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 for stock options, restricted stock units, performance share units and stock awards totaled approximately $5 million and $11 million for the three and six months ended June 30, 2014 and $5 million and $9 million for the three and six months ended June 30, 2013, 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):



June 30, 2014	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	$	213,869	$	51,289	$	265,158
Facility payors	326,672		130,346		457,018
Private Pay payors	76,507		86,491		162,998
Total gross accounts receivable	$	617,048	$	268,126	$	885,174
December 31, 2013
Medicare (Part D and Part B), Medicaid and Third-Party payors	$	195,544	$	67,791	$	263,335
Facility payors	328,444		146,751		475,195
Private Pay payors	75,655		84,101		159,756
Total gross accounts receivable	$	599,643	$	298,643	$	898,286

Accumulated Other Comprehensive Income (Loss)

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



	June 30, 2014			December 31, 2013
Unrealized loss on fair value of investments	$	(555	)	$	(702	)
Pension and postemployment benefits	(1,719		)	(1,839		)
Total accumulated other comprehensive loss, net	$	(2,274	)	$	(2,541	)

The amounts are net of applicable tax benefits, which were not material at June 30, 2014 and December 31, 2013. The reclassifications out of AOCI did not materially affect any individual line item on the Consolidated Statement of Comprehensive Income.

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)
June 30, 2014
Bond portfolio	$	25,203	$	—	$	25,203	$	—
7.75% interest rate swap agreements - fair value hedge	22,088		—		22,088		—
Derivatives	—		—		—		—
Total	$	47,291	$	—	$	47,291	$	—
December 31, 2013
Bond portfolio	$	25,140	$	—	$	25,140	$	—
7.75% interest rate swap agreements - fair value hedge	18,671		—		18,671		—
Derivatives	—		—		—		—
Total	$	43,811	$	—	$	43,811	$	—

The fair value of the Company’s fixed-rate debt facilities are shown at the "Debt" note.

Offsetting Assets and Liabilities

The Company has interest rate swap agreements (the "Interest Rate Swap Agreements") with multiple counterparties on its 7.75% Senior Subordinated Notes due 2020 (the "2020 Notes"). The following table presents the Interest Rate Swap Agreements offsetting securities as of June 30, 2014 and December 31, 2013 (in thousands):



							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
June 30, 2014
Swap A	$	11,195	$	—	$	11,195	$	—	$	—	$	11,195
Swap B	10,893		—		10,893		—		—		10,893
	$	22,088	$	—	$	22,088	$	—	$	—	$	22,088

December 31, 2013
Swap A	$	9,408	$	—	$	9,408	$	—	$	—	$	9,408
Swap B	9,263		—		9,263		—		—		9,263
	$	18,671	$	—	$	18,671	$	—	$	—	$	18,671

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.

Other Charges

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



	Three months ended June 30,				Six months ended June 30,
	2014		2013		2014		2013
Debt related costs	$	7,760	$	—	$	7,760	$	—
Disposition of businesses	520		28,786		520		28,786
Separation and other costs	3,004		719		13,280		4,188
Acquisition and other related costs	—		1,763		—		2,300
Total - other charges	$	11,284	$	31,268	$	21,560	$	35,274

See the "Debt" note for additional details on the debt related costs.

Disposition of Businesses

In the second quarter of 2013, the Company completed the disposition of certain assets in its Medical Supply Services business which was not considered significant to the operations of Omnicare. The Company recorded a charge on the disposition of these businesses of $29 million ($18 million after-tax) in the three and six months ended June 30, 2013. These charges are reflected in the "Other charges" caption of the Consolidated Statements of Comprehensive Income.

Separation and Other Costs

In the three and six months ended June 30, 2014, the Company recorded separation related costs and accelerated stock based compensation expense for certain employees of approximately $3 million and $13 million, respectively, including charges related to retirement of the Chief Executive Officer in the second quarter of 2014. In the three and six months ended June 30, 2013, the Company recorded separation related costs for certain employees of approximately $1 million and $4 million, respectively. These charges are reflected in the "Other charges" caption of the Consolidated Statement of Comprehensive Income.

Restructuring and Other Related Charges

The Company continues to make payments in connection with its Company-wide Reorganization Program (the “CWR Program”), primarily related to certain severance amounts and its relocation of the corporate office. As of June 30, 2014, the Company has made cumulative payments of approximately $3 million for severance and other employee-related costs for the CWR Program. The Company had liabilities related to the CWR Program of approximately $5 million at December 31, 2013, with utilization of approximately $1 million in the six months ended June 30, 2014. The remaining liabilities pursuant to the CWR Program of $4 million at June 30, 2014, represent amounts not yet paid relating to actions taken in connection with the CWR Program (primarily lease termination costs) and will be settled as these matters are finalized.

Common Stock Repurchase Program

In the six months ended June 30, 2014, the Company repurchased approximately 2.7 million shares through its authorized share repurchase program at an aggregate cost of approximately $160 million. Cumulatively, since the inception of the share repurchase programs in May 2010 through June 30, 2014, the Company has repurchased approximately 27 million shares of common stock repurchased at an aggregate cost of approximately $1 billion. In the six months ended June 30, 2013, the Company repurchased approximately 1.9 million shares at an aggregate cash outlay approximately $100 million through authorized share repurchase programs. The cash expenditure in the six months ended June 30, 2013 includes the impact of the equity forward contract components of the Company's two previously disclosed accelerated share repurchase programs. The Company had approximately $340 million of share repurchase authority remaining as of June 30, 2014, which expires on December 31, 2015.

Capped Call

On April 2, 2012, the Company entered into capped call transactions with a counterparty, paying $48 million for the purchase of the capped calls, which were recorded as additional paid in capital. The capped call transactions are intended to reduce potential economic dilution upon conversion of the 3.75% Convertible Senior Subordinated Notes due 2042. The capped calls settle in tranches through March 2016, one of which settled in the first quarter of 2014. The adjusted strike price for the capped calls ranged from $40.96 to $41.05 and the adjusted cap price for the tranche settled in 2014 ranged from $56.75 to $56.88; the strike and cap prices adjust for the Company's dividend payments. The Company received approximately 0.6 million net shares upon settlement with a value of approximately $38 million.

Recently Issued Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, which provides guidance for revenue recognition. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosures. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Consolidated Financial Statements.

In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” which changes the criteria for determining which disposals can be presented as discontinued operations and modifies the related disclosure requirements. Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results and is disposed of or classified as held for sale. The standard also introduces several new disclosures. The guidance applies prospectively to new disposals and new classifications of disposal groups as held for sale after the effective date. ASU 2014-08 is effective for annual and interim periods beginning after December 15, 2014, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption of this ASU on the Consolidated Financial Statements.