Owens & Minor Reports 1st Quarter 2018 Financial Results
- O&M completes acquisition of Halyard Health’s Surgical & Infection Prevention (S&IP) business
- Consolidated quarterly revenues were
$2.37 billion vs.$2.33 billion a year ago - EPS for the quarter was
$0.13 , while non-GAAP adjusted EPS was$0.43
Consolidated operating income for the first quarter of 2018 was
“We are pleased to have completed the acquisition of Halyard Health’s
S&IP business, which represents a meaningful step in the evolution of
our business. Together, the Halyard S&IP business and
Acquisition of Halyard Health S&IP Business
On
To finance the transaction,
Segment Results
The Global Solutions SBU is comprised of the former Domestic and
International segments, which includes our U.S. and European
distribution, logistics and value-added services business, as well as
The Global Products SBU is comprised of our former Proprietary
Products segment, which includes Global Sourcing, Clinical & Procedural
Solutions (CPS), and now the Halyard S&IP business. Revenues in the
first quarter of 2018 were
Asset Management
The balance of cash and cash equivalents was
Upcoming Investor Events
Bank of America Merrill Lynch 2018 Healthcare Conference;May 15 Goldman Sachs 2018 Global Healthcare Conference;June 12
Investors Conference Call & Supplemental Material
Conference Call:
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
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
Owens & Minor, Inc. | ||||||||
Consolidated Statements of Income (unaudited) | ||||||||
(dollars in thousands, except per share data) |
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Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Net revenue | $ | 2,372,579 | $ | 2,328,573 | ||||
Cost of goods sold | 2,047,892 | 2,047,393 | ||||||
Gross margin | 324,687 | 281,180 | ||||||
Distribution, selling and administrative expenses | 284,361 | 237,693 | ||||||
Acquisition-related and exit and realignment charges | 14,760 | 8,942 | ||||||
Other operating (income) expense, net | 1,349 | (972 | ) | |||||
Operating income | 24,217 | 35,517 | ||||||
Interest expense, net | 10,253 | 6,744 | ||||||
Income before income taxes | 13,964 | 28,773 | ||||||
Income tax provision | 5,813 | 9,988 | ||||||
Net income | $ | 8,151 | $ | 18,785 | ||||
Net income per common share: | ||||||||
Basic and diluted | $ | 0.13 | $ | 0.31 | ||||
Owens & Minor, Inc. | |||||||
Condensed Consolidated Balance Sheets (unaudited) | |||||||
(dollars in thousands) |
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March 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 87,632 | $ | 104,522 | |||
Accounts receivable, net | 778,155 | 758,936 | |||||
Merchandise inventories | 1,021,711 | 990,193 | |||||
Other current assets | 300,275 | 328,254 | |||||
Total current assets | 2,187,773 | 2,181,905 | |||||
Property and equipment, net | 207,042 | 206,490 | |||||
Goodwill, net | 715,445 | 713,811 | |||||
Intangible assets, net | 178,880 | 184,468 | |||||
Other assets, net | 102,414 | 89,619 | |||||
Total assets | $ | 3,391,554 | $ | 3,376,293 | |||
Liabilities and equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 958,270 | $ | 947,572 | |||
Accrued payroll and related liabilities | 30,480 | 30,416 | |||||
Other current liabilities | 337,230 | 331,745 | |||||
Total current liabilities | 1,325,980 | 1,309,733 | |||||
Long-term debt, excluding current portion | 897,071 | 900,744 | |||||
Deferred income taxes | 73,180 | 74,247 | |||||
Other liabilities | 76,405 | 76,090 | |||||
Total liabilities | 2,372,636 | 2,360,814 | |||||
Total equity | 1,018,918 | 1,015,479 | |||||
Total liabilities and equity | $ | 3,391,554 | $ | 3,376,293 | |||
Owens & Minor, Inc. | ||||||||
Consolidated Statements of Cash Flows (unaudited) | ||||||||
(dollars in thousands) |
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Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Operating activities: | ||||||||
Net income | $ | 8,151 | $ | 18,785 | ||||
Adjustments to reconcile net income to cash provided by (used for) operating activities: | ||||||||
Depreciation and amortization | 17,911 | 12,558 | ||||||
Share-based compensation expense | 3,035 | 2,511 | ||||||
Provision for losses on accounts receivable | 1,073 | (603 | ) | |||||
Deferred income tax (benefit) expense | (1,482 | ) | (825 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (18,519 | ) | 1,554 | |||||
Merchandise inventories | (30,556 | ) | (32,777 | ) | ||||
Accounts payable | 9,478 | (7,341 | ) | |||||
Net change in other assets and liabilities | 28,904 | (24,965 | ) | |||||
Other, net | 278 | 4,743 | ||||||
Cash provided by (used for) operating activities | 18,273 | (26,360 | ) | |||||
Investing activities: | ||||||||
Additions to property and equipment | (7,074 | ) | (10,146 | ) | ||||
Additions to computer software and intangible assets | (7,086 | ) | (4,622 | ) | ||||
Proceeds from sale of property and equipment | — | 315 | ||||||
Cash used for investing activities | (14,160 | ) | (14,453 | ) | ||||
Financing activities: | ||||||||
Borrowings (repayments) under revolving credit facility | (300 | ) | — | |||||
Repayments of debt | (3,125 | ) | — | |||||
Cash dividends paid | (16,074 | ) | (15,740 | ) | ||||
Other, net | (2,304 | ) | (2,759 | ) | ||||
Cash used for financing activities | (21,803 | ) | (18,499 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 800 | 991 | ||||||
Net (decrease) increase in cash and cash equivalents | (16,890 | ) | (58,321 | ) | ||||
Cash and cash equivalents at beginning of period | 104,522 | 185,488 | ||||||
Cash and cash equivalents at end of period | $ | 87,632 | $ | 127,167 | ||||
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Owens & Minor, Inc. | ||||||||||||||
Summary Segment Information (unaudited) | ||||||||||||||
(dollars in thousands) |
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Three Months Ended March 31, | ||||||||||||||
2018 | 2017 | |||||||||||||
% of | % of | |||||||||||||
consolidated | consolidated | |||||||||||||
Amount | net revenue | Amount | net revenue | |||||||||||
Net revenue: | ||||||||||||||
Segment net revenue | ||||||||||||||
Global Solutions | $ | 2,341,122 | 98.68 | % | $ | 2,288,955 | 98.30 | % | ||||||
Global Products | 121,287 | 5.11 | % | 137,153 | 5.89 | % | ||||||||
Total segment net revenue | 2,462,409 | 2,426,108 | ||||||||||||
Inter-segment revenue | ||||||||||||||
Global Products | (89,830 | ) | (3.79 | )% | (97,535 | ) | (4.19 | )% | ||||||
Total inter-segment revenue | (89,830 | ) | (97,535 | ) | ||||||||||
Consolidated net revenue | $ | 2,372,579 | 100.00 | % | $ | 2,328,573 | 100.00 | % | ||||||
% of segment | % of segment | |||||||||||||
Operating income (loss): | net revenue | net revenue | ||||||||||||
Global Solutions | $ | 31,625 | 1.35 | % | $ | 37,951 | 1.66 | % | ||||||
Global Products | 9,811 | 8.09 | % | 8,128 | 5.93 | % | ||||||||
Inter-segment eliminations | (242 | ) | (698 | ) | ||||||||||
Acquisition-related and exit and realignment charges | (14,760 | ) | (8,942 | ) | ||||||||||
Other (1) | (2,217 | ) | (922 | ) | ||||||||||
Consolidated operating income | $ | 24,217 | 1.02 | % | $ | 35,517 | 1.53 | % | ||||||
Depreciation and amortization: | ||||||||||||||
Global Solutions | $ | 15,781 | $ | 10,664 | ||||||||||
Global Products | 2,130 | 1,894 | ||||||||||||
Consolidated depreciation and amortization | $ | 17,911 | $ | 12,558 | ||||||||||
Capital expenditures: | ||||||||||||||
Global Solutions | $ | 13,602 | $ | 13,840 | ||||||||||
Global Products | 558 | 928 | ||||||||||||
Consolidated capital expenditures | $ | 14,160 | $ | 14,768 | ||||||||||
(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. |
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Owens & Minor, Inc. | ||||||||
Net Income Per Common Share (unaudited) | ||||||||
(dollars in thousands, except per share data) |
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Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Numerator: | ||||||||
Net income | $ | 8,151 | $ | 18,785 | ||||
Less: income allocated to unvested restricted shares | (323 | ) | (239 | ) | ||||
Net income attributable to common shareholders - basic | 7,828 | 18,546 | ||||||
Add: undistributed income attributable to unvested restricted shares -basic | — | 23 | ||||||
Less: undistributed income attributable to unvested restricted shares -diluted | — | (23 | ) | |||||
Net income attributable to common shareholders - diluted | $ | 7,828 | $ | 18,546 | ||||
Denominator: | ||||||||
Weighted average shares outstanding - basic and diluted | 59,969 | 60,013 | ||||||
Net income per share attributable to common shareholders: | ||||||||
Basic and diluted | $ | 0.13 | $ | 0.31 | ||||
Owens & Minor, Inc. | ||||||||
GAAP/Non-GAAP Reconciliations (unaudited) | ||||||||
Three Months Ended | ||||||||
(dollars in thousands, except per share data) |
March 31, | |||||||
2018 | 2017 | |||||||
Operating income, as reported (GAAP) | $ | 24,217 | $ | 35,517 | ||||
Acquisition-related intangible amortization (1) | 6,407 | 2,319 | ||||||
Acquisition-related charges (2) | 12,081 | 1,347 | ||||||
Exit and realignment charges (3) | 2,679 | 7,595 | ||||||
Other (4) | 2,217 | 922 | ||||||
Operating income, adjusted (Non-GAAP) | $ | 47,601 | $ | 47,700 | ||||
Net income, as reported (GAAP) | $ | 8,151 | $ | 18,785 | ||||
Acquisition-related intangible amortization (1) | 6,407 | 2,319 | ||||||
Income tax expense (benefit) (5) | (1,557 | ) | (696 | ) | ||||
Acquisition-related charges(2) | 12,081 | 1,347 | ||||||
Income tax expense (benefit) (5) | (3,019 | ) | (450 | ) | ||||
Exit and realignment charges (3) | 2,679 | 7,595 | ||||||
Income tax expense (benefit) (5) | (557 | ) | (3,055 | ) | ||||
Other (4) | 2,217 | 922 | ||||||
Income tax expense (benefit) (5) | (228 | ) | (354 | ) | ||||
Net income, adjusted (Non-GAAP) | $ | 26,174 | $ | 26,413 | ||||
Net income per share, as reported (GAAP) | $ | 0.13 | $ | 0.31 | ||||
Acquisition-related intangible amortization, after-tax (1) | 0.08 | 0.03 | ||||||
Acquisition-related charges, after-tax (2) | 0.15 | 0.01 | ||||||
Exit and realignment charges, after-tax (3) | 0.04 | 0.08 | ||||||
Other, after-tax (4) | 0.03 | 0.01 | ||||||
Net income per share, adjusted (Non-GAAP) | $ | 0.43 | $ | 0.44 | ||||
The following items in the current quarter have been excluded in our non-GAAP financial measures:
(1) Acquisition-related intangible amortization includes amortization of certain intangible assets established during purchase accounting for business combinations. These amounts are highly dependent on the size and frequency of acquisitions and are being excluded to allow for a more consistent comparison with forecasted, current and historical results and the results of our peers. We began to exclude these charges from our non-GAAP results in the second quarter of 2017 and thus prior year amounts have been recast on the same basis.
(2)Acquisition related expenses in the current quarter consist primarily of transition and transaction costs for the Halyard S&IP transaction and Byram and in first quarter of 2017 consist primarily of transition and transaction costs for Byram.
(3) Exit and realignment charges in 2018 were primarily associated with establishment of our Client Engagement Center. Amounts in 2017 were associated with the write-down of information system assets which are no longer used and severance charges from reduction in force and other employee costs associated with the establishment of our new client engagement center.
(4) Software as a Service (SaaS) implementation costs associated with the upgrading of global IT platforms in connection with the redesign of our global information system strategy. SaaS implementation costs are recorded in other operating (income) expense, net.
(5)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 |
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). In general, the measures exclude items and charges that (i) management does not believe reflect Owens & Minor, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company's performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation. |
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. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20180510005367/en/
Source:
Owens & Minor, Inc.
Truitt Allcott, 804-723-7555
Director,
Investor & Media Relations
truitt.allcott@owens-minor.com
or
Chuck
Graves, 804-723-7556
Director, Finance & Investor Relations
chuck.graves@owens-minor.com