Owens & Minor Reports 1st Quarter 2019 Financial Results
“My first sixty days have been full of meetings with customers and teammates, and I am pleased with the open dialogue that has helped to validate some of our strategies and some of my initial perspectives,” said
Financial Summary |
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($ in millions, except per share data) |
1Q19 |
1Q18 |
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Revenue | $2,461 | $2,373 | |||||||||
% yoy growth | 3.7% | ||||||||||
Operating income, GAAP1 | $14.7 | $24.2 | |||||||||
Adj. Operating income, Non-GAAP1 | $30.5 | $47.6 | |||||||||
Net income (loss), GAAP1 | $(14.1) | $8.2 | |||||||||
Adj. Net income, Non-GAAP1 | $1.0 | $26.2 | |||||||||
Net Income (loss) per share, GAAP1 | $(0.23) | $0.13 | |||||||||
Adj. Net Income per share, Non-GAAP1 | $0.02 | $0.43 | |||||||||
1. | Reconciliations of the differences between the non-GAAP financial measures presented in this news release and their most directly comparable GAAP financial measures are included in the financial tables below. | ||||||
1Q 2019 Results
- Investments made in the company’s operations have resulted in significant improvement in service levels compared to 2018. The company is now consistently meeting service level targets and is beginning to drive improved productivity in operations.
- Compared to the prior year’s first quarter, consolidated quarterly revenues grew 3.7%, primarily resulting from Halyard sales of
$189 million for the quarter (net of$52 million of intercompany sales) and strong sales growth withByram Healthcare . These gains were partially offset by lower distribution revenues, as a result of customer non-renewals during 2018 and early 2019, primarily resulting from service issues. - Quarterly results reflected revenue changes, continued pressure on distribution gross margins, higher supply chain costs, and increased expenses incurred for the development of new solutions. In addition, interest expense of
$29.1 million for the quarter increased$18.8 million when compared to the prior year as a result of the company’s new debt structure.
Financial Guidance and Outlook
For 2019, the company maintained its previously issued guidance of adjusted net income per share to be in a range of
Although the company does provide guidance for adjusted net income 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 without unreasonable effort. Certain elements of the composition of the GAAP amount are not predictable, making it impracticable for the company to forecast. Such elements include, but are not limited to restructuring and acquisition charges. As a result, no GAAP guidance or reconciliation of the company’s adjusted net income per share guidance is provided. For the same reasons, the company is unable to assess the probable significance of the unavailable information, which could have a potentially significant impact on its future GAAP financial results. The outlook is based on certain assumptions that are subject to the risk factors discussed in the company’s filings with the
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Investor Conference Call for 1Q 2019 Financial Results
Safe Harbor
This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the SEC’s Fair Disclosure Regulation. This release contains certain “forward-looking” statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the statements in this release regarding our expectations with respect to our 2019 financial performance, as well as other statements related to the company’s expectations regarding the performance of its business, growth, and improvement of operational performance. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. Investors should refer to Owens & Minor’s Annual Report on Form 10-K for the year ended
About
Owens & Minor, Inc. Consolidated Statements of Income (Loss) (unaudited) (dollars in thousands, except per share data) |
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Three Months Ended March 31, | |||||||||
2019 | 2018 | ||||||||
Net revenue | $ | 2,461,388 | $ | 2,372,579 | |||||
Cost of goods sold | 2,102,964 | 2,047,892 | |||||||
Gross margin | 358,424 | 324,687 | |||||||
Distribution, selling and administrative expenses | 338,703 | 284,361 | |||||||
Acquisition-related and exit and realignment charges | 4,990 | 14,760 | |||||||
Other operating expense, net | 39 | 1,349 | |||||||
Operating income | 14,692 | 24,217 | |||||||
Interest expense, net | 29,101 | 10,253 | |||||||
Income (loss) before income taxes | (14,409 | ) | 13,964 | ||||||
Income tax provision (benefit) | (313 | ) | 5,813 | ||||||
Net income (loss) | $ | (14,096 | ) | $ | 8,151 | ||||
Net income (loss) per common share: | |||||||||
Basic and diluted | $ | (0.23 | ) | $ | 0.13 | ||||
Owens & Minor, Inc. Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands) |
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March 31, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 75,239 | $ | 103,367 | ||||
Accounts receivable, net | 843,384 | 823,418 | ||||||
Merchandise inventories | 1,210,558 | 1,290,103 | ||||||
Other current assets | 336,065 | 321,690 | ||||||
Total current assets | 2,465,246 | 2,538,578 | ||||||
Property and equipment, net | 386,135 | 386,723 | ||||||
Operating lease assets | 197,200 | — | ||||||
Goodwill | 413,235 | 414,122 | ||||||
Intangible assets, net | 311,254 | 321,764 | ||||||
Other assets, net | 109,294 | 112,601 | ||||||
Total assets | $ | 3,882,364 | $ | 3,773,788 | ||||
Liabilities and equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 990,688 | $ | 1,109,589 | ||||
Accrued payroll and related liabilities | 40,999 | 48,203 | ||||||
Other current liabilities | 377,989 | 314,219 | ||||||
Total current liabilities | 1,409,676 | 1,472,011 | ||||||
Long-term debt, excluding current portion | 1,685,135 | 1,650,582 | ||||||
Operating lease liabilities, excluding current portion | 155,703 | — | ||||||
Deferred income taxes | 42,144 | 50,852 | ||||||
Other liabilities | 87,867 | 81,924 | ||||||
Total liabilities | 3,380,525 | 3,255,369 | ||||||
Total equity | 501,839 | 518,419 | ||||||
Total liabilities and equity | $ | 3,882,364 | $ | 3,773,788 | ||||
Owens & Minor, Inc. Consolidated Statements of Cash Flows (unaudited) (dollars in thousands) |
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Three Months Ended March 31, | ||||||||||
2019 | 2018 | |||||||||
Operating activities: | ||||||||||
Net income (loss) | $ | (14,096 | ) | $ | 8,151 | |||||
Adjustments to reconcile net income (loss) to cash (used for) provided by operating activities: | ||||||||||
Depreciation and amortization | 28,720 | 17,911 | ||||||||
Share-based compensation expense | 4,505 | 3,035 | ||||||||
Provision for losses on accounts receivable | 3,619 | 1,073 | ||||||||
Deferred income tax benefit | (8,613 | ) | (1,482 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts receivable | (22,573 | ) | (18,519 | ) | ||||||
Merchandise inventories | 80,194 | (30,556 | ) | |||||||
Accounts payable | (120,480 | ) | 9,478 | |||||||
Net change in other assets and liabilities | (15,858 | ) | 28,904 | |||||||
Other, net | 3,678 | 278 | ||||||||
Cash (used for) provided by operating activities | (60,904 | ) | 18,273 | |||||||
Investing activities: | ||||||||||
Additions to property and equipment | (11,674 | ) | (7,074 | ) | ||||||
Additions to computer software and intangible assets | (2,605 | ) | (7,086 | ) | ||||||
Proceeds from sale of property and equipment | 271 | — | ||||||||
Cash used for investing activities | (14,008 | ) | (14,160 | ) | ||||||
Financing activities: | ||||||||||
Borrowings (repayments) under revolving credit facility | 72,100 | (300 | ) | |||||||
Repayments of debt | (12,394 | ) | (3,125 | ) | ||||||
Financing costs paid | (4,313 | ) | — | |||||||
Cash dividends paid | (4,764 | ) | (16,074 | ) | ||||||
Other, net | (1,124 | ) | (2,304 | ) | ||||||
Cash provided by (used for) financing activities | 49,505 | (21,803 | ) | |||||||
Effect of exchange rate changes on cash and cash equivalents | (2,721 | ) | 800 | |||||||
Net decrease in cash and cash equivalents | (28,128 | ) | (16,890 | ) | ||||||
Cash and cash equivalents at beginning of period | 103,367 | 104,522 | ||||||||
Cash and cash equivalents at end of period | $ | 75,239 | $ | 87,632 | ||||||
Owens & Minor, Inc. Summary Segment Information (unaudited) (dollars in thousands) |
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Three Months Ended March 31, | ||||||||||||||||||
2019 | 2018 | |||||||||||||||||
% of | % of | |||||||||||||||||
consolidated | consolidated | |||||||||||||||||
Amount | net revenue | Amount | net revenue | |||||||||||||||
Net revenue: | ||||||||||||||||||
Segment net revenue | ||||||||||||||||||
Global Solutions | $ | 2,234,147 | 90.77 | % | $ | 2,341,122 | 98.68 | % | ||||||||||
Global Products | 347,085 | 14.10 | % | 121,287 | 5.11 | % | ||||||||||||
Total segment net revenue | 2,581,232 | 2,462,409 | ||||||||||||||||
Inter-segment revenue | ||||||||||||||||||
Global Products | (119,844 | ) | (4.87 |
)% |
(89,830 | ) | (3.79 | )% | ||||||||||
Total inter-segment revenue | (119,844 | ) | (89,830 | ) | ||||||||||||||
Consolidated net revenue | $ | 2,461,388 | 100.00 | % | $ | 2,372,579 | 100.00 | % | ||||||||||
% of segment | % of segment | |||||||||||||||||
Operating income (loss): | net revenue | net revenue | ||||||||||||||||
Global Solutions | $ | 21,071 | 0.94 | % | $ | 36,759 | 1.57 | % | ||||||||||
Global Products | 7,724 | 2.23 | % | 11,084 | 9.14 | % | ||||||||||||
Inter-segment eliminations | 1,746 | (242 | ) | |||||||||||||||
Intangible amortization | (10,361 | ) | (6,407 | ) | ||||||||||||||
Acquisition-related and exit and realignment charges | (4,990 | ) | (14,760 | ) | ||||||||||||||
Other (1) | (498 | ) | (2,217 | ) | ||||||||||||||
Consolidated operating income | $ | 14,692 | 0.60 | % | $ | 24,217 | 1.02 | % | ||||||||||
Depreciation and amortization: | ||||||||||||||||||
Global Solutions | $ | 16,113 | $ | 15,781 | ||||||||||||||
Global Products | 12,607 | 2,130 | ||||||||||||||||
Consolidated depreciation and amortization | $ | 28,720 | $ | 17,911 | ||||||||||||||
Capital expenditures: | ||||||||||||||||||
Global Solutions | $ | 11,376 | $ | 13,602 | ||||||||||||||
Global Products | 2,903 | 558 | ||||||||||||||||
Consolidated capital expenditures | $ | 14,279 | $ | 14,160 | ||||||||||||||
(1) | Other consists of Software as a Service (SaaS) implementation costs associated with significant global IT platforms in connection with the redesign of our global information system strategy. | |
Owens & Minor, Inc. Net Income (Loss) Per Common Share (unaudited) (dollars in thousands, except per share data) |
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Three Months Ended |
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2019 | 2018 | |||||||||
Numerator: | ||||||||||
Net income (loss) | $ | (14,096 | ) | $ | 8,151 | |||||
Less: income allocated to unvested restricted shares | — | (323 | ) | |||||||
Net income (loss) attributable to common shareholders - basic and diluted | (14,096 | ) | 7,828 | |||||||
Denominator: | ||||||||||
Weighted average shares outstanding - basic and diluted | 60,376 | 59,969 | ||||||||
Net income (loss) per share attributable to common shareholders: | ||||||||||
Basic and diluted | $ | (0.23 | ) | $ | 0.13 | |||||
Owens & Minor, Inc. GAAP/Non-GAAP Reconciliations (unaudited) |
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(dollars in thousands, except per share data) |
Three Months Ended |
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2019 | 2018 | |||||||||
Operating income (loss), as reported (GAAP) | $ | 14,692 | 24,217 | |||||||
Intangible amortization (1) | 10,361 | 6,407 | ||||||||
Acquisition-related and exit and realignment charges (2) | 4,990 | 14,760 | ||||||||
Other (3) | 499 | 2,217 | ||||||||
Operating income, adjusted (non-GAAP) (Adjusted Operating Income) | $ | 30,542 | $ | 47,601 | ||||||
Net income (loss), as reported (GAAP) | $ | (14,096 | ) | $ | 8,151 | |||||
Intangible amortization (1) | 10,361 | 6,407 | ||||||||
Income tax expense (benefit) (5) | (1,664 | ) | (1,557 | ) | ||||||
Acquisition-related and exit and realignment charges (2) | 4,990 | 14,760 | ||||||||
Income tax expense (benefit) (5) | (760 | ) | (3,576 | ) | ||||||
Write-off of deferred financing costs (4) | 2,003 | — | ||||||||
Income tax expense (benefit) (5) | (313 | ) | — | |||||||
Other (3) | 499 | 2,217 | ||||||||
Income tax expense (benefit) (5) | (55 | ) | (228 | ) | ||||||
Net income, adjusted (non-GAAP) (Adjusted Net Income) | $ | 965 | $ | 26,174 | ||||||
Net income (loss) per diluted common share, as reported (GAAP) | $ | (0.23 | ) | $ | 0.13 | |||||
Intangible amortization, per diluted common share (1) | 0.14 | 0.08 | ||||||||
Acquisition-related and exit and realignment charges, per diluted common share (2) | 0.07 | 0.19 | ||||||||
Write-off of deferred financing costs, per diluted common share (4) | 0.03 | — | ||||||||
Other, per diluted common share (3) | 0.01 | 0.03 | ||||||||
Net income per diluted common share, adjusted (non-GAAP) (Adjusted EPS) | $ | 0.02 | $ | 0.43 | ||||||
The following items have been excluded in our non-GAAP financial measures:
(1) Intangible amortization includes amortization of 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.
(2)Acquisition-related charges were
Exit and realignment charges were
(3) Other consists of 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) Write-off of deferred financing costs associated with the revolving credit facility as a result of the Fourth Amendment to the Credit Agreement.
(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
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 substitutes 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/20190507005217/en/
Source:
INVESTORS: Chuck Graves, Director, Finance & Investor Relations, 804-723-7556, chuck.graves@owens-minor.com
MEDIA: Jenny Graves, Operating Vice President, Global Corporate Communications, 804-723-7754, jenny.graves@owens-minor.com