Owens & Minor Reports 4th Quarter & Full-Year 2014 Financial Results
- Consolidated revenue grew 7.5% for the fourth quarter and 4.1% for the year
-
Adjusted consolidated net income was
$0.49 per diluted share for the fourth quarter and$1.76 per diluted share for 2014 -
Owens & Minor completed two acquisitions in the fourth quarter, complementing its surgical kitting capabilities and unitized delivery services in the U.S. andEurope
For the quarter ended
"Revenue growth in the fourth quarter and for the year exceeded our
original expectations, which we view as an endorsement of our approach
to serving the healthcare market," said
Consolidated operating earnings for the fourth quarter of 2014, were
2014 Annual Results
For the year ended
Consolidated operating earnings for 2014 were
For the full year, the tax rate increased to 47.4% as a result of the impact of foreign taxes and certain non-deductible acquisition-related costs.
Acquisition Update
Balance Sheet Recapitalization Update
In the third quarter of 2014,
Asset Management
The balance of cash and cash equivalents was
Segment Results
Domestic segment revenues for the fourth quarter of 2014 were
For the fourth quarter of 2014, Domestic segment operating earnings were
For the International segment, quarterly revenues increased 32.4% to
2015 Outlook
The company provided updated financial guidance for 2015, consistent
with the growth guidance originally provided at its
For 2015, the company is targeting adjusted net income per diluted share
of
Reiterating his comments from the company's Investor Day in
Upcoming Investor Relations Events
-
Barclays Capital 2015 Global Healthcare Conference;March 11 ,Miami
Investors Conference Call & Supplemental Material
Conference Call: Owens & Minor's management team will conduct a
conference call for investors on
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.
Safe Harbor Statement
Except for historical information, the matters discussed in this press
release may constitute forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
those projected. These risk factors are discussed in reports filed by
the company with the
Consolidated Statements of Income (unaudited) (in thousands, except per share data) |
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Three Months Ended |
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2014 | 2013 | |||||||||
Net revenue | $ | 2,491,817 | $ | 2,318,524 | ||||||
Cost of goods sold | 2,177,802 | 2,027,261 | ||||||||
Gross margin | 314,015 | 291,263 | ||||||||
Selling, general and administrative expenses | 244,152 | 222,043 | ||||||||
Acquisition-related and exit and realignment charges | 17,988 | 7,049 | ||||||||
Depreciation and amortization | 15,528 | 13,239 | ||||||||
Other operating expense (income), net | (4,426 | ) | (2,002 | ) | ||||||
Operating earnings | 40,773 | 50,934 | ||||||||
Interest expense, net | 7,270 | 3,263 | ||||||||
Income before income taxes | 33,503 | 47,671 | ||||||||
Income tax provision | 19,516 | 19,729 | ||||||||
Net income | $ | 13,987 | $ | 27,942 | ||||||
Net income per common share: | ||||||||||
Basic | $ | 0.22 | $ | 0.44 | ||||||
Diluted | $ | 0.22 | $ | 0.44 | ||||||
Twelve Months Ended |
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2014 | 2013 | |||||||||
Net revenue | $ | 9,440,182 | $ | 9,071,532 | ||||||
Cost of goods sold | 8,270,216 | 7,954,457 | ||||||||
Gross margin | 1,169,966 | 1,117,075 | ||||||||
Selling, general and administrative expenses | 926,977 | 863,656 | ||||||||
Acquisition-related and exit and realignment charges | 42,801 | 12,444 | ||||||||
Depreciation and amortization | 57,125 | 50,586 | ||||||||
Other operating expense (income), net | (16,473 | ) | (7,694 | ) | ||||||
Operating earnings | 159,536 | 198,083 | ||||||||
Loss on early retirement of debt | 14,890 | — | ||||||||
Interest expense, net | 18,163 | 13,098 | ||||||||
Income before income taxes | 126,483 | 184,985 | ||||||||
Income tax provision | 59,980 | 74,103 | ||||||||
Net income | $ | 66,503 | $ | 110,882 | ||||||
Net income per common share: | ||||||||||
Basic | $ | 1.06 | $ | 1.76 | ||||||
Diluted | $ | 1.06 | $ | 1.76 | ||||||
Condensed Consolidated Balance Sheets (unaudited) (in thousands) |
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2014 | 2013 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 56,772 | $ | 101,905 | |||
Accounts and notes receivable, net | 626,192 | 572,854 | |||||
Merchandise inventories | 872,457 | 771,663 | |||||
Other current assets | 315,285 | 279,510 | |||||
Total current assets | 1,870,706 | 1,725,932 | |||||
Property and equipment, net | 232,979 | 191,961 | |||||
Goodwill, net | 423,276 | 275,439 | |||||
Intangible assets, net | 108,593 | 40,406 | |||||
Other assets, net | 99,852 | 90,304 | |||||
Total assets | $ | 2,735,406 | $ | 2,324,042 | |||
Liabilities and equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 608,846 | $ | 643,872 | |||
Accrued payroll and related liabilities | 31,507 | 23,296 | |||||
Deferred income taxes | 37,979 | 41,613 | |||||
Other current liabilities | 326,223 | 281,427 | |||||
Total current liabilities | 1,004,555 | 990,208 | |||||
Long-term debt, excluding current portion | 608,551 | 212,786 | |||||
Deferred income taxes | 63,901 | 43,727 | |||||
Other liabilities | 67,561 | 52,278 | |||||
Total liabilities | 1,744,568 | 1,298,999 | |||||
Total equity | 990,838 | 1,025,043 | |||||
Total liabilities and equity | $ | 2,735,406 | $ | 2,324,042 | |||
Consolidated Statements of Cash Flows (unaudited) (in thousands) |
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Twelve Months Ended |
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2014 | 2013 | |||||||
Operating activities: | ||||||||
Net income | $ | 66,503 | $ | 110,882 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 63,407 | 50,586 | ||||||
Loss on early retirement of debt | 14,890 | — | ||||||
Share-based compensation expense | 8,207 | 6,381 | ||||||
Deferred income tax (benefit) expense | (3,385 | ) | 3,713 | |||||
Provision for losses on accounts and notes receivable | 448 | 787 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and notes receivable | (17,803 | ) | (38,645 | ) | ||||
Merchandise inventories | (57,329 | ) | (7,064 | ) | ||||
Accounts payable | (52,148 | ) | 47,374 | |||||
Net change in other assets and liabilities | (25,828 | ) | (32,337 | ) | ||||
Other, net | (723 | ) | (1,123 | ) | ||||
Cash (used for) provided by operating activities | (3,761 | ) | 140,554 | |||||
Investing activities: | ||||||||
Acquisitions, net of cash acquired | (248,536 | ) | — | |||||
Additions to computer software and intangible assets | (22,384 | ) | (32,010 | ) | ||||
Additions to property and equipment | (48,424 | ) | (28,119 | ) | ||||
Proceeds from the sale of investment | 1,937 | — | ||||||
Proceeds from the sale of property and equipment | 156 | 3,051 | ||||||
Cash used for investing activities | (317,251 | ) | (57,078 | ) | ||||
Financing activities: | ||||||||
Proceeds from issuance of debt | 547,693 | — | ||||||
Proceeds from revolver | 33,700 | — | ||||||
Repayment of debt | (217,352 | ) | — | |||||
Cash dividends paid | (63,104 | ) | (60,731 | ) | ||||
Repurchases of common stock | (9,934 | ) | (18,876 | ) | ||||
Financing costs paid | (5,391 | ) | — | |||||
Proceeds from exercise of stock options | 1,180 | 5,352 | ||||||
Excess tax benefits related to share-based compensation | 582 | 898 | ||||||
Purchase of noncontrolling interest | (1,500 | ) | — | |||||
Other, net | (7,314 | ) | (8,623 | ) | ||||
Cash provided by (used for) financing activities | 278,560 | (81,980 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (2,681 | ) | 2,521 | |||||
Net increase (decrease) in cash and cash equivalents | (45,133 | ) | 4,017 | |||||
Cash and cash equivalents at beginning of period | 101,905 | 97,888 | ||||||
Cash and cash equivalents at end of period | $ | 56,772 | $ | 101,905 | ||||
Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) (in thousands, except per share data) |
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Quarter Ended | ||||||||||||||||||||
(in thousands, except ratios and per share data) |
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Consolidated operating results: | ||||||||||||||||||||
Domestic | $ | 2,353,321 | $ | 2,262,081 | $ | 2,187,535 | $ | 2,148,915 | $ | 2,213,949 | ||||||||||
International | 138,496 | 124,045 | 118.323 | 107,465 | 104,575 | |||||||||||||||
Net revenue | $ | 2,491,817 | $ | 2,386,126 | $ | 2,305,858 | $ | 2,256,380 | $ | 2,318,524 | ||||||||||
Gross margin | $ | 314,015 | $ | 292,483 | $ | 282,272 | $ | 281,195 | $ | 291,263 | ||||||||||
Gross margin as a percent of revenue | 12.60 | % | 12.26 | % | 12.24 | % | 12.46 | % | 12.56 | % | ||||||||||
SG&A expenses | $ | 244,152 | $ | 231,377 | $ | 225,838 | $ | 225,610 | $ | 222,043 | ||||||||||
SG&A expenses as a percent of revenue | 9.80 | % | 9.70 | % | 9.79 | % | 10.00 | % | 9.58 | % | ||||||||||
Operating earnings, as reported (GAAP) | $ | 40,773 | $ | 35,377 | $ | 37,101 | $ | 46,284 | $ | 50,934 | ||||||||||
Acquisition-related charges (1) | 7,394 | 4,565 | 3,490 | 634 | 1,970 | |||||||||||||||
Exit and realignment charges (2) | 10,594 | 9,392 | 4,103 | 2,628 | 5,079 | |||||||||||||||
Fair value adjustments related to purchase accounting (3) | (3,706 | ) | — | — | — | — | ||||||||||||||
Other (4) | 3,907 | — | — | — | — | |||||||||||||||
Operating earnings, adjusted (Non-GAAP) | $ | 58,962 | $ | 49,334 | $ | 44,694 | $ | 49,546 | $ | 57,983 | ||||||||||
Operating earnings as a percent of revenue, adjusted (Non-GAAP) | 2.37 | % | 2.07 | % | 1.94 | % | 2.20 | % | 2.50 | % | ||||||||||
Net income, as reported (GAAP) | $ | 13,987 | $ | 7,155 | $ | 19,876 | $ | 25,485 | $ | 27,942 | ||||||||||
Acquisition-related charges, after-tax (1) | 6,211 | 3,543 | 2,504 | 450 | 1,912 | |||||||||||||||
Exit and realignment charges, after-tax (2) | 11,477 | 6,754 | 2,591 | 1,772 | 3,112 | |||||||||||||||
Fair value adjustments related to purchase accounting, after-tax (3) | (4,703 | ) | — | — | — | — | ||||||||||||||
Other, after-tax (4) | 3,907 | — | — | — | — | |||||||||||||||
Loss on early retirement of debt, after-tax (5) | — | 9,092 | — | — | — | |||||||||||||||
Net income, adjusted (Non-GAAP) | $ | 30,879 | $ | 26,544 | $ | 24,971 | $ | 27,707 | $ | 32,966 | ||||||||||
Net income per diluted common share, as reported (GAAP) | $ | 0.22 | $ | 0.11 | $ | 0.32 | $ | 0.41 | $ | 0.44 | ||||||||||
Acquisition-related charges, after-tax (1) | 0.10 | 0.06 | 0.04 | 0.01 | 0.03 | |||||||||||||||
Exit and realignment charges, after-tax (2) | 0.18 | 0.11 | 0.04 | 0.02 | 0.05 | |||||||||||||||
Fair value adjustments related to purchase accounting, after-tax (3) | (0.07 | ) | — | — | — | — | ||||||||||||||
Other, after-tax (4) | 0.06 | — | — | — | — | |||||||||||||||
Loss on early retirement of debt, after tax (5) | — | 0.14 | — | — | — | |||||||||||||||
Net income per diluted common share, adjusted (Non-GAAP) | $ | 0.49 | $ | 0.42 | $ | 0.40 | $ | 0.44 | $ | 0.52 | ||||||||||
Financing: | ||||||||||||||||||||
Cash and cash equivalents | $ | 56,772 | $ | 610,147 | $ | 92,027 | $ | 182,373 | $ | 101,905 | ||||||||||
Total interest-bearing debt | $ | 613,809 | $ | 766,283 | $ | 221,496 | $ | 217,261 | $ | 216,243 | ||||||||||
Stock information: | ||||||||||||||||||||
Cash dividends per common share | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.25 | $ | 0.24 | ||||||||||
Stock price at quarter-end | $ | 35.11 | $ | 32.74 | $ | 33.98 | $ | 35.03 | $ | 36.56 | ||||||||||
Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited)
The following items have been excluded in our non-GAAP financial measures:
(1) Acquisition-related charges in the current year consist primarily of costs incurred to perform due diligence and analysis related to the Medical Action and Arc Royal acquisitions, costs to complete the transactions, and costs to begin the integration of the acquired operations (including certain severance and contractual payments to former management) as well as certain costs in Movianto to resolve issues and claims with the former owner.
(2)Exit and realignment charges in the current year were
associated with optimizing our operations and include the closure and
consolidation of certain distribution and logistics centers,
administrative offices and warehouses in
(3) The fourth quarter of 2014 includes a gain of
(4) The fourth quarter includes a loss in other operating
income, net related to an accrual for the estimated settlement amount of
a breach of contract claim in the
(5) In 2014, we repaid our 2016 Notes and recorded a net loss
on the early retirement of
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
Summary Segment Information (unaudited) (in thousands) |
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Three Months Ended |
Twelve Months Ended |
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2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
% of | % of | % of | % of | ||||||||||||||||||||||||||
consolidated | consolidated | consolidated | consolidated | ||||||||||||||||||||||||||
Amount | net revenue | Amount | net revenue | Amount | net revenue | Amount | net revenue | ||||||||||||||||||||||
Net revenue: | |||||||||||||||||||||||||||||
Domestic | $ | 2,353,321 | 94.44 | % | $ | 2,213,949 | 95.49 | % | $ | 8,951,852 | 94.83 | % | $ | 8,688,018 | 95.77 | % | |||||||||||||
International | 138,496 | 5.56 | % | 104,575 | 4.51 | % | 488,330 | 5.17 | % | 383,514 | 4.23 | % | |||||||||||||||||
Consolidated net revenue | $ | 2,491,817 | 100.00 | % | $ | 2,318,524 | 100.00 | % | $ | 9,440,182 | 100.00 | % | $ | 9,071,532 | 100.00 | % | |||||||||||||
% of segment | % of segment | % of segment | % of segment | ||||||||||||||||||||||||||
Operating earnings(loss): | net revenue | net revenue | net revenue | net revenue | |||||||||||||||||||||||||
Domestic | $ | 57,428 | 2.44 | % | $ | 56,568 | 2.56 | % | $ | 209,277 | 2.34 | % | $ | 211,932 | 2.44 | % | |||||||||||||
International | 1,534 | 1.11 | % | 1,415 | 1.35 | % | (6,740 | ) | (1.38 | )% | (1,405 | ) | (0.37 | )% | |||||||||||||||
Acquisition-related and exit and realignment charges (1) | (17,988 | ) | N/A | (7,049 | ) | N/A | (42,801 | ) | N/A | (12,444 | ) | N/A | |||||||||||||||||
Fair value adjustments related to purchase accounting | 3,706 | N/A | — | N/A | 3,706 | N/A | — | N/A | |||||||||||||||||||||
Other | (3,907 | ) | N/A | — | N/A | (3,907 | ) | N/A | — | N/A | |||||||||||||||||||
Consolidated operating earnings | $ | 40,773 | 1.64 | % | $ | 50,934 | 2.20 | % | $ | 159,535 | 1.69 | % | $ | 198,083 | 2.18 | % | |||||||||||||
Depreciation and amortization: | |||||||||||||||||||||||||||||
Domestic | $ | 10,420 | $ | 9,033 | $ | 37,193 | $ | 35,808 | |||||||||||||||||||||
International | 5,406 | 4,206 | 20,230 | 14,778 | |||||||||||||||||||||||||
Consolidated depreciation and amortization | $ | 15,826 | $ | 13,239 | $ | 57,423 | $ | 50,586 | |||||||||||||||||||||
Capital expenditures: (2) | |||||||||||||||||||||||||||||
Domestic | $ | 12,419 | $ | 8,295 | $ | 52,529 | $ | 42,802 | |||||||||||||||||||||
International | 4,232 | 6,328 | 18,279 | 17,327 | |||||||||||||||||||||||||
Consolidated capital expenditures | $ | 16,651 | $ | 14,623 | $ | 70,808 | $ | 60,129 | |||||||||||||||||||||
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Total assets: | |||||||||||||||||||||||||||||
Domestic | $ | 2,208,663 | $ | 1,747,572 | |||||||||||||||||||||||||
International | 469,971 | 474,565 | |||||||||||||||||||||||||||
Segment assets | 2,678,634 | 2,222,137 | |||||||||||||||||||||||||||
Cash and cash equivalents | 56,772 | 101,905 | |||||||||||||||||||||||||||
Consolidated total assets | $ | 2,735,406 | $ | 2,324,042 | |||||||||||||||||||||||||
(1) The fourth quarter and year ended |
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(2) Represents additions to property and equipment and additions to computer software and separately acquired intangible assets. | |||||||||||||||||||||||||||||
Net Income Per Common Share (unaudited) (in thousands, except per share data) |
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Three Months Ended |
Twelve Months |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 13,987 | $ | 27,942 | $ | 66,503 | $ | 110,882 | ||||||||
Less: income allocated to unvested restricted shares | (141 | ) | (193 | ) | (597 | ) | (738 | ) | ||||||||
Net income attributable to common shareholders - basic | 13,846 | 27,749 | 65,906 | 110,144 | ||||||||||||
Add: undistributed income attributable to unvested restricted shares -basic | — | 67 | 18 | 257 | ||||||||||||
Less: undistributed income attributable to unvested restricted shares -diluted | — | (67 | ) | (18 | ) | (257 | ) | |||||||||
Net income attributable to common shareholders - diluted | $ | 13,846 | $ | 27,749 | $ | 65,906 | $ | 110,144 | ||||||||
Denominator: | ||||||||||||||||
Weighted average shares outstanding — basic | 62,193 | 62,446 | 62,220 | 62,625 | ||||||||||||
Dilutive shares - stock options | 4 | 21 | 6 | 36 | ||||||||||||
Weighted average shares outstanding — diluted | 62,197 | 62,467 | 62,226 | 62,661 | ||||||||||||
Net income per share attributable to common shareholders: | ||||||||||||||||
Basic | $ | 0.22 | $ | 0.44 | $ | 1.06 | $ | 1.76 | ||||||||
Diluted | $ | 0.22 | $ | 0.44 | $ | 1.06 | $ | 1.76 | ||||||||
Director,
Investor & Media Relations
truitt.allcott@owens-minor.com
or
Director, Finance & Investor Relations
chuck.graves@owens-minor.com
Source:
News Provided by Acquire Media