UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________
FORM 10-Q
________________________________________________
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2018
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-9810
_______________________________________________________
Owens & Minor, Inc.
(Exact name of Registrant as specified in its charter)
_______________________________________________________
Virginia | 54-1701843 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
9120 Lockwood Boulevard, Mechanicsville, Virginia | 23116 |
(Address of principal executive offices) | (Zip Code) |
Post Office Box 27626, Richmond, Virginia | 23261-7626 |
(Mailing address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (804) 723-7000
_________________________________________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | o | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | o | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares of Owens & Minor, Inc.’s common stock outstanding as of May 7, 2018, was 61,791,911 shares.
Owens & Minor, Inc. and Subsidiaries
Index
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Item 2. | ||
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Item 4. | ||
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Item 1A. | ||
Item 2. | ||
Item 5. | ||
Item 6. | ||
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Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited)
Three Months Ended March 31, | ||||||||
(in thousands, except per share data) | 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 | ||||
Cash dividends per common share | $ | 0.26 | $ | 0.2575 | ||||
See accompanying notes to consolidated financial statements.
3
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Net income | $ | 8,151 | $ | 18,785 | ||||
Other comprehensive income, net of tax: | ||||||||
Currency translation adjustments (net of income tax of $0 in 2018 and 2017) | 8,921 | 5,492 | ||||||
Change in unrecognized net periodic pension costs (net of income tax of $142 in 2018 and $226 in 2017) | 380 | 236 | ||||||
Other (net of income tax of $0 in 2018 and 2017) | 6 | 110 | ||||||
Total other comprehensive income, net of tax | 9,307 | 5,838 | ||||||
Comprehensive income | $ | 17,458 | $ | 24,623 | ||||
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
March 31, | December 31, | ||||||
(in thousands, except per share data) | 2018 | 2017 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 87,632 | $ | 104,522 | |||
Accounts receivable, net of allowances of $17,925 and $16,280 | 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 of accumulated depreciation of $248,482 and $239,581 | 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 | |||||
Commitments and contingencies | |||||||
Equity | |||||||
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 61,812 shares and 61,476 shares | 123,624 | 122,952 | |||||
Paid-in capital | 228,273 | 226,937 | |||||
Retained earnings | 682,798 | 690,674 | |||||
Accumulated other comprehensive loss | (15,777 | ) | (25,084 | ) | |||
Total equity | 1,018,918 | 1,015,479 | |||||
Total liabilities and equity | $ | 3,391,554 | $ | 3,376,293 | |||
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
Three Months Ended March 31, | |||||||
(in thousands) | 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 expense (benefit) | (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 increase (decrease) 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 | |||
Supplemental disclosure of cash flow information: | |||||||
Income taxes paid, net | $ | 1,197 | $ | 2,825 | |||
Interest paid | $ | 9,661 | $ | 6,183 | |||
See accompanying notes to consolidated financial statements.
6
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
(unaudited)
(in thousands, except per share data) | Common Shares Outstanding | Common Stock ($2 par value ) | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | ||||||||||||||||
Balance December 31, 2016 | 61,031 | $ | 122,062 | $ | 219,955 | $ | 685,504 | $ | (67,483 | ) | $ | 960,038 | ||||||||||
Net income | 18,785 | 18,785 | ||||||||||||||||||||
Other comprehensive income (loss) | 5,838 | 5,838 | ||||||||||||||||||||
Dividends declared ($0.2575 per share) | (15,698 | ) | (15,698 | ) | ||||||||||||||||||
Share-based compensation expense, exercises and other | 171 | 341 | 653 | 994 | ||||||||||||||||||
Balance March 31, 2017 | 61,202 | $ | 122,403 | $ | 220,608 | $ | 688,591 | $ | (61,645 | ) | $ | 969,957 | ||||||||||
Balance December 31, 2017 | 61,476 | $ | 122,952 | $ | 226,937 | $ | 690,674 | $ | (25,084 | ) | $ | 1,015,479 | ||||||||||
Net income | 8,151 | 8,151 | ||||||||||||||||||||
Other comprehensive income (loss) | 9,307 | 9,307 | ||||||||||||||||||||
Dividends declared ($0.26 per share) | (16,027 | ) | (16,027 | ) | ||||||||||||||||||
Share-based compensation expense, exercises and other | 336 | 672 | 1,336 | 2,008 | ||||||||||||||||||
Balance March 31, 2018 | 61,812 | $ | 123,624 | $ | 228,273 | $ | 682,798 | $ | (15,777 | ) | $ | 1,018,918 | ||||||||||
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, unless otherwise indicated)
Note 1—Basis of Presentation and Use of Estimates
Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, or our) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.
Recently, we have made certain changes to the leadership team, organizational structure, budgeting and financial reporting processes which drive changes to segment reporting. These changes align our operations into two distinct business units: Global Solutions and Global Products. Global Solutions (previously Domestic and International) is our U.S. and European distribution, logistics and value-added services business. Global Products (previously Proprietary Products) provides product-related solutions, including surgical and procedural kitting and sourcing. Beginning with the quarter ended March 31, 2018, we now report financial results using this two segment structure and have recast prior year segment results on the same basis.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Actual results may differ from these estimates.
Revenue Recognition
On January 1, 2018, we adopted ASC 606 Revenue from Contracts with Customers, which establishes principles for recognizing revenue and reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We applied the guidance using the modified retrospective transition method. The adoption of this guidance had no impact on the amount and timing of revenue recognized, therefore, no adjustments were recorded to our consolidated financial statements upon adoption.
Our revenue is primarily generated from sales contracts with customers. Under most of our distribution arrangements, our performance obligations are limited to delivery of products to a customer upon receipt of a purchase order. For these arrangements, we recognize revenue at the point in time when shipment is completed, as control passes to the customer upon product receipt.
Revenue for activity-based fees and other services is recognized over time as activities are performed. Depending on the specific contractual provisions and nature of the performance obligation, revenue from services may be recognized on a straight-line basis over the term of the service, on a proportional performance model, based on level of effort, or when final deliverables have been provided.
Our contracts sometimes allow for forms of variable consideration including rebates, incentives and performance guarantees. In these cases, we estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer. Rebates and customer incentives are estimated based on contractual terms or historical experience and we maintain a liability for rebates or incentives that have been earned but are unpaid. The amount accrued for rebates and incentives due to customers was $14.8 million at March 31, 2018 and $13.0 million at December 31, 2017.
Additionally, we generate fees from arrangements that include performance targets related to cost-saving initiatives for customers that result from our supply-chain management services. Achievement against performance targets, measured in accordance with contractual terms, may result in additional fees paid to us or, if performance targets are not achieved, we may be obligated to refund or reduce a portion of our fees or to provide credits toward future purchases by the customer. For these arrangements, contingent revenue is deferred and recognized as the performance target is achieved and the applicable contingency is released. When we determine that a loss is probable under a contract, the estimated loss is accrued. The amount deferred under these arrangements is not material.
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For our direct to patient and home health agency sales, revenues are recorded based upon the estimated amounts due from patients and third-party payors. Third-party payors include federal and state agencies (under Medicare and Medicaid programs), managed care health plans and commercial insurance companies. Estimates of contractual allowances are based upon historical collection rates for the related payor agreements. The estimated reimbursement amounts are made on a payor-specific basis and are recorded based on the best information available regarding management’s interpretation of the applicable laws, regulations and reimbursement terms.
In most cases, we record revenue gross, as we are the primary obligor in the arrangement and we obtain control of the products before they are transferred to the customer. When we act as an agent in a sales arrangement and do not bear a significant portion of inventory risks, primarily for our third-party logistics business, we record revenue net of product cost. Sales taxes collected from customers and remitted to governmental authorities are excluded from revenues.
See Note 13 for disaggregation of revenue by segment and geography as we believe that best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
Note 2—Fair Value
The carrying amounts of cash and cash equivalents, accounts receivable, financing receivables, accounts payable and financing payables included in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The fair value of long-term debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings and average remaining maturities (Level 2). We determine the fair value of our derivatives, if any, based on estimated amounts that would be received or paid to terminate the contracts at the reporting date based on current market prices for applicable currencies. See Note 8 for the fair value of long-term debt.
Note 3—Acquisitions
On August 1, 2017, we completed the acquisition of Byram Healthcare, a leading domestic distributor of reimbursable medical supplies sold directly to patients and home health agencies.
The consideration was $367 million, net of cash acquired, which is subject to final working capital adjustments with the seller. The purchase price was allocated on a preliminary basis to the underlying assets acquired and liabilities assumed based upon our current estimate of their fair values at the date of acquisition. The purchase price exceeded the preliminary estimated fair value of the net tangible and identifiable intangible assets by $289 million which was allocated to goodwill. The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed recognized as of the acquisition date. The fair value of intangibles from this acquisition was primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate. These inputs are considered Level 3 inputs. The allocation of purchase price to assets and liabilities acquired is not yet complete, as final working capital adjustments with the seller are still pending.
Preliminary Fair Value Originally Estimated as of Acquisition Date (1) | Differences Between Prior and the Current Periods Preliminary Fair Value Estimate | Preliminary Fair Value Currently Estimated as of Acquisition Date | |||||||||
Assets acquired: | |||||||||||
Current assets | $ | 61,986 | $ | — | $ | 61,986 | |||||
Goodwill | 288,691 | — | 288,691 | ||||||||
Intangible assets | 115,000 | — | 115,000 | ||||||||
Other noncurrent assets | 5,069 | — | 5,069 | ||||||||
Total assets | 470,746 | — | 470,746 | ||||||||
Liabilities assumed: | |||||||||||
Current liabilities | 72,962 | — | 72,962 | ||||||||
Noncurrent liabilities | 31,215 | — | 31,215 | ||||||||
Total liabilities | 104,177 | — | 104,177 | ||||||||
Fair value of net assets acquired, net of cash | $ | 366,569 | $ | — | $ | 366,569 | |||||
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(1) As previously reported in our 2017 Form 10-K.
We are amortizing the preliminary fair value of acquired intangible assets, primarily chronic customer relationships and a trade name, over their weighted average useful lives of three to 10 years.
Goodwill of $289 million, which we assigned to our Global Solutions segment, consists largely of expected opportunities to expand into the non-acute market with direct to patient distribution capabilities. None of the goodwill recognized is expected to be deductible for income tax purposes.
Pro forma results of operations for Byram has not been presented because the effects on revenue and net income were not material to our historic consolidated financial statements.
Acquisition-related expenses in the current quarter consist primarily of transition and transaction costs for the Halyard S&IP transaction (See Note 16) as well as Byram and in first quarter of 2017 consist primarily of transaction costs for Byram. We recognized pre-tax acquisition-related expenses of $12.1 million in 2018 and $1.3 million related to these activities in 2017.
Note 4—Financing Receivables and Payables
At March 31, 2018 and December 31, 2017, we had financing receivables of $170.5 million and $192.1 million and related payables of $106.7 million and $124.9 million outstanding under our order-to-cash program and product financing arrangements, which were included in other current assets and other current liabilities, respectively, in the consolidated balance sheets.
Note 5—Goodwill and Intangible Assets
In connection with our new segment structure, goodwill is now reported as part of Global Solutions or Global Products. There was no change to our underlying reporting units as part of this segment change and therefore no reallocation of goodwill. The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through March 31, 2018:
Global Solutions | Global Products | Consolidated | |||||||||
Carrying amount of goodwill, December 31, 2017 | $ | 495,860 | $ | 217,951 | $ | 713,811 | |||||
Currency translation adjustments | 1,070 | 564 | 1,634 | ||||||||
Carrying amount of goodwill, March 31, 2018 | $ | 496,930 | $ | 218,515 | $ | 715,445 | |||||
Intangible assets at March 31, 2018, and December 31, 2017, were as follows:
March 31, 2018 | December 31, 2017 | ||||||||||||||
Customer Relationships | Other Intangibles | Customer Relationships | Other Intangibles | ||||||||||||
Gross intangible assets | $ | 200,574 | $ | 43,683 | $ | 199,265 | $ | 43,537 | |||||||
Accumulated amortization | (60,641 | ) | (4,736 | ) | (54,757 | ) | (3,577 | ) | |||||||
Net intangible assets | $ | 139,933 | $ | 38,947 | $ | 144,508 | $ | 39,960 | |||||||
At March 31, 2018, $122.8 million in net intangible assets were held in the Global Solutions segment and $56.1 million were held in the Global Products segment. Amortization expense for intangible assets was $6.4 million and $2.3 million for the three months ended March 31, 2018 and 2017.
Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $19.2 million for the remainder of 2018, $25.6 million for 2019, $24.6 million for 2020, $22.9 million for 2021, $22.1 million for 2022 and $21.1 million for 2023.
Note 6—Exit and Realignment Costs
We periodically incur exit and realignment and other charges associated with optimizing our operations which include the closure and consolidation of certain distribution and logistics centers, administrative offices and warehouses in the United States and Europe. These charges also include costs associated with our strategic organizational realignment which include management changes, certain professional fees, and costs to streamline administrative functions and processes.
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Exit and realignment charges by segment for the three months ended March 31, 2018 and 2017 were as follows:
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Global Solutions segment | $ | 2,708 | $ | 7,132 | |||
Global Products segment | (29 | ) | 463 | ||||
Total exit and realignment charges | $ | 2,679 | $ | 7,595 | |||
The following table summarizes the activity related to exit and realignment cost accruals through March 31, 2018 and 2017:
Lease Obligations | Severance and Other | Total | |||||||||
Accrued exit and realignment costs, December 31, 2017 | $ | — | $ | 11,972 | $ | 11,972 | |||||
Provision for exit and realignment activities | — | 2,295 | 2,295 | ||||||||
Change in estimate | — | (23 | ) | (23 | ) | ||||||
Cash payments | — | (6,479 | ) | (6,479 | ) | ||||||
Accrued exit and realignment costs, March 31, 2018 | $ | — | $ | 7,765 | $ | 7,765 | |||||
Accrued exit and realignment costs, December 31, 2016 | $ | — | $ | 2,238 | $ | 2,238 | |||||
Provision for exit and realignment activities | — | 3,211 | 3,211 | ||||||||
Change in estimate | — | (304 | ) | (304 | ) | ||||||
Cash payments | — | (3,034 | ) | (3,034 | ) | ||||||
Accrued exit and realignment costs, March 31, 2017 | $ | — | $ | 2,111 | $ | 2,111 | |||||
In addition to the exit and realignment accruals in the preceding table, we also incurred $0.4 million in costs that were expensed as incurred for the quarter ended March 31, 2018, including $0.2 million in information system restructuring costs and $0.2 million in other costs.
We also incurred $4.7 million of costs that were expensed as incurred for the quarter ended March 31, 2017, including $4.5 million in asset write-downs and $0.2 million in other costs.
Note 7—Retirement Plans
We have a noncontributory, unfunded retirement plan for certain officers and other key employees in the United States. Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective employees.
The components of net periodic benefit cost, which are included in distribution, selling and administrative expenses, for the three months ended March 31, 2018 and 2017, were as follows:
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Service cost | $ | 19 | $ | 12 | |||
Interest cost | 419 | 474 | |||||
Recognized net actuarial loss | 522 | 462 | |||||
Net periodic benefit cost | $ | 960 | $ | 948 | |||
Certain of our foreign subsidiaries have health and welfare plans covering substantially all of their respective employees. Our expense for these plans totaled $0.5 million and $0.4 million for the three months ended March 31, 2018 and 2017.
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Note 8—Debt
We have $275 million of 3.875% senior notes due 2021 (the “2021 Notes”) and $275 million of 4.375% senior notes due 2024 (the “2024 Notes”), with interest payable semi-annually. The 2021 Notes were sold at 99.5% of the principal amount with an effective yield of 3.951%. The 2024 Notes were sold at 99.6% of the principal with an effective yield of 4.422% . We have the option to redeem the 2021 Notes and 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100% of the principal amount or the present value of the remaining scheduled payments discounted at the Treasury Rate plus 30 basis points. As of March 31, 2018 and December 31, 2017, the estimated fair value of the 2021 Notes was $272.7 million and $278.1 million and the estimated fair value of the 2024 Notes was $271.2 million and $277.9 million, respectively.
We have a Credit Agreement with a borrowing capacity of $600 million and a $250 million term loan. We make principal payments under the term loan on a quarterly basis with the remaining outstanding principal due in July 2022. The revolving credit facility matures in July 2022. Under the Credit Agreement, we have the ability to request two one -year extensions and to request an increase in aggregate commitments by up to $200 million . The interest rate on the Credit Agreement, which is subject to adjustment quarterly, is based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus an adjustment based on the better of our debt ratings or leverage ratio (Credit Spread) as defined by the Credit Agreement. We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the facility. The terms of the Credit Agreement limit the amount of indebtedness that we may incur and require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition. Based on our Credit Spread, the interest rate under the credit facility at March 31, 2018 is Eurocurrency Rate plus 1.5%.
At March 31, 2018, we had borrowings of $104.3 million under the revolver and letters of credit of approximately $6.8 million outstanding under the Credit Agreement, leaving $488.9 million available for borrowing. We also had a letter of credit outstanding for $1.3 million as of March 31, 2018 and December 31, 2017, which supports our facilities leased in Europe.
Scheduled future principal payments of debt are $12.5 million in 2018, $12.5 million in 2019, $14.1 million in 2020, $295.3 million in 2021, $291.8 million in 2022, and $275.0 million thereafter.
The Credit Agreement and senior notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement. We believe we were in compliance with our debt covenants at March 31, 2018.
In connection with the Halyard S&IP acquisition, we have amended our Credit Agreement. See Note 16 for further information.
Note 9—Income Taxes
The effective tax rate was 41.6% for the three months ended March 31, 2018, compared to 34.7% in the same quarter of 2017. The increase in the rate resulted from losses in jurisdictions with full valuation allowances and additional income tax expense associated with the vesting of restricted stock. The liability for unrecognized tax benefits was $13.9 million at March 31, 2018 and $13.6 million at December 31, 2017. Included in the liability at March 31, 2018 were $5.1 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
On December 22, 2017, the President signed the Tax Cuts and Jobs Act (the Act). While we substantially completed our analysis of the Act as of December 31, 2017, the amounts recorded for the Act remain provisional for the transition tax, the remeasurement of deferred taxes, our reassessment of permanently reinvested earnings, uncertain tax positions and valuation allowances. These estimates may be impacted by further analysis and future clarification and guidance regarding available tax accounting methods and elections, earnings and profits computations, state tax conformity to federal tax changes and the impact of the global intangible low-taxed Income (GILTI) provisions. We included an estimate of the current GILTI impact in our tax provision for 2018, however, we have not yet determined our policy election with respect to whether such taxes are recorded as a current period expense when incurred or whether such amounts should be factored into a company’s measurement of its deferred taxes.
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Note 10—Net Income per Common Share
The following summarizes the calculation of net income per common share attributable to common shareholders for the three months ended March 31, 2018 and 2017.
Three Months Ended March 31, | |||||||
(in thousands, except per share data) | 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 | |||
Note 11—Shareholders’ Equity
Our Board of Directors has authorized a share repurchase program of up to $100 million of our outstanding common stock to be executed at the discretion of management over a three-year period, expiring in December 2019. The timing of repurchases and the exact number of shares of common stock to be purchased will depend upon market conditions and other factors and may be suspended or discontinued at any time. Purchases under the share repurchase program are made either pursuant to 10b5-1 plans entered into by the company from time to time and/or during the company’s scheduled quarterly trading windows for officers and directors. We did not repurchase any shares during the three months ended March 31, 2018. As of March 31, 2018, we have approximately $94.0 million remaining under the repurchase program. We have elected to allocate any excess of share repurchase price over par value to retained earnings.
13
Note 12—Accumulated Other Comprehensive Income (Loss)
The following table shows the changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2018 and 2017:
Retirement Plans | Currency Translation Adjustments | Other | Total | ||||||||||||
Accumulated other comprehensive income (loss), December 31, 2017 | $ | (12,066 | ) | $ | (13,185 | ) | $ | 167 | $ | (25,084 | ) | ||||
Other comprehensive income (loss) before reclassifications | — | 8,921 | 6 | 8,927 | |||||||||||
Income tax | — | — | — | — | |||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | — | 8,921 | 6 | 8,927 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 522 | — | — | 522 | |||||||||||
Income tax | (142 | ) | — | — | (142 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax | 380 | — | — | 380 | |||||||||||
Other comprehensive income (loss) | 380 | 8,921 | 6 | 9,307 | |||||||||||
Accumulated other comprehensive income (loss), March 31, 2018 | $ | (11,686 | ) | $ | (4,264 | ) | $ | 173 | $ | (15,777 | ) | ||||
Retirement Plans | Currency Translation Adjustments | Other | Total | ||||||||||||
Accumulated other comprehensive income (loss), December 31, 2016 | $ | (11,209 | ) | $ | (56,245 | ) | $ | (29 | ) | $ | (67,483 | ) | |||
Other comprehensive income (loss) before reclassifications | — | 5,492 | 110 | 5,602 | |||||||||||
Income tax | — | — | — | — | |||||||||||
Other comprehensive income (loss) before reclassifications, net of tax | — | 5,492 | 110 | 5,602 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 462 | — | 462 | ||||||||||||
Income tax | (226 | ) | — | — | (226 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax | 236 | — | — | 236 | |||||||||||
Other comprehensive income (loss) | 236 | 5,492 | 110 | 5,838 | |||||||||||
Accumulated other comprehensive income (loss), March 31, 2017 | $ | (10,973 | ) | $ | (50,753 | ) | $ | 81 | $ | (61,645 | ) | ||||
We include amounts reclassified out of accumulated other comprehensive income related to defined benefit pension plans as a component of net periodic pension cost recorded in distribution, selling and administrative expenses. For both the three months ended March 31, 2018 and 2017, we reclassified $0.5 million of actuarial net losses.
Note 13—Segment Information
We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance. We report our business under two segments: Global Solutions and Global Products. The Global Solutions segment includes our United States and European distribution, logistics and value-added services business. Global Products provides product-related solutions, including surgical and procedural kitting and sourcing. The Halyard S&IP business, acquired on April 30, 2018, will be part of Global Products.
14
We evaluate the performance of our segments based on their operating income excluding acquisition-related and exit and realignment charges, certain purchase price fair value adjustments, and other substantive items that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis. Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading or not meaningful. We believe all inter-segment sales are at prices that approximate market.
The following tables present financial information by segment:
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net revenue: | |||||||
Segment net revenue | |||||||
Global Solutions | $ | 2,341,122 | $ | 2,288,955 | |||
Global Products | 121,287 | 137,153 | |||||
Total segment net revenue | 2,462,409 | 2,426,108 | |||||
Inter-segment revenue | |||||||
Global Products | (89,830 | ) | (97,535 | ) | |||
Total inter-segment revenue | (89,830 | ) | (97,535 | ) | |||
Consolidated net revenue | $ | 2,372,579 | $ | 2,328,573 | |||
Operating income (loss): | |||||||
Global Solutions | $ | 31,625 | $ | 37,951 | |||
Global Products | 9,811 | 8,128 | |||||
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 | $ | 35,517 | |||
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.
15
March 31, 2018 | December 31, 2017 | ||||||
Total assets: | |||||||
Global Solutions | $ | 2,900,618 | $ | 2,870,999 | |||
Global Products | 403,304 | 400,772 | |||||
Segment assets | 3,303,922 | 3,271,771 | |||||
Cash and cash equivalents | 87,632 | 104,522 | |||||
Consolidated total assets | $ | 3,391,554 | $ | 3,376,293 | |||
The following table presents net revenue by geographic area, which were attributed based on the location from which we ship products or provide services.
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Net revenue: | |||||||
United States | $ | 2,252,634 | $ | 2,220,649 | |||
Outside of the United States | 119,945 | 107,924 | |||||
Consolidated net revenue | $ | 2,372,579 | $ | 2,328,573 | |||
Note 14—Condensed Consolidating Financial Information
The following tables present condensed consolidating financial information for: Owens & Minor, Inc. (O&M); the guarantors of Owens & Minor, Inc.’s 2021 Notes and 2024 Notes, on a combined basis; and the non-guarantor subsidiaries of the 2021 Notes and 2024 Notes, on a combined basis. The guarantor subsidiaries are 100% owned by Owens & Minor, Inc. Separate financial statements of the guarantor subsidiaries are not presented because the guarantees by our guarantor subsidiaries are full and unconditional, as well as joint and several, and we believe the condensed consolidating financial information is more meaningful in understanding the financial position, results of operations and cash flows of the guarantor subsidiaries.
Three Months Ended March 31, 2018 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Statements of Income | |||||||||||||||||||
Net revenue | $ | — | $ | 2,110,861 | $ | 301,266 | $ | (39,548 | ) | $ | 2,372,579 | ||||||||
Cost of goods sold | — | 1,914,637 | 172,726 | (39,471 | ) | 2,047,892 | |||||||||||||
Gross margin | — | 196,224 | 128,540 | (77 | ) | 324,687 | |||||||||||||
Distribution, selling and administrative expenses | (179 | ) | 160,870 | 123,670 | — | 284,361 | |||||||||||||
Acquisition-related and exit and realignment charges | — | 13,228 | 1,532 | — | 14,760 | ||||||||||||||
Other operating income, net | — | (583 | ) | 1,932 | — | 1,349 | |||||||||||||
Operating income (loss) | 179 | 22,709 | 1,406 | (77 | ) | 24,217 | |||||||||||||
Interest expense (income), net | 6,741 | 2,022 | 1,490 | — | 10,253 | ||||||||||||||
Income (loss) before income taxes | (6,562 | ) | 20,687 | (84 | ) | (77 | ) | 13,964 | |||||||||||
Income tax (benefit) provision | — | 4,456 | 1,357 | — | 5,813 | ||||||||||||||
Equity in earnings of subsidiaries | 14,713 | 2,210 | — | (16,923 | ) | — | |||||||||||||
Net income (loss) | 8,151 | 18,441 | (1,441 | ) | (17,000 | ) | 8,151 | ||||||||||||
Other comprehensive income (loss) | 9,307 | 9,363 | 8,921 | (18,284 | ) | 9,307 | |||||||||||||
Comprehensive income (loss) | $ | 17,458 | $ | 27,804 | $ | 7,480 | $ | (35,284 | ) | $ | 17,458 | ||||||||
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Three Months Ended March 31, 2017 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Statements of Income | |||||||||||||||||||
Net revenue | $ | — | $ | 2,193,285 | $ | 186,854 | $ | (51,566 | ) | $ | 2,328,573 | ||||||||
Cost of goods sold | — | 1,990,186 | 108,185 | (50,978 | ) | 2,047,393 | |||||||||||||
Gross margin | — | 203,099 | 78,669 | (588 | ) | 281,180 | |||||||||||||
Distribution, selling and administrative expenses | 156 | 161,235 | 76,302 | — | 237,693 | ||||||||||||||
Acquisition-related and exit and realignment charges | — | 7,799 | 1,143 | — | 8,942 | ||||||||||||||
Other operating income, net | — | (374 | ) | (598 | ) | — | (972 | ) | |||||||||||
Operating income (loss) | (156 | ) | 34,439 | 1,822 | (588 | ) | 35,517 | ||||||||||||
Interest expense (income), net | 6,848 | (790 | ) | 686 | — | 6,744 | |||||||||||||
Income (loss) before income taxes | (7,004 | ) | 35,229 | 1,136 | (588 | ) | 28,773 | ||||||||||||
Income tax (benefit) provision | — | 8,013 | 1,975 | — | 9,988 | ||||||||||||||
Equity in earnings of subsidiaries | 25,789 | (1,105 | ) | — | (24,684 | ) | — | ||||||||||||
Net income (loss) | 18,785 | 26,111 | (839 | ) | (25,272 | ) | 18,785 | ||||||||||||
Other comprehensive income (loss) | 5,838 | 5,644 | 5,492 | (11,136 | ) | 5,838 | |||||||||||||
Comprehensive income (loss) | $ | 24,623 | $ | 31,755 | $ | 4,653 | $ | (36,408 | ) | $ | 24,623 | ||||||||
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March 31, 2018 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non- guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Balance Sheets | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 13,271 | $ | 1,018 | $ | 73,343 | $ | — | $ | 87,632 | ||||||||||
Accounts receivable, net | — | 613,000 | 172,044 | (6,889 | ) | 778,155 | ||||||||||||||
Merchandise inventories | — | 933,024 | 90,342 | (1,655 | ) | 1,021,711 | ||||||||||||||
Other current assets | 25 | 111,987 | 188,263 | — | 300,275 | |||||||||||||||
Total current assets | 13,296 | 1,659,029 | 523,992 | (8,544 | ) | 2,187,773 | ||||||||||||||
Property and equipment, net | — | 108,770 | 98,272 | — | 207,042 | |||||||||||||||
Goodwill, net | — | 180,006 | 535,439 | — | 715,445 | |||||||||||||||
Intangible assets, net | — | 9,064 | 169,816 | — | 178,880 | |||||||||||||||
Due from O&M and subsidiaries | — | 413,109 | — | (413,109 | ) | — | ||||||||||||||
Advances to and investment in consolidated subsidiaries | 2,129,567 | 566,615 | — | (2,696,182 | ) | — | ||||||||||||||
Other assets, net | — | 67,071 | 35,343 | — | 102,414 | |||||||||||||||
Total assets | $ | 2,142,863 | $ | 3,003,664 | $ | 1,362,862 | $ | (3,117,835 | ) | $ | 3,391,554 | |||||||||
Liabilities and equity | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable | $ | — | $ | 841,364 | $ | 123,814 | $ | (6,908 | ) | $ | 958,270 | |||||||||
Accrued payroll and related liabilities | — | 14,888 | 15,592 | — | 30,480 | |||||||||||||||
Other accrued liabilities | 5,867 | 166,738 | 164,625 | — | 337,230 | |||||||||||||||
Total current liabilities | 5,867 | 1,022,990 | 304,031 | (6,908 | ) | 1,325,980 | ||||||||||||||
Long-term debt, excluding current portion | 545,603 | 337,024 | 14,444 | — | 897,071 | |||||||||||||||
Due to O&M and subsidiaries | 572,475 | — | 460,381 | (1,032,856 | ) | — | ||||||||||||||
Intercompany debt | — | 138,890 | — | (138,890 | ) | — | ||||||||||||||
Deferred income taxes | — | 24,058 | 49,122 | — | 73,180 | |||||||||||||||
Other liabilities | — | 66,152 | 10,253 | — | 76,405 | |||||||||||||||
Total liabilities | 1,123,945 | 1,589,114 | 838,231 | (1,178,654 | ) | 2,372,636 | ||||||||||||||
Equity | ||||||||||||||||||||
Common stock | 123,624 | — | — | — | 123,624 | |||||||||||||||
Paid-in capital | 228,273 | 174,614 | 583,866 | (758,480 | ) | 228,273 | ||||||||||||||
Retained earnings (deficit) | 682,798 | 1,254,606 | (54,857 | ) | (1,199,749 | ) | 682,798 | |||||||||||||
Accumulated other comprehensive income (loss) | (15,777 | ) | (14,670 | ) | (4,378 | ) | 19,048 | (15,777 | ) | |||||||||||
Total equity | 1,018,918 | 1,414,550 | 524,631 | (1,939,181 | ) | 1,018,918 | ||||||||||||||
Total liabilities and equity | $ | 2,142,863 | $ | 3,003,664 | $ | 1,362,862 | $ | (3,117,835 | ) | $ | 3,391,554 | |||||||||
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December 31, 2017 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||
Balance Sheets | |||||||||||||||||||
Assets | |||||||||||||||||||
Current assets | |||||||||||||||||||
Cash and cash equivalents | $ | 13,700 | $ | 865 | $ | 89,957 | $ | — | $ | 104,522 | |||||||||
Accounts receivable, net | — | 559,269 | 206,410 | (6,743 | ) | 758,936 | |||||||||||||
Merchandise inventories | — | 902,190 | 89,580 | (1,577 | ) | 990,193 | |||||||||||||
Other current assets | 100 | 123,067 | 205,087 | — | 328,254 | ||||||||||||||
Total current assets | 13,800 | 1,585,391 | 591,034 | (8,320 | ) | 2,181,905 | |||||||||||||
Property and equipment, net | — | 107,010 | 99,480 | — | 206,490 | ||||||||||||||
Goodwill, net | — | 180,006 | 533,805 | — | 713,811 | ||||||||||||||
Intangible assets, net | — | 9,582 | 174,886 | — | 184,468 | ||||||||||||||
Due from O&M and subsidiaries | — | 439,654 | — | (439,654 | ) | — | |||||||||||||
Advances to and investments in consolidated subsidiaries | 2,114,853 | 558,429 | — | (2,673,282 | ) | — | |||||||||||||
Other assets, net | — | 57,724 | 31,895 | — | 89,619 | ||||||||||||||
Total assets | $ | 2,128,653 | $ | 2,937,796 | $ | 1,431,100 | $ | (3,121,256 | ) | $ | 3,376,293 | ||||||||
Liabilities and equity | |||||||||||||||||||
Current liabilities | |||||||||||||||||||
Accounts payable | $ | — | $ | 824,307 | $ | 130,028 | $ | (6,763 | ) | $ | 947,572 | ||||||||
Accrued payroll and related liabilities | — | 15,504 | 14,912 | — | 30,416 | ||||||||||||||
Other current liabilities | 5,822 | 140,048 | 185,875 | — | 331,745 | ||||||||||||||
Total current liabilities | 5,822 | 979,859 | 330,815 | (6,763 | ) | 1,309,733 | |||||||||||||
Long-term debt, excluding current portion | 545,352 | 340,672 | 14,720 | — | 900,744 | ||||||||||||||
Due to O&M and subsidiaries | 562,000 | — | 506,703 | (1,068,703 | ) | — | |||||||||||||
Intercompany debt | — | 138,890 | — | (138,890 | ) | — | |||||||||||||
Deferred income taxes | — | 25,493 | 48,754 | — | 74,247 | ||||||||||||||
Other liabilities | — | 66,136 | 9,954 | — | 76,090 | ||||||||||||||
Total liabilities | 1,113,174 | 1,551,050 | 910,946 | (1,214,356 | ) | 2,360,814 | |||||||||||||
Equity | |||||||||||||||||||
Common stock | 122,952 | — | — | — | 122,952 | ||||||||||||||
Paid-in capital | 226,937 | 174,614 | 583,869 | (758,483 | ) | 226,937 | |||||||||||||
Retained earnings (deficit) | 690,674 | 1,236,165 | (50,416 | ) | (1,185,749 | ) | 690,674 | ||||||||||||
Accumulated other comprehensive income (loss) | (25,084 | ) | (24,033 | ) | (13,299 | ) | 37,332 | (25,084 | ) | ||||||||||
Total equity | 1,015,479 | $ | 1,386,746 | 520,154 | (1,906,900 | ) | 1,015,479 | ||||||||||||
Total liabilities and equity | $ | 2,128,653 | $ | 2,937,796 | $ | 1,431,100 | $ | (3,121,256 | ) | $ | 3,376,293 | ||||||||
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Three Months Ended March 31, 2018 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Statements of Cash Flows | ||||||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 8,151 | $ | 18,441 | $ | (1,441 | ) | $ | (17,000 | ) | $ | 8,151 | ||||||||
Adjustments to reconcile net income to cash provided by (used for) operating activities: | ||||||||||||||||||||
Equity in earnings of subsidiaries | (14,713 | ) | (2,210 | ) | — | 16,923 | — | |||||||||||||
Depreciation and amortization | — | 6,653 | 11,258 | — | 17,911 | |||||||||||||||
Share-based compensation expense | — | 3,035 | — | — | 3,035 | |||||||||||||||
Provision for losses on accounts receivable | — | (724 | ) | 1,797 | — | 1,073 | ||||||||||||||
Deferred income tax expense (benefit) | — | (1,453 | ) | (29 | ) | — | (1,482 | ) | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||||
Accounts receivable | — | (53,007 | ) | 34,341 | 147 | (18,519 | ) | |||||||||||||
Merchandise inventories | — | (30,834 | ) | 202 | 76 | (30,556 | ) | |||||||||||||
Accounts payable | — | 17,057 | (7,439 | ) | (140 | ) | 9,478 | |||||||||||||
Net change in other assets and liabilities | 121 | 31,976 | (3,187 | ) | (6 | ) | 28,904 | |||||||||||||
Other, net | 250 | 132 | (104 | ) | — | 278 | ||||||||||||||
Cash provided by (used for) operating activities | (6,191 | ) | (10,934 | ) | 35,398 | — | 18,273 | |||||||||||||
Investing activities: | ||||||||||||||||||||
Additions to property and equipment | — | (5,847 | ) | (1,227 | ) | — | (7,074 | ) | ||||||||||||
Additions to computer software and intangible assets | — | (6,078 | ) | (1,008 | ) | — | (7,086 | ) | ||||||||||||
Cash provided by (used for) investing activities | — | (11,925 | ) | (2,235 | ) | — | (14,160 | ) | ||||||||||||
Financing activities: | ||||||||||||||||||||
Borrowing (repayments) under revolving credit facility | — | (300 | ) | — | — | (300 | ) | |||||||||||||
Repayment of debt | — | (3,125 | ) | — | — | (3,125 | ) | |||||||||||||
Change in intercompany advances | 22,949 | 26,858 | (49,807 | ) | — | — | ||||||||||||||
Cash dividends paid | (16,074 | ) | — | — | — | (16,074 | ) | |||||||||||||
Other, net | (1,113 | ) | (421 | ) | (770 | ) | — | (2,304 | ) | |||||||||||
Cash provided by (used for) financing activities | 5,762 | 23,012 | (50,577 | ) | — | (21,803 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 800 | — | 800 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | (429 | ) | 153 | (16,614 | ) | — | (16,890 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 13,700 | 865 | 89,957 | — | 104,522 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 13,271 | $ | 1,018 | $ | 73,343 | $ | — | $ | 87,632 | ||||||||||
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Three Months Ended March 31, 2017 | Owens & Minor, Inc. | Guarantor Subsidiaries | Non-guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Statements of Cash Flows | ||||||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income (loss) | $ | 18,785 | $ | 26,111 | $ | (839 | ) | $ | (25,272 | ) | $ | 18,785 | ||||||||
Adjustments to reconcile net income to cash provided by (used for) operating activities: | ||||||||||||||||||||
Equity in earnings of subsidiaries | (25,789 | ) | 1,105 | — | 24,684 | — | ||||||||||||||
Depreciation and amortization | — | 6,876 | 5,682 | — | 12,558 | |||||||||||||||
Share-based compensation expense | — | 2,511 | — | — | 2,511 | |||||||||||||||