- Consolidated quarterly revenue grew
5.0% to $2.42 billion
- Adjusted net income per diluted share
improved 15% to $0.46 for the quarter
- Year-to-date operating cash flow was
$247 million
- International segment reported positive
operating earnings for the third consecutive quarter
Owens & Minor, Inc. (NYSE:OMI) today reported financial
results for the second quarter ended June 30, 2015, including
consolidated net revenues of $2.42 billion, which improved 5.0%
when compared to the prior year period. The quarterly revenue
growth was driven primarily by strength in the Domestic segment.
Excluding the impact of the two fourth-quarter 2014 acquisitions,
quarterly consolidated revenues increased 2.9% compared to the same
period last year. Quarterly net income was $24.2 million, or $0.39
per diluted share. Adjusted net income (non-GAAP), excluding
after-tax charges of $1.3 million for acquisition-related and $3.5
million for exit and realignment activities, was $29.1 million, or
$0.46 per diluted share, an improvement of 15% compared to last
year’s second quarter. (A table providing reconciliation of
reported results to adjusted (non-GAAP) measures is included
below.)
Consolidated operating earnings for the second quarter of 2015
were $47.9 million, increased by $10.8 million, when compared to
the second quarter last year. Adjusted consolidated operating
earnings (non-GAAP) for the second quarter of 2015 were $53.6
million, or 2.21% of revenues, improved by $8.9 million when
compared to the prior year period.
“We are pleased with our performance year-to-date, which gives
us solid results to build upon for the rest of the year,” said P.
Cody Phipps, president & chief executive officer of Owens &
Minor, who joined the company on July 1, 2015. “After coming
onboard in July, I began a period of intense immersion in Owens
& Minor’s operations, strategy and culture, learning as much as
I can about the company. I am very excited about the opportunity to
work together with the leadership team as we further enhance our
strategy for long-term success and profitable growth.”
2015 Year-to-Date
Results
For the six months ended June 30, 2015, consolidated revenues
were $4.81 billion, an increase of $251 million, or 5.5%, when
compared to the first six months of 2014. Excluding the impact of
the acquisitions, consolidated revenues increased 3.4% for the
year-to-date period. Net income for the first half of 2015 was
$43.2 million, or $0.69 per diluted share. For the year-to-date
period, adjusted net income (non-GAAP), which excludes after-tax
charges of $3.6 million for acquisition-related and $9.9 million
for exit and realignment activities, was $56.6 million, or $0.90
per diluted share. When comparing year-to-date results to the same
period last year, 2014 results included the first-quarter recovery
of $5.3 million, resulting from the settlement of a direct
purchaser anti-trust class action lawsuit, which was included in
other operating income.
Consolidated operating earnings for the year-to-date period of
2015 improved $5.4 million to $88.8 million, when compared to the
same period of 2014. On an adjusted basis, consolidated operating
earnings for the year-to-date period were $104.5 million, or 2.17%
of revenues, an improvement of $10.2 million versus the first six
months of 2014.
Asset Management
The balance of cash and cash equivalents was $201 million at
June 30, 2015. For the year-to-date period of 2015, the company
reported cash provided by operating activities of approximately
$247 million compared to $73.5 million for the same period last
year, primarily due to timing of payments to vendors and
improvements in net working capital. Asset management metrics for
the quarter were solid with consolidated days sales outstanding
(DSO) of 20.4 days as of June 30, 2015, compared to DSO of 20.6
days as of June 30, 2014. Consolidated inventory turns were 9.6
compared to 10.1 for 2014.
Segment Results
Domestic segment revenues for the second quarter of 2015 were
$2.32 billion, an increase of 5.9% when compared to the prior year.
Excluding the impact of the domestic acquisition, Domestic segment
revenues grew 4.2% in the second quarter. Domestic segment revenue
growth resulted primarily from growth among larger healthcare
provider customer accounts and new business, which offset declines
from smaller customers. For the year-to-date period of 2015,
Domestic segment revenues improved 6.2% to $4.60 billion, or 4.5%
excluding the impact of the 2014 acquisition.
For the second quarter of 2015, Domestic segment operating
earnings improved $4.1 million to $52.4 million, or 2.26% of
segment revenues. For the year-to-date period, Domestic segment
operating earnings were $102.9 million, or 2.24% of segment
revenues, a $1.8 million improvement, when compared to the prior
year period. Year-to-date results for 2014 included the previously
discussed benefit from the settlement of a direct purchaser
anti-trust class action lawsuit. For both the quarter and the
year-to-date periods, the Domestic segment operating earnings
reflected the benefits of strong revenue growth and supplier price
changes.
The International segment contributed revenues of $105 million
for the second quarter of 2015 and $210 million in revenues for the
year-to-date period, representing declines of $13.8 million and
$15.7 million respectively. The declines were driven by the
unfavorable foreign currency translation of $15.7 million and $30.5
million for the quarter and year-to-date periods. Excluding the
impact of foreign exchange, the 2014 acquisition, and the late 2014
transition of a customer from a buy-sell to a fee-for-service
arrangement, International segment revenues were essentially flat
for the quarter and the year-to-date periods.
The International segment reported operating earnings of $1.2
million for the second quarter of 2015 and $1.6 million for the
year-to-date period. In both periods, the operating earnings
results represent a significant positive swing of $4.8 million for
the quarter and $8.4 million for the year-to-date period, when
compared to the same periods in the prior year.
“Our teams in Europe are to be commended for achieving steady
progress toward our goals and a third consecutive quarter of
profitability,” said Richard A. Meier, executive vice president
& chief financial officer of Owens & Minor. “Operational
improvements and efficiency gains across the platform contributed
to success in the first half of the year.”
2015 Outlook
The company is expanding the range of its targeted adjusted net
income per diluted share for the year to $1.85 to $1.95 (from the
previous $1.90 to $1.95) to incorporate the impact of foreign
currency and an estimated $0.05 impact from the recruitment and
transition of the company’s new chief executive officer.
The 2015 outlook is based on certain assumptions that are
subject to the risk factors discussed in the company’s filings with
the Securities & Exchange Commission.
Investor Events
Owens & Minor is scheduled to participate in several
investor conferences in the third quarter of 2015; webcasts of the
company’s formal presentations will be posted on the company’s
corporate website:
- Baird 2015 Healthcare Conference – New
York, September 9th
- Wells Fargo Healthcare Conference –
Boston, September 10th
- Morgan Stanley Global Healthcare
Conference – New York, September 16th
Investors Conference Call &
Supplemental Material
Conference Call: Owens & Minor will conduct a conference
call for investors on Tuesday, July 28, 2015, at 8:30 a.m. EDT. The
access code for the conference call, international dial-in and
replay is #79276970. 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.”
Owens & Minor uses its website 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 Investor Relations at
www.owens-minor.com.
Included with the press release financial tables are
reconciliations of the differences between the non-GAAP financial
measures presented in this news release, which exclude
acquisition-related and exit and realignment charges, and their
most directly comparable GAAP financial measures.
Safe Harbor Statement
Except for historical information, the matters discussed in this
press release may constitute forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those projected. These risk factors are
discussed in reports filed by the company with the 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) is a leading healthcare logistics company dedicated to
Connecting the World of Medical Products to the Point of CareTM by
providing vital supply chain services to healthcare providers and
manufacturers of healthcare products. Owens & Minor provides
logistics services across the spectrum of medical products from
disposable medical supplies to devices and implants. With logistics
platforms strategically located in the United States and Europe,
Owens & Minor serves markets where three quarters of global
healthcare spending occurs. Owens & Minor’s customers span the
healthcare market from independent hospitals to large integrated
healthcare networks, as well as group purchasing organizations,
healthcare products manufacturers, and the federal government. A
FORTUNE 500 company, Owens & Minor is headquartered in
Richmond, Virginia, and has annualized revenues exceeding $9
billion. For more information about Owens & Minor, visit the
company website at www.owens-minor.com.
Owens & Minor, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Three Months Ended June 30, 2015
2014 Net revenue
$ 2,422,167 $ 2,305,858 Cost
of goods sold
2,123,830 2,023,586 Gross margin
298,337 282,272 Selling, general and administrative expenses
231,498 225,838 Acquisition-related and exit and realignment
charges
5,707 7,593 Depreciation and amortization
15,460 13,892 Other operating income, net
(2,188
) (2,152 ) Operating earnings
47,860 37,101 Interest
expense, net
6,680 3,342 Income before income
taxes
41,180 33,759 Income tax provision
16,954
13,883
Net income $ 24,226
$ 19,876
Net income per common share:
Basic $ 0.39 $ 0.32
Diluted $
0.39 $ 0.32
Six Months Ended June 30,
2015 2014 Net revenue
$ 4,813,363 $
4,562,239 Cost of goods sold
4,217,425 3,998,771
Gross margin
595,938 563,468 Selling, general and
administrative expenses
465,323 451,448 Acquisition-related
and exit and realignment charges
15,623 10,855 Depreciation
and amortization
31,329 27,756 Other operating income, net
(5,172 ) (9,978 ) Operating earnings
88,835
83,387 Interest expense, net
13,560 6,589
Income before income taxes
75,275 76,798 Income tax
provision
32,109 31,436
Net income
$ 43,166 $ 45,362
Net income
per common share: Basic $ 0.69 $ 0.72
Diluted $ 0.69 $ 0.72
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
June 30, 2015
December 31, 2014
Assets Current assets
Cash and cash equivalents
$ 200,969 $ 56,772 Accounts
and notes receivable, net
580,739 626,192 Merchandise
inventories
903,501 872,457 Other current assets
275,481 315,285
Total current
assets 1,960,690 1,870,706 Property and equipment, net
219,372 232,979 Goodwill, net
421,760 423,276
Intangible assets, net
100,904 108,593 Other assets, net
92,180 99,852
Total
assets $ 2,794,906 $
2,735,406
Liabilities and equity Current liabilities
Accounts payable
$ 753,495 $ 608,846 Accrued payroll
and related liabilities
34,797 31,507 Deferred income taxes
41,378 37,979 Other current liabilities
288,432 326,223
Total current
liabilities 1,118,102 1,004,555 Long-term debt,
excluding current portion
574,623 608,551 Deferred income
taxes
62,282 63,901 Other liabilities
62,772
67,561
Total liabilities
1,817,779 1,744,568
Total equity
977,127 990,838
Total liabilities
and equity $ 2,794,906
$ 2,735,406
Owens & Minor, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Six Months Ended June 30, 2015
2014 Operating activities: Net income
$ 43,166 $ 45,362 Adjustments to reconcile net income
to cash provided by operating activities: Depreciation and
amortization
36,138 27,756 Share-based compensation expense
5,048 4,190 Provision for losses on accounts and notes
receivable
41 334 Deferred income tax (benefit) expense
2,992 (5,151 ) Changes in operating assets and liabilities:
Accounts and notes receivable
41,622 28,477 Merchandise
inventories
(31,866 ) (48,575 ) Accounts payable
145,682 54,922 Net change in other assets and liabilities
2,771 (32,765 ) Other, net
1,196
(1,078 )
Cash provided by operating activities
246,790 73,472
Investing
activities: Additions to property and equipment
(12,009
) (25,657 ) Additions to computer software and intangible
assets
(10,816 ) (13,166 ) Proceeds from sale of
investment
— 1,937 Proceeds from sale of property and
equipment
837 45
Cash used
for investing activities (21,988 )
(36,841 )
Financing activities: Change in bank
overdraft
1,530 — Repayment of revolving credit facility
(33,700 ) — Cash dividends paid
(31,867
) (31,564 ) Repurchases of common stock
(7,440
) (9,448 ) Excess tax benefits related to share-based
compensation
457 444 Proceeds from exercise of stock options
— 1,180 Purchase of noncontrolling interest
— (1,500
) Other, net
(5,112 ) (4,441 )
Cash
used for financing activities (76,132 )
(45,329 )
Effect of exchange rate changes on cash and
cash equivalents (4,473 ) (1,180 )
Net increase (decrease) in cash and cash equivalents
144,197 (9,878 )
Cash and cash equivalents at beginning
of period 56,772 101,905
Cash and cash equivalents at end of period $
200,969 $ 92,027
Owens & Minor, Inc.
Financial Statistics and GAAP/Non-GAAP
Reconciliations (unaudited)
(in thousands, except per share data)
Quarter Ended (in thousands, except ratios and
per share data)
6/30/2015 3/31/2015
12/31/2014 9/30/2014 6/30/2014
Consolidated operating results: Domestic
$ 2,317,661 $ 2,285,635 $ 2,353,321 $ 2,262,081 $
2,187,535 International
104,506 105,561
138,496 124,045 118,323 Net revenue
$ 2,422,167 $ 2,391,196 $
2,491,817 $ 2,386,126 $ 2,305,858
Gross margin
$ 298,337 $ 297,601 $
314,015 $ 292,483 $ 282,272 Gross margin as a percent of revenue
12.32 % 12.45 % 12.60 %
12.26 % 12.24 % SG&A expenses
$
231,498 $ 233,825 $ 244,152 $ 231,377 $ 225,838 SG&A
expenses as a percent of revenue
9.56 %
9.78 % 9.80 % 9.70 % 9.79 % Operating
earnings, as reported (GAAP)
$ 47,860 $ 40,975 $
40,773 $ 35,377 $ 37,101 Acquisition-related charges (1)
1,786 2,605 7,394 4,565 3,490 Exit and realignment charges
(2)
3,921 7,311 10,594 9,392 4,103 Fair value adjustments
related to purchase accounting (3)
— — (3,706 ) — — Other
(4)
— — 3,907 — —
Operating earnings, adjusted (Non-GAAP)
$ 53,567 $
50,891 $ 58,962 $ 49,334 $ 44,694 Operating earnings as a percent
of revenue, adjusted (Non-GAAP)
2.21 %
2.13 % 2.37 % 2.07 % 1.94 % Net income,
as reported (GAAP)
$ 24,226 $ 18,940 $ 13,987 $ 7,155
$ 19,876 Acquisition-related charges, after-tax (1)
1,349
2,257 6,211 3,543 2,504 Exit and realignment charges, after-tax (2)
3,520 6,335 11,477 6,754 2,591 Fair value adjustments
related to purchase accounting, after-tax (3)
— — (4,703 ) —
— Other, after-tax (4)
— — 3,907 — — Loss on early
retirement of debt, after-tax (5)
— — —
9,092 — Net income, adjusted (Non-GAAP)
$ 29,095 $ 27,532 $
30,879 $ 26,544 $ 24,971
Net income per diluted common share, as reported (GAAP)
$
0.39 $ 0.30 $ 0.22 $ 0.11 $ 0.32 Acquisition-related
charges, after-tax (1)
0.02 0.03 0.10 0.06 0.04 Exit and
realignment charges, after-tax (2)
0.05 0.11 0.18 0.11 0.04
Fair value adjustments related to purchase accounting, after-tax
(3)
— — (0.07 ) — — Other, after-tax (4)
— — 0.06 — —
Loss on early retirement of debt, after tax (5)
— —
— 0.14 — Net income per diluted common
share, adjusted (Non-GAAP)
$ 0.46
$ 0.44 $ 0.49 $ 0.42
$ 0.40
Financing: Cash and cash
equivalents
$ 200,969 $ 159,056 $ 56,772 $ 610,147 $
92,027 Total interest-bearing debt
$ 579,415
$ 579,505 $ 613,809 $
766,283 $ 221,496
Stock
information: Cash dividends per common share
$
0.2525 $ 0.2525 $ 0.25
$ 0.25 $ 0.25 Stock price at
quarter-end
$ 34.00 $ 33.84
$ 35.11 $ 32.74 $ 33.98
Owens & Minor, Inc.
Financial Statistics and GAAP/Non-GAAP Reconciliations
(unaudited)
The following items in the current quarter have been excluded in
our non-GAAP financial measures:
(1) Acquisition-related charges in the quarters ended June 30,
2015 and March 31, 2015 consist primarily of costs to continue the
integration of Medical Action and ArcRoyal which were acquired in
the fourth quarter of 2014 including certain severance and
contractual payments to former management and costs to transition
information technology and other administrative functions. Charges
incurred in 2014 related primarily to costs to perform due
diligence and analysis related to the Medical Action and Arc Royal
acquisitions, costs to complete the transactions, and costs to
begin the integration of the acquired operations (including certain
severance and contractual payments to former management) as well as
certain costs in Movianto to resolve issues and claims with the
former owner.
(2) Exit and realignment charges in 2015 and 2014 were
associated with optimizing our operations and include the
consolidation of distribution and logistics centers and closure of
offsite warehouses in the United States and Europe, as well as
other costs associated with our strategic organizational
realignment which include certain professional fees and costs to
streamline administrative functions and processes in Europe.
(3) The fourth quarter of 2014 included a gain of $6.7 million
(pretax) recorded in other operating income, net from a fair value
adjustment to contingent consideration related to the Movianto
acquisition purchase price, offset by the incremental charge to
cost of goods sold of $3.0 million (pretax) from purchase
accounting impacts related to the sale of acquired inventory that
was written up to fair value in connection with the 2014
acquisitions.
(4) The fourth quarter of 2014 included a loss in other
operating income, net related to an accrual for the settlement
amount of a contract claim in the United Kingdom for $3.9 million
(pretax).
(5) In 2014, we repaid our 2016 Notes and recorded a net loss on
the early retirement of $14.9 million (pretax), which included the
redemption premium offset by the recognition of a gain on
previously settled interest rate swaps.
These charges have been tax effected in the preceding table by
determining the income tax rate depending on the amount of charges
incurred in different tax jurisdictions and the deductibility of
those charges for income tax purposes.
Use of Non-GAAP
Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP"). In general, the measures exclude items and
charges that (i) management does not believe reflect 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.
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(in thousands)
Three Months Ended June 30, 2015 2014
% of % of consolidated consolidated
Amount net
revenue Amount net revenue
Net revenue: Domestic
$
2,317,661 95.69 % $ 2,187,535 94.87 %
International
104,506 4.31 % 118,323
5.13 % Consolidated net revenue
$
2,422,167 100.00 % $ 2,305,858
100.00 % % of segment % of segment
Operating earnings (loss): net revenue net revenue Domestic
$ 52,390 2.26 % $ 48,317 2.21
%
International
1,177 1.13 % (3,623 )
(3.06
)
%
Acquisition-related and exit and realignment charges (1)
(5,707 )
N/A
(7,593 )
N/A
Consolidated operating earnings
$ 47,860
1.98 % $ 37,101 1.61
%
Depreciation and amortization: Domestic
$ 10,504 $ 8,812 International
5,277
5,080 Consolidated depreciation and amortization
$
15,781 $ 13,892
Capital
expenditures: (2) Domestic
$ 3,384 $
18,858 International
7,875 5,737 Consolidated
capital expenditures
$ 11,259 $ 24,595
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(in thousands)
Six Months Ended June 30, 2015 2014
% of % of consolidated consolidated
Amount net
revenue Amount net revenue
Net revenue: Domestic
$
4,603,296 95.64 % $ 4,336,451 95.05 %
International
210,067 4.36 % 225,788
4.95 % Consolidated net revenue
$ 4,813,363
100.00 % $ 4,562,239 100.00 %
% of segment % of segment
Operating earnings (loss):
net revenue net revenue Domestic
$ 102,901
2.24 % $ 101,053 2.33
%
International
1,557 0.74 % (6,811 ) (3.02 )%
Acquisition-related and exit and realignment charges (1)
(15,623 )
N/A
(10,855 )
N/A
Consolidated operating earnings
$ 88,835
1.85 % $ 83,387 1.83
%
Depreciation and amortization: Domestic
$ 21,242 $ 17,787 International
10,708
9,969 Consolidated depreciation and amortization
$
31,950 $ 27,756
Capital
expenditures: (2) Domestic
$ 12,035 $
29,033 International
10,790 9,790 Consolidated
capital expenditures
$ 22,825 $ 38,823
June 30, 2015 December 31, 2014
Total
assets: Domestic
$ 2,130,996 $ 2,139,972
International
462,941 538,662 Segment assets
2,593,937 2,678,634 Cash and cash equivalents
200,969
56,772 Consolidated total assets
$
2,794,906 $ 2,735,406 (1) The three and
six months ended June 30, 2015 include $1.2 million and $4.2
million, respectively in accelerated amortization related to an
information system that is being replaced. (2) Represents additions
to property and equipment and additions to computer software and
separately acquired intangible assets.
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, 2015
2014 2015 2014 Numerator: Net income
$ 24,226 $ 19,876
$ 43,166 $ 45,362
Less: income allocated to unvested restricted shares
(195
) (159 )
(359 ) (345 ) Net income attributable
to common shareholders - basic
24,031 19,717
42,807
45,017 Add: undistributed income attributable to unvested
restricted shares -basic
42 19
63 68 Less:
undistributed income attributable to unvested restricted shares
-diluted
(42 ) (19 )
(63 ) (68 )
Net
income attributable to common shareholders - diluted $
24,031 $ 19,717
$ 42,807
$ 45,017 Denominator: Weighted average shares outstanding —
basic
62,226 62,311
62,281 62,271 Dilutive shares -
stock options
— 5
1 9
Weighted average shares outstanding — diluted 62,226
62,316
62,282 62,280
Net income per share attributable to common shareholders:
Basic
$ 0.39 $ 0.32
$ 0.69 $ 0.72
Diluted
$ 0.39 $ 0.32
$ 0.69 $ 0.72
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150727006339/en/
Owens & Minor, Inc.Trudi Allcott, 804-723-7555,
truitt.allcott@owens-minor.comDirector, Investor & Media
RelationsorChuck Graves, 804-723-7556,
chuck.graves@owens-minor.comDirector, Finance & Investor
Relations
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