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EX-99.2 - EX-99.2 - OWENS & MINOR INC/VA/d575270dex992.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

July 29, 2013

Owens & Minor Releases 2nd Quarter 2013 Financial Results, Including a 3.7% Increase in Quarterly Revenues

RICHMOND, VA…Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the second quarter ended June 30, 2013, including consolidated quarterly revenues of $2.27 billion, increased 3.7% when compared to quarterly revenues of $2.19 billion for the second quarter of 2012. The company’s International segment, consisting primarily of Movianto which was acquired in the third quarter of 2012, contributed $123.0 million to second quarter consolidated revenues.

For the second quarter of 2013, net income was $28.9 million, or $0.46 per diluted share, a decline of 4.1% when compared to $30.1 million, or $0.48 per diluted share, for the same period of 2012. For the quarter, adjusted net income (non-GAAP), which excludes pre-tax charges of $0.6 million for acquisition-related and exit & realignment activities in each period, was $29.3 million, or $0.46 per diluted share, compared to $30.5 million, or $0.48 per diluted share, for the same period last year.

“While conditions remain challenging in the U.S. healthcare market, we continue to work on improving day-to-day operations, while making the right investments for our future,” said Craig R. Smith, chairman, president & chief executive officer of Owens & Minor. “We continue to receive validation of our approach to the market from our provider and manufacturer partners. While we are very encouraged by the progress we are making in Europe with Movianto, we recognize we still have work to do this year to achieve the goals we have established for our International segment.”

Consolidated operating earnings for the second quarter of 2013 were $50.1 million, a decrease of $3.1 million when compared to operating earnings of $53.2 million for the same period in the prior year.

Adjusted consolidated operating earnings (non-GAAP) for the second quarter of 2013 were $50.7 million, or 2.24% of revenues, decreased $3.1 million, when compared to adjusted operating earnings of $53.8 million, or 2.46% of revenues, in the same period of 2012. For purposes of comparison, the second quarter 2012 results did not contain results from the company’s International segment. On a sequential basis, second quarter adjusted consolidated operating earnings (non-GAAP) as a percentage of revenues improved when compared to both the first quarter of 2013 and the fourth quarter of 2012.

2013 Year-to-Date Results

For the six months ended June 30, 2013, consolidated revenues were $4.54 billion, increased approximately $140 million, or 3.2%, when compared to revenues of $4.40 billion for the first six months of 2012. The International segment contributed $244.0 million to consolidated revenues for the first half of the year. Net income for the first half of 2013 was $55.0 million, or $0.87 per diluted share,

 

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a decline of 7.6% when compared to net income of $59.5 million, or $0.94 per diluted share in the same period last year. For the year-to-date period, adjusted net income (non-GAAP), which excludes pre-tax charges of $2.6 million for acquisition-related and exit & realignment activities, was $56.9 million, or $0.90 per diluted share, compared to $59.8 million, or $0.94 per diluted share, in the first six months of 2012.

Consolidated operating earnings for the year-to-date period of 2013 were $97.9 million, or 2.16% of revenues, compared to operating earnings of $105.0 million, or 2.39% of revenues, for the same period of 2012. Adjusted consolidated operating earnings for the year-to-date period were $100.6 million, or 2.21% of revenues, compared to adjusted operating earnings of $105.7 million, or 2.40% of revenues for the same period last year.

Asset Management

The balance of cash and cash equivalents was $208 million at June 30, 2013. For the first half of 2013, the company reported cash provided by operating activities of approximately $180 million, compared to $143 million for the same period last year. The increase in cash from operations was primarily affected by an increase in accounts payable of $191 million, due to an increase in inventories and the timing of payments. Asset management metrics were positive with Domestic segment days sales outstanding (DSO) of 19.3 days as of June 30, 2013, compared favorably to days sales outstanding (DSO) of 19.5 as of June 30, 2012. Domestic inventory turns were 10.3 for the second quarter of 2013, compared to inventory turns of 10.8 for the second quarter of 2012.

Segment Results

Domestic segment revenues for the second quarter of 2013 were $2.14 billion, a decline of 1.9% when compared to the prior year’s second quarter revenue of $2.19 billion. The decline in second quarter Domestic segment revenues was primarily due to ongoing market trends, including lower rates of healthcare utilization and reduced government purchases, as well as the company’s continued rationalization of smaller, less profitable provider and supplier customers. For the year-to-date period, Domestic segment revenues were $4.3 billion, a decline of 2.4% when compared to revenues of $4.4 billion for the same period last year.

For the second quarter of 2013, Domestic segment operating earnings were $51.2 million, or 2.39% of segment revenues, a decline of approximately $2.5 million when compared to operating earnings of $53.8 million, or 2.46% of segment revenues, in the same period of 2012. During the second quarter of 2013, Domestic segment operating earnings benefitted from settlement of an administrative review by the state of California related to certain municipal sales tax incentives in the net amount of $3.5 million. Domestic segment operating earnings were also positively affected by certain supplier price changes. The majority of the benefits were offset by certain expenses, including higher than expected healthcare costs, litigation expenses, adjustments to benefit accruals, and expenses associated with the transition to a new fleet vendor. For the year-to-date period, Domestic segment operating earnings were $104.2 million, or 2.42% of segment revenues, a decline of $1.5 million when compared to segment operating earnings of $105.7 million in the same period in the prior year.

 

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The International segment contributed revenue of $123.0 million for the second quarter of 2013 and had an operating loss of $0.6 million. The company attributed the sequential improvement in the International segment operating losses to improved capacity utilization and continued attention to cost control measures. For the year-to-date period, the International segment reported $244.0 million in revenues, and an operating loss of $3.6 million, which reduced year-to-date consolidated net income by $0.05 per diluted share.

2013 Outlook

The company reaffirmed its financial guidance for 2013, which remains unchanged since it was provided at the company’s Investor Day in November 2012.

For 2013, the company is targeting revenue growth of 2% to 4% and adjusted net income per diluted share of $1.90 to $2.00 for the year, which includes operating results from the Movianto acquisition, but excludes exit and realignment costs, as well as acquisition-related costs.

The 2013 outlook is based on certain assumptions that are subject to the risk factors discussed in the company’s filings with the Securities & Exchange Commission.

Highlights

 

   

In the second quarter of 2013, Owens & Minor signed a three-year agreement with MedAssets, effective September 1, 2013, which will remain in effect through August 31, 2016.

 

   

Owens & Minor was honored with a number of awards and distinctions during the second quarter of 2013, including the following:

 

   

Owens & Minor Distribution has been selected as an Inbound Logistics Top 100 Third-Party Logistics Provider for 2013.

 

   

Owens & Minor was named U.S. Healthcare Supplier of the Year: Large Organization in the 13th Annual GHXcellence Awards for leveraging supply chain automation and trading partner collaboration to drive out costs, reduce waste and improve business performance.

 

   

In June, the Premier healthcare alliance recognized Owens & Minor with the Premier Pinnacle Award, the Premier Polaris Award, and the Premier Supplier Diversity Award.

Investors Conference Call & Supplemental Material

Conference Call: Owens & Minor will conduct a conference call for investors on Tuesday, July 30, 2013, at 8:30 a.m. EDT. The access code for the conference call, international dial-in and replay is #17405913. Participants may access the call at 866-393-1604. The international dial-in number is 224-357-2191. Replay: A replay of the call will be available for one week by dialing 855-859-2056. Webcast: A listen-only webcast of the call, along with supplemental information, will be available on www.owens-minor.com under “Investor Relations.”

Information on www.Owens-Minor.com

Owens & Minor uses its website, www.owens-minor.com, as a channel of distribution for material company information, including news releases, investor presentations and financial information. This information is routinely posted and accessible under the Investor Relations section.

 

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Safe Harbor Statement

Except for historical information, the matters discussed in this press release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are discussed in reports filed by the company with the Securities & Exchange Commission. All of this information is available at www.owens-minor.com. The company assumes no obligation, and expressly disclaims any such obligation, to update or alter information, whether as a result of new information, future events, or otherwise.

Owens & Minor, Inc., (NYSE: OMI) a FORTUNE 500 company headquartered in Richmond, Virginia, is a leading national distributor of name-brand medical and surgical supplies. Owens & Minor also offers global third-party logistics services to pharmaceutical, life-science, and medical-device manufacturers through its European business unit, Movianto, and through its U.S.-based service, OM HealthCare Logistics. With a diverse product and service offering and distribution centers throughout the United States, the company serves hospitals, integrated healthcare systems, alternate site locations, group purchasing organizations, healthcare manufacturers, and the federal government. Owens & Minor also provides technology and consulting programs that improve inventory management and streamline logistics across the entire medical supply chain. For news releases, or for more information about Owens & Minor, visit the company website at www.owens-minor.com.

 

CONTACTS:   Trudi Allcott, Director, Investor & Media Relations, 804-723-7555;
  Chuck Graves, Director, Finance & Investor Relations, 804-723-7556

Source: Owens & Minor, Inc.

 

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Owens & Minor, Inc.

Consolidated Statements of Income (unaudited)

(in thousands, except per share data)

 

     Three Months Ended June 30,  
     2013     2012  

Net revenue

   $ 2,266,687      $ 2,185,444   

Cost of goods sold

     1,993,256        1,974,015   
  

 

 

   

 

 

 

Gross margin

     273,431        211,429   

Selling, general and administrative expenses

     212,548        150,288   

Acquisition-related and exit and realignment charges

     638        617   

Depreciation and amortization

     12,276        8,515   

Other operating income, net

     (2,081     (1,168
  

 

 

   

 

 

 

Operating earnings

     50,050        53,177   

Interest expense, net

     3,248        3,487   
  

 

 

   

 

 

 

Income before income taxes

     46,802        49,690   

Income tax provision

     17,930        19,577   
  

 

 

   

 

 

 

Net income

   $ 28,872      $ 30,113   
  

 

 

   

 

 

 

Net income per common share:

    

Basic

   $ 0.46      $ 0.48   

Diluted

   $ 0.46      $ 0.48   

 

     Six Months Ended June 30,  
     2013     2012  

Net revenue

   $ 4,542,395      $ 4,403,326   

Cost of goods sold

     3,989,913        3,977,569   
  

 

 

   

 

 

 

Gross margin

     552,482        425,757   

Selling, general and administrative expenses

     430,269        305,860   

Acquisition-related and exit and realignment charges

     2,648        617   

Depreciation and amortization

     24,905        17,093   

Other operating income, net

     (3,274     (2,862
  

 

 

   

 

 

 

Operating earnings

     97,934        105,049   

Interest expense, net

     6,446        6,909   
  

 

 

   

 

 

 

Income before income taxes

     91,488        98,140   

Income tax provision

     36,518        38,667   
  

 

 

   

 

 

 

Net income

   $ 54,970      $ 59,473   
  

 

 

   

 

 

 

Net income per common share:

    

Basic

   $ 0.87      $ 0.94   

Diluted

   $ 0.87      $ 0.94   

 

Page 5


Owens & Minor, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

 

     June 30,
2013
     December 31,
2012
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 207,826       $ 97,888   

Accounts and notes receivable, net

     550,642         553,502   

Merchandise inventories

     794,020         763,756   

Other current assets

     248,219        213,748   
  

 

 

    

 

 

 

Total current assets

     1,800,707         1,628,894   

Property and equipment, net

     187,512         191,841   

Goodwill, net

     272,597         274,884   

Intangible assets, net

     40,050         42,313   

Other assets, net

     78,628         69,769   
  

 

 

    

 

 

 

Total assets

   $ 2,379,494      $ 2,207,701   
  

 

 

    

 

 

 

Liabilities and equity

     

Current liabilities

     

Accounts payable

   $ 791,004       $ 603,137   

Accrued payroll and related liabilities

     27,106         25,468   

Deferred income taxes

     46,646         40,758   

Other current liabilities

     225,428        254,924   
  

 

 

    

 

 

 

Total current liabilities

     1,090,184         924,287   

Long-term debt, excluding current portion

     214,682         215,383   

Deferred income taxes

     29,501         30,921   

Other liabilities

     55,306        63,454   
  

 

 

    

 

 

 

Total liabilities

     1,389,673         1,234,045   

Total equity

     989,821         973,656   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 2,379,494      $ 2,207,701   
  

 

 

    

 

 

 

 

Page 6


Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

     Six Months Ended June 30,  
     2013     2012  

Operating activities:

    

Net income

   $ 54,970      $ 59,473   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     24,905        17,093   

Share-based compensation expense

     3,449        4,126   

Provision for losses on accounts and notes receivable

     315        270   

Deferred income tax expense (benefit)

     5,777        (1,146

Changes in operating assets and liabilities:

    

Accounts and notes receivable

     1,789        21,239   

Merchandise inventories

     (31,176     57,519   

Accounts payable

     191,406        (16,075

Net change in other assets and liabilities

     (69,462     684   

Other, net

     (2,794 )     (404
  

 

 

   

 

 

 

Cash provided by operating activities

     179,179       142,779   
  

 

 

   

 

 

 

Investing activities:

    

Additions to property and equipment

     (16,221     (5,460

Additions to computer software and intangible assets

     (14,826     (12,697

Proceeds from the sale of property and equipment

     68        115   
  

 

 

   

 

 

 

Cash used for investing activities

     (30,979 )     (18,042
  

 

 

   

 

 

 

Financing activities:

    

Cash dividends paid

     (30,411     (27,956

Repurchases of common stock

     (8,297     (7,500

Financing costs paid

     —          (1,303

Excess tax benefits related to share-based compensation

     550        1,160   

Proceeds from exercise of stock options

     4,195        3,761   

Other, net

     (5,167     (3,900
  

 

 

   

 

 

 

Cash used for financing activities of continuing operations

     (39,130 )     (35,738
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     868       —     
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     109,938        88,999   

Cash and cash equivalents at beginning of period

     97,888        135,938   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 207,826     $ 224,937   
  

 

 

   

 

 

 

 

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Owens & Minor, Inc.

Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited)

(in thousands, except ratios and per share data)

 

     Quarter Ended  
     6/30/2013     3/31/2013     12/31/2012     9/30/2012     6/30/2012  

Consolidated operating results:

          

Net revenue

   $ 2,266,687      $ 2,275,709      $ 2,324,924      $ 2,179,895      $ 2,185,444   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 273,431      $ 279,052      $ 270,774      $ 228,123      $ 211,429   

Gross margin as a percent of revenue

     12.06     12.26     11.65     10.46     9.67
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SG&A expenses

   $ 212,548      $ 217,721      $ 211,415      $ 165,320      $ 150,288   

SG&A expenses as a percent of revenue

     9.38     9.57     9.09     7.58     6.88
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings, as reported (GAAP)

   $ 50,050      $ 47,884      $ 45,041      $ 46,663      $ 53,177   

Acquisition-related and exit and realignment charges

     638        2,010        1,717        7,831        617   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings, adjusted (Non-GAAP)

   $ 50,688      $ 49,894      $ 46,758      $ 54,494      $ 53,794   

Operating earnings as a percent of revenue, adjusted (Non-GAAP)

     2.24     2.19     2.01     2.50     2.46
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income, as reported (GAAP)

   $ 28,872      $ 26,098      $ 24,934      $ 24,597      $ 30,113   

Acquisition-related and exit and realignment charges, after-tax

     412        1,521        1,237        6,588        375   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income, adjusted (Non-GAAP)

   $ 29,284      $ 27,619      $ 26,171      $ 31,185      $ 30,488   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share, as reported (GAAP)

   $ 0.46      $ 0.41      $ 0.39      $ 0.39      $ 0.48   

Acquisition-related and exit and realignment charges

     —          0.03        0.02        0.10        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share, adjusted (Non-GAAP)

   $ 0.46      $ 0.44      $ 0.41      $ 0.49      $ 0.48   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing:

          

Cash and cash equivalents

   $ 207,826      $ 218,563      $ 97,888      $ 79,667      $ 224,937   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest-bearing debt

   $ 216,994      $ 216,414      $ 217,591      $ 216,924      $ 213,982   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock information:

          

Cash dividends per common share

   $ 0.24      $ 0.24      $ 0.22      $ 0.22      $ 0.22   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock price at quarter-end

   $ 33.83      $ 32.56      $ 28.51      $ 29.88      $ 30.63   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Use of Non-GAAP Measures

This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the measures exclude items and charges that (i) management does not believe reflect Owens & Minor, Inc.’s (the “Company”) core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.

 

Page 8


Owens & Minor, Inc.

Summary Segment Information (unaudited)

(in thousands, except ratios)

 

     Three Months Ended June 30,  
     2013     2012  
     Amount     % of
consolidated
net revenue
    Amount     % of
consolidated
net revenue
 

Net revenue:

        

Domestic

   $ 2,143,690        94.57   $ 2,185,444        100.00

International

     122,997        5.43        N/A        N/A   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net revenue

   $ 2,266,687        100.00   $ 2,185,444        100.00
  

 

 

   

 

 

   

 

 

   

 

 

 
           % of
segment net
revenue
          % of
segment net
revenue
 

Operating earnings (loss):

        

Domestic

   $ 51,245        2.39   $ 53,794        2.46

International

     (557     (0.45 )%      N/A        N/A   

Acquisition-related and exit and realignment charges

     (638     N/A        (617     N/A   
  

 

 

     

 

 

   

Consolidated operating earnings

   $ 50,050        2.21   $ 53,177        2.43
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

Domestic

   $ 8,887        $ 8,515     

International

     3,389          N/A     
  

 

 

     

 

 

   

Consolidated depreciation and amortization

   $ 12,276        $ 8,515     
  

 

 

     

 

 

   

Capital expenditures: (1)

        

Domestic

   $ 12,872        $ 9,781     

International

     3,398          N/A     
  

 

 

     

 

 

   

Consolidated capital expenditures

   $ 16,270        $ 9,781     
  

 

 

     

 

 

   
     Six Months Ended June 30,  
     2013     2012  
     Amount     % of
consolidated
net revenue
    Amount     % of
consolidated
net revenue
 

Net revenue:

        

Domestic

   $ 4,298,406        94.63   $ 4,403,326        100.00

International

     243,989        5.37        N/A        N/A   
  

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net revenue

   $ 4,542,395        100.00   $ 4,403,326        100.00
  

 

 

   

 

 

   

 

 

   

 

 

 
           % of
segment net
revenue
          % of
segment net
revenue
 

Operating earnings (loss):

        

Domestic

   $ 104,151        2.42   $ 105,666        2.40

International

     (3,569     (1.46 )%      N/A        N/A   

Acquisition-related and exit and realignment charges

     (2,648     N/A        (617     N/A   
  

 

 

     

 

 

   

Consolidated operating earnings

   $ 97,934        2.16   $ 105,049        2.39
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

Domestic

   $ 17,969        $ 17,093     

International

     6,936          N/A     
  

 

 

     

 

 

   

Consolidated depreciation and amortization

   $ 24,905        $ 17,093     
  

 

 

     

 

 

   

Capital expenditures: (1)

        

Domestic

   $ 24,474        $ 18,157     

International

     6,573          N/A     
  

 

 

     

 

 

   

Consolidated capital expenditures

   $ 31,047        $ 18,157     
  

 

 

     

 

 

   
     June 30,
2013
          December 31,
2012
       

Total assets:

        

Domestic

   $ 1,757,369        $ 1,723,699     

International

     414,299          386,114     
  

 

 

     

 

 

   

Segment assets

     2,171,668          2,109,813     

Cash and cash equivalents

     207,826          97,888     
  

 

 

     

 

 

   
   $ 2,379,494        $ 2,207,701     
  

 

 

     

 

 

   

 

(1) 

Represents additions to property and equipment and additions to computer software and separately acquired intangible assets.

 

Page 9


Owens & Minor, Inc.

Net Income Per Common Share (unaudited)

(in thousands, except per share data)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Numerator:

        

Net income

   $ 28,872      $ 30,113      $ 54,970      $ 59,473   

Less: income allocated to unvested restricted shares

     (156     (194     (351     (421
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders - basic

     28,716        29,919        54,619        59,052   

Add: undistributed income attributable to unvested restricted shares - basic

     64        87        122        176   

Less: undistributed income attributable to unvested restricted shares - diluted

     (64     (87     (122     (175
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders - diluted

   $ 28,716      $ 29,919      $ 54,619      $ 59,053   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average shares outstanding - basic

     62,707        62,815        62,695        62,825   

Dilutive shares - stock options

     45        80        51        89   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding - diluted

     62,752        62,895        62,746        62,914   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to common shareholders:

        

Basic

   $ 0.46      $ 0.48      $ 0.87      $ 0.94   

Diluted

   $ 0.46      $ 0.48      $ 0.87      $ 0.94   

 

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