Interim Financial Data

The interim financial data is unaudited; however, in the opinion of Omnicare management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Omnicare consolidated results of operations, financial position and cash flows for the interim periods presented have been made. All significant intercompany accounts and transactions have been eliminated.

Stock-Based Compensation

Stock-based compensation expense recognized in the Consolidated Statement of Comprehensive Income (Loss) for stock options, restricted stock units, performance share units and stock awards totaled approximately $5.0 million and $14.2 million for the three and nine months ended September 30, 2013, respectively, and $4.1 million and $13.0 million for the three and nine months ended September 30, 2012, respectively.

Accounts Receivable

The following table is an aging of the Company’s gross accounts receivable (net of allowances for contractual adjustments), aged based on payment terms and categorized based on the three primary types of accounts receivable characteristics (in thousands):



September 30, 2013	Current and 0-180 Days Past Due		181 Days and Over Past Due		Total
Medicare (Part D and Part B), Medicaid and Third-Party payors	$	210,957	$	67,697	$	278,654
Facility payors	351,162		163,069		514,231
Private Pay payors	72,631		84,677		157,308
Total gross accounts receivable	$	634,750	$	315,443	$	950,193
December 31, 2012
Medicare (Part D and Part B), Medicaid and Third-Party payors	$	238,348	$	163,773	$	402,121
Facility payors	383,848		168,945		552,793
Private Pay payors	70,835		100,719		171,554
Total gross accounts receivable	$	693,031	$	433,437	$	1,126,468

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) ("AOCI") by component and in the aggregate, follows (in thousands):



	September 30, 2013			December 31, 2012
Unrealized loss on fair value of investments	$	(695	)	$	(428	)
Pension and postemployment benefits	(2,219		)	(2,392		)
Total accumulated other comprehensive income (loss), net	$	(2,914	)	$	(2,820	)

The amounts are net of applicable tax benefits which were not material at September 30, 2013 and December 31, 2012. The reclassifications out of AOCI did not materially affect any individual line item on the Consolidated Statement of Comprehensive Income (Loss).

Fair Value

The Company’s financial assets and liabilities, measured at fair value on a recurring basis, were as follows (in thousands):



			Based on
	Fair Value		Quoted Prices in Active Markets (Level 1)		Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
September 30, 2013
Bond portfolio	$	25,111	$	—	$	25,111	$	—
7.75% interest rate swap agreements - fair value hedge	23,570		—		23,570		—
Derivatives	—		—		—		—
Total	$	48,681	$	—	$	48,681	$	—
December 31, 2012
Bond portfolio	$	24,887	$	—	$	24,887	$	—
7.75% interest rate swap agreements - fair value hedge	46,090		—		46,090		—
Derivatives	—		—		—		—
Total	$	70,977	$	—	$	70,977	$	—

The fair value of the Company’s fixed-rate debt facilities are shown at the Debt note of the Notes to Consolidated Financial Statements.

Offsetting Assets and Liabilities

Effective January 1, 2013 the Company adopted Accounting Standards Update (“ASU”) 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities which clarifies ASU 2011-11, Disclosures about Offsetting Assets and Liabilities. The amended standard requires an entity to disclose information about offsetting and related arrangements to enable users of the financial statements to understand the effect of those arrangements on its financial position.

The Company has interest rate swap agreements with multiple counterparties on its 7.75% Senior Subordinated Notes due 2020 (the "2020 Notes"), which are subject to this guidance. The following table presents these swap agreements offsetting securities as of September 30, 2013 and December 31, 2012:



							Gross Amounts not offset in the statement of financial position
Interest Rate Swaps as of:	Gross amount of recognized assets (liabilities)		Gross amount offset in the statement of financial position		Net amount of assets (liabilities) presented in the statement of financial position		Financial instruments		Cash collateral received		Net amount
September 30, 2013
Swap A	$	11,969	$	—	$	11,969	$	—	$	—	$	11,969
Swap B	11,601		—		11,601		—		—		11,601
	$	23,570	$	—	$	23,570	$	—	$	—	$	23,570

December 31, 2012
Swap A	$	20,560	$	—	$	20,560	$	—	$	—	$	20,560
Swap B	20,011		—		20,011		—		—		20,011
Swap C	2,896		—		2,896		—		—		2,896
Swap D	2,623		—		2,623		—		—		2,623
	$	46,090	$	—	$	46,090	$	—	$	—	$	46,090

In the third quarter of 2013, in connection with the repurchase of $150 million in aggregate principal amount of its outstanding 2020 Notes, the Company terminated the applicable swap agreements (Swap C and Swap D). See further discussion of Omnicare's debt repurchases at the "Debt" note of the Notes to Consolidated Financial Statements.

Income Taxes

The quarterly effective tax rates are different than the federal statutory rate largely as a result of the impact of state and local income taxes and certain non-deductible charges, including a litigation settlement charge recognized in 2013. The year over year change in the effective tax rate is primarily due to certain non-deductible charges related to the disposition of businesses and the 2013 settlement charge.

Other Charges

Other charges (on a pre-tax basis) consist of the following (in thousands):



	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013		2012
Debt related costs	$	50,868	$	—		$	50,868	$	35,092
Disposition of businesses	10,116		(7,680		)	38,902		(1,777		)
Separation costs	648		5,500			4,836		21,000
Acquisition and other related costs	—		(3,830		)	2,300		396
Restructuring charges	—		11,046			—		11,046
Total - other charges	$	61,632	$	5,036		$	96,906	$	65,757

The Company completed one acquisition in the three and nine months ended September 30, 2012 which was not considered significant to the operations of the Company. The Company recorded professional fees and acquisition related restructuring costs which were offset by a reduction of the Company's original estimate of contingent consideration payable for a prior acquisition during the three and nine months ended September 30, 2012.

Disposition of Businesses

In 2013, the Company completed the disposition of certain assets, primarily in its medical supply services business and in 2012, completed the dispositions of its Canadian pharmacy and the Company's pharmacy operational software businesses, which were not considered, individually or in the aggregate, significant to the operations of Omnicare. The Company recorded a charge on the disposition of these businesses of $10.1 million and $38.9 million ($9.4 million and $27.1 million after-tax), respectively, in the three and nine months ended September 30, 2013 and gains on disposition of businesses of $7.7 million and $1.8 million in the three and nine months ended September 30, 2012. These charges are reflected in the "Other charges" caption of the Consolidated Statement of Comprehensive Income (Loss).

Separation Costs

In the three and nine months ended September 30, 2013, the Company recorded separation related costs for certain employees of approximately $0.6 million and $4.8 million, respectively. In the three and nine months ended September 30, 2012, the Company recorded charges of approximately $5.5 million and $21 million, respectively, related to separation related costs with the former CEO and other former executives. These charges are reflected in the "Other charges" caption of the Consolidated Statement of Comprehensive Income (Loss).

Common Stock Repurchase Program

As part of the Company's share repurchase program, on May 23, 2013, the Company entered into an accelerated share repurchase agreement (“JP ASR”) with J.P. Morgan Securities LLC as agent for JPMorgan Chase Bank, National Association, London Branch ("JPMorgan"). Pursuant to the JP ASR, the Company made a $100 million payment to JPMorgan on May 24, 2013 and received an initial number of approximately 1.3 million shares of its outstanding common stock from JPMorgan on the same day. The initial shares were valued at $60 million and recorded in treasury stock. The remaining $40 million balance was recorded as an equity forward contract and was included in paid in capital at the time of the JP ASR. The equity forward contract was settled with approximately 0.4 million additional shares of the Company's common stock and $19.0 million in cash delivered by JPMorgan to the Company during the three months ended September 30, 2013.

In 2012, the Company entered into an accelerated share repurchase agreement (“GS ASR”) with Goldman, Sachs & Co. ("Goldman"). Pursuant to the GS ASR, the Company made a $250 million payment to Goldman on November 30, 2012 and received an initial number of approximately 5.8 million shares of its outstanding common stock from Goldman on the same day. The initial shares were valued at $200 million and recorded in treasury stock. The remaining $50 million balance was recorded as an equity forward contract, which was included in paid in capital at December 31, 2012. The equity forward contract was settled with approximately 0.6 million additional shares of the Company's common stock being delivered by Goldman to the Company during the three months ended June 30, 2013.

In the nine months ended September 30, 2013, the Company repurchased approximately 2.5 million shares through authorized share repurchase programs (including shares purchased pursuant to the JP ASR and the GS ASR) at an aggregate cost of approximately $91.3 million, for a cumulative purchased amount of its common stock of approximately 21.7 million shares repurchased at an aggregate cost of approximately $721 million from the inception of the share repurchase programs in May 2010 through September 30, 2013. The Company had approximately $129 million of combined share repurchase authority remaining as of September 30, 2013, which expires on December 31, 2014.

Recently Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendments in this update require an entity to provide information about the amounts reclassified from accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the income statement or in the notes, significant amounts reclassified from accumulated other comprehensive income by the net income line item. The adoption of this amended guidance on January 1, 2013 did not have a material impact on the Company's consolidated results of operations, financial position and cash flows.