Owens & Minor Reports 2nd Quarter 2017 Financial Results
With the closing of the
Consolidated operating earnings for the second quarter of 2017 were
"We are pleased to have successfully closed the acquisition of
Year-to-Date 2017 Results
For the first six months of 2017, consolidated revenues were
Consolidated operating earnings for the first half of 2017 were
Acquisition of
Owens & Minor also announced that it has closed the previously announced
acquisition of
Segment Results
Segment financial results for the quarter are shown in the financial tables included with this release. Segment results include:
-
Domestic Segment quarterly revenues were
$2.13 billion , compared to$2.35 billion a year ago; operating earnings were$29.5 million , compared to$43.5 million for the same period last year. -
International Segment quarterly revenues were
$95.9 million , compared to$88.6 million last year; operating earnings were$0.8 million , compared to$0.9 million in last year's second quarter. -
Proprietary Products Segment quarterly revenues were
$131 million , compared to$135 million in the prior year quarter; operating earnings were$8.8 million versus$14.3 million last year.
Revised Financial Guidance and Outlook
As a result of the closing of the
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
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 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 | $ | 2,265,907 | $ | 2,483,676 | ||||||
Cost of goods sold | 1,992,374 | 2,184,256 | ||||||||
Gross margin | 273,533 | 299,420 | ||||||||
Distribution, selling and administrative expenses | 236,615 | 242,914 | ||||||||
Acquisition-related and exit and realignment charges | 2,893 | 6,752 | ||||||||
Other operating (income) expense, net | 1,188 | (2,300 | ) | |||||||
Operating earnings | 32,837 | 52,054 | ||||||||
Interest expense, net | 6,736 | 6,765 | ||||||||
Income before income taxes | 26,101 | 45,289 | ||||||||
Income tax provision | 5,960 | 17,573 | ||||||||
Net income | $ | 20,141 | $ | 27,716 | ||||||
Net income per common share: | ||||||||||
Basic | $ | 0.33 | $ | 0.45 | ||||||
Diluted | $ | 0.33 | $ | 0.45 | ||||||
Six Months Ended |
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2017 | 2016 | |||||||||
Net revenue | $ | 4,594,480 | $ | 4,939,469 | ||||||
Cost of goods sold | 4,039,768 | 4,343,413 | ||||||||
Gross margin | 554,712 | 596,056 | ||||||||
Distribution, selling and administrative expenses | 474,308 | 485,639 | ||||||||
Acquisition-related and exit and realignment charges | 11,835 | 17,235 | ||||||||
Other operating (income) expense, net | 216 | (3,842 | ) | |||||||
Operating earnings | 68,353 | 97,024 | ||||||||
Interest expense, net | 13,480 | 13,554 | ||||||||
Income before income taxes | 54,873 | 83,470 | ||||||||
Income tax provision | 15,947 | 31,619 | ||||||||
Net income | $ | 38,926 | $ | 51,851 | ||||||
Net income per common share: | ||||||||||
Basic | $ | 0.64 | $ | 0.83 | ||||||
Diluted | $ | 0.64 | $ | 0.83 | ||||||
Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands) |
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Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 57,066 | $ | 185,488 | |||||||
Accounts receivable, net | 655,259 | 606,084 | |||||||||
Merchandise inventories | 1,004,076 | 916,311 | |||||||||
Other current assets | 306,452 | 254,156 | |||||||||
Total current assets | 2,022,853 | 1,962,039 | |||||||||
Property and equipment, net | 198,442 | 191,718 | |||||||||
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423,107 | 414,936 | |||||||||
Intangible assets, net | 80,051 | 82,511 | |||||||||
Other assets, net | 70,684 | 66,548 | |||||||||
Total assets | $ | 2,795,137 | $ | 2,717,752 | |||||||
Liabilities and equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 798,454 | $ | 750,750 | |||||||
Accrued payroll and related liabilities | 23,819 | 45,051 | |||||||||
Other current liabilities | 241,091 | 238,837 | |||||||||
Total current liabilities | 1,063,364 | 1,034,638 | |||||||||
Long-term debt, excluding current portion | 579,117 | 564,583 | |||||||||
Deferred income taxes | 89,812 | 90,383 | |||||||||
Other liabilities | 69,273 | 68,110 | |||||||||
Total liabilities | 1,801,566 | 1,757,714 | |||||||||
Total equity | 993,571 | 960,038 | |||||||||
Total liabilities and equity | $ | 2,795,137 | $ | 2,717,752 | |||||||
Consolidated Statements of Cash Flows (unaudited) (dollars in thousands) |
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Six Months Ended |
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2017 | 2016 | ||||||||||||
Operating activities: | |||||||||||||
Net income | $ | 38,926 | $ | 51,851 | |||||||||
Adjustments to reconcile net income to cash (used for) provided by operating activities: | |||||||||||||
Depreciation and amortization | 25,206 | 28,343 | |||||||||||
Share-based compensation expense | 5,619 | 5,969 | |||||||||||
Provision for losses on accounts receivable | (368 | ) | (27 | ) | |||||||||
Deferred income tax (benefit) expense |
(5,385 | ) | (2,071 | ) | |||||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | (41,863 | ) | (29,736 | ) | |||||||||
Merchandise inventories | (86,234 | ) | (17,947 | ) | |||||||||
Accounts payable | 42,235 | 62,710 | |||||||||||
Net change in other assets and liabilities | (66,003 | ) | (56,599 | ) | |||||||||
Other, net | 5,371 | 743 | |||||||||||
Cash (used for) provided by operating activities | (82,496 | ) | 43,236 | ||||||||||
Investing activities: | |||||||||||||
Additions to property and equipment | (16,433 | ) | (8,857 | ) | |||||||||
Additions to computer software and intangible assets | (7,860 | ) | (4,602 | ) | |||||||||
Proceeds from sale of property and equipment | 573 | 4,565 | |||||||||||
Cash used for investing activities | (23,720 | ) | (8,894 | ) | |||||||||
Financing activities: | |||||||||||||
Proceeds from revolving credit facility | 15,400 | — | |||||||||||
Cash dividends paid | (31,476 | ) | (32,003 | ) | |||||||||
Repurchases of common stock | (4,998 | ) | (20,849 | ) | |||||||||
Other, net | (5,658 | ) | (5,968 | ) | |||||||||
Cash used for financing activities | (26,732 | ) | (58,820 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | 4,526 | 2,409 | |||||||||||
Net decrease in cash and cash equivalents | (128,422 | ) | (22,069 | ) | |||||||||
Cash and cash equivalents at beginning of period | 185,488 | 161,020 | |||||||||||
Cash and cash equivalents at end of period | $ | 57,066 | $ | 138,951 | |||||||||
Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) |
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(dollars in thousands, except per share data) | Quarter Ended | |||||||||||||||||||||||||||
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Consolidated operating results: | ||||||||||||||||||||||||||||
Net revenue | $ | 2,265,907 | $ | 2,328,573 | $ | 2,368,361 | $ | 2,415,601 | $ | 2,483,676 | ||||||||||||||||||
Gross margin | $ | 273,533 | $ | 281,180 | $ | 294,980 | $ | 296,275 | $ | 299,420 | ||||||||||||||||||
Gross margin as a percent of revenue | 12.07 | % | 12.08 | % | 12.46 | % | 12.27 | % | 12.06 | % | ||||||||||||||||||
Distribution, selling & administrative expenses | $ | 236,615 | $ | 237,693 | $ | 243,480 | $ | 241,305 | $ | 242,914 | ||||||||||||||||||
Distribution, selling & administrative expenses as a percent of revenue | 10.44 | % | 10.21 | % | 10.28 | % | 9.99 | % | 9.78 | % | ||||||||||||||||||
Operating earnings, as reported (GAAP) | $ | 32,837 | $ | 35,517 | $ | 49,008 | $ | 53,568 | $ | 52,054 | ||||||||||||||||||
Acquisition-related charges (1) | 692 | 1,347 | 286 | 597 | 730 | |||||||||||||||||||||||
Exit and realignment charges (2) | 2,201 | 7,595 | 4,415 | 2,142 | 6,022 | |||||||||||||||||||||||
Acquisition-related intangible amortization (3) | 2,347 | 2,319 | 2,450 | 2,489 | 2,538 | |||||||||||||||||||||||
Other (4) | 3,311 | 922 | — | — | — | |||||||||||||||||||||||
Operating earnings, adjusted (Non-GAAP) | $ | 41,388 | $ | 47,700 | $ | 56,159 | $ | 58,796 | $ | 61,344 | ||||||||||||||||||
Operating earnings as a percent of revenue (GAAP) | 1.45 | % | 1.53 | % | 2.07 | % | 2.22 | % | 2.10 | % | ||||||||||||||||||
Operating earnings as a percent of revenue, adjusted (Non-GAAP) | 1.83 | % | 2.05 | % | 2.37 | % | 2.43 | % | 2.47 | % | ||||||||||||||||||
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Net income, as reported (GAAP) | $ | 20,141 | $ | 18,785 | $ | 27,105 | $ | 29,831 | $ | 27,716 | ||||||||||||||||||
Acquisition-related charges(1) | 692 | 1,347 | 286 | 597 | 730 | |||||||||||||||||||||||
Income tax expense (benefit) (5) | (228 | ) | (450 | ) | 67 | (221 | ) | (164 | ) | |||||||||||||||||||
Exit and realignment charges (2) | 2,201 | 7,595 | 4,415 | 2,142 | 6,022 | |||||||||||||||||||||||
Income tax expense (benefit) (5) | (780 | ) | (3,055 | ) | (289 | ) | (794 | ) | (2,081 | ) | ||||||||||||||||||
Acquisition-related intangible amortization (3) | 2,347 | 2,319 | 2,450 | 2,489 | 2,538 | |||||||||||||||||||||||
Income tax expense (benefit) (5) | (696 | ) | (696 | ) | (633 | ) | (645 | ) | (658 | ) | ||||||||||||||||||
Other (4) | 3,311 | 922 | — | — | — | |||||||||||||||||||||||
Income tax expense (benefit) (5) | (1,139 | ) | (354 | ) | — | — | — | |||||||||||||||||||||
Net income, adjusted (Non-GAAP) | $ | 25,849 | $ | 26,413 | $ | 33,401 | $ | 33,399 | $ | 34,103 | ||||||||||||||||||
Net income per share, as reported (GAAP) | $ | 0.33 | $ | 0.31 | $ | 0.45 | $ | 0.48 | $ | 0.45 | ||||||||||||||||||
Acquisition-related charges, after-tax (1) | 0.01 | 0.01 | — | 0.01 | 0.01 | |||||||||||||||||||||||
Exit and realignment charges, after-tax (2) | 0.02 | 0.08 | 0.07 | 0.02 | 0.06 | |||||||||||||||||||||||
Acquisition-related intangible amortization, after-tax (3) | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 | |||||||||||||||||||||||
Other, after-tax (4) | 0.04 | 0.01 | — | — | — | |||||||||||||||||||||||
Net income per share, adjusted (Non-GAAP) | $ | 0.43 | $ | 0.44 | $ | 0.55 | $ | 0.54 | $ | 0.55 | ||||||||||||||||||
Financing: | ||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 57,066 | $ | 127,167 | $ | 185,488 | $ | 213,096 | $ | 138,951 | ||||||||||||||||||
Total interest-bearing debt | $ | 583,201 | $ | 568,565 | $ | 569,387 | $ | 570,263 | $ | 571,143 | ||||||||||||||||||
Stock information: | ||||||||||||||||||||||||||||
Cash dividends per common share | $ | 0.2575 | $ | 0.2575 | $ | 0.255 | $ | 0.255 | $ | 0.255 | ||||||||||||||||||
Stock price at quarter-end | $ | 32.19 | $ | 34.60 | $ | 35.29 | $ | 34.73 | $ | 37.38 | ||||||||||||||||||
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Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) |
The following items in the current quarter have been excluded in our non-GAAP financial measures:
(1) Acquisition-related charges in the first and second
quarters of 2017 were primarily transaction and transition costs
associated with the acquisition of
(2) Exit and realignment charges 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.
Expenses associated with the establishment of the client engagement
center will continue to be recorded throughout 2017. Charges in 2016
included severance activities (including our voluntary employee
separation program in the first quarter of 2016), and other costs
associated with our strategic organizational realignment which include
certain professional fees and costs to streamline administrative
functions and processes in
(3) 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 have begun 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.
Full year 2016 intangible amortization was
(4) Software as a Service (SaaS) implementation costs associated with significant global IT platforms in connection with the redesign of our global information system strategy.
(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 |
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 | $ | 2,130,468 | 94.02 | % | $ | 2,345,746 | 94.45 | % | ||||||||||
International | 95,899 | 4.23 | % | 88,559 | 3.57 | % | ||||||||||||
Proprietary Products | 130,959 | 5.78 | % | 134,964 | 5.43 | % | ||||||||||||
Total segment net revenue | 2,357,326 | 2,569,269 | ||||||||||||||||
Inter-segment revenue | ||||||||||||||||||
Proprietary Products | (91,419 | ) | (4.03 | )% | (85,593 | ) | (3.45 | )% | ||||||||||
Total inter-segment revenue | (91,419 | ) | (85,593 | ) | ||||||||||||||
Consolidated net revenue | $ | 2,265,907 | 100.00 | % | $ | 2,483,676 | 100.00 | % | ||||||||||
% of segment | % of segment | |||||||||||||||||
Operating earnings (loss): | net revenue | net revenue | ||||||||||||||||
Domestic | $ | 29,460 | 1.38 | % | $ | 43,451 | 1.85 | % | ||||||||||
International | 752 | 0.78 | % | 893 | 1.01 | % | ||||||||||||
Proprietary Products | 8,810 | 6.73 | % | 14,255 | 10.56 | % | ||||||||||||
Inter-segment eliminations | 19 | 207 | ||||||||||||||||
Acquisition-related and exit and realignment charges | (2,893 | ) | (6,752 | ) | ||||||||||||||
Other (1) | (3,311 | ) | — | |||||||||||||||
Consolidated operating earnings | $ | 32,837 | 1.45 | % | $ | 52,054 | 2.10 | % | ||||||||||
Depreciation and amortization: | ||||||||||||||||||
Domestic | $ | 6,769 | $ | 7,497 | ||||||||||||||
International | 3,964 | 4,416 | ||||||||||||||||
Proprietary Products | 1,915 | 2,213 | ||||||||||||||||
Consolidated depreciation and amortization | $ | 12,648 | $ | 14,126 | ||||||||||||||
Capital expenditures: | ||||||||||||||||||
Domestic | $ | 4,986 | $ | 2,659 | ||||||||||||||
International | 3,431 | 2,860 | ||||||||||||||||
Proprietary Products | 1,105 | 880 | ||||||||||||||||
Consolidated capital expenditures | $ | 9,522 | $ | 6,399 | ||||||||||||||
Summary Segment Information (unaudited) (dollars in thousands) |
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Six Months Ended |
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2017 | 2016 | |||||||||||||||||
% of | % of | |||||||||||||||||
consolidated | consolidated | |||||||||||||||||
Amount | net revenue | Amount | net revenue | |||||||||||||||
Net revenue: | ||||||||||||||||||
Segment net revenue | ||||||||||||||||||
Domestic | $ | 4,324,428 | 94.12 | % | $ | 4,667,455 | 94.49 | % | ||||||||||
International | 190,894 | 4.15 | % | 172,110 | 3.48 | % | ||||||||||||
Proprietary Products | 268,112 | 5.84 | % | 276,317 | 5.59 | % | ||||||||||||
Total segment net revenue | 4,783,434 | 5,115,882 | ||||||||||||||||
Inter-segment revenue | ||||||||||||||||||
Proprietary Products | (188,954 | ) | (4.11 | )% | (176,413 | ) | (3.57 | )% | ||||||||||
Total inter-segment revenue | (188,954 | ) | (176,413 | ) | ||||||||||||||
Consolidated net revenue | $ | 4,594,480 | 100.00 | % | $ | 4,939,469 | 100.00 | % | ||||||||||
% of segment | % of segment | |||||||||||||||||
Operating earnings (loss): | net revenue | net revenue | ||||||||||||||||
Domestic | $ | 66,756 | 1.54 | % | $ | 85,169 | 1.82 | % | ||||||||||
International | 1,408 | 0.74 | % | 2,021 | 1.17 | % | ||||||||||||
Proprietary Products | 16,938 | 6.32 | % | 27,526 | 9.96 | % | ||||||||||||
Inter-segment eliminations | (681 | ) | (457 | ) | ||||||||||||||
Acquisition-related and exit and realignment charges | (11,835 | ) | (17,235 | ) | ||||||||||||||
Other (1) | (4,233 | ) | — | |||||||||||||||
Consolidated operating earnings | $ | 68,353 | 1.49 | % | $ | 97,024 | 1.96 | % | ||||||||||
Depreciation and amortization: | ||||||||||||||||||
Domestic | $ | 13,630 | $ | 15,038 | ||||||||||||||
International | 7,768 | 8,865 | ||||||||||||||||
Proprietary Products | 3,808 | 4,440 | ||||||||||||||||
Consolidated depreciation and amortization | $ | 25,206 | $ | 28,343 | ||||||||||||||
Capital expenditures: | ||||||||||||||||||
Domestic | $ | 13,804 | $ | 7,202 | ||||||||||||||
International | 8,453 | 4,830 | ||||||||||||||||
Proprietary Products | 2,036 | 1,427 | ||||||||||||||||
Consolidated capital expenditures | $ | 24,293 | $ | 13,459 | ||||||||||||||
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Total assets: | ||||||||||||||||||
Domestic | $ | 1,945,271 | $ | 1,778,481 | ||||||||||||||
International | 405,020 | 352,898 | ||||||||||||||||
Proprietary Products | 387,780 | 400,885 | ||||||||||||||||
Segment assets | 2,738,071 | 2,532,264 | ||||||||||||||||
Cash and cash equivalents | 57,066 | 185,488 | ||||||||||||||||
Consolidated total assets | $ | 2,795,137 | $ | 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 |
Six Months Ended |
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2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Numerator: | ||||||||||||||||||||
Net income | $ | 20,141 | $ | 27,716 | $ | 38,926 | $ | 51,851 | ||||||||||||
Less: income allocated to unvested restricted shares | (229 | ) | (281 | ) | (469 | ) | (560 | ) | ||||||||||||
Net income attributable to common shareholders - basic | 19,912 | 27,435 | 38,457 | 51,291 | ||||||||||||||||
Add: undistributed income attributable to unvested restricted shares -basic | 27 | 72 | 51 | 131 | ||||||||||||||||
Less: undistributed income attributable to unvested restricted shares -diluted | (27 | ) | (72 | ) | (51 | ) | (131 | ) | ||||||||||||
Net income attributable to common shareholders - diluted | $ | 19,912 | $ | 27,435 | $ | 38,457 | $ | 51,291 | ||||||||||||
Denominator: | ||||||||||||||||||||
Weighted average shares outstanding - basic and diluted | 59,863 | 61,502 | 60,020 | 61,588 | ||||||||||||||||
Net income per share attributable to common shareholders: | ||||||||||||||||||||
Basic | $ | 0.33 | $ | 0.45 | $ | 0.64 | $ | 0.83 | ||||||||||||
Diluted | $ | 0.33 | $ | 0.45 | $ | 0.64 | $ | 0.83 | ||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170801006742/en/
Director,
Investor & Media Relations
truitt.allcott@owens-minor.com
or
Director, Finance & Investor Relations
chuck.graves@owens-minor.com
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