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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________ 
FORM 10-Q
________________________________________________ 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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)
_______________________________________________________
Virginia54-1701843
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9120 Lockwood BoulevardMechanicsvilleVirginia23116
(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 (804723-7000
        Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $2 par value per shareOMINew York Stock Exchange
_________________________________________________________
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      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       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 filerAccelerated filer
Non-accelerated filer
  (Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
The number of shares of Owens & Minor, Inc.’s common stock outstanding as of July 31, 2020, was 63,781,275 shares.



Table of Contents
Owens & Minor, Inc. and Subsidiaries
Index
 
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
2


Table of Contents
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
 
 Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands, except per share data)2020201920202019
Net revenue$1,807,719  $2,376,705  $3,930,412  $4,727,544  
Cost of goods sold1,538,312  2,090,187  3,392,445  4,164,407  
Gross margin269,407  286,518  537,967  563,137  
Distribution, selling and administrative expenses241,734  264,215  495,782  519,326  
Acquisition-related and exit and realignment charges6,054  5,390  12,118  10,254  
Other operating (income) expense, net(577) 1,014  (2,886) 1,056  
Operating income22,196  15,899  32,953  32,501  
Interest expense, net21,605  26,048  44,948  51,506  
Other (income) expense, net(4,552) 731  294  3,464  
Income (loss) from continuing operations before income taxes5,143  (10,880) (12,289) (22,469) 
Income tax provision (benefit)4,982  (1,146) (3,541) (1,816) 
Income (loss) from continuing operations, net of tax161  (9,734) (8,748) (20,653) 
Loss from discontinued operations, net of tax(55,788) (742) (58,203) (3,919) 
Net loss$(55,627) $(10,476) $(66,951) $(24,572) 
Income (loss) from continuing operations per common share: basic and diluted$  $(0.16) $(0.14) $(0.34) 
Loss from discontinued operations per common share: basic and diluted(0.91) (0.01) (0.96) (0.07) 
Net loss per common share: basic and diluted$(0.91) $(0.17) $(1.10) $(0.41) 
See accompanying notes to consolidated financial statements.
3

Table of Contents
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(unaudited)
 
 Three Months Ended June 30,Six Months Ended
June 30,
(in thousands)2020201920202019
Net loss$(55,627) $(10,476) $(66,951) $(24,572) 
Other comprehensive income (loss), net of tax:
Currency translation adjustments (net of income tax of $0 in 2020 and 2019)30,008  7,452  1,830  3,245  
Change in unrecognized net periodic pension costs (net of income tax of $44 and $88 in 2020, and $63 and $126 in 2019)595  197  765  394  
Net unrealized loss on derivative instruments and other (net of income tax benefit of $238 and $4,064 in 2020, and $2,662 and $3,641 in 2019)(76) (5,262) (11,473) (7,675) 
Total other comprehensive income (loss), net of tax30,527  2,387  (8,878) (4,036) 
Comprehensive loss$(25,100) $(8,089) $(75,829) $(28,608) 
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
 
June 30,December 31,
(in thousands, except per share data)20202019
Assets
Current assets
Cash and cash equivalents$101,276  $67,030  
Accounts receivable, net of allowances of $23,319 and $21,015633,647  674,706  
Merchandise inventories1,040,861  1,146,192  
Other current assets175,244  79,372  
Current assets of discontinued operations  439,983  
Total current assets1,951,028  2,407,283  
Property and equipment, net of accumulated depreciation of $264,169 and $245,718297,033  315,427  
Operating lease assets142,200  142,219  
Goodwill391,670  393,181  
Intangible assets, net262,539  285,018  
Other assets, net93,316  99,956  
Total assets$3,137,786  $3,643,084  
Liabilities and equity
Current liabilities
Accounts payable$824,131  $808,035  
Accrued payroll and related liabilities54,445  53,584  
Other current liabilities317,658  231,029  
Current liabilities of discontinued operations  323,511  
Total current liabilities1,196,234  1,416,159  
Long-term debt, excluding current portion1,269,854  1,508,415  
Operating lease liabilities, excluding current portion117,800  117,080  
Deferred income taxes41,430  40,550  
Other liabilities117,306  98,726  
Total liabilities2,742,624  3,180,930  
Commitments and contingencies
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 63,737 shares and 62,843 shares127,474  125,686  
Paid-in capital258,733  251,401  
Retained earnings70,540  137,774  
Accumulated other comprehensive loss(61,585) (52,707) 
Total equity395,162  462,154  
Total liabilities and equity$3,137,786  $3,643,084  
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
 
Six Months Ended June 30,
(in thousands)20202019
Operating activities:
Net loss$(66,951) $(24,572) 
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization48,804  58,902  
Share-based compensation expense7,814  8,093  
Loss on divestiture65,472    
Provision for losses on accounts receivable7,589  6,534  
Deferred income tax expense (benefit)4,269  (14,597) 
Changes in operating lease right-of-use assets and lease liabilities(1,029) (616) 
Changes in operating assets and liabilities:
Accounts receivable37,154  (23,346) 
Merchandise inventories107,083  52,346  
Accounts payable16,395  (71,704) 
Net change in other assets and liabilities(76,289) 32,226  
Other, net146  5,748  
Cash provided by operating activities150,457  29,014  
Investing activities:
Proceeds from divestiture133,000    
Additions to property and equipment(8,733) (21,020) 
Additions to computer software(3,409) (4,511) 
Proceeds from sale of property and equipment69  339  
Proceeds from cash surrender value of life insurance policies6,032    
Cash provided by (used for) investing activities126,959  (25,192) 
Financing activities:
Proceeds from issuance of debt150,000    
(Repayments) borrowings under revolving credit facility(47,900) 19,900  
Repayments of debt(258,005) (24,788) 
Financing costs paid(10,367) (4,313) 
Cash dividends paid(311) (4,918) 
Other, net(4,479) (1,934) 
Cash used for financing activities(171,062) (16,053) 
Effect of exchange rate changes on cash and cash equivalents5,412  203  
Net increase (decrease) in cash, cash equivalents and restricted cash111,766  (12,028) 
Cash, cash equivalents and restricted cash at beginning of period84,687  103,367  
Cash, cash equivalents and restricted cash at end of period$196,453  $91,339  
Supplemental disclosure of cash flow information:
Income taxes paid (received), net of refunds$5,975  $(13,929) 
Interest paid$43,840  $53,183  

See accompanying notes to consolidated financial statements.
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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 Loss
Total
Equity
Balance, December 31, 201862,294  $124,588  $238,773  $200,670  $(45,612) $518,419  
Net loss(14,096) (14,096) 
Other comprehensive loss(6,423) (6,423) 
Dividends declared ($0.0025 per share)(119) (119) 
Share-based compensation expense, exercises and other642  1,284  2,774  4,058  
Balance, March 31, 201962,936  125,872  241,547  186,455  (52,035) 501,839  
Net loss(10,476) (10,476) 
Other comprehensive income2,387  2,387  
Dividends declared ($0.0025 per share)(114) (114) 
Share-based compensation expense, exercises and other28  56  3,209  3,265  
Balance, June 30, 201962,964  $125,928  $244,756  $175,865  $(49,648) $496,901  
Balance, December 31, 201962,843  $125,686  $251,401  $137,774  $(52,707) $462,154  
Net loss(11,324) (11,324) 
Other comprehensive loss(39,405) (39,405) 
Dividends declared ($0.0025 per share)(127) (127) 
Share-based compensation expense, exercises and other42  84  4,956  5,040  
Balance, March 31, 202062,885  125,770  256,357  126,323  (92,112) 416,338  
Net loss(55,627) (55,627) 
Other comprehensive income30,527  30,527  
Dividends declared ($0.0025 per share)(156) (156) 
Share-based compensation expense, exercises and other852  1,704  2,376  4,080  
Balance, June 30, 202063,737  $127,474  $258,733  $70,540  $(61,585) $395,162  
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—Summary of Significant Accounting Policies
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 Movianto business represents a component that met accounting requirements to be classified as discontinued operations and held-for-sale beginning December 31, 2019. In accordance with GAAP, the results of operations and financial position of the Movianto business are presented as discontinued operations through June 18, 2020 (the Divestiture Date) and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. and its subsidiaries. See Note 3 for additional information regarding discontinued operations. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 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.
Cash, Cash Equivalents and Restricted Cash
        Cash, cash equivalents and restricted cash includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less. Cash, cash equivalents and restricted cash are stated at cost. Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in the United States, Europe, and Asia. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. Restricted cash included in Other current assets represents $78.9 million held in a designated account as of June 30, 2020 as required by the Fifth Amendment to the Credit Agreement, which stipulates that the cash proceeds from the sale of the Movianto business is to be used to repay the 2021 Notes or the Term Loans. Restricted cash included in Other assets, net as of June 30, 2020 represents $16.3 million held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) Advanced Program.
        The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of those same amounts presented in the accompanying consolidated statements of cash flows.
June 30, 2020December 31, 2019
Cash and cash equivalents$101,276  $67,030  
Restricted cash included in Other current assets78,854    
Restricted cash included in Other assets, net16,323  16,261  
Cash of discontinued operations  1,396  
Total cash, cash equivalents and restricted cash$196,453  $84,687  

Note 2—Fair Value
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The carrying amount of restricted cash also approximates fair value due to its nature. The fair value of 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). See Note 6 for the fair value of debt. The fair value of interest rate swaps and foreign currency contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 8 for the fair value of derivatives.
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Note 3—Discontinued Operations
        On June 18, 2020, we completed the previously announced divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million. We concluded that the Movianto business met the criteria for discontinued operations as of December 31, 2019 and through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met. Movianto was previously reported in the Global Solutions segment.
Accordingly, the results of operations from the Movianto business are reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the three and six months ended June 30, 2020 and 2019, and the related assets and liabilities are classified as held-for-sale as of December 31, 2019 in the accompanying balance sheet. We are working with the Buyer on a final working capital adjustment that could result in a benefit in an amount up to $42 million. There is no benefit of any such adjustment reflected in our consolidated financial statements as of June 30, 2020.

The following table summarizes the financial results of our discontinued operations for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,Six Months Ended
June 30,
2020201920202019
Net revenue$104,417  $107,495  $226,759  $218,043  
Cost of goods sold21,817  25,585  53,923  54,330  
Gross margin82,600  81,910  172,836  163,713  
Distribution, selling, and administrative expenses76,560  80,954  157,512  163,997  
Loss on divestiture56,392    65,472    
Acquisition-related and exit and realignment charges4,554  265  4,825  391  
Other operating expense (income), net73  (285) (388) (472) 
Operating income (loss)(54,979) 976  (54,585) (203) 
Interest expense, net1,424  1,635  3,144  3,275  
Loss from discontinued operations before income taxes(56,403) (659) (57,729) (3,478) 
Income tax (benefit) provision from discontinued operations(615) 83  474  441  
Loss from discontinued operations, net of tax$(55,788) $(742) $(58,203) $(3,919) 

We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No. 2016-02, for the three and six months ended June 30, 2020.

All revenue and expense included in discontinued operations during the three and six months ended June 30, 2020 relates to activity through the Divestiture Date. No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date.

We have entered into transition services agreements with a subsidiary of the Buyer, pursuant to which we and a subsidiary of the Buyer will provide to each other various transitional services. Certain transition service arrangement costs and reimbursements were recorded during the three and six months ended June 30, 2020. These amounts were immaterial for the period ended June 30, 2020.

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        The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheet at December 31, 2019 were as follows:
December 31, 2019
Assets of discontinued operations
Cash and cash equivalents$1,396  
Accounts receivable, net78,643  
Merchandise inventories16,058  
Other current assets188,853  
Current assets of discontinued operations284,950  
Property and equipment, net65,710  
Intangible assets, net6,579  
Other assets, net27,431  
Operating lease assets87,425  
Valuation allowance on disposal group classified as held-for-sale(32,112) 
Total assets of discontinued operations$439,983  
Liabilities of discontinued operations
Accounts payable$53,981  
Other current liabilities182,980  
Current liabilities of discontinued operations236,961  
Long-term debt, excluding current portion5,523  
Operating lease liabilities, excluding current portion76,270  
Other liabilities4,757  
Total liabilities of discontinued operations$323,511  
        
        Assets and liabilities held-for-sale as of December 31, 2019 were classified as current since we expected the Divestiture to be completed within one year of the balance sheet date.

        The following table provides operating and investing cash flow information for our discontinued operations:

June 30, 2020June 30, 2019
Operating Activities:
Depreciation and amortization$  $10,834  
Loss on divestiture65,472    
Investing Activities:
Capital expenditures3,027  14,211  

Note 4—Goodwill and Intangible Assets
The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through June 30, 2020:
Global SolutionsGlobal ProductsConsolidated
Carrying amount of goodwill, December 31, 2019$283,905  $109,276  $393,181  
Currency translation adjustments  (1,511) (1,511) 
Carrying amount of goodwill, June 30, 2020$283,905  $107,765  $391,670  
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Intangible assets at June 30, 2020 and December 31, 2019 were as follows:
June 30, 2020December 31, 2019
Customer
Relationships
TradenamesOther
Intangibles
Customer
Relationships
TradenamesOther
Intangibles
Gross intangible assets$269,090  $90,000  $43,230  $270,693  $90,000  $43,055  
Accumulated amortization(107,341) (20,701) (11,739) (92,947) (16,520) (9,263) 
Net intangible assets$161,749  $69,299  $31,491  $177,746  $73,480  $33,792  
Weighted average useful life10 years11 years8 years10 years11 years8 years

At June 30, 2020, $71.4 million in net intangible assets were held in the Global Solutions segment and $191.1 million were held in the Global Products segment. Amortization expense for intangible assets was $10.6 million and $12.8 million for the three months ended June 30, 2020 and 2019, respectively, and $21.2 million and $22.8 million for the six months ended June 30, 2020 and 2019, respectively.
Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $20.7 million for the remainder of 2020, $39.8 million for 2021, $38.9 million for 2022, $38.7 million for 2023, $33.9 million for 2024 and $28.2 million for 2025.

Note 5—Exit and Realignment Costs
We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses, and IT restructuring charges. 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.

Exit and realignment charges by segment for the three and six months ended June 30, 2020 and 2019 were as follows:
Three Months Ended June 30,Six Months Ended
June 30,
2020201920202019
Global Solutions segment$1,713  $1,614  $3,542  $2,180  
Global Products segment487  103  487  241  
Total exit and realignment charges$2,200  $1,717  $4,029  $2,421  


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The following table summarizes the activity related to exit and realignment cost accruals through June 30, 2020 and 2019:
Total
Accrued exit and realignment costs, December 31, 2019$8,162  
Provision for exit and realignment activities:
Severance1,391  
Information system restructuring costs183  
Other255  
Cash payments(5,799) 
Accrued exit and realignment costs, March 31, 20204,192  
Provision for exit and realignment activities:
Severance809  
Information system restructuring costs671  
Other720  
Cash payments(2,072) 
Accrued exit and realignment costs, June 30, 2020$4,320  
Accrued exit and realignment costs, December 31, 2018$7,477  
Provision for exit and realignment activities:
Severance360  
Information system restructuring costs261  
Other83  
Cash payments(2,206) 
Accrued exit and realignment costs, March 31, 20195,975  
Provision for exit and realignment activities:
Severance1,008  
Information system restructuring costs705  
Other4  
Cash payments(2,301) 
Accrued exit and realignment costs, June 30, 2019$5,391  
        
Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $3.9 million and $8.1 million for the three and six months ended June 30, 2020 and $3.7 million and $7.8 million for the three and six months ended June 30, 2019, respectively, and consisted primarily of transition costs for the Halyard acquisition.