Owens & Minor Reports 1st Quarter 2017 Financial Results and Announces Acquisition
-
Owens & Minor signs definitive purchase agreement to acquire
Byram Healthcare -
Consolidated quarterly revenues were
$2.33 billion vs.$2.46 billion a year ago -
Operating earnings were
$35.5 million ; non-GAAP adjusted operating earnings were$45.4 million -
EPS for the quarter was
$0.31 , while non-GAAP adjusted EPS was$0.41
Consolidated operating earnings for the first quarter of 2017 were
"Despite underperformance in certain areas of our business, overall
results were in line with our expectations," said
The company also announced that it has signed a definitive purchase
agreement to acquire
Segment Results
As mentioned at its recent Investor Day event, Owens & Minor has renamed
its Clinical & Procedural Solutions (CPS) segment as the Proprietary
Products Segment, which encompasses its CPS business segment, as well as
-
Domestic Segment quarterly revenues were
$2.19 billion compared to$2.32 billion a year ago; operating earnings were$37.3 million compared to$41.7 million for the same period last year. -
International Segment quarterly revenues were
$95.0 million compared to$83.6 million last year; operating earnings were$0.7 million compared to$1.1 million in last year's first quarter. -
Proprietary Products Segment quarterly revenues were
$137 million compared to$141 million in the prior year quarter; operating earnings were$8.1 million versus$13.3 million last year.
Financial Guidance and Outlook
Owens & Minor is affirming its guidance for 2017 earnings on an adjusted
basis (non-GAAP) in a range of
Although the company does provide guidance for adjusted earnings per share (which is a non-GAAP financial measure), it is not able to forecast the most directly comparable measure calculated and presented in accordance with GAAP. Certain elements of the composition of the GAAP amounts are not predictable, making it impractical for the company to forecast. Such elements include, but are not limited to restructuring and acquisition charges. As a result, no GAAP guidance is provided.
The outlook is based on certain assumptions that are subject to the risk
factors discussed in the company's filings with the
Upcoming Investor Events
Owens & Minor is scheduled to participate in a number of investor conferences in the second quarter of 2017; webcasts of formal presentations will be posted on the company's corporate website:
-
Annual Shareholders Meeting;
May 5 inRichmond, Virginia , at9:00 a.m. EDT -
Bank of America Merrill Lynch 2017 Healthcare Conference;May 17 -
2017
UBS Global Healthcare Conference ;May 22 -
Goldman Sachs 2017 Global Healthcare Conference;
June 13
Investors Conference Call & Supplemental Material
Conference Call: Owens & Minor will conduct a conference call for
investors on
Safe Harbor Statement
This release is intended to be disclosure through methods reasonably
designed to provide broad, non-exclusionary distribution to the public
in compliance with the
Owens & Minor uses its Web site, www.owens-minor.com, as a channel of distribution for material company information, including news releases, investor presentations and financial information. This information is routinely posted and accessible under the Investor Relations section.
Included with the press release financial tables are reconciliations of the differences between the non-GAAP financial measures presented in this news release, which exclude acquisition-related and exit and realignment charges, and their most directly comparable GAAP financial measures.
About
Consolidated Statements of Income (unaudited) (dollars in thousands, except per share data) |
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Three Months Ended |
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2017 | 2016 | |||||||||
Net revenue | $ | 2,328,573 | $ | 2,455,793 | ||||||
Cost of goods sold | 2,047,393 | 2,159,157 | ||||||||
Gross margin | 281,180 | 296,636 | ||||||||
Distribution, selling and administrative expenses | 237,693 | 242,725 | ||||||||
Acquisition-related and exit and realignment charges | 8,942 | 10,483 | ||||||||
Other operating income, net | (972 | ) | (1,542 | ) | ||||||
Operating earnings | 35,517 | 44,970 | ||||||||
Interest expense, net | 6,744 | 6,790 | ||||||||
Income before income taxes | 28,773 | 38,180 | ||||||||
Income tax provision | 9,988 | 14,045 | ||||||||
Net income | $ | 18,785 | $ | 24,135 | ||||||
Net income per common share: | ||||||||||
Basic | $ | 0.31 | $ | 0.39 | ||||||
Diluted | $ | 0.31 | $ | 0.39 |
Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands) |
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Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 127,167 | $ | 185,488 | |||||
Accounts receivable, net | 605,249 | 606,084 | |||||||
Merchandise inventories | 949,346 | 916,311 | |||||||
Other current assets | 261,232 | 254,156 | |||||||
Total current assets | 1,942,994 | 1,962,039 | |||||||
Property and equipment, net | 195,312 | 191,718 | |||||||
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416,697 | 414,936 | |||||||
Intangible assets, net | 80,736 | 82,511 | |||||||
Other assets, net | 64,810 | 66,548 | |||||||
Total assets | $ | 2,700,549 | $ | 2,717,752 | |||||
Liabilities and equity | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 745,165 | $ | 750,750 | |||||
Accrued payroll and related liabilities | 28,625 | 45,051 | |||||||
Other current liabilities | 233,905 | 238,837 | |||||||
Total current liabilities | 1,007,695 | 1,034,638 | |||||||
Long-term debt, excluding current portion | 564,145 | 564,583 | |||||||
Deferred income taxes | 90,115 | 90,383 | |||||||
Other liabilities | 68,637 | 68,110 | |||||||
Total liabilities | 1,730,592 | 1,757,714 | |||||||
Total equity | 969,957 | 960,038 | |||||||
Total liabilities and equity | $ | 2,700,549 | $ | 2,717,752 | |||||
Consolidated Statements of Cash Flows (unaudited) (dollars in thousands) |
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Three Months Ended |
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2017 | 2016 | |||||||||
Operating activities: | ||||||||||
Net income | $ | 18,785 | $ | 24,135 | ||||||
Adjustments to reconcile net income to cash (used for) provided by operating activities: | ||||||||||
Depreciation and amortization | 12,558 | 14,218 | ||||||||
Share-based compensation expense | 2,511 | 2,603 | ||||||||
Provision for losses on accounts receivable | (603 | ) | 115 | |||||||
Deferred income tax expense | (825 | ) | 6,907 | |||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | 1,554 | (26,815 | ) | |||||||
Merchandise inventories | (32,777 | ) | 15,178 | |||||||
Accounts payable | (7,341 | ) | 46,751 | |||||||
Net change in other assets and liabilities | (24,965 | ) | (38,100 | ) | ||||||
Other, net | 4,743 | 153 | ||||||||
Cash (used for) provided by operating activities | (26,360 | ) | 45,145 | |||||||
Investing activities: | ||||||||||
Additions to property and equipment | (10,146 | ) | (5,283 | ) | ||||||
Additions to computer software and intangible assets | (4,622 | ) | (1,777 | ) | ||||||
Proceeds from sale of property and equipment | 315 | 4,599 | ||||||||
Cash used for investing activities | (14,453 | ) | (2,461 | ) | ||||||
Financing activities: | ||||||||||
Change in bank overdraft | — | 8,359 | ||||||||
Cash dividends paid | (15,740 | ) | (16,029 | ) | ||||||
Repurchases of common stock | — | (5,630 | ) | |||||||
Other, net | (2,759 | ) | (3,016 | ) | ||||||
Cash used for financing activities | (18,499 | ) | (16,316 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 991 | 2,935 | ||||||||
Net (decrease) increase in cash and cash equivalents | (58,321 | ) | 29,303 | |||||||
Cash and cash equivalents at beginning of period | 185,488 | 161,020 | ||||||||
Cash and cash equivalents at end of period | $ | 127,167 | $ | 190,323 | ||||||
Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) (dollars in thousands, except per share data) |
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Quarter Ended | ||||||||||||||||||||
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Consolidated operating results: | ||||||||||||||||||||
Net revenue | $ | 2,328,573 | $ | 2,368,361 | $ | 2,415,601 | $ | 2,483,676 | $ | 2,455,793 | ||||||||||
Gross margin | $ | 281,180 | $ | 294,980 | $ | 296,275 | $ | 299,420 | $ | 296,636 | ||||||||||
Gross margin as a percent of revenue | 12.08 | % | 12.46 | % | 12.27 | % | 12.06 | % | 12.08 | % | ||||||||||
Distribution, selling & administrative expenses | $ | 237,693 | $ | 243,480 | $ | 241,305 | $ | 242,914 | $ | 242,725 | ||||||||||
Distribution, selling & administrative expenses as a percent of revenue | 10.21 | % | 10.28 | % | 9.99 | % | 9.78 | % | 9.88 | % | ||||||||||
Operating earnings, as reported (GAAP) | $ | 35,517 | $ | 49,008 | $ | 53,568 | $ | 52,054 | $ | 44,970 | ||||||||||
Acquisition-related charges (1) | 1,347 | 286 | 597 | 730 | (399 | ) | ||||||||||||||
Exit and realignment charges (2) | 7,595 | 4,415 | 2,142 | 6,022 | 10,882 | |||||||||||||||
Other (3) | 922 | — | — | — | — | |||||||||||||||
Operating earnings, adjusted (Non-GAAP) | $ | 45,381 | $ | 53,709 | $ | 56,307 | $ | 58,806 | $ | 55,453 | ||||||||||
Operating earnings as a percent of revenue (GAAP) | 1.53 | % | 2.07 | % | 2.22 | % | 2.10 | % | 1.83 | % | ||||||||||
Operating earnings as a percent of revenue, adjusted (Non-GAAP) | 1.95 | % | 2.27 | % | 2.33 | % | 2.37 | % | 2.26 | % | ||||||||||
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Net income, as reported (GAAP) | $ | 18,785 | $ | 27,105 | $ | 29,831 | $ | 27,716 | $ | 24,135 | ||||||||||
Acquisition-related charges(1) | 1,347 | 286 | 597 | 730 | (399 | ) | ||||||||||||||
Income tax expense (benefit) (4) | (450 | ) | 67 | (221 | ) | (164 | ) | 152 | ||||||||||||
Exit and realignment charges (2) | 7,595 | 4,415 | 2,142 | 6,022 | 10,882 | |||||||||||||||
Income tax expense (benefit) (4) | (3,055 | ) | (289 | ) | (794 | ) | (2,081 | ) | (3,506 | ) | ||||||||||
Other (3) | 922 | — | — | — | — | |||||||||||||||
Income tax expense (benefit) (4) | (354 | ) | — | — | — | — | ||||||||||||||
Net income, adjusted (Non-GAAP) | $ | 24,790 | $ | 31,584 | $ | 31,555 | $ | 32,223 | $ | 31,264 | ||||||||||
Net income per share, as reported (GAAP) | $ | 0.31 | $ | 0.45 | $ | 0.48 | $ | 0.45 | $ | 0.39 | ||||||||||
Acquisition-related charges, after-tax (1) | 0.01 | — | 0.01 | 0.01 | — | |||||||||||||||
Exit and realignment charges, after-tax (2) | 0.08 | 0.07 | 0.02 | 0.06 | 0.11 | |||||||||||||||
Other, after-tax (3) | 0.01 | — | — | — | — | |||||||||||||||
Net income per share, adjusted (Non-GAAP) | $ | 0.41 | $ | 0.52 | $ | 0.51 | $ | 0.52 | $ | 0.50 | ||||||||||
Financing: | ||||||||||||||||||||
Cash and cash equivalents | $ | 127,167 | $ | 185,488 | $ | 213,096 | $ | 138,951 | $ | 190,323 | ||||||||||
Total interest-bearing debt | $ | 568,565 | $ | 569,387 | $ | 570,263 | $ | 571,143 | $ | 572,318 | ||||||||||
Stock information: | ||||||||||||||||||||
Cash dividends per common share | $ | 0.2575 | $ | 0.255 | $ | 0.255 | $ | 0.255 | $ | 0.255 | ||||||||||
Stock price at quarter-end | $ | 34.60 | $ | 35.29 | $ | 34.73 | $ | 37.38 | $ | 40.42 | ||||||||||
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Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) |
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The following items in the current quarter have been excluded in our non-GAAP financial measures: | |
(1) |
Acquisition-related charges, pre-tax, were |
(2) |
Exit and realignment charges, pre-tax, were |
(3) | Software as a Service (SaaS) implementation costs associated with significant global IT platforms in connection with the redesign of our global information system strategy. |
(4) | These charges have been tax effected in the preceding table by determining the income tax rate depending on the amount of charges incurred in different tax jurisdictions and the deductibility of those charges for income tax purposes. |
Use of Non-GAAP Measures |
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This earnings release contains financial measures that are not
calculated in accordance with |
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Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company's performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. | |
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated. | |
Summary Segment Information (unaudited) (dollars in thousands) |
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Three Months Ended |
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2017 | 2016 | |||||||||||||||||
% of | % of | |||||||||||||||||
consolidated | consolidated | |||||||||||||||||
Amount | net revenue | Amount | net revenue | |||||||||||||||
Net revenue: | ||||||||||||||||||
Segment net revenue | ||||||||||||||||||
Domestic | $ | 2,193,960 | 94.22 | % | $ | 2,321,708 | 94.54 | % | ||||||||||
International | 94,995 | 4.08 | % | 83,551 | 3.40 | % | ||||||||||||
Proprietary Products | 137,153 | 5.89 | % | 141,353 | 5.76 | % | ||||||||||||
Total segment net revenue | 2,426,108 | 2,546,612 | ||||||||||||||||
Inter-segment revenue | ||||||||||||||||||
Proprietary Products | (97,535 | ) | (4.19 | )% | (90,819 | ) | (3.70 | )% | ||||||||||
Total inter-segment revenue | (97,535 | ) | (90,819 | ) | ||||||||||||||
Consolidated net revenue | $ | 2,328,573 | 100.00% | $ | 2,455,793 | 100.00% | ||||||||||||
% of segment | % of segment | |||||||||||||||||
Operating earnings (loss): | net revenue | net revenue | ||||||||||||||||
Domestic | $ | 37,295 | 1.70 | % | $ | 41,718 | 1.80 | % | ||||||||||
International | 656 | 0.69 | % | 1,128 | 1.35 | % | ||||||||||||
Proprietary Products | 8,128 | 5.93 | % | 13,271 | 9.39 | % | ||||||||||||
Inter-segment eliminations | (698 | ) | (664 | ) | ||||||||||||||
Acquisition-related and exit and realignment charges | (8,942 | ) | (10,483 | ) | ||||||||||||||
Other (1) | (922 | ) | — | |||||||||||||||
Consolidated operating earnings | $ | 35,517 | 1.53 | % | $ | 44,970 | 1.83 | % | ||||||||||
Depreciation and amortization: | ||||||||||||||||||
Domestic | $ | 6,860 | $ | 7,542 | ||||||||||||||
International | 3,804 | 4,450 | ||||||||||||||||
Proprietary Products | 1,894 | 2,226 | ||||||||||||||||
Consolidated depreciation and amortization | $ | 12,558 | $ | 14,218 | ||||||||||||||
Capital expenditures: | ||||||||||||||||||
Domestic | $ | 8,818 | $ | 4,543 | ||||||||||||||
International | 5,022 | 1,970 | ||||||||||||||||
Proprietary Products | 928 | 547 | ||||||||||||||||
Consolidated capital expenditures | $ | 14,768 | $ | 7,060 | ||||||||||||||
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Total assets: | ||||||||||||||||||
Domestic | $ | 1,830,369 | $ | 1,778,481 | ||||||||||||||
International | 359,614 | 352,898 | ||||||||||||||||
Proprietary Products | 383,399 | 400,885 | ||||||||||||||||
Segment assets | 2,573,382 | 2,532,264 | ||||||||||||||||
Cash and cash equivalents | 127,167 | 185,488 | ||||||||||||||||
Consolidated total assets | $ | 2,700,549 | $ | 2,717,752 | ||||||||||||||
(1) | Software as a Service (SaaS) implementation costs associated with significant global IT platforms in connection with the redesign of our global information system strategy. |
Net Income Per Common Share (unaudited) (dollars in thousands, except per share data) |
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Three Months Ended |
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2017 | 2016 | |||||||||
Numerator: | ||||||||||
Net income | $ | 18,785 | $ | 24,135 | ||||||
Less: income allocated to unvested restricted shares | (239 | ) | (276 | ) | ||||||
Net income attributable to common shareholders - basic | 18,546 | 23,859 | ||||||||
Add: undistributed income attributable to unvested restricted shares -basic | 23 | 57 | ||||||||
Less: undistributed income attributable to unvested restricted shares -diluted | (23 | ) | (57 | ) | ||||||
Net income attributable to common shareholders - diluted | $ | 18,546 | $ | 23,859 | ||||||
Denominator: | ||||||||||
Weighted average shares outstanding - basic and diluted | 60,013 | 61,696 | ||||||||
Net income per share attributable to common shareholders: | ||||||||||
Basic | $ | 0.31 | $ | 0.39 | ||||||
Diluted | $ | 0.31 | $ | 0.39 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170502006941/en/
Director,
Investor & Media Relations
truitt.allcott@owens-minor.com
or
Director, Finance & Investor Relations
chuck.graves@owens-minor.com
Source:
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