Owens & Minor Reports 4th Quarter & Full-Year 2016 Financial Results
-
Consolidated annual revenues were
$9.72 billion -
Operating earnings for 2016 were
$200 million ; adjusted operating earnings were$224 million -
Diluted EPS for the year was
$1.76 , while adjusted diluted EPS was$2.05 - Company provides long-range financial outlook
Consolidated operating earnings for 2016 were
"We had a solid year in 2016, driven by focused execution and the
dedication of our teammates against a backdrop of challenging industry
dynamics," said
Fourth Quarter 2016 Results
For the fourth quarter of 2016, consolidated revenues were
Consolidated operating earnings for the fourth quarter of 2016 declined
Asset Management
The balance of cash and cash equivalents was
Segment Results
For the full year of 2016, Domestic segment revenue increased slightly
by 0.2% to
For the full year, Domestic segment operating earnings were
For the International segment, full-year revenues decreased 7.8% to
Clinical & Procedural Solutions (CPS) full-year revenues decreased 4.0%
to
"Although 2016 was a challenging year, we achieved our goals despite
facing a variety of external market pressures," said
Financial Guidance and Outlook
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.
"We are keenly aware of the challenges and opportunities that are part
of repositioning our business in a rapidly changing healthcare market,"
said Phipps. "I am confident that the changes we are making today will
position
The outlook is based on certain assumptions that are subject to the risk
factors discussed in the company's filings with the
2017 Investor Day
The company will host its Investor Day on
Investors Conference Call & Supplemental Material
Conference Call: Company executives will host a conference call,
which will also be webcast,
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
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) (in thousands, except per share data) |
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Three Months Ended |
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2016 | 2015 | ||||||||||
Net revenue | $ | 2,368,361 | $ | 2,487,914 | |||||||
Cost of goods sold | 2,073,381 | 2,175,632 | |||||||||
Gross margin | 294,980 | 312,282 | |||||||||
Distribution, selling and administrative expenses | 243,480 | 250,171 | |||||||||
Acquisition-related and exit and realignment charges | 4,701 | 6,647 | |||||||||
Other operating income, net | (2,209 | ) | (2,489 | ) | |||||||
Operating earnings | 49,008 | 57,953 | |||||||||
Interest expense, net | 6,733 | 6,845 | |||||||||
Income before income taxes | 42,275 | 51,108 | |||||||||
Income tax provision | 15,170 | 19,040 | |||||||||
Net income | $ | 27,105 | $ | 32,068 | |||||||
Net income per common share: | |||||||||||
Basic | $ | 0.45 | $ | 0.51 | |||||||
Diluted | $ | 0.45 | $ | 0.51 | |||||||
Twelve Months Ended |
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2016 | 2015 | ||||||||||
Net revenue | $ | 9,723,431 | $ | 9,772,946 | |||||||
Cost of goods sold | 8,536,121 | 8,558,373 | |||||||||
Gross margin | 1,187,310 | 1,214,573 | |||||||||
Distribution, selling and administrative expenses | 970,424 | 993,783 | |||||||||
Acquisition-related and exit and realignment charges | 24,675 | 28,404 | |||||||||
Other operating income, net | (7,388 | ) | (7,973 | ) | |||||||
Operating earnings | 199,599 | 200,359 | |||||||||
Interest expense, net | 27,057 | 27,149 | |||||||||
Income before income taxes | 172,542 | 173,210 | |||||||||
Income tax provision | 63,755 | 69,801 | |||||||||
Net income | $ | 108,787 | $ | 103,409 | |||||||
Net income per common share: | |||||||||||
Basic | $ | 1.76 | $ | 1.65 | |||||||
Diluted | $ | 1.76 | $ | 1.65 |
Condensed Consolidated Balance Sheets (unaudited) (in thousands) |
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2016 | 2015 | ||||||||
Assets | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 185,488 | $ | 161,020 | |||||
Accounts and notes receivable, net | 606,084 | 587,935 | |||||||
Merchandise inventories | 916,311 | 940,775 | |||||||
Other current assets | 254,156 | 284,970 | |||||||
Total current assets | 1,962,039 | 1,974,700 | |||||||
Property and equipment, net | 191,718 | 208,930 | |||||||
|
414,936 | 419,619 | |||||||
Intangible assets, net | 82,511 | 95,250 | |||||||
Other assets, net | 66,548 | 75,277 | |||||||
Total assets | $ | 2,717,752 | $ | 2,773,776 | |||||
Liabilities and equity | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 750,750 | $ | 710,609 | |||||
Accrued payroll and related liabilities | 45,051 | 45,907 | |||||||
Other current liabilities | 238,837 | 307,073 | |||||||
Total current liabilities | 1,034,638 | 1,063,589 | |||||||
Long-term debt, excluding current portion | 564,583 | 568,495 | |||||||
Deferred income taxes | 90,383 | 86,326 | |||||||
Other liabilities | 68,110 | 62,776 | |||||||
Total liabilities | 1,757,714 | 1,781,186 | |||||||
Total equity | 960,038 | 992,590 | |||||||
Total liabilities and equity | $ | 2,717,752 | $ | 2,773,776 |
Consolidated Statements of Cash Flows (unaudited) (in thousands) |
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Twelve Months Ended |
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2016 | 2015 | |||||||||
Operating activities: | ||||||||||
Net income | $ | 108,787 | $ | 103,409 | ||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||
Depreciation and amortization | 55,393 | 65,982 | ||||||||
Share-based compensation expense | 12,042 | 11,306 | ||||||||
Deferred income tax expense (benefit) | 4,218 | (6,101 | ) | |||||||
Provision for losses on accounts and notes receivable | 377 | (24 | ) | |||||||
Changes in operating assets and liabilities: | ||||||||||
Accounts and notes receivable | (25,244 | ) | 18,333 | |||||||
Merchandise inventories | 22,589 | (69,727 | ) | |||||||
Accounts payable | 43,430 | 114,011 | ||||||||
Net change in other assets and liabilities | (37,559 | ) | 30,177 | |||||||
Other, net | 2,901 | 2,231 | ||||||||
Cash provided by operating activities | 186,934 | 269,597 | ||||||||
Investing activities: | ||||||||||
Additions to computer software and intangible assets | (9,819 | ) | (16,085 | ) | ||||||
Additions to property and equipment | (20,302 | ) | (20,531 | ) | ||||||
Proceeds from the sale of property and equipment | 5,375 | 143 | ||||||||
Cash used for investing activities | (24,746 | ) | (36,473 | ) | ||||||
Financing activities: | ||||||||||
Proceeds from (repayment of) revolving credit facility | — | (33,700 | ) | |||||||
Cash dividends paid | (63,382 | ) | (63,651 | ) | ||||||
Repurchases of common stock | (71,028 | ) | (20,000 | ) | ||||||
Excess tax benefits related to share-based compensation | 761 | 646 | ||||||||
Other, net | (8,294 | ) | (7,528 | ) | ||||||
Cash used for financing activities | (141,943 | ) | (124,233 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 4,223 | (4,643 | ) | |||||||
Net increase in cash and cash equivalents | 24,468 | 104,248 | ||||||||
Cash and cash equivalents at beginning of period | 161,020 | 56,772 | ||||||||
Cash and cash equivalents at end of period | $ | 185,488 | $ | 161,020 |
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: | |||||||||||||||||||||||||
Net revenue | $ | 2,368,361 | $ | 2,415,601 | $ | 2,483,676 | $ | 2,455,793 | $ | 2,487,914 | |||||||||||||||
Gross margin | $ | 294,980 | $ | 296,275 | $ | 299,420 | $ | 296,636 | $ | 312,282 | |||||||||||||||
Gross margin as a percent of revenue | 12.46 | % | 12.27 | % | 12.06 | % | 12.08 | % | 12.55 | % | |||||||||||||||
Distribution, selling & administrative expenses | $ | 243,480 | $ | 241,305 | $ | 242,914 | $ | 242,725 | $ | 250,172 | |||||||||||||||
Distribution, selling & administrative expenses as a percent of revenue | 10.28 | % | 9.99 | % | 9.78 | % | 9.88 | % | 10.06 | % | |||||||||||||||
Operating earnings, as reported (GAAP) | $ | 49,008 | $ | 53,568 | $ | 52,054 | $ | 44,970 | $ | 57,953 | |||||||||||||||
Acquisition-related charges (1) | 286 | 597 | 730 | (399 | ) | 4,048 | |||||||||||||||||||
Exit and realignment charges (2) | 4,415 | 2,142 | 6,022 | 10,882 | 2,599 | ||||||||||||||||||||
Other (3) | — | — | — | — | (1,500 | ) | |||||||||||||||||||
Operating earnings, adjusted (Non-GAAP) | $ | 53,709 | $ | 56,307 | $ | 58,806 | $ | 55,453 | $ | 63,100 | |||||||||||||||
Operating earnings as a percent of revenue (GAAP) | 2.07 | % | 2.22 | % | 2.10 | % | 1.83 | % | 2.33 | % | |||||||||||||||
Operating earnings as a percent of revenue, adjusted (Non-GAAP) | 2.27 | % | 2.33 | % | 2.37 | % | 2.26 | % | 2.54 | % | |||||||||||||||
. | |||||||||||||||||||||||||
Net income, as reported (GAAP) | $ | 27,105 | $ | 29,831 | $ | 27,716 | $ | 24,135 | $ | 32,068 | |||||||||||||||
Acquisition-related charges(1) | 286 | 597 | 730 | (399 | ) | 4,048 | |||||||||||||||||||
Income tax expense (benefit) (4) | 67 | (221 | ) | (164 | ) | 152 | 77 | ||||||||||||||||||
Exit and realignment charges (2) | 4,415 | 2,142 | 6,022 | 10,882 | 2,599 | ||||||||||||||||||||
Income tax expense (benefit) (4) | (289 | ) | (794 | ) | (2,081 | ) | (3,506 | ) | (2,163 | ) | |||||||||||||||
Other (3) | — | — | — | — | (1,500 | ) | |||||||||||||||||||
Income tax expense (benefit) (4) | — | — | — | — | — | ||||||||||||||||||||
Net income, adjusted (Non-GAAP) | $ | 31,584 | $ | 31,555 | $ | 32,223 | $ | 31,264 | $ | 35,129 | |||||||||||||||
Net income per diluted common share, as reported (GAAP) | $ | 0.45 | $ | 0.48 | $ | 0.45 | $ | 0.39 | $ | 0.51 | |||||||||||||||
Acquisition-related charges, after-tax (1) | — | 0.01 | 0.01 | — | 0.07 | ||||||||||||||||||||
Exit and realignment charges, after-tax (2) | 0.07 | 0.02 | 0.06 | 0.11 | — | ||||||||||||||||||||
Other, after-tax (3) | — | — | — | — | (0.02 | ) | |||||||||||||||||||
Net income per diluted common share, adjusted (Non-GAAP) | $ | 0.52 | $ | 0.51 | $ | 0.52 | $ | 0.50 | $ | 0.56 | |||||||||||||||
Financing: | |||||||||||||||||||||||||
Cash and cash equivalents | $ | 185,488 | $ | 213,096 | $ | 138,951 | $ | 190,323 | $ | 161,020 | |||||||||||||||
Total interest-bearing debt | $ | 569,387 | $ | 570,263 | $ | 571,143 | $ | 572,318 | $ | 573,521 | |||||||||||||||
Stock information: | |||||||||||||||||||||||||
Cash dividends per common share | $ | 0.255 | $ | 0.255 | $ | 0.255 | $ | 0.255 | $ | 0.2525 | |||||||||||||||
Stock price at quarter-end | $ | 35.29 | $ | 34.73 | $ | 37.38 | $ | 40.42 | $ | 35.98 | |||||||||||||||
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 2016 primarily related to costs incurred to settle certain obligations and address other on-going matters associated with the acquisitions of ArcRoyal and Medical Action. The gain in the first quarter related to the sale of property acquired with the Medical Action acquisition. Charges in 2015 consisted primarily of costs to continue the integration of Medical Action and ArcRoyal which were acquired in the fourth quarter of 2014 including certain severance and contractual payments to the former owner and costs to transition information technology and other administrative functions.
(2) Charges in 2016 were associated with severance activities
(including our voluntary employee separation program in the first
quarter of 2016), and other costs associated with our strategic
organizational realignment which included asset write-downs, certain
professional fees and costs to streamline administrative functions and
processes in
(3) The fourth quarter of 2015 included a partial recovery of
(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
This earnings release contains financial measures that are not
calculated in accordance with
Summary Segment Information (unaudited) (in thousands) |
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Three Months Ended |
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2016 | 2015 | |||||||||||||||
% of | % of | |||||||||||||||
consolidated | consolidated | |||||||||||||||
Amount | net revenue | Amount | net revenue | |||||||||||||
Net revenue: | ||||||||||||||||
Segment net revenue | ||||||||||||||||
Domestic | $ | 2,236,887 | 94.45 | % | $ | 2,326,124 | 93.50 | % | ||||||||
International | 87,813 | 3.71 | % | 91,493 | 3.68 | % | ||||||||||
CPS | 130,558 | 5.51 | % | 152,587 | 6.13 | % | ||||||||||
Total segment net revenue | 2,455,258 | 2,570,204 | ||||||||||||||
Inter-segment revenue | ||||||||||||||||
CPS | (86,897 | ) | (3.67 | )% | (82,290 | ) | (3.31 | )% | ||||||||
Total inter-segment revenue | (86,897 | ) | (82,290 | ) | ||||||||||||
Consolidated net revenue | $ | 2,368,361 | 100.00 | % | $ | 2,487,914 | 100.00 | % | ||||||||
% of segment | % of segment | |||||||||||||||
Operating earnings (loss): | net revenue | net revenue | ||||||||||||||
Domestic | $ | 39,293 | 1.76 | % | $ | 44,466 | 1.91 | % | ||||||||
International | 2,193 | 2.50 | % | 706 | 0.77 | % | ||||||||||
CPS | 11,933 | 9.14 | % | 18,296 | 11.99 | % | ||||||||||
Inter-segment eliminations | 290 | (368 | ) | |||||||||||||
Acquisition-related and exit and realignment charges (1) | (4,701 | ) | (6,647 | ) | ||||||||||||
Other (2) | — | 1,500 | ||||||||||||||
Consolidated operating earnings | $ | 49,008 | 2.07 | % | $ | 57,953 | 2.33 | % | ||||||||
Depreciation and amortization: | ||||||||||||||||
Domestic | $ | 7,070 | $ | 7,834 | ||||||||||||
International | 3,992 | 4,473 | ||||||||||||||
CPS | 2,149 | 1,803 | ||||||||||||||
Consolidated depreciation and amortization |
$ | 13,211 | $ | 14,110 | ||||||||||||
Capital expenditures: | ||||||||||||||||
Domestic | $ | 4,059 | $ | 3,911 | ||||||||||||
International | 4,820 | 133 | ||||||||||||||
CPS | 478 | 375 | ||||||||||||||
Consolidated capital expenditures | $ | 9,357 | $ | 4,419 |
Summary Segment Information (unaudited) (in thousands) |
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Twelve Months Ended |
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2016 | 2015 | ||||||||||||||||
% of | % of | ||||||||||||||||
consolidated | consolidated | ||||||||||||||||
Amount | net revenue | Amount | net revenue | ||||||||||||||
Net revenue: | |||||||||||||||||
Segment net revenue | |||||||||||||||||
Domestic | $ | 9,191,574 | 94.53 | % | $ | 9,176,855 | 93.90 | % | |||||||||
International | 343,674 | 3.53 | % | 372,638 | 3.81 | % | |||||||||||
CPS | 539,580 | 5.55 | % | 561,812 | 5.75 | % | |||||||||||
Total segment net revenue | 10,074,828 | 10,111,305 | |||||||||||||||
Inter-segment revenue | |||||||||||||||||
CPS | (351,397 | ) | (3.61 | )% | (338,359 | ) | (3.46 | )% | |||||||||
Total inter-segment revenue | (351,397 | ) | (338,359 | ) | |||||||||||||
Consolidated net revenue | $ | 9,723,431 | 100.00 | % | $ | 9,772,946 | 100.00 | % | |||||||||
% of segment | % of segment | ||||||||||||||||
Operating earnings (loss): | net revenue | net revenue | |||||||||||||||
Domestic | $ | 165,495 | 1.80 | % | $ | 162,944 | 1.78 | % | |||||||||
International | 5,596 | 1.63 | % | 3,198 | 0.86 | % | |||||||||||
CPS | 53,799 | 9.97 | % | 61,932 | 11.02 | % | |||||||||||
Inter-segment eliminations | (616 | ) | (811 | ) | |||||||||||||
Acquisition-related and exit and realignment charges (1) | (24,675 | ) | (28,404 | ) | |||||||||||||
Other (2) | — | 1,500 | |||||||||||||||
Consolidated operating earnings | $ | 199,599 | 2.05 | % | $ | 200,359 | 2.05 | % | |||||||||
Depreciation and amortization: | |||||||||||||||||
Domestic | $ | 29,469 | $ | 34,425 | |||||||||||||
International | 17,117 | 18,903 | |||||||||||||||
CPS | 8,807 | 8,180 | |||||||||||||||
Consolidated depreciation and amortization | $ | 55,393 | $ | 61,508 | |||||||||||||
Capital expenditures: | |||||||||||||||||
Domestic | $ | 14,333 | $ | 17,310 | |||||||||||||
International | 12,874 | 18,158 | |||||||||||||||
CPS | 2,914 | 1,148 | |||||||||||||||
Consolidated capital expenditures | $ | 30,121 | $ | 36,616 | |||||||||||||
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Total assets: | |||||||||||||||||
Domestic |
$ |
1,778,481 |
$ |
1,785,676 |
|||||||||||||
International |
|
352,898 |
|
406,787 |
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CPS |
|
400,885 |
|
420,293 |
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Segment assets |
|
2,532,264 |
|
2,612,756 |
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Cash and cash equivalents |
|
185,488 |
|
161,020 |
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Consolidated total assets |
$ |
2,717,752 |
$ |
2,773,776 |
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(1) The year ended |
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(2) Contract settlement claim in 2014 of which |
Net Income Per Common Share (unaudited) (in thousands, except per share data) |
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Three Months Ended |
Twelve Months Ended |
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2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Numerator: | ||||||||||||||||||||
Net income | $ | 27,105 | $ | 32,068 | $ | 108,787 | $ | 103,409 | ||||||||||||
Less: income allocated to unvested restricted shares | (289 | ) | (307 | ) | (1,147 | ) | (925 | ) | ||||||||||||
Net income attributable to common shareholders - basic | 26,816 | 31,761 | 107,640 | 102,484 | ||||||||||||||||
Add: undistributed income attributable to unvested restricted shares -basic | 79 | 107 | 297 | 235 | ||||||||||||||||
Less: undistributed income attributable to unvested restricted shares -diluted | (79 | ) | (107 | ) | (297 | ) | (235 | ) | ||||||||||||
Net income attributable to common shareholders - diluted | $ | 26,816 | $ | 31,761 | $ | 107,640 | $ | 102,484 | ||||||||||||
Denominator: | ||||||||||||||||||||
Weighted average shares outstanding — basic | 60,259 | 61,771 | 61,093 | 62,116 | ||||||||||||||||
Dilutive shares - stock options | — | — | — | 1 | ||||||||||||||||
Weighted average shares outstanding — diluted | 60,259 | 61,771 | 61,093 | 62,117 | ||||||||||||||||
Net income per share attributable to common shareholders: | ||||||||||||||||||||
Basic | $ | 0.45 | $ | 0.51 | $ | 1.76 | $ | 1.65 | ||||||||||||
Diluted | $ | 0.45 | $ | 0.51 | $ | 1.76 | $ | 1.65 |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170214006473/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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