And the results have shown the right now 60% of our clients have more than one program and we're supporting more than one product within the group.

I want to talk a little bit now about our approach to the market from a sale standpoint, we segment the market in the two categories. The fee-for-service category which we are very excited about them and believe based upon the pipeline and the products coming forward, we show great opportunities for growth within this category we're targeting manufacturers. On the large pharma bio manufacturers these services quite frankly we find ourselves as end up being the hub for these organizations, where we're integrating the various silos and segments within those business units. These company frequently under price pressures so they're more commoditized little bit in that segment, but still have bring high value as we move forward to the market. On the smaller organizations these companies tend to be virtual in nature, and thus the high touch component is very valuable and important to those companies.

On our specialty dispensing side, it's really about three primary things, access to products, so we're partnering with manufacturers to make certain limited distribution networks, patient assistance program we're removing any barriers to success on the commercial side from the co-pay, co-pay support programs and the path conversion foundation program.

And then finally, targeting physician office to obtain prescriptions to be able to dispense. (inaudible) deal characteristics are somewhat different in the fee-for-service side, the sale cycles about six to nine months, while our contractual, our contracts are generally three years or longer, where on the specialty dispensing side as we're partnering for accessing for the reimbursement services those components are months as opposed to the longer component on the fee-for-service elements.

And the targeting physician is obviously a shorter cycle of 10 to 14 day window. Contractual tenure three to six years versus the three years on the contract tenure versus a variability on the dispensing side. Key point here is since the fourth quarter of 2010, we had 100%, 100% client retention.

In terms of our sales process the first, third and fourth points are typical sales process similar to what Amit spoke, we're going to do our research in the lead generation, we'll do the standard type of deal closing, in terms of how we approach it and then obviously the program launches. where we separate ourselves from our competitors is in that second (inaudible) solutions. We're not selling a standard approach, we're not selling widgets if you will, we approach each product, each client, each patient population differently and what we're looking for is the blemishes that exist within that product, and how can we polish those blemishes. In the process, we not only integrate with our sales organization but we're bringing fourth key executives from within the operating entities that will ultimately support that program to present the solutions. And the work with our targeted customers in almost the workshops standpoint to develop jointly that solution that will ultimately create commercial success for these products.

And what we've seen is over the last five quarters a steady increase in the number of opportunities we've had participated in RFPs and present proposals with our manufacturing partners along with a steady increase in win rate as well.

And with that I'd like to turn it over to Denise Von Dohren, who is going to share a bit with your, on some of the market dynamics that are in place, in the market segments.

Denise Von Dohren

Great, thank you, David and good morning. I'd like to take this opportunity to briefly go through some of the market dynamics that are change in the specialty landscape. More importantly how these dynamics impact the informant define the Omnicare Specialty Care Group strategy.

So as we look at the specialty market dynamics there is many issues that are volume pressure on the specialty market. David did touch on some of these they include payer pressures which are restriction that you step out at your prior authorization that impact access to product, product price increases, so there is pressure or scrutiny on pricing of those launch products and price increase. The impact of Biosimilar's is really so unknown especially since we haven't had any launch in the U.S. but the concern here for specialty pharmacy is that we're not sure what they will mean as far as pricing or reimbursement. Co-pay challenges of course the affordability issues for specialty products continue to grow and will grow as we see HUB care reform executed. Regulatory changes and again this is more of the (inaudible) unknown how will, healthcare reform impact specialty products.

And finally supply chain challenges and develop in the appropriate strategy to get product to market. All of these pressures and more are causing biopharma to really look beyond traditional marketing and channel management and strategy and look more to execution of specialty services and specialty distribution.

Another look at the – a industry executive. In 2011 pharmaceutical executive did a survey and the following concerns were identified as the most challenging issues facing industry.

At the top of the list was the growing healthcare pricing budget pressures followed by the growing need to demonstrate cost effectiveness and this not only impacts FDA approval but also can have implications to reimbursement and coverage. The restrictive market access that Sahney is concern over half of the executives that were surveys that the decrease in access to their physicians was change in the way they were able to do business.

And finally the patient ability to pay which we no is an issue and will be ongoing issue. So as these dynamics continue to evolve the opportunity for Omnicare Specialty Care group grows.

So how these dynamics inform our strategy, our strategy is really two fold, one is to expand and grow our established product and two is to identify a good pipeline opportunity. So this is where products will have the most need for specialty services. Established manufacturers they continue to look at their programs and redoing and revise to ensure that they have the appropriate services and place to have optimal access to the market. So here as the opportunity where they identify new services necessary due to the evolve in landscape opportunity for Omnicare Specialty Care group.

We balance the established product strategy with the pipeline strategy and really from a pipeline perspective this is really where Omnicare Specialty Care groups integrated portfolio is maximize.

So launched products need to build from the ground hub, launch products require distributions, third party logistics, services and perhaps even clinical services. The opportunity for Omnicare Specialty Care group is to provide the full suite of services integrated needed to get a specialty product from manufacturers to patient.

I am going to focus a bit on the pipeline strategy, as you have already heard this morning there is tremendous growth in the specialty market. 2008, 25% of the FDA approved drugs were considered to be specialty product, by 2011 50% of the approvals were specialty products.

Today, there is over 900 specialty products in the pipeline of which 40% on oncology, this really make sense because oncology just a broad heading for 100s of individual diseases state meet the oncology category.

So obviously oncology is an important focus for the Omnicare specialty care group and in addition to RA and MF and other diseases areas that are met by specialty treatment. A key area that I would like to focus on is the Orphan Drug space and this is really where smallest becoming the new beg. As many of you are aware Orphan Drugs are drugs that tree – patient populations of 200,000 or less there is about 600,000 to 800,000 where condition that this drug treat. There are a number of benefits to biopharma for developing Orphan Drugs. And these are as a result of the Orphan drug active 1983 and they include seven years exclusivity and this is in addition to patent life.

Clinical trial worth of 200 to $400,000 per year, plus tax credit, they also have a lower risk associated with discovery, there are smaller trial, shorter time to market. Smaller infrastructure to support so once this products launch, smaller sales for us, less key opinion leaders, really ideal opportunities for BioPharma.

And finally, Orphan indication are usually only the first step into the market, there is also in following indications that make these products more appealing. So there is a number of reasons why Omnicare Specialty Care Group is ideal for the Orphan market. So as these entities continue to grow we had five approvals in 2007, 12 approvals in 2011. Significant opportunity for us provide multiple services for this high touch, high me products through a single service provider.

And this is really what's the key it's consolidation of vendors is especially appealing to this small to mid size pharma company. So Omnicare specialty care group is the ideal partner to deliver this end to end value, our platform as David mentioned, brand support third party logistics, consigned pharmacy, specialty pharmacy and medication therapy management, combined to deliver integrated end to end services that enhance therapy for this product maintain patients on therapy provide clinical data that's important to our pharma decision makers. And finally provide a seamless patient experience obviously not least last but least.

So Omnicare specialty care group is able to align their assets to meet the market needs. A growing trend that as arising in the market is the combination of the channel strategy with brand support. So brand support services we're traditionally perform to our Hub model, or a service model. Where patiet or prescription comes into the hub the hub services as a conscious, takes the patient through reimbursement services, coverage the port, benefit investigation, co-pay assistance and packages of that prescription and send it out to the pharmacy to the dispense.

The Hub then takes all the data consolidates the data and get it to our pharma partners. What we're seeing now, is this central service provider and this is a model that we see more frequently with small to mid size products and in this model the central service provider or the hub is a Specialty Pharmacy. So the prescription or patient come in directly to this central service provider, specialty pharmacy, they just draw into all of the reimbursement, co-pay assistance and they dispense the product.

Some manufacturer set up business rule of which there is a network of pharmacy, so this central service provider either dispenses or sense on to one of the other in the network. And again they combined data and going back to pharma. So obviously Omnicare Specialty Care Group is in a great position to perform either one of these models but because of our advanced care script, specialty pharmacy within our group, we're quite adaptable to this new model.

So when we look at the numerous tools or services in our toolbox, these services are adopted and combined meet the unique requirements of particular specialty products. Has a simple example let say there was an oral oncology product it's a high cost product, patient needs to get therapy very quickly and system management issue for this particular product profile.

Potential services for this product could be direct to physician distribution, so for dispensing physicians we could direct shift to this entities, reimbursement services which would always be needed because of the high cost oral product. Co-pay services again due to the affordability issues for patients to access this high cost product. Quick Start program such as really because of all the complexity maybe prior authorizations step that and so forth, a Quick Start program would allow the patient to receive a sample of the product, start on therapy while all the logistics of prescription of the prescription were completed.

And then finally, nurse support services to with the system management so educate the patient. This is just an example of how we can build this unique programs based on specific product profiles and through the services that Omnicare has in their toolbox.

So in conclusion, Omnicare is really well positioned to capitalize on the rapidly changing and growing marketplace. Our integrated platform enables customization and streamlined services to drive market differentiation. And finally Omnicare specialty care group creates innovative programs that assist and access speed to therapy and maintenance on therapy, and can really helped to differentiate and commercialize specialty products.

With that I thank you for your time and I will hand it back over to Nitin.

Nitin Sahney

Thank you, Denise. Just continuing with our specialty business over the last two years we laid a very solid foundation operationally, strategically and from a sales point of view of our specialty business.

As we had mentioned earlier we put five different entities into five different platforms we did that by constructing a very good management bench, we laid our operational infrastructure in place, we put a brand new sales function that did not exist two years ago and those have shown good results in terms of our numbers. If you look at from Q3 2010 where we were to Q3 of 2012, you can see that we achieved our results by being very methodical and very planned and very focused on our operation and sales.

Now on our specialty side we don't intent slowing down, we feel as you've seen from Denise's presentation and David's presentation the good opportunities ahead for us, and the market has yet to mature in our view. We will continue to enhance our structure, we're warranted adding key talent to further our credibility with our BioPharma clients. We will also look to penetrate additional disease states to open up markets and underserved therapeutic states, like Orphan Drugs, we also will look invest to leverage both assets collectively especially with both businesses now being under one management team.

We believe our Specialty Care Group add tremendous value to Omnicare. In addition to be in closer to the manufacturer to business also diversifies Omnicare's payer mix with the substantial amount of EBITDA now coming from non-government resources. We believe our Specialty Care Group has only begun to realize it's tremendous potential based on the structure we put in place and we expect the momentum to continue in the foreseeable future.

Now that both our businesses are in the single management team we are now focused in a very standardize way on metrics and with the same sense of urgency that helped us construct the Specialty Care Group. Our multi phase plan for a long term care business is underway and we'll focus on Omnicare's key differentiated services, clinical operations and technology. We also believe our specialty offering is very differentiated from our competitors due to the integrated nature of our services and which is very well resonating with our customers today.

In conclusion today we have now presented to you and in-depth insight on our two lines of business, both of our businesses are now pointed towards positive growth. We are now confident that with our new plan for a long term care business, we will now be able to go to the offense in terms of new sales and with the recent enhancements we have made operationally we will now be able to better protect our existing business.

With respect to our specialty care business, we will continue to focus on the same level of growth as experience recently. We have assembled of good team of executives on both sides of our business that will help us achieve our goal methodically and on the timeline basis.

So with that I will conclude my remarks and thank you and we'll take a short break.

[Luncheon break]

John Workman

Okay, I think we're going to go ahead and get started again and our next session is our new Chief Financial Officer, Robert Kraft, he goes by the name Rocky, we did not want for those of you from Boston to confuse him with the owner of the Patriots, so he's going Rocky Kraft, today so with that I'll Rocky talk.

Rocky Kraft

Thanks, John. Like my colleagues, let me thank everyone for coming today. And let me start by saying I'm excited to be at my first Analyst Day as the Chief Financial Officer of Omnicare. One thing I wasn't going to say but I was actually going to use that joke about Robert Kraft, and John threatened me with my job yesterday if I used it. So it's pretty interesting, that he used it himself.

I'm going to talk about four topics today. First, I'm going to spend some time on some of our key operating metrics and our key financial metrics. Then I'm going to move on to talk about our recent Q3 performance, third I'm going to talk about cash flow characteristics of the company. And then finally end with an overview of our capital allocation program.

Turning first to our operating metrics. Over the last 7 quarters our scripts have been flat on slightly lower bed base. As each of my colleagues John and Nitin have talked about, our generic dispensing rate is up, it's climbed over this period, eclipsing 83% in the third quarter of 2012. Our retention rate over this period is ranged between 92 and 94% significantly higher than the high eighties we experienced in 2010.

Next let me turn to some of our financial metrics, again over the last seven quarters we've seen a modest decline in revenue that's primarily driven by generic introductions and lower average bed count, partially offset by the robust growth in our specialty care group. Again generic introductions are driving expansion of our gross margin, we've seen a 277 basis point expansion in gross margin in the periods presented. We've seen a similar trajectory in the increases in our EBITDA and our cash EPS.

Let me turn now to our third quarter results. LTC results in 2012 for the third quarter were very strong driven again primarily by generic introductions. Our Specialty Care Group saw strong performance on both the top line and operating profit lines in each of its platforms, generating a 26% increase year-over-year in operating profit.

During the quarter we returned $46 million of capital to our shareholders via dividends and share repurchases, on a year-to-date basis that brings us to a $146 million returned to shareholders or 34% of our operating cash flow.

Finally, we had a very strong cash flow quarter. $196 million I will caution everyone that we don't have our semi annual interest payments in the third quarter and we have some benefits from working capital that we don't anticipate will recur in the fourth quarter.

Given that strong cash flow in the third quarter let me talk a little bit about the cash flow aspects of the company. As we've been telling you for some time we believe cash flow is one of the most compelling aspects of the financial pieces of Omnicare, we provided this slide, in front of you now, to show what we believe is a normalized cash flow. What we've done is we've taken out litigation charges, we've also taken out certain benefits that we've received in prior years from tax refunds and other items such as insurance refunds.

What you see, is our cash flow is strong and consistent. And that consistency is followed through in 2012 through the third quarter. The two key points we want to make about our cash flow. The first is the primary driving factor of our cash flow is our strong operations and the high quality of our earnings. You've heard us say before, our EBITDA turns into cash flow.

Second our cash flow provides us with a significant amount of flexibility. That flexibility allows us to do acquisitions, it allows us to return the capital to shareholders and other aspects both that lead to long-term growth and also can lead to EPS growth.

There's one other key aspect of our cash flow that I'd like to talk to you about and that's the benefits that we receive below the EBITDA line. There are three items that fall below the EBITDA line that we believe are very compelling from Omnicare's cash flow perspective, first the amortization of intangible assets which are significant from transactions we've done historically. The second and third items both relate to taxes, we're able to deduct goodwill for tax purposes, on the books that goodwill is not deductible and so we generate a much lower cash tax rate than book tax rate.

In addition, through some of the convertible debentures that we have we're able to deduce interest at a much higher rate than the face value of that debt. There's two important aspects to these items, first they're consistent and second they're long-term, because of this consistency and their long-term nature a year ago we decided to go to a cash-based EPS number that adds these back.

Let me now talk about the deployment of these cash flows. As we think about our capital allocation program we believe there's four facets, there's acquisitions, there's investment in our core business there's the pay down of debt, and there's the return of capital to shareholders. I'm going to talk about each of those individually. First, let me talk about acquisitions. As you all know over the last couple of years we've taken a very disciplined approach to acquisitions.

That doesn't mean we won't do deals. Let me talk about when we will as a matter of fact, we've probably looked at over 20 transactions this year and as you know we've completed one. First from a financial perspective, we're looking for acquisitions that will provide us with at least an after tax return of 15%. Let me talk about each of the businesses a little separately now, because there are other characteristics that we're looking forwards to transactions.

First in the long-term care side, on the long-term care side, we're looking for good operators, businesses that make money and generate cash and finally and maybe the most important don't have compliance issues. On the Specialty Care side, similarly, we're looking for businesses, that are fast growth. What do I mean by that? They should be growing as fast as our business is growing today. They also should have the characteristics that allow us not to slow down the organic growth that we're experiencing in our Specialty Care Group, and finally they should have cash flow generation characteristics.

This disciplined approach that we have taken over the last couple of years, has resulted in a much lower use of cash to fund acquisition. The result, as you know as we've had more capital to return to shareholders. We look at each as ways to grow the business and grow our EPS over time. Next, let me talk about the second facet, which is investing in our business.

As we've told you historically, Omnicare is a relatively low CapEx business, from a maintenance CapEx perspective, probably $30 million to $40 million on an ongoing basis. Having said that we have and we'll continue to invest in technology. Again, we use our hurdle rate go determine when we believe an investment makes sense, those are risk-adjusted depending on whether it's existing technology or new technology, but as we invest we think about several areas, first investing inside our pharmacies, inside our pharmacies we're going to invest in automation that helps us fill prescriptions, those reduce costs increase efficiency, and reduce the amount of errors that we have inside our pharmacies.

Second, we'll continue to look to invest with our customers. Our customers continue to tell us about challenges they have in areas such as med availability, we'll work towards that overtime when we find the right solution for our customers.

Finally, our back office, as Nitin and John both spoke about we have one system project, which is called OCEAN. I'm going to spend a minute on OCEAN now. OCEAN is a prime example of our investments and why would we do – why are embarking in OCEAN, as many of you know, we currently have two dispensing systems, we have numerous operating systems across the platform and across our company. We're going to bring that to one under OCEAN. That means we'll have improved information. That improved information will allow us to have better customer experience, inside our pharmacies it will mean more efficiency, it will also mean an entire network of redundant pharmacies that will able to move drugs back and forth depending on circumstances.

We'll also have one source of information inside the company to make management decisions. As we've told you historically, the return associated with OCEAN is a multiple of the cost that we'll spend. I'm happy to report today, the system is on-time from a plan perspective and on budget. One go to caution for investors, as we invest in OCEAN and some of these other technology investments, over time our depreciation expense will go up.

Let me now turn to the next facet of our capital allocation program returning to shareholders. I'd like to start first with our dividend program. We've consistently increased our dividends since, 2010, with our goal to provide a reasonable yield to shareholders. Currently our dividend stands at $0.14 per quarter, I will tell you on a quarterly basis we review that dividend, as we think about it today and into the future, our plan is to provide a reasonable yield to our shareholders while also providing flexibility around our capital allocation. We don't want to block our ability to do a transaction if it comes due, to invest in the business or to take other facets of our capital allocation program.

Next, let me talk about our share repurchase, again, beginning in 2010, we began an aggressive share repurchase program, over that time through the third quarter we bought back 12.6 million shares for an average price of less than $28 per share. As you know, we've just announced an accelerated share repurchase that provided another 5.8 million shares to us at the signing.

Remaining shares under that accelerated share repurchase will be delivered in the first half of 2013. Even after this accelerated share repurchase, we still have $200 million remaining on our authorization for share repurchase from our board.

One of the things that's allowed us to return more capital to shareholders and to be flexible is what we've done with our capital structure and that's pay down of debt over the last several years. As many of you will recall in the third quarter of 2010, Omnicare was looking at a significant wall of debt coming due in 2015. That number was north of $1.7 billion excluding tax impacts which were a couple of hundred million. So at that point we began to spread maturities, in late 2010, a third of that wall went away. It went away through a convertible debenture issuance that extended the maturity on that 10 additional years, as we moved into 2011, we took advantage of favorable market conditions to do banks refinancing, we put in place a new revolver in term loan, and we also did some minor bond refinancing.

At that point making significant enhancements to our debt maturity schedule. 2012, we were more opportunistic, first we entered into a convertible exchanges that extended one of our convertible bonds from a 15 year maturity to 30 years, in addition we amended and extended our credit facility that pushed up the tenor on the term A loan one year, and also a reduction in interest rate to 50 basis points.

As we fit today, we like to talk about saying we don't have a gun door ahead. Given our cash flow characteristics, at any point in time we could just use operating cash flow to pay off our debt. In addition, we've lowered our effective interest rate on an after tax basis, actually below 2% today. As you'll see on the next slide, we've done all of this while maintaining a strong capital structure. Our debt-to-capital ratios have remained relatively consistent. And our leverage ratios have gotten better as we've improved our EBITDA.

So let me use this slide to summarize, our capital allocation program. In summary, we believe we've had a disciplined and balanced approach to capital allocation that's provided us with a solid capital structure, it's provided us with efficiencies, and also income statement benefits and we've reduced acquisitions over the last several years. What that's resulted in is a lot of cash. What we plan to do with that cash over the next several periods, as we disclosed in our third quarter call, is return more to shareholders.

If you take just our remaining authorization on our share repurchase program and the dividends at the current levels that would equate to a 50% return of cash flow from operations to shareholders over the next two years. We truly believe that cash at Omnicare is a value creator for our shareholders.

With that I'll turn it back over to John.

John Workman

Thank you, Rocky. So I'm going to have some closing comments and also talk about 2012, and our outlook for the future. I think today, hopefully you've gained appreciation for Omnicare's compelling value creation our focus on the three priorities again which we've disclosed and again I would characterize these as our priorities over the 12 month period which really got started in 2012 primarily in the third quarter. We want to continue to focus on building a operating platform and long-term care, that generates consistent and sustainable net organic growth.

We want to continue to grow Specialty Care, again a very robust growth in revenue and operating income, we want to continue that momentum going forward and as Rocky just spent some time talking about, we also want to make certain that we're very efficiency relative to the allocation of our capital. And using it in the most judicious fashion that we believe will build value for shareholders. We think those are important elements and again we just want to keep emphasizing those.

Now if I think about those three platforms if we look at long term care first, our long term care is a leverage model, so volume growth is important and helps us to drive earnings. For long –term care it's really based on two things, one is volume and secondly driving efficiencies. We didn't spend as much time today talking about efficiencies, but we have a lot of programs that are standardization or process changes and I would say in terms of improving a efficiency Omnicare is still in the fairly early stages.

We think we have a fair amount of runway and opportunities to improve efficiencies going forward, volume does equate to scripts in terms of looking at overall volumes and the platform I think you saw a number of factors today that we believe will help us drive scripts going forward, some tied to beds some is not and I think you'll gain appreciation for those. But it is important that we continue to drive volumes in long-term care and again, through efficiencies we think we can take advantage of this fairly leveraged model that we have and continue to grow results in the long-term care platform.

Just to talk about the concepts relative to beds, we wanted to put up a very simple model, because I think a lot of you understand this but we thought it would be good to emphasize it. Not all beds are the same, if you look at the beds in this chart, with given different characterizations, you're going to see a size of SNF facility, you didn't see the impact for the census that may have again, not controllable, necessarily Omnicare, but the thing it is typically consistent, when we serve a skilled nursing facility we serve all the customers, or all the patients within that facility, and you can see that in the penetration rate, but it's going to be a direct correlation based on the census or the occupancy in the skilled nursing home.

Again we're seeing strong acuity typically across a lot of the skilled nursing facilities, that's demonstrated on the far left example, 100 bed unit, and as you can see if you're going to have a facility that has more rehab type patients it's going to drive a higher script count, but we are seeing that momentum especially among the larger players of which we have a lot of those larger players moving towards that higher acuity rehab category.

Now, in SNFs we have used the same number of scripts per patient if you will. In this example some times that can vary too, but we did use the same number of scripts per patient. Contrasting that with the ALF alternative, in the ALF alternative, you're going to have the residence, they have a choice, they may choose not to use Omnicare's institutional pharmacy, today across the board we operated about a 50% penetration rate, and as you can see that's going to translate, when looking at their occupancy rate into a lot of fewer residence served if you will in terms of the number of beds.

Again a little lower utilization typically taking the same number of drug the difference is they're going to be more likely taking more over the counter, so you're not going to have the same number of prescriptions necessarily with an assisted living facility resident. It is important to drive that penetration rate and you can see that in this example, and again we do have some markets where we are I that 70% plus penetration rate and in and out market. But it does vary relative to scripts and we just wanted you to gain some perspective on that.

I think some of you know that but it is important, because we're going to continue to talk about scripts, and again we're not going to stop talking about beds as a proxy for scripts, we just want to remind everybody scripts is how we get paid so as we evolve and talk about our strategies going forward, it's going to be important and we're trying to make certain there's an understanding of how scripts are generated.

Next turning to specialty care group, clearly it's a different model, it's driven by revenues and mix of the revenues within those different platforms that Nitin and David talked about. We expect it to continue to benefit from the tends in the Specialty Pharmaceutical market, while also emphasizing our fee-for-service business. And again we didn't talk as much about that but I think you all appreciate the fee-for-service is a very higher margin business and one that we're very focused on in terms of driving future profitability relative to that segment.

Again we are in terms of in long term care, as Nitin described we're in three different phases, we think this is going to better position the company in long-term care to consistently and have a sustainable net organic bed growth. It's going to be critical to our long-term success. As I think you've seen today and one of the things we wanted to do is expose you to some of the executives, and one of the things we're trying to do is make certain you have a better understanding for specialty. Again we only started breaking specialty out of the segment at the beginning of 2012, so you saw a few more executives in that segment today, [peculiar] than you've seen before, but we want you to start to understand the breadth of that business and also it's depth.

But again we've also have added those resources in long-term care, we're seeing again with Amit coming over and applying the same tools that were successful in Specialty Care. The other thing I want to emphasize is that Nitin and I spend a lot of time talking about this, these are basics. And I think you guys are probably sit here today and said, yeah, those things all make sense and the issues is these weren't done at Omnicare, and we're putting in place those basics and we do believe that those are tried improvement success stories and will result in improved results going forward.

2012 guidance, there's no change here this is nothing new, I think you've seen this while we wanted to do is reaffirm this guidance today the cash based EPS, guidance where we are today it is our - it's our second revision, at the end of third quarter it was our second revision upward in 2012, you take the mid-point of that guidance today it's about a 15% improvement over 2011. Of course revenues re impacted by more generics since they drive a lower revenue base, so you can see revenues are generally flat, and you can see that cash flow from operations again is basically consistent and in '12 versus '11 even though '11 had a little bit more benefit from some working capital improvements than we have seen in 2012.

Well it's not on the chart today, I'll also tell you we're also very comfortable with the multi-year compound annual growth rate in the high-single digits for the period through 2013, that we've previously disclosed and we're still very comfortable with that guidance also.

Now as we think about 2013, I want to spend a little bit of time talking about the major drivers and again we told you we would be providing guidance for 2013, as we provide our fourth quarter results. But I think it's important for you to gain an understanding of Omnicare and how we're looking at things to understand the key drivers behind the business and give you some view at least or some direction of how we see results unfolding in '13 and '14.

First is brand-to-generics. Huge home run in 2012 and we were very happy that we were able to translate that results into the brand-to-generic benefit into results for the company. And it's actually probably gone better than we expected. So that's been a little bit of a stronger performance than was expected in 2012. It's helped us to exceed expectations.

We were concerned early in 2012 about was it going to be a large headwind and 2013, because of the brand-to-generic cycle. As we look at it today, it's fairly neutral, I mean that we expect a slight negative but truly deminimus relative to the size of the company. Some of that's benefited from the fact that we have carryover. Some of the generics were introduced later in 2012, and as a consequence, we're seeing some of that carryover benefit in 2013, which is making that a fairly neutral impact.

Reimbursement is something that – it's always been negative. I mean if the one thing that in the long-term care business you don't get price increases and so we're constantly faced with a changing reimbursement trending downward, occasionally you'll get a little bit more favorable trends, we can be – our reimbursement can change a little bit because even though we have contracts with a lot of Part D plans and they are fairly consistent without a great deal of variability.

There's some pretty big numbers when half of revenues come through our Part D plans and Tim Hopkins who runs our Part D plans will be available on the tables too, to talk to you about that. But when you get some reassignment or re-contracting as they go through their bidding process, that can change your dynamics reimbursements, but today we're looking at reimbursement is continue to be negative but it's something we've been dealing with for the last few years and we feel comfortable now we have an ability to not only deal with that but we also predictability in it. We are expecting it to be a little worse than 2013, than we experienced in 2012.

Brand drug inflation, we haven't spent as much time talking about that in long-term care, it wasn't as big an item in 2012, just because there were fewer branded drugs, but that is a benefit going forward in long-term care and it's a decent sized benefit relative to specialty pharmacy and specialty care business, but we see that as a positive going forward in each year.

Systems initiatives we have broken out, specifically this category of OCEAN that you heard Rocky talk about and we do have our Chief Information Officer who's going to be at one of the tables too if you want to understand that perspective a little bit more.

I would say overall, Omnicare underinvested in technology in the past and one of the things we started doing with OCEAN is going to one billing dispensing system from multiple platforms we think there's going to be very significant benefit from OCEAN going forward, they're going to come in two categories, one is in cost reductions, which are going to be things like headcount reductions because when you need for your people we have better information we're also going to be able to capture more revenue because today there are certain rejects that occur that we're unable to build because we don't have the proper information.

So buy going to OCEAN, we're going to have one system that will be consistent across all platforms, it also – we believe gives us a competitive edge. And that's to dealing with our customer base it allows us to be to have access to more information that can also be used by them. One of the things that we're starting to do is part of the changes to some regulatory events relative to long-term care, I thin you've all heard about short cycle dispensing, and that becomes effective January 1, 2013. Omnicare has been very successful in mitigating that exposure as we look forward, but there is also reporting requirements that are necessary by the Part D plans. So again we've been able to use our capabilities to provide information say, hey we can help serve the needs that you have relative providing information, so again we're using things like that to our advantage in terms of the – and OCEAN is going to provide us greater opportunity to use that information to our advantage with our plans and our various customers.

Again, standardization automation initiatives, you've heard us talk a lot about the ALBs and we're piloting something called ULBs which would be the same kind of automation in smaller platforms the ALB is a tried and tested concept, but we're looking again at rolling that out a little bit more in 2013. ULB is something that we are spending a little bit more time I terms of testing.

I will tell you that one of our views is that we want to be careful when we talk about automation issues, we have a view that we want to pilot those, we want to make sure they're successful. And if they're going to work in and build the right business case and so we're going to do that, before we start to roll those out. And that's the communication we're having with our customers which they respect but again we think we're far ahead in terms of having some of these solutions.

But I know many of you are expecting us to talk about a rapid rollout of those and I think you've heard today that the things that you hear about the ULBs are really being piloted and tested automation are the first dose solution is also something that's being – we're being tested here in the fourth quarter. There will be more report on that as we move into 2013. We have some slight benefit we're not expecting a large benefit from that right now as we go into 2013 on the first dose but all of our automation solutions as well as a bunch of standardization processes because again Omnicare came together through a lot of acquisitions. So there really weren't standardized processes, and again we're in the early stages here. We know those things are going to warrant savings and help offset some of the reimbursement pressure as we move forward.

Clearly script growth is important and we have spent a lot of time talking about that, we're characterizing it neutral in 2013, not because we don't expect to get to a net organic bed growth some time in 2013, but because and then you guys will understand this very well, since we've been declining beds in 2012, and if you look at the average bed served, you kind of think about a graph coming down and you think about a graph going up in 2013 the average bed served is probably going to be similar in 2013 to what we experienced in 2012, that's why it's characterized as a neutral.

Lastly, Specialty Care growth, we're really excited about that asset. I think you've heard a lot more about it again today. We do believe the momentum is there, we continue to growing this specialty care growth, or the specialty care group, going forward and we characterize that – as double digit both revenue and operating income. And it's been outperforming that in 2012.

A note, cash flow, this is all underpinned by the company's significant ability to generate cash, and we're going to continue to focus on cash, I mean that's one of the other things that this management team started focusing on a while ago, was let's make certain that we're tightened down on all of the elements to translate all those earnings including the working capital components and as much cash generation capabilities that the company can eek out of the business if you will.

We're going to continue to utilize that cash flows in ways to benefit shareholders. One thing I would comment on and you – and I know as you've built your models and we're not trying to give you specific direction, but clearly we're spending a little bit more in CapEx these days, than we have, part of that's on OCEAN, that does translate into higher depreciation, I'm not so sure all of you picked that up, but that does impact the EPS a little bit negatively. It obviously dose impact the cash flow side, we've already talked about it. But it also have an impact EPS.

My last comment on this disciplined use of cash flow is, whether it's acquisition or share repurchases, we believe this continue, this cash flow is going to be a continued source of growth and not allowing us to grow earnings and to meet objectives of creating shareholder value, in prior years, Omnicare went out and made a lot of acquisitions. And those acquisitions improved earnings perhaps in the short term but they weren't sustainable. And so one of the key issues that we've looked at in acquisitions today is to make certain number one it's a good business, as Rocky demonstrated, we not only expect a certain financial return, we also expect the cash-on-cash return. So we expect to get our cash back pretty quickly. But again we're very disciplined about the types of acquisitions, we don't want to – we don't want to replicate any issues of the past, if there's any kind of compliance – (inaudible) we're walking away from those types of thins and not looking at those acquisitions.

And as Rocky mentioned we probably have looked at 20 different acquisitions, in the last year we did one. But the other thing I would say is that we've sent a message, because Omnicare not only had a practice of making a lot of acquisitions, we had a practice of some times buying the same pharmacy multiple times. And Omnicare would buy a pharmacy, there would be a non-compete, non-compete would expire, that operator go out and create a new pharmacy, start taking business from Omnicare and we'd buy it again. So the other message we've sent is we're not doing that. So again, that excludes some acquisitions. When we look at our filtering process we want to make certain that message is out there. We think that's going to be good for the long-term of the company and we want to make the right acquisitions.

Five Start we think was a good example, that we closed in 2012, we already served some of their customers, but we're able not only to pick up that pharmacy and it was a successful one, and to grow our business, but it also picked up some other third party customers that they were servicing and one that we think we will keep those customers again going forward. But we do look at every situation and allocation of capital and whether we're looking at acquisitions, again it's simple to buy acquisitions and to fuel earnings in the short term, we can virtually look at those, are we better off to buy back shares, because we also know that's a sources of earnings growth. And so I just want to make that point that we do look at those things, separately, as we think about capital allocations decisions.

Again, kind of closing, there's a number of different ways that we believe we create value at Omnicare, we do have a unique collection of assets, again very large scale, we think scale is going to count in the new healthcare platform, we are improving our – we believe we're improving our market positioning, especially in the long-term care group and we're excited about the prospects that that will generate going forward, though it's not all done. And we're in the process as you've heard from Amit and Nitin talking about that. We're working through that process but things that we believe are tried and true and that will generate success.

In terms of the specialty care, clearly we think that's a hidden jewel, in Omnicare, and in one that we continue to think will continue to grow, and both now and in the future meaning 2013, and forward and lastly you know the generation of the amount of cash at Omnicare creates we think creates a great opportunity, continue to fuel growth in the company both in earnings and returning value to shareholders.

Now, what I'd like to do is that we're going to I think break in a few minutes. We're going to have Q&A first, and I then after the Q&A we're going to have a round table discussion with various other members of management those that you heard on our platform today and you've heard those speak, we have some others that are in attendance, so let me just kind of go through.

Bob Dries, who's our SVP of operations and finance group, more recently aligned in the specifically the focus on long-term care, Bob is going to be at one of the tables, let me go on Tim Hopkins. Tim's our SVP of Trade Relations, which really means he oversees all the Part D contracting. So Tim will be here also for those meetings. Dan Maloney who's our Senior Vice President of Purchasing, Dan does a great job in terms of making sure we get the lowest cost in playing the bidders against each other.

Don Wetherhold, who's new to the company, Don's also in the Long Term Care Group, more responsibilities these days for national accounts, retention, so again a great value-add executives. And lastly our General Counsel, I'm sorry, we've got Randy Carpenter. Randy Carpenter our Chief Information Officer, Randy and I used to work together so, that's easy for me to forget him. But Randy Carpenter who's our Chief Information Officer, again driving a lot of the initiatives relative to the IT, a great healthcare IT executive, you know, with 30 some years experience and helping to transform the company.

And then lastly Ally Kayne, who's our General Counsel. Ally is also going to be at one of the tables, but he will be probably be cautious on what he can say, as an attorney in terms of various matters but again a great add to the company.

As I look at this list, I was struck by the fact that I think I didn't hope my math is right, I think there's 14 people that we've brought today to be on that list. As I look at that list 11 of the 14 are new to the company within the last three years. So I think you also get an impression of the things we've talked about today in terms of transforming the company, you're also seeing that in terms of the people that we're bringing in to the company, using the good people that were already here, but also bringing in other people that can help build and make Omnicare successful in the future, and I would lastly tell you – we 're not done in that respect, Nitin and I will probably spend about 40% of our time talking about people, we continue to look to people to recruit in the company, that we would characterize as good athletes that can help Omnicare, grow now and be successful in the future.

And I would encourage you as you sit with these people at the different tables and I think the way it's set up, is we're going to kind of rotate around, is that correct, that, to hear about the backgrounds a little bit. I think you'll be impressed their backgrounds too and so again encourage you to get to know them ask, questions, just don't ask them for confidential information, that's my own request.

So with that, I think we'll stop and I think that's next Q&A right. Yep, Q&A, Brendan?

Question-and-Answer Session

John Workman

You've got a microphone, I'm going to sit back down if I can.

Brendan Strong - Barclays Capital

Thanks, Brenda Strong with Barclays. I wanted to ask two questions. First slide 57 and slide 110. First on slide 57, it's on the six hubs, just curious if there's anything geographically related to those hubs, if there's anything you could say about the percentage of business that goes through those hubs, or if you can comment on what your script growth would have looked like without those hubs?

Nitin Sahney

Can you hear me?

Brendan Strong - Barclays Capital


Nitin Sahney

Your question is without the six hubs?

Brendan Strong - Barclays Capital

Yeah, what scripts growth would have looked like without those hubs?

Nitin Sahney

I would say a retention rate would be more like 94%, but you know those hubs are still servicing significant amount of beds, I think the question has been out of those six, some of them had huge service related losses, and we are addressing those, so as we get that back, we frankly want to go on the offence with those hubs, not all of them are in the category that they should not be there, in fact I think the question is how do you put the sales element on those hubs, and make them robust again.

John Workman

We don't want to break out specific information I think we said retention rate would be higher, but one thing I would focus on is one of those is really low. If you look at that one hub, and not all hubs are the same size, but again, hubs are generally, are going to be larger but they're not all quite the same size, the one that's in the 50%, bucket is that right? Yeah, the 50% bucket it's a pretty poor performing hub, we've made significant management changes, have a focus, we again we believe it's fixable, it's not one that's going to go away, but it does also, handcuff us, and this is one of the things that's Amit's making sure we're focused on, is until we get this strong customer services orientation back in that hub, it's also a restricting our ability to get new customers because obviously you can't sell a new customer if you have a poor service reputation.

So we are focused on one, I think there's one really big outlier, Brendan which is the 50%, and we're focused on that, that's in the Eastern part of the United States.

Brendan Strong - Barclays Capital

Okay, thanks and then just one question on slide 110, which is on OCEAN, just what's your level of confidence, around these numbers long term and you don't have the time line on you, you don't have numbers on here, but if I was going to guess, I'd say it's over a $100 million in EBITDA by the end of 2015, it seems like an enormous opportunity, so your level of conviction in these numbers, and some of the specific items that are going to drive those over time?

John Workman

We have put down timeline in the past, I mean that program started – they put it in a gauge, we've said it's been $70 million on the project, from a cash outflow standpoint we've said the five year return on that once it's on it's run rate would be two to three times the investment, so we didn't pay any specific number. Having said that, 2012, we started to see some benefits they were pretty much neutral to the cost, we see some benefit in 2013, ramping up in 2014, and then basically, it's run rate in 2015. The reason for that that's divided into three releases, the first release was just kind of getting us on a common database, the second one is more on the revenue enhancement side, that will allow us to consolidate some billing centers, reduce headcount, start to capping some of the rejects that will continue into 2014, but then when we'll start to roll out and the phasing out of the two, systems in our hubs, and our pharmacies and so the annual run rate is not going to be until you really get to the beginning of 2015.

Randy is shaking his head, yes, so I must have answered that okay.

Bob Jones - Goldman Sachs

Bob Jones, Goldman Sachs. I know we're not going to get official guidance, save it for your [to put you in any spot] anyway, you said you're comfortable with the two-year guidance which implies very low single digit EPS growth for '13, I'm thinking about some of the drivers I guess as it relates to slide 123, sounds like the generic headwind is actually neutral, I think that's probably incrementally better than what most of us would have thought. You mentioned, OCEAN, sounds like there's a chance that could be additive in '13, and then obviously the impact of the ASR, which is going to be completed now into the beginning of '13.

Is there any other drivers of the headwinds that we might be missing as there is –

John Workman

Knowing I think that we miss some times, or that people don't focus on is this is a declining reimbursement business in long term care. And 2013, that's going to be a little bigger, negative than it was in 2012, it's nothing new, you know we make our plans and recognition that we're going to be into lower reimbursement cycle. We do not have that benefit of generics to 2013, but we view that is somewhat neutral.

When we made our comments, before, all we've said is we're comfortable with that, we didn't say we don't want you to interpret that necessarily as guidance for 2013 right now. We're just kind of saying we're comfortable with that, so you kind of have, yeah, you know what the company's is going to achieve at least that.

There's a way I would say it, and as we finish out the year, and give in a 2013, we'll give some specific guidance, but we do always factor in how we use our cash including for share repurchases, and thinking about how we look at future guidance, because we make conscious decisions some times, not to make acquisitions, which could have been add-up in the short term, because we don't think those are in the best long term value to company.

Bob Jones - Goldman Sachs

And then just if I could follow-up on the specific generic headwind component, in your comment, that that's going to be neutral, next year, is that – is that because I think that's probably relatively more positive than most of us would have thought, when we look at '13, is that because maybe we were just missing something, or is the pricing better, I was just trying to better sense of how the generic landscape really looks as we move out of some of these exclusive drugs in '12?

John Workman

I think some of them were introduced later in the year and so there is a the carryover benefit into 2013. That's why it's not as negative as expected, but again I think we've done a we started two years ago, Tim who heads up our Part D plans and giving us some predictability and prediction on the reimbursement situation with the Part D plans. And then Dan Maloney who is our Senior Vice President of Purchasing also does a great job in bringing the cost down, so one of the things and one of the benefits we've had in 2012, where we've actually done better on branded generics, is probably buying a little better than we expected.

And we expect that to continue as we move into 2013, also we see that as a little bigger opportunity.

Charles Rhyee - Cowen & Co.

Yeah, Charles Rhyee with Cowen, maybe a couple of questions, but first just to clarify a question from Bob here, when you're – the sort of the long term guidance that you had that you feel comfortable, high-single digits, if I recall correctly what was given at the end of 2010, and it's not really a – is that really a two-year number of are we – that meant to be states from 2010 as a starting line.

John Workman

Great, question, I mean when we – you did – you're right Charles. We gave that guidance at the beginning of '11 after the '10 results. And we set a double digit CAGR for 2010 to 2013, in 2011, we moved to cash-based EPS, which changed the – changed our EPS, at about $0.80 a share, so obviously a higher base and we've said, look it's going to be, the year is already behind us at that point of time, so we said that was going to be – that translates into a high-single digit CAGR with a two years now '12 and '13.

Charles Rhyee - Cowen & Co.

Okay. Thanks that's helpful. A question really for Amit or Nitin, when we talk about the aftermarket opportunity here, when we talk to some of the ALF providers they don't really, don't seem to have a real focus on pharmacy yet, because to them it seems like a pass-through cost, how do you change the sales pitch, to really get them to focus on it more, so that you can be increasing the penetration. And then how is that message resonating for you guys.

Amit Jain

I can provide some comments, Charles on assisted living, so that actually is a very attractive market, for the last few years, practically every quarter we see an increase in occupancy, an increase in inventories. It's very interesting how that increased penetration how they're going focus more on working more closer within institutional pharmacy, just yesterday I that I read the number one deficiency in assisted living is medication management. So just as SNFs are moving more of the acuity scale, assisted living is doing the same thing and so to the extent that they get more clinically complex, which I think will continue I mean if you look at, where the SNFs are positioned today they're focused more on rehab therapies, average cost of care there is about $90,000 a year. In assisted living it's about half of that. So to the extent that the managed care organizations have any control on where they push the patients they're going to try to push these residents into assisted living.

So there's going to be more acuity there, there's going to be a greater requirement for medication management I mean these residents are going to be a little bit more challenged to get their medications either by mail or through retail pharmacy. So what we're doing is we are developing a strategy that's focused on three elements, and the first element is really about making our service offering more competitive in the marketplace and what I mean by that is making some tweaks whether it's around standardizing our pricing methodologies so that it's more scalable, for our sales force and it's more appealing for the residents and the again for the persons paying the bill, and also having the technology strategy so as the assisted living facilities are moving up the acuity scale, they're investing in infrastructure like [CMOR] platforms, which they didn't really go down that path five years ago.

So that's element number one, it's focusing on how we can make our service offering more competitive, and it's the second component there, it's really differentiating our service offering, and what I mean by that is both within Omnicare and externally to the customer this is a market where it's more of a hospitality type mindset, I would it's kind of far from a hospital type setting, so the service that you need to deliver it's a lot higher.

I think where Omnicare has had some missteps in the past as we've taken the same skilled nursing approach, and applied it to assisted living, that doesn't work. In a lot of cases that actually have [offends] the customer, and it offends the residents. So we're doing it – we're developing a structure, it's differentiated from how we deal with our skilled nursing customers. Then finally, we're going to do all (inaudible) scale introduction, so the structure that we've put in place, is going to be very scalable so as we stuck to grow with the industry and hopefully take some market share, we're getting the scale up as we need.

Glen Santangelo - Credit Suisse

John, Glen Santangelo from Credit Suisse. I just want to follow up with some of your prepared remarks when you're talking about the drivers, you did obviously call out the reimbursement being incrementally worse than 2013 versus 2012, and you highlighted the Part D plans being the culprit there, I'm curious could you elaborate on that a little bit, because I'm not sure what's different about 2013 that would make it incrementally worse and maybe as part of that answer could you air your thought on sequestration and how that could ultimately impact the company from a reimbursement perspective?

John Workman

Sure, the we've – part of it is Part D plans, I mean we've always have reimbursement pressure going on Part D plans, facilities, no [secret] here by Medicaid is not going up, but specifically on the Part D plans, we have our contracts, that again we've locked in, and those contracts typically, they don't have the same level of reimbursement every year, I mean they can go down in a subsequent year, so you may contract for a period of time and give up some pricing and we're – we know what those numbers are, but one thing that makes 2013, different than 2012, relative to your question, is we had a favorable benefit in 2012 on the reassignment side.

So when reassignment, re-contracting happened with Part D plans in 2012, the line up of Part D plans that served the patients in the nursing homes were contracts that were better contracts for us. In 2013, I mean you've already seen, that's already happened, we know what the reassignment-re-contracting is. That's why we're not going to have that same [part] to repeat itself in 2013, so we know it's going to be more pressure if you will going forward.

Glen Santangelo - Credit Suisse

On sequestration?

John Workman

On sequestration again, I mean I think the one thing that's favorable to Omnicare, clearly if that happens, it looks to be getting closer, that there's going to be some added pressure, I would say, we've built some pressure expectations just for reimbursement in general, we don't see that as a large direct risk, primarily because we don't contract directly, with Medicare, or Medicaid I mean that's going to impact the nursing homes themselves, again, they had a 12% reimbursement cut a year ago we were able to weather through that without pricing decreases.

And we also think the same thing would happen with the nursing homes. We're not even certain how it would play out, and maybe you have a better perspective or some of the others in the room, but again since Part D plans bid every year and it come across and stays across the board 2% reduction, I expect and they'll be just probably up a [bit 2%] but again we don't know how that will play out. We don't expect that to have a direct impact, because we're not directly linked other than some case with Medicaid which is just a small portion of our revenue base.

Glen Santangelo - Credit Suisse

Sorry, maybe if I could just squeeze a last one in. I want to also ask you about script growth, you seem to suggest that in 2013, your script growth will be neutral which kind of given the decline in beds throughout 2012, you're kind of implying in that statement that you're going to see a ramp in beds throughout 2013 and so for you to get to a neutral script number, is that correct in terms of what you're implying?

John Workman

I think we've said in the past that we expect to get [generic] gaining bed growth in 2013 and for the full year, we just want the specific on which quarter might be a chance.

Amit Jain

So if I can just add one thing there, Glen, the other things to keep in mind so to the extent that we grow our penetration within assisted living doesn't have an impact on beds, but the increase in scripts, also last year was a relatively light here in terms of utilization I think all of you have probably seen this already start off to be a fairly robust flu season. So hopefully we have some increase in utilization from that standpoint.

John Workman

It's always about bad things so.

Unidentified Analyst

John, you have network of 32 hub pharmacies and 120 spokes according to the slide, there I mean in your dream scenario how much do you really need to support the business and the growth you anticipate? And as maybe part of that the reason behind the question I mean what are your opportunities to actually cut that tangible asset base for the company going forward?

John Workman

I'll start and let Nitin to add on the great question with the – it's something that we will be looking at but part of this ties with again we want to make certain that things are successful in work before we start saying you know what the benefits might be, automation, we've talked about that but if we stop boost those automation, today you know the spokes are generally within a few hours proximity to the nursing homes, so that's kind of your governing piece, either a hub or a spoke to be able to service that nursing home.

But some of that's driven by the fact that it's acuity has changed under Medicare Part A coming into the nursing homes, then we need to be able to get those drugs, those patients more quickly with the advent of things like OmniviewDr we've shorten that cycle and if we saw the first does it will allow us to reduce the perhaps a number of spokes or hubs that we have today.

But we're not there yet to make that decision. I had that same question would the break relative to some of the automation and today as we centralize some things and do some of the automation unless we can get to a point where we eliminate spokes or hubs, it's not the same cost benefit, there's some incremental cost benefit on having further automation but it does drive to that point, we're just not at a point but that is something that we will probably looking at 2013 as automation and our first does solutions started to become more view – we'll have a better perspective of that.

There's nothing built in to here, really about there might be some routine consolidations but other than that there's really noting in expectations.

Unidentified Analyst

And do you see other opportunities to trim the asset base anywhere whether it's an inventory balance or?

John Workman

That's really great question, I mean we have as we've kind of guiding to either some small business Omnicare's had that we've routinely sold off I mean Accu-Med was the last one but it was a small dollar amount because they were more of a trouble if you will than really a benefit to the company. But I do think one of the things that OCEAN will allow us to move towards, believe it or not, we didn't have (inaudible) inventory system across the company and that will provide us with the perpetual inventory system, that will lower inventory cost we believe will help us improve the days on hand even though today we do a pretty good job but it's with a lot of manual intervention and a lot of people that some of which are in this room that watch the ordering patterns and make certain that we keep the amount of drugs right in the pharmacies.

Over here.

Steve Valiquette - UBS

Just a follow-up on Glen's earlier question, sorry this is Steve Valiquette from UBS. You guys did a pretty good job, smoothening out the earnings over the past couple of years, by putting more [MAC– floors] into the reimbursement contracts so shouldn't that help out, I guess for 2013, to soften the blow on the generic degradation, I mean how should we think about that in terms of more mac more prevalence within the contracts.

John Workman

If a when we speak about the worlds of MAC and FULs specifically about FULs, most both states and Part D plans are very quick to MAC those drugs farther long the FULs ever happens. To your point what we've been doing is working away from that to give more predictability, some times we gave up a little pricing to get that predictability though, so part of those solutions said okay we're willing to give you a slight concessional pricing because now we know we don't have a free fall.

So those are the part of the negotiations but the other thing that Steve that I mentioned earlier which is about the reassignment re-contracting turned out to be more favorable to us in '12 just because it went to a Part D plan that was a more profitable plan to us versus the one that we're in before we don't have that same benefit coming in 2013, we already know how that line up is coming so that's why reimbursement is going to be more negative in 2013 versus 2012, but to your point. We can have more confidence, and you said smoothing out earnings we actually grew earnings 15%. I won't point that out you know that mid point of the EPS, just to so I didn't get lost in the conversation, but I also gives us more predictability we believe, we believe it makes us help more – helpful in terms of forecasting results, and we also think it's good for the Part D plans and our customers.

And the reason we say that is it gives them more predictability about their business also, and allows us to work on an approach that shares information, makes it more transparent versus arguing a lot about you know, what was the MAC appropriate or not appropriate type of thing.

Steve Valiquette - UBS

Okay, and then just a MAC side of use of acronyms, I forgot just to again, to the (inaudible) where we stand and your thought around AMP for 2013, just kind of having any impact or anything just to kind of where we going with that right now? Thanks.

John Workman

We have – and again in the breakout session, Bob Dries our Senior VP of operations Finance has been Bob is very instrumental working with CMS both on short cycle and he and Dan Maloney worked with them on the AMP, so where we are is we think something will happen in 2013, and that will be part of our guidance, so when we also say some lower reimbursement – we're expecting something there, we don't expect a big hit, relative to AMP again, because we've changed our agreements, both on the Part D side and on the facilities side going forward.

Amit Jain

The other thing is we kind of assumed we'd get nothing in the way of increased dispensing fees, there've been a few states that have gone through similar type of formula where they have actually increased the dispensing fee, from the neighborhood of $4 to about $10, there's a couple of other states that are evaluating that right now, same kind of scenario where they're looking at increasing the dispensing fee.

John Workman

Since it's being webcast if you don't mind (inaudible) you get the mic, yep.

Unidentified Analyst

(Inaudible), Nitin you've mentioned that the actual usage adoption of some of the technology that you've provided has been, not as robust as you would have hoped last year, you guys showcased a number of those technologies, and they seem to be pretty nifty actually. I'd like to hear more about that, is there lack of utility there, unfamiliarness, what's creating that?

Nitin Sahney

I was referring to the bilects, I think what you saw last year it was a first does technology [OmniViewNow] it's in development, and I think the question is not about, we're not excited about it, I think it's about the development of those, we are little bit more cautious, before we invest further and scale it up, we want to make sure it generates savings for us and our clients, and I think in the next couple of months, we will find out how that in your technology works, I was referring to that particular technology, not technology overall, that we're doing a good job with.

John Workman

One of the things that we're also focused on, is in the past there – I mean Omnicare does have a full time engineering department, just everybody is aware of – that's always looking for solutions, it's kind of an R&D crew, it means some times those things were announced they might even try what wasn't thought through necessarily was the fact that those might create disruptions in your workflow because accommodate that solution they may have to been workarounds which may have affected IT I mean we're face with all kinds of change we may had to – make to the IT platform, we were saying wait a minute. Let's look at his in the right context, so if we were going to introduce – where if we were going to introduce automation, let's make sure it's fully integrated and some of the things will be a lot easier with Ocean than they are with the multi-dispensing systems – those dispensing systems are 25 years old even though they are better than the competition, and I won't use the right (inaudible) term Randy can correct me later, I called hard coded, so every time there is a change piece automation somebody's got to go in and make hard coded changes in two systems make it work that's not very efficient.

And so we're also making sure, we think through this in context that how the company is going to operate, so we don't create situations where we're doing something unique and special that probably cause us to fall down on customer service to somebody else. So we're thinking through that whole solution and that's another pause for the concerned to make sure we're doing through right way. Any other, yeah, Greg.

Unidentified Analyst

So this is a question about getting to organic growth and where you think about sort of looking out five years when you're hitting out hopefully all cylinder. So if you think about customer retention, what is your optimal level, in this past, I think you said it was 97% because there is a natural churn to the industry on this side. And then may be talk about organic growth on the sales side both at the off level and the sniff level in terms of net, net what would have resulting for organic growth?

Nitin Sahney

I don't think that the 97% or 95, I don't we're ready to say that I think we can say that we will make significant progress when it comes to the retention rate. I think part of it is we are – internally now we have categorizes uncontrollable and controllable retention rates. So we're very focused on the controllable ones for example bed losses due to service, bed losses due to lack of relationship just give you an example. I think those on a weekly basis we're making very good progress. On the often side when it comes to sales I think we mentioned not just out or within our sniff marketplace are messaging and our value proposition the marketing around that had not been as effective before.

So I think that will result even within the sniff we feel we will be able to at least get back to the market share we have before. The third element of it which is scripts we've been talking about I think that is additional opportunity when it comes to like IV sales for example, they don't show up as beds. So I think to John's point and to Rocky's point where we're saying is that from an operating income point of view, I think the company will grow or as we've indicated but what retention rate and exactly what net organic and the timelines around it we're still developing that, but we're confident all those three things are coming together.

John Workman

I don't think we are too far off Greg I mean again that's how we try to profile we already have some hubs it generate at a much higher rates in 95% even, and what we wanted to show you as we are focused on those that are performing less than that and how we fixed those. So we know that could be improve and as the slight pointed out if you just normalize those up back up you're kind of at the 94%. So we're kind of I don't remember saying 97 but if I do know 95 has been said before. I think we're more excited probably on the sale side about what the opportunities are that in terms of potential growing sales as we move forward and with the process and plan that you heard it from office.

Unidentified Analyst

[Question inaudible] that would essentially 100%.

John Workman

Again I think we will – in terms of the churn, it somebody's from 3 and 5% I mean it's not an exact science in terms of that guidance.

Unidentified Analyst

John, you mentioned the couple times you as a company looked in 20 different businesses this year from an M&A perspective, but yet you only involved one. I was wondering if you could tell us how many of those were specialty businesses versus long term care, maybe what was the problem why many of them didn't come to fruition, was it – were they bad businesses were they too expensive and I guess as you look forward to 2013 would you expect to be more inquisitive?

Nitin Sahney

I will let Rocky.

Rocky Kraft

Yeah, I think Glenn as we look back at the businesses that we looked at, I am not going to give you split off what we look that. But on the Specialty Care side these are high growth businesses that people are trying to sell and they expect very high multiples. What we found a lot of times when you look into the hood on these companies, those growth rates are in high as they portrait and because of that in our view they don't necessarily – of they don't – we shouldn't be paying that extremely high multiple for those. When we come down to multiples so people won't necessarily is excited to sell. So that's been pretty much the challenge on the SCG side plus we want to business as I said in my remarks that's going to grow as fast as we do and generates cash.

SCG – on a Long-Term Care side it's a little different dynamic, I mean we have a lot of leverage as you know and we can go scale was up and so even if we're paying a reasonably high multiple, we can bring that down because of our synergies that we have in our business, or I will say there a lot of times we wanted to compliance issues and so over coming those what we've seen happen often, as we go back to these businesses and we say clean up your business, if you clean it up we'll come back in a year to and potentially buy it. So coming full circle I think the pipeline that we see today both in Long-Term Care for sure is very strong we just haven't found the assets that we think meet our criteria.

Nitin Sahney

Yeah, I'd like to add something more, I think if you look at the 20, or 22 that we looked at majority of them going to specialty area Glenn, I think you will also a question of timing issue. For example the last 12 months we've just constructed the operation infrastructure in the specialty side. We feel going forward now some of those businesses that we felt were not necessarily at that time we could get leverage probably we can't going forward. So we are looking at them revisitng some of them we've kept excellent relationships we have had exclusive looks in some cases. So we've not moved away from it, I think the timing aspect now that specialty operations are more mature, our sales is more mature, I think looking at those assets might be even more prudent going forward.

John Workman

I think, we're about out of time. But I just want maybe make one closing comment about this issue about the three year or two year CAGR, I mean one of the things that's clearly happen is when we said out looking at things longer term we had certain expectations about events, including when some of those events may or may not happen.

Some of those favorable events '12 has been a much better year than we expected, some of those favorable things that we were expecting have to come out in late '12 or early '13 have come a little earlier to us then we expect it.

So I just want to put that in context, because I know you guys are struggling with this growth rate relative to thinking that through in '13. But some of those things where expectations we had, the either we're just think that happen favorable sooner than we expected, or in some cases maybe we didn't have the bed losses because those got push back in those generated some benefit. So we're just again trying to set realistic that you guys are thinking through the business. It's a very strong business; it's going to have a little volatility in it. I mean and what we've been trying to do over the years as minimize that volatility, so we've got more of predictable model that's why you hear us talking about the way we contracts kind of create the right standardize processes that exist. But clearly branded generics are going to be one of those volatile items and '12 was a nice benefit on the plus side, we are pleased as everybody said is not a negative on '13 but I would also if you look at the pipeline going out that even though '13 not a robust year, I think '14 is a little better than '15 turns around to be a pretty good year again.

So that is going to fluctuate little bit in brand generic, Nitin do you want to add something.

Nitin Sahney

No, I would just say because on the timing of generics you can't just look at, hey, these are the drugs going to generic in '14, these are the drugs going in '15, I will look at when they fall within the year and that's kind of what we're seeing we've had these drugs go generic in '12 and some of the benefit role in the '13. When you look at the generic calendar for '13. The drugs that are meaningful to the Long-Term Care segment are more at the later stages of the year, seamless to that benefit then will role into '14 something to just kind of keep in mind.

John Workman

All right, well I think we're at about the time we were expected to break and so we have a set up now where we have back out where we had (inaudible) some roundtables and I think managements going to rotate round some of the tables of their sittings assignments.

Patrick Lee

Yeah, we've got all of you should have your table numbers and then if you just go to your table numbers and management will rotate every 50 minute or so.

John Workman

All right thanks guys we'll see out there.

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