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Omnicell Announces First Quarter 2008 Results

MOUNTAIN VIEW, Calif., April 21 /PRNewswire-FirstCall/ -- Omnicell, Inc. (Nasdaq: OMCL), a leading provider of system solutions to acute healthcare facilities, today announced results for its first quarter ended March 31, 2008.

GAAP results: Revenues for the first quarter of 2008 totaled $62.1 million, up $4.1 million or 7.2% from the fourth quarter of 2007 and up $13.9 million or 29.8% from the first quarter of 2007.

First quarter 2008 net income as reported in accordance with U.S. generally accepted accounting principles (GAAP) was $3.7 million, or $0.10 per fully diluted share. This compares to net income of $14.3 million, or $0.39 per fully diluted share in the fourth quarter of 2007, and compares to $4.0 million in the first quarter of 2007, or $0.13 per fully diluted share. The existence and subsequent release of a tax valuation allowance created differences in income tax liabilities which affect the comparability of results for these periods:

1. Excluding the partial reversal of a tax valuation allowance, the

effective tax rate in 2007 was 6% in the first quarter and 3% in the

fourth quarter. These low tax rates were due to the availability of a

valuation allowance to offset our tax liabilities.

2. The fourth quarter of 2007 included an income tax benefit related to

the partial reversal of a tax valuation allowance totaling $7.2

million, or $0.20 per fully diluted share.

3. Due to the release of the valuation allowance in the prior quarter, our

effective tax rate in the first quarter of 2008 increased to a

statutory rate of 40.5%.

Non-GAAP results: Non-GAAP net income for the first quarter of 2008 was $6.8 million, or $0.> Advance payments from customers 583 156

Accrued liabilities 11,552 12,877

Deferred service revenue 12,540 11,263

Deferred gross profit 19,397 14,565

Obligation resulting from sale of

receivables 410 538

Total current liabilities 65,015 57,821

Long-term deferred service revenue 17,019 15,726

Other long-term liabilities 189 237

Total liabilities 82,223 73,784

Stockholders' equity 225,497 254,639

Total liabilities and

stockholders' equity $307,720 $328,423

Omnicell, Inc.

Reconciliation of GAAP to Non-GAAP

(in thousands, except per share data, unaudited)

Three months ended

March 31, 2008 December 31, 2007

Earnings Earnings

per per

Net share- Net share-

income diluted income diluted

GAAP $3,733 $0.10 $14,297 $0.39

Non-GAAP Adjustments:

SFAS No. 123R adjustment (a)

Gross Margin 510 469

Operating Expenses 2,557 2,680

Income tax adjustment (b) (7,217)

3,067 0.09 (4,068) (0.11)

Non-GAAP $6,800 $0.19 $10,229 $0.28

(a) This adjustment reflects the accounting impact of non-cash share-

based compensation expense related to the impact of SFAS No.123R for

the three months ended March 31, 2008 and December 31, 2007.

(b) This adjustment reflects the accounting impact of income tax

provision and tax benefit from release of valuation allowance reserve

for the three months ended December 31, 2007. There was no such

adjustment for the three months ended March 31, 2008.

19 per fully diluted share. This compares to non-GAAP net income of $10.2 million, or $0.28 per fully diluted share, for the fourth quarter of 2007. Non-GAAP results excludes share-based compensation expenses related to SFAS No. 123(R), and any tax benefit from the reversal of tax valuation allowances.

"We are pleased with our strong financial results and record revenue for the first quarter," said Randall A. Lipps, Omnicell's President and Chief Executive Officer. "Our orders in the first quarter were lower than we had expected, which we attribute to the macroeconomic environment. However, our customer base and our opportunities pipeline continued to grow in the first quarter, and our competitive position remains strong. I believe that when economic conditions improve, we will be well positioned to take advantage of the market opportunity. Our customers continue to rely on us to deliver the best customer experience in healthcare with products that enable them to be more efficient so they can continually improve patient safety."

Omnicell Conference Call Information

Omnicell will hold a conference call today at 1:30 p.m. PDT to discuss first quarter financial results. The conference call can be monitored by dialing 1-888-803-5209 within the U.S. or 1-706-679-1978 for all other locations. The Conference ID # is 43853338. Internet users can access the conference call at A replay of the call will be available today at approximately 5:00 p.m. PDT and will be available until April 28. The replay access numbers are 1-800-642-1687 within the U.S. and 1-706-645-9291 for all other locations, conference code 43853338#.

About Omnicell

Omnicell, Inc. (Nasdaq: OMCL) is a leading provider of systems and software solutions targeting patient safety and operational efficiency in healthcare facilities. Since 1992, Omnicell has worked to enhance patient safety and allow clinicians to spend more time with their patients.

Omnicell's medication-use product line includes solutions for the central pharmacy, nursing unit, operating room, and patient bedside. Solutions range from large central pharmacy "smart inventory" carousels to small handheld devices. From the point at which a medication arrives at the receiving dock to the time it is administered, Omnicell systems store it, package it, bar code it, order it, issue it, and provide information and controls on its use and reorder.

Omnicell's supply product lines provide a healthcare institution with fast, effective control of costs, capture of charges for payer reimbursement, and timely reorder of supplies. Products range from high-security closed-cabinet systems and software to open-shelf and combination solutions in the nursing unit, cath lab and operating room.

Omnicell's mission is to provide the best customer experience in healthcare, helping hospitals reduce medication errors, operate more efficiently, and decrease costs. For more information, visit

Forward-Looking Statements

To the extent any statements contained in this release deal with information that is not historical, these statements are necessarily forward-looking. As such, they are subject to the occurrence of many events outside Omnicell's control and are subject to various risk factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. The risk factors are described in the Company's Securities and Exchange Commission (SEC) filings and include, without limitation, the continued growth and acceptance of our products and services and the continued growth of the clinical automation and workflow automation market generally, the potential of increasing competition, the ability of the company to grow product backlog, retain key personnel, cut expenses, develop new products and integrate acquired products or intellectual property in a timely and cost-effective manner, and improve sales productivity. Prospective investors are cautioned not to place undue reliance on forward-looking statements.

Use of Non-GAAP Financial Information

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). Our management evaluates and makes operating decisions using various performance measures. In addition to Omnicell's GAAP results, we also consider non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, and non-GAAP earnings per diluted share. These non-GAAP results should not be considered as an alternative to gross margin, operating expenses, net income, earnings per fully diluted share, or any other performance measure derived in accordance with GAAP. We present these non-GAAP results because we consider them to be important supplemental measures of Omnicell's performance.

Our non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income, non-GAAP earnings per fully diluted share are exclusive of certain items to facilitate management's review of the comparability of Omnicell's core operating results on a period to period basis because such items are not related to Omnicell's ongoing core operating results as viewed by management. We define our "core operating results" as those revenues recorded in a particular period and the expenses incurred within that period that directly drive operating income in that period. Management uses these non-GAAP financial measures in making operating decisions because, in addition to meaningful supplemental information regarding operation performance, the measures give us a better understanding of how we should invest in research and development, fund infrastructure growth and evaluate marketing strategies. In calculating the above non-GAAP results, management specifically adjusted for the following excluded items:

a) Stock-based compensation expense impact of SFAS No. 123R. We recognize

equity plan-related compensation expenses, which represent the fair

value of all share-based payments to employees, including grants of

employee stock options, as required under SFAS No. 123 (revised 2004),

"Share-Based Payment" (SFAS No. 123R).

b) Income tax benefit from tax valuation allowance release. This refers to

the recognition of an income tax benefit from the partial reversal of

our tax valuation allowance on specific deferred tax assets that is no

longer required. Under Statement of Financial Accounting Standards No.

109, the release of the tax valuation allowance is necessary, primarily

as a result of achieving sustained profitability in certain tax


Management adjusts for the excluded items because management believes that, in general, these items possess one or more of the following characteristics: their magnitude and timing is largely outside of Omnicell's control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual and we do not expect them to occur in the ordinary course of business; or they are non-operational, or non-cash expenses involving stock option grants.

We believe that the presentation of these non-GAAP financial measures is warranted for several reasons:

1) Such non-GAAP financial measures provide an additional analytical tool

for understanding Omnicell's financial performance by excluding the

impact of items which may obscure trends in the core operating results

of the business;

2) Since we have historically reported non-GAAP results to the investment

community, we believe the inclusion of non-GAAP numbers provides

consistency and enhances investors' ability to compare our performance

across financial reporting periods;

3) These non-GAAP financial measures are employed by Omnicell's management

in its own evaluation of performance and are utilized in financial and

operational decision making processes, such as budget planning and

forecasting; and

4) These non-GAAP financial measures facilitate comparisons to the

operating results of other companies in our industry, which use similar

financial measures to supplement their GAAP results, thus enhancing the

perspective of investors who wish to utilize such comparisons in their

analysis of our performance.

Set forth below are additional reasons why specific items are excluded from our non-GAAP financial measures:

a) While stock-based compensation calculated in accordance with SFAS

No.123R constitutes an ongoing and recurring expense of Omnicell, it is

not an expense which requires cash settlement by Omnicell. We therefore

exclude these charges for purposes of evaluating core operating

results. Thus, our non-GAAP measurements are presented exclusive of

stock-based compensation expenses to assist management and investors in

evaluating our core operating results.

b) We present our reconciliation of non-GAAP financial measures on a net

of tax basis because the exact tax differences related to the timing

and deductibility of stock-based compensation, pursuant to the adoption

of SFAS No. 123R, is dependent upon the trading price of Omnicell's

common stock and the timing and exercise by employees of their stock

options. We analyze and measure operating results net of tax when

evaluating core operating results because the tax effect related to

stock-based compensation expenses is inconsistent in amount and


c) We concluded under Statement of Financial Accounting Standards No. 109

that a portion of our tax valuation allowance on specific deferred tax

assets was no longer required, primarily as a result of achieving

sustained profitability in certain tax jurisdictions. Therefore, we

reversed a portion of our tax valuation allowance which favorably

impacted income tax expense and net income.

As stated above, we present non-GAAP financial measures because we consider them to be important supplemental measures of performance. However, non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for Omnicell's GAAP results. In the future, we expect to incur expenses similar to the non-GAAP adjustments described above and expect to continue reporting non-GAAP financial measures excluding such items. Some of the limitations in relying on non-GAAP financial measures are:

-- Omnicell's stock option and stock purchase plans are important

components of incentive compensation arrangements and compensation

related to these plans will be reflected as expenses in Omnicell's

GAAP results for the foreseeable future under SFAS No. 123R.

-- Other companies, including other companies in Omnicell's industry, may

calculate non-GAAP financial measures differently than Omnicell,

limiting their usefulness as a comparative measure.

Pursuant to the requirements of SEC Regulation G, a detailed reconciliation between the GAAP and non-GAAP financial results is set forth in the financial statements at the end of this press release. Investors are advised to carefully review and consider this information strictly as a supplement to the GAAP results that are contained in this press release and in the Company's SEC filings.

Omnicell, Inc.

Condensed Consolidated Statement of Operations

(in thousands, except per share data, unaudited)

Three Months Ended

March 31, December 31, March 31,

2008 2007 2007


Product $52,415 $48,735 $40,241

Services and other revenues 9,675 9,211 7,920

Total revenue 62,090 57,946 48,161

Cost of revenues:

Cost of product revenues 23,970 21,724 18,740

Cost of services and other revenues 5,776 5,317 4,178

Total cost of revenues 29,746 27,041 22,918

Gross profit 32,344 30,905 25,243

Operating expenses:

Research and development 4,276 4,051 3,386

Selling, general, and administrative 23,207 21,538 18,363

Total operating expenses 27,483 25,589 21,749

Income from operations 4,861 5,316 3,494

Other income and expense 1,410 1,978 748

Income before provision for (benefit

from) income taxes 6,271 7,294 4,242

Provision for (benefit from) income

taxes 2,538 (7,003) 277

Net income $3,733 $14,297 $3,965

Net income per share:

Basic $0.11 $0.41 $0.14

Diluted $0.10 $0.39 $0.13

Weighted average shares outstanding:

Basic 34,193 34,482 28,738

Diluted 35,582 36,203 30,570

Omnicell, Inc.

Condensed Consolidated Balance Sheet

(In thousands)

March 31, December 31,

2008 2007


Current Assets:

Cash and cash equivalents $142,578 $169,812

Accounts receivable, net 44,818 37,521

Inventories 15,216 13,732

Prepaid expenses 8,490 9,482

Deferred tax assets 11,830 11,830

Other current assets 9,825 9,807

Total current assets 232,757 252,184

Property and equipment, net 11,290 10,184

Non-current net investment in

sales-type leases 12,905 12,634

Goodwill 23,164 23,076

Other intangible assets 8,732 9,466

Non-current deferred tax asset 10,375 12,881

Other assets 8,497 7,998

Total assets $307,720 $328,423

Current Liabilities:

Accounts payable $13,755 $10,116

Accrued compensation 6,778 8,306

SOURCE Omnicell, Inc.
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