Notes to Consolidated Financial Statements
(in thousands, except per share data, unless otherwise indicated)
Note 1—Summary of Significant Accounting Policies
Owens & Minor, Inc. and subsidiaries (we, us or our), is a Fortune 500 company headquartered in Richmond, Virginia. We are a leading global healthcare services company that connects the world of medical products to the point of care by providing vital supply chain assistance to the providers of healthcare services and the manufacturers of healthcare products, supplies, and devices in the United States and Europe. We serve our customers with a service portfolio that covers procurement, inventory management, delivery and sourcing for the healthcare market. With fully developed networks in the United States and Europe, we are equipped to serve a customer base ranging from hospitals, integrated healthcare systems, group purchasing organizations, and the U.S. federal government, to manufacturers of life-science and medical devices and supplies, including pharmaceuticals in Europe.
In 2016, 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
three
distinct business units: Domestic, International and Clinical & Procedural Solutions (CPS). Domestic is our U.S. distribution, logistics and value-added services business, while International is our European distribution, logistics and value-added services business. CPS provides product-related solutions, including surgical and procedural kitting and sourcing. Furthermore, the basis for segment reporting shifts from the geography of the end customer to the business unit selling the product or providing the service. This includes intercompany transactions as well. Beginning with the first quarter of 2016, we report our financial results using this
three
segment structure and have recast prior year segment results on the same basis.
Basis of Presentation.
The consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls, in conformity with U.S generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated.
Reclassifications.
Certain prior year amounts have been reclassified to conform to current year presentation. Depreciation and amortization, previously reported as a separate financial statement line item in the consolidated statements of income is now included in distribution, selling and administrative expenses for all periods presented.
Use of Estimates.
The preparation of the consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Estimates are used for, but are not limited to, the allowances for losses on accounts and notes receivable, inventory valuation allowances, supplier incentives, depreciation and amortization, goodwill valuation, valuation of intangible assets and other long-lived assets, valuation of property held for sale, self-insurance liabilities, tax liabilities, defined benefit obligations, share-based compensation and other contingencies. Actual results may differ from these estimates.
Cash and Cash Equivalents.
Cash and cash equivalents includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less. Cash and cash equivalents are stated at cost. Nearly all of our cash and cash equivalents are held in cash depository accounts in major banks in the United States and Europe.
Book overdrafts represent the amount of outstanding checks issued in excess of related bank balances and are included in accounts payable in our consolidated balance sheets, as they are similar to trade payables and are not subject to finance charges or interest. Changes in book overdrafts are classified as operating activities in our consolidated statements of cash flows.
Accounts and Notes Receivable, Net.
Accounts receivable from customers are recorded at the invoiced amount. We assess finance charges on overdue accounts receivable that are recognized as other operating income based on their estimated ultimate collectability. We have arrangements with certain customers under which they make deposits on account. Customer deposits in excess of outstanding receivable balances are classified as other current liabilities.
We maintain valuation allowances based upon the expected collectability of accounts and notes receivable. Our allowances include specific amounts for accounts that are likely to be uncollectible, such as customer bankruptcies and disputed amounts and general allowances for accounts that may become uncollectible. Allowances are estimated based on a number of factors, including industry trends, current economic conditions, creditworthiness of customers, age of the receivables, changes in customer payment patterns, and historical experience. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Financing Receivables and Payables.
We have an order-to-cash program in our International segment under which we invoice manufacturers’ customers and remit collected amounts to the manufacturers. We retain credit risk for certain uncollected receivables under this program where contractually obligated. We continually monitor the expected collectability in this program and maintain valuation allowances when it is likely that an amount may be or may become uncollectible. Allowances are estimated based on a number of factors including creditworthiness of customers, age of the receivables and historical experience. We write off uncollected receivables under this program when collection is no longer being pursued. At December 31,
2016
and
2015
, the allowance for uncollectible accounts as part of this program was
$0.1 million
. Fees charged for this program are included in net revenue. Product pricing and related product risks are retained by the manufacturer. Balances receivable and related amounts payable under this program are classified in other current assets and other current liabilities in the consolidated balance sheets.
Merchandise Inventories.
Merchandise inventories are valued at the lower of cost or market, with cost determined by the last-in, first-out (LIFO) method for inventories in the U.S. Cost of inventories outside the U.S. is determined using the first-in, first out (FIFO) method.
Property and Equipment.
Property and equipment are stated at cost less accumulated depreciation or, if acquired under capital leases, at the lower of the present value of minimum lease payments or fair market value at the inception of the lease less accumulated amortization. Depreciation and amortization expense for financial reporting purposes is computed on a straight-line method over the estimated useful lives of the assets or, for capital leases and leasehold improvements, over the term of the lease, if shorter. During 2015 we changed the useful lives of certain warehouse assets from
eight
years to
15
to better align with our current business practices. The cost basis of these assets was
$12.9 million
at December 31, 2015 and the change in useful lives reduced total depreciation expense by
$0.9 million
for the year ended December 31, 2015. In general, the estimated useful lives for computing depreciation and amortization are
four
to
15
years for warehouse equipment,
five
to
40
years for buildings and building improvements, and
three
to
eight
years for computers, furniture and fixtures, and office and other equipment. Straight-line and accelerated methods of depreciation are used for income tax purposes. Normal maintenance and repairs are expensed as incurred, and renovations and betterments are capitalized.
Leases.
We have entered into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from
one
to
30
years. We also lease most of our transportation and material handling equipment for terms generally ranging from
three
to
ten
years. Certain information technology assets embedded in an outsourcing agreement are accounted for as capital leases. Leases are classified as operating leases or capital leases at their inception. Rent expense for leases with rent holidays or pre-determined rent increases are recognized on a straight-line basis over the lease term. Incentives and allowances for leasehold improvements are deferred and recognized as a reduction of rent expense over the lease term.
Goodwill.
We evaluate goodwill for impairment annually, as of October 1, and whenever events occur or changes in circumstance indicate that the carrying amount of goodwill may not be recoverable. In connection with our new
three
segment structure, goodwill has been reallocated based on the relative fair value of the underlying reporting units. We performed an interim impairment analysis in the first quarter of 2016 as a result of this change and noted no impairment. We review goodwill first by performing a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If not, we then perform a quantitative assessment by first comparing the carrying amount to the fair value of the reporting unit. If the fair value of the reporting unit is determined to be less than its carrying value, a second step is performed to measure the goodwill impairment loss as the excess of the carrying value of the reporting unit’s goodwill over the estimated fair value of its goodwill. We estimate the fair value of the reporting unit using valuation techniques which can include comparable multiples of the unit’s earnings before interest, taxes, depreciation and amortization (EBITDA) and present value of expected cash flows. The EBITDA multiples are based on an analysis of current enterprise values and recent acquisition prices of similar companies, if available.
Intangible Assets.
Intangible assets acquired through purchases or business combinations are stated at fair value at the acquisition date and net of accumulated amortization in the consolidated balance sheets. Intangible assets, consisting primarily of customer relationships, customer contracts, non-competition agreements, trademarks, and tradenames are amortized over their estimated useful lives. In determining the useful life of an intangible asset, we consider our historical experience in renewing or extending similar arrangements. Customer relationships are generally amortized over
10
to
15
years and other intangible assets are amortized generally for periods between
one
and
15
years, based on their pattern of economic benefit or on a straight-line basis.
Computer Software.
We develop and purchase software for internal use. Software development costs incurred during the application development stage are capitalized. Once the software has been installed and tested, and is ready for use, additional costs incurred in connection with the software are expensed as incurred. Capitalized computer software costs are amortized over the estimated useful life of the software, usually between
three
and
ten
years. Capitalized computer software costs are included in other assets, net, in the consolidated balance sheets. Unamortized software at December 31,
2016
and
2015
was
$59.2 million
and
$68.4 million
. Depreciation and amortization expense includes
$12.9 million
,
$15.4 million
and
$16.4 million
of software amortization for the years ended December 31,
2016
,
2015
and
2014
. Additional amortization of
$4.5 million
in 2015 and
$6.0 million
in 2014 related to the accelerated amortization of an information system which was replaced in the International segment is included in acquisition-related and exit and realignment charges in the consolidated statements of income.
Long-Lived Assets.
Long-lived assets, which include property and equipment, finite-lived intangible assets, and unamortized software costs, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. We assess long-lived assets for potential impairment by comparing the carrying value of an asset, or group of related assets, to their estimated undiscounted future cash flows.
Self-Insurance Liabilities.
We are self-insured for most employee healthcare, workers’ compensation and automobile liability costs; however, we maintain insurance for individual losses exceeding certain limits. Liabilities are estimated for healthcare costs using current and historical claims data. Liabilities for workers’ compensation and automobile liability claims are estimated using historical claims data and loss development factors. If the underlying facts and circumstances of existing claims change or historical trends are not indicative of future trends, then we may be required to record additional expense or reductions to expense. Self-insurance liabilities are included in other accrued liabilities on the consolidated balance sheets.
Revenue Recognition.
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price or fee is fixed or determinable, and collectability is reasonably assured. Under most of our distribution contracts, we record revenue at the time shipment is completed as title passes to the customer when the product is received by the customer.
Revenue for activity-based fees and other services is recognized as work is performed and as amounts are earned. Depending on the specific contractual provisions and nature of the deliverable, 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. 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, all 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.
We allocate revenue for arrangements with multiple deliverables meeting the criteria for a separate unit of accounting using the relative selling price method and recognize revenue for each deliverable in accordance with applicable revenue recognition criteria.
In most cases, we record revenue gross, as we are the primary obligor in our sales arrangements, bear the risk of general and physical inventory loss and carry all credit risk associated with sales. When we act as an agent in a sales arrangement and do not bear a significant portion of these 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.
Cost of Goods Sold.
Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor, bear the risk of general and physical inventory loss and carry all credit risk associated with sales. Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our CPS business. We have contractual arrangements with certain suppliers that provide incentives, including cash discounts for prompt payment, operational efficiency and performance-based incentives. These incentives are recognized as a reduction in cost of goods sold as targets become probable of achievement.
In situations where we act as an agent in a sales arrangement and do not bear a significant portion of these risks, primarily for our third-party logistics business, there is no cost of goods sold and all costs to provide the service to the customer are recorded in selling, general and administrative expenses.
As a result of different practices of categorizing costs and different business models throughout our industry, our gross margins may not necessarily be comparable to other distribution companies.
Distribution, Selling and Administrative (DS&A) Expenses.
DS&A expenses include shipping and handling costs, labor, depreciation, amortization and other costs for selling and administrative functions associated with our distribution and logistics services and all costs associated with our fee-for-service arrangements.
Shipping and Handling.
Shipping and handling costs are included in DS&A expenses on the consolidated statements of income and include costs to store, to move, and to prepare products for shipment, as well as costs to deliver products to customers. Shipping and handling costs totaled
$558.9 million
,
$548.6 million
and
$576.8 million
for the years ended December 31,
2016
,
2015
and
2014
, respectively. Third-party shipping and handling costs billed to customers, which are included in net revenue, are immaterial for all periods presented.
Share-Based Compensation.
We account for share-based payments to employees at fair value and recognize the related expense in selling, general and administrative expenses over the service period for awards expected to vest.
Derivative Financial Instruments.
We are directly and indirectly affected by changes in certain market conditions, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks, primarily foreign currency exchange risk. We use forward contracts, which are agreements to buy or sell a quantity of a commodity at a predetermined future date, and at a predetermined rate or price. We do not enter into derivative financial instruments for trading purposes. All derivatives are carried at fair value in our consolidated balance sheets, which is determined by using observable market inputs (Level 2). The cash flow impact of the our derivative instruments is primarily included in our consolidated statements of cash flows in net cash provided by operating activities.
Income Taxes.
We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided if it is more likely than not that a deferred tax asset will not be realized. When we have claimed tax benefits that may be challenged by a tax authority, an estimate of the effect of these uncertain tax positions is recorded. It is our policy to provide for uncertain tax positions and the related interest and penalties based upon an assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the tax outcome of these uncertain tax positions changes, based on our assessment, such changes in estimate may impact the income tax provision in the period in which such determination is made.
We earn a portion of our operating earnings in foreign jurisdictions outside the United States, which we consider to be indefinitely reinvested. Accordingly,
no
United States federal and state income taxes and withholding taxes have been provided on these earnings. Our cash, cash-equivalents, short-term investments, and marketable securities held by our foreign subsidiaries totaled
$82.1 million
and
$46.0 million
as of December 31,
2016
and
2015
. We do not intend, nor do we foresee a need, to repatriate these funds or other assets held outside the U.S. In the future, should we require more capital to fund activities in the U.S. than is generated by our domestic operations and is available through our borrowings, we could elect to repatriate cash or other assets from foreign jurisdictions that have previously been considered to be indefinitely reinvested. Upon distribution of these assets, we could be subject to additional U.S. federal and state income taxes and withholding taxes payable to foreign jurisdictions, where applicable.
Fair Value Measurements.
Fair value is determined based on assumptions that a market participant would use in pricing an asset or liability. The assumptions used are in accordance with a three-tier hierarchy, defined by GAAP, that draws a distinction between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the use of present value and other valuation techniques in the determination of fair value (Level 3).
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. Property held for sale is reported at estimated fair value less selling costs with fair value determined based on recent sales prices for comparable properties in similar locations (Level 2). 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). See Notes 7, 10 and 11 for the fair value of property held for sale, debt instruments and derivatives.
Acquisition-Related and Exit and Realignment Charges
. We present costs incurred in connection with acquisitions in acquisition-related and exit and realignment charges in our consolidated statements of income. Acquisition-related charges consist primarily of transaction costs incurred to perform due diligence and to analyze, negotiate and consummate an acquisition, costs to perform post-closing activities to establish the organizational structure, and costs to transition the acquired company’s information technology and other operations and administrative functions from the former owner.
Costs associated with exit and realignment activities are recorded at their fair value when incurred. Liabilities are established at the cease-use date for remaining operating lease and other contractual obligations, net of estimated sub-lease income. The net lease termination cost is discounted using a credit-adjusted risk-free rate of interest. We evaluate these assumptions quarterly and adjust the liability accordingly. The current portion of accrued lease and other contractual termination costs is included in other current liabilities on the consolidated balance sheets, and the non-current portion is included in other liabilities. Severance benefits are recorded when payment is considered probable and reasonably estimable.
Income Per Share.
Basic and diluted income per share are calculated pursuant to the two-class method, under which unvested share-based payment awards containing nonforfeitable rights to dividends are participating securities.
Foreign Currency Translation.
Our foreign subsidiaries generally consider their local currency to be their functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and revenues and expenses are translated at average exchange rates during the period. Cumulative currency translation adjustments are included in accumulated other comprehensive income (loss) in shareholders’ equity. Gains and losses on intercompany foreign currency transactions that are long-term in nature and which we do not intend to settle in the foreseeable future are also recognized in other comprehensive income (loss) in shareholders’ equity. Realized gains and losses from foreign currency transactions are recorded in other operating income, net in the consolidated statements of income and were not material to our consolidated results of operations in
2016
,
2015
and
2014
.
Business Combinations
.
We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
Recent Accounting Pronouncements
. During
2016
, we adopted Accounting Standard Updates (ASU’s) issued by the Financial Accounting Standards Board (FASB).
On January 1, 2016, we adopted ASU 2015-03,
Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs
, which requires that our
$3.5 million
in debt issuance costs at December 31, 2016 related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. As a result of this adoption, we have also presented
$4.1
million in debt issuance costs from our December 31, 2015 balance sheet in a manner that conforms to the new presentation. The adoption of this standard did not affect our results of operations or cash flows in either the current or prior interim or annual periods.
In February 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-02,
Leases
which requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The new standard states that a lessee will recognize a lease liability for the obligation to make lease payments and a right-of-use (ROU) asset for the right to use the underlying asset for the lease term. Expense related to leases determined to be operating leases will be recognized on a straight-line basis, while those determined to be financing leases will be recognized following a front-loaded expense profile in which interest and amortization are presented separately in the income statement. This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted and should be applied using a modified retrospective approach. We expect this standard will have a material effect on our financial statements. While we are continuing to assess the effect of adoption, we currently believe the most significant changes relate to the recognition of new ROU assets and lease liabilities on our balance sheet for office and warehouse facilities operating leases.
In March 2016, the FASB issued ASU No. 2016-09,
Improvements to Employee Share-Based Payment Accounting.
The amendments in this updated guidance will change several aspects of the accounting for shared-based payment transactions.
The guidance requires all income tax effects of share-based awards to be recognized in the income statement as awards vest or are settled. Additionally, the guidance increases the amount employers can withhold in shares to cover employee income taxes without requiring liability classification and allows a policy election for accounting for forfeitures. This guidance is effective for us beginning January 1, 2017. We expect the adoption of this new guidance will not have a material impact on our financial statements.
In May 2014, the FASB issued an ASU,
Revenue from Contracts with Customers
. The amended guidance eliminates industry specific guidance and applies to all companies. Revenue will be recognized when an entity satisfies a performance obligation by transferring control of a promised good or service to a customer in an amount that reflects the consideration to which the entity expects to be entitled for that good or service. Revenue from a contract that contains multiple performance obligations is allocated to each performance obligation generally on a relative standalone selling price basis. Amended guidance was issued on: principal versus agent considerations, shipping and handling activities that occur after the customer has obtained control of a good as an activity to fulfill the promise to transfer the good, clarification on how an entity should evaluate the collectibility threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The amended guidance also requires additional quantitative and qualitative disclosures. These amended standards are all effective for us beginning January 1, 2018 and allow for either full retrospective adoption or modified retrospective adoption (cumulative effect). We plan to adopt the new guidance in the first quarter of 2018 and have not determined the method we will use for adoption or the effect the standards will have on our ongoing financial reporting.
Note 2—Significant Risks and Uncertainties
Many of our hospital customers in the U.S. are represented by group purchasing organizations (GPOs) that contract with us for services on behalf of the GPO members. GPOs representing a significant portion of our business are Vizient (formerly Novation, LLC and MedAssets Inc.), Premier, Inc. (Premier) and Health Trust Purchasing Group (HPG). Members of these GPOs have incentives to purchase from their primary selected distributor; however, they operate independently and are free to negotiate directly with distributors and manufacturers. For
2016
,
2015
and
2014
, net revenue from hospitals under contract with these GPOs represented the following approximate percentages of our net revenue annually: Vizient—
48%
to
54%
; Premier—
20%
to
22%
; and HPG—
10%
to
14%
.
Net revenue from sales of product supplied by Medtronic represented approximately
13%
and Johnson & Johnson represented approximately
9%
of our net revenue annually for each of the previous three years. Net revenue from sales of product supplied by Becton Dickinson represented approximately
9%
of our net revenue for 2016.
Note 3—Acquisitions
On October 1, 2014, we completed the acquisition of Medical Action Industries Inc., (Medical Action), a leading producer of surgical kits and procedure trays, which has enabled an expansion of our capabilities in the assembly of kits, packs and trays for the healthcare market.
On November 1, 2014, we acquired ArcRoyal, a privately held surgical kitting company based in Ireland (ArcRoyal). The transaction expanded our capabilities in the assembly of kits, packs and trays in the European healthcare market.
The combined consideration for these
two
acquisitions was
$261.6 million
, net of cash acquired, and including debt assumed of
$13.4 million
(capitalized lease obligations).
The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon our preliminary estimate of their fair values at the date of acquisition, with certain exceptions permitted under GAAP. The combined purchase price exceeded the preliminary estimated fair value of the net tangible and identifiable intangible assets by
$150.6 million
, which was allocated to goodwill. The following table presents, in the aggregate, the estimated fair value of the assets acquired and liabilities assumed recognized as of the acquisition date.
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary Fair
Value Estimated as of
Acquisition Date
|
Measurement Period Adjustments Recorded in 2015
|
Fair Value as of Acquisition Date
|
|
Assets acquired:
|
|
|
|
|
Current assets
|
$
|
90,608
|
|
$
|
(229
|
)
|
$
|
90,379
|
|
|
Property and equipment
|
34,048
|
|
(2,502
|
)
|
31,546
|
|
|
Goodwill
|
150,492
|
|
121
|
|
150,613
|
|
|
Intangible assets
|
77,623
|
|
—
|
|
77,623
|
|
|
Total assets
|
352,771
|
|
(2,610
|
)
|
350,161
|
|
|
Liabilities assumed:
|
|
|
|
|
Current liabilities
|
64,736
|
|
(1,187
|
)
|
63,549
|
|
|
Noncurrent liabilities
|
26,426
|
|
(1,423
|
)
|
25,003
|
|
|
Total liabilities
|
91,162
|
|
(2,610
|
)
|
88,552
|
|
|
Fair value of net assets acquired, net of cash
|
$
|
261,609
|
|
$
|
—
|
|
$
|
261,609
|
|
|
We are amortizing the fair value of acquired intangible assets, primarily customer relationships, over their weighted average useful lives of
14
years.
Goodwill of
$150.6 million
held in the CPS segment consists largely of expected opportunities to expand our kitting capabilities.
None
of the goodwill recognized is expected to be deductible for income tax purposes.
Pro forma results of operations for these acquisitions have not been presented because the effects on revenue and net income were not material to our historic consolidated financial statements.
We recognized pre-tax acquisition-related expenses of
$1.2 million
,
$9.8 million
and
$16.1 million
for the years ended December 31, 2016, 2015 and 2014. The current year amount related primarily to costs incurred to settle certain obligations and address other on-going matters associated with the acquisitions of ArcRoyal and Medical Action which were partially offset on a year-to-date basis by the first quarter gain on the sale of property acquired with Medical Action. Charges in 2015 consisted primarily of costs to continue the integration of Medical Action and ArcRoyal which were acquired in the fourth quarter of 2014 including certain severance and contractual payments to the former owner and costs to transition information technology and other administrative functions. Charges in 2014 consisted primarily of transaction costs incurred to perform due diligence and analysis related to these acquisitions, as well as costs to resolve certain contingencies with the former Movianto owner.
Note 4—Accounts and Notes Receivable, Net
Allowances for losses on accounts and notes receivable of
$13.5 million
and
$13.2 million
have been applied as reductions of accounts receivable at December 31,
2016
and
2015
. Write-offs of accounts and notes receivable were
$0.9 million
,
$1.2 million
and
$3.1 million
for
2016
,
2015
and
2014
.
Note 5—Merchandise Inventories
At December 31,
2016
and
2015
we had inventory of
$916.3 million
and
$940.8 million
, of which
$902.2 million
and
$927.7 million
were valued under LIFO. If LIFO inventories had been valued on a current cost or first-in, first-out (FIFO) basis, they would have been greater by
$115.4 million
and
$116.4 million
as of December 31,
2016
and
2015
. At December 31,
2016
and
2015
, included in our inventory was
$19.7 million
and
$22.3 million
in raw materials,
$10.8 million
and
$10.6 million
in work in process and the remainder was finished goods.
Note 6—Financing Receivables and Payables
At December 31,
2016
and
2015
, we had financing receivables of
$156.5 million
and
$198.5 million
and related payables of
$110.0 million
and
$148.5 million
outstanding under our order-to-cash program, which were included in other current assets and other current liabilities, respectively, in the consolidated balance sheets.
Note 7—Property and Equipment
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
2016
|
|
2015
|
Warehouse equipment
|
$
|
167,889
|
|
|
$
|
168,599
|
|
Computer equipment
|
51,513
|
|
|
53,566
|
|
Building and improvements
|
72,780
|
|
|
75,229
|
|
Leasehold improvements
|
60,360
|
|
|
60,522
|
|
Land and improvements
|
17,311
|
|
|
17,386
|
|
Furniture and fixtures
|
14,668
|
|
|
14,517
|
|
Office equipment and other
|
8,596
|
|
|
8,216
|
|
|
393,117
|
|
|
398,035
|
|
Accumulated depreciation
|
(201,399
|
)
|
|
(189,105
|
)
|
Property and equipment, net
|
$
|
191,718
|
|
|
$
|
208,930
|
|
The gross value of assets recorded under capital leases was
$36.4 million
and
$38.7 million
with associated accumulated depreciation of
$16.4 million
and
$13.7 million
as of December 31,
2016
and
2015
, respectively. Depreciation expense for property and equipment and assets under capital leases was
$32.5 million
,
$36.3 million
and
$35.5 million
for the years ended December 31,
2016
,
2015
and
2014
.
Property held for sale in our Domestic segment was
$3.8 million
and
$5.6 million
at December 31, 2015 and 2014 and was included in other current assets, net, in the consolidated balance sheets. We had
no
property held for sale at December 31, 2016.
Note 8—Goodwill and Intangible Assets
In connection with our new
three
segment structure, goodwill has been reallocated based on the relative fair value of the underlying reporting units. We performed an interim impairment analysis in the first quarter of 2016 as a result of this change and noted
no
impairment. The following table summarizes the changes in the carrying amount of goodwill through
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
International
|
|
CPS
|
|
Consolidated
|
Carrying amount of goodwill, December 31, 2015
|
$
|
180,006
|
|
|
$
|
23,426
|
|
|
216,187
|
|
|
$
|
419,619
|
|
Currency translation adjustments
|
—
|
|
|
(4,035
|
)
|
|
(648
|
)
|
|
(4,683
|
)
|
Carrying amount of goodwill, December 31, 2016
|
$
|
180,006
|
|
|
$
|
19,391
|
|
|
$
|
215,539
|
|
|
$
|
414,936
|
|
Intangible assets at
December 31, 2016
and
2015
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Customer
Relationships
|
|
Other
Intangibles
|
|
Customer
Relationships
|
|
Other
Intangibles
|
Gross intangible assets
|
$
|
118,223
|
|
|
$
|
4,045
|
|
|
$
|
121,888
|
|
|
$
|
4,621
|
|
Accumulated amortization
|
(38,429
|
)
|
|
(1,328
|
)
|
|
(29,872
|
)
|
|
(1,387
|
)
|
Net intangible assets
|
$
|
79,794
|
|
|
$
|
2,717
|
|
|
$
|
92,016
|
|
|
$
|
3,234
|
|
Weighted average useful life
|
14 years
|
|
|
5 years
|
|
|
14 years
|
|
|
5 years
|
|
At
December 31, 2016
,
$11.7 million
in net intangible assets were held in the Domestic segment,
$10.8 million
in the International segment, and
$60.1 million
in CPS. Amortization expense for intangible assets was
$10.0 million
for
2016
,
$9.8 million
for
2015
and
$5.5 million
for
2014
.
Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is
$9.5 million
for 2017,
$8.9 million
for 2018,
$8.8 million
for 2019,
$8.7 million
for 2020 and
$8.3 million
for 2021.
Note 9—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.
Exit and realignment charges by segment for the years ended December 31,
2016
,
2015
and
2014
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Domestic segment
|
$
|
14,304
|
|
|
$
|
7,318
|
|
|
$
|
7,223
|
|
International segment
|
7,491
|
|
|
11,312
|
|
|
19,490
|
|
CPS
|
1,669
|
|
|
—
|
|
|
—
|
|
Total exit and realignment charges
|
$
|
23,464
|
|
|
$
|
18,630
|
|
|
$
|
26,713
|
|
The following table summarizes the activity related to exit and realignment cost accruals through
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
Obligations
|
|
Severance and
Other
|
|
Total
|
Accrued exit and realignment charges, January 1, 2014
|
$
|
2,434
|
|
|
$
|
475
|
|
|
$
|
2,909
|
|
Provision for exit and realignment activities
|
5,592
|
|
|
6,338
|
|
|
11,930
|
|
Change in estimate
|
(1,260
|
)
|
|
—
|
|
|
(1,260
|
)
|
Cash payments, net of sublease income
|
(3,191
|
)
|
|
(3,926
|
)
|
|
(7,117
|
)
|
Accrued exit and realignment charges, December 31, 2014
|
3,575
|
|
|
2,887
|
|
|
6,462
|
|
Provision for exit and realignment activities
|
1,118
|
|
|
3,965
|
|
|
5,083
|
|
Change in estimate
|
(3,002
|
)
|
|
(875
|
)
|
|
(3,877
|
)
|
Cash payments, net of sublease income
|
(1,205
|
)
|
|
(4,137
|
)
|
|
(5,342
|
)
|
Accrued exit and realignment charges, December 31, 2015
|
486
|
|
|
1,840
|
|
|
2,326
|
|
Provision for exit and realignment activities
|
—
|
|
|
11,823
|
|
|
11,823
|
|
Change in estimate
|
—
|
|
|
(261
|
)
|
|
(261
|
)
|
Cash payments, net of sublease income
|
(486
|
)
|
|
(11,164
|
)
|
|
(11,650
|
)
|
Accrued exit and realignment charges, December 31, 2016
|
$
|
—
|
|
|
$
|
2,238
|
|
|
$
|
2,238
|
|
In addition to the exit and realignment accruals in the preceding table, we also incurred
$11.9 million
of costs that were expensed as incurred for the year ended December 31, 2016, including
$3.6 million
in professional services fees,
$3.0 million
in asset write-downs,
$2.9 million
in information system costs,
$0.9 million
in labor costs,
$0.7 million
in other facility costs and
$0.8 million
in other costs.
We incurred
$17.4 million
of costs that were expensed as incurred for the year ended December 31, 2015, including
$4.6 million
in facility costs,
$4.5 million
in accelerated amortization of an information system that was replaced,
$3.8 million
in professional services fees,
$3.0 million
in information systems costs,
$1.4 million
in labor costs and
$0.1 million
in other costs.
We incurred
$16.0 million
of costs that were expensed as incurred for the year ended December 31, 2014, including
$6.0 million
in accelerated amortization of an information system that was replaced,
$3.3 million
in facility costs,
$2.9 million
in labor costs,
$1.8 million
in information systems costs,
$1.3 million
in professional services fees and
$0.7 million
in other costs.
We do
no
t expect significant additional costs in 2017 for activities that were initiated through December 31, 2016; however, we anticipate new actions will be taken in 2017 that will incur costs similar to prior years.
Note 10—Debt
Debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
December 31,
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
3.875% Senior Notes, $275 million par value, maturing September 2021
|
$
|
272,394
|
|
|
$
|
274,450
|
|
|
$
|
271,928
|
|
|
$
|
273,680
|
|
4.375% Senior Notes, $275 million par value, maturing December 2024
|
272,444
|
|
|
269,995
|
|
|
272,054
|
|
|
272,828
|
|
Capital leases
|
24,549
|
|
|
24,549
|
|
|
29,539
|
|
|
29,539
|
|
Total debt
|
569,387
|
|
|
568,994
|
|
|
573,521
|
|
|
576,047
|
|
Less current maturities
|
(4,804
|
)
|
|
(4,804
|
)
|
|
(5,026
|
)
|
|
(5,026
|
)
|
Long-term debt
|
$
|
564,583
|
|
|
$
|
564,190
|
|
|
$
|
568,495
|
|
|
$
|
571,021
|
|
On September 16, 2014, we issued
$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”). 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%
. Interest on the 2021 Notes and 2024 Notes is payable semiannually in arrears, commencing on March 15, 2015 and December 15, 2014, respectively. 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. We have
$3.5 million
of deferred costs associated with the issuance of the 2021 Notes and 2024 Notes which were unamortized as of December 31, 2016.
In 2014, we used a portion of the net proceeds from the 2021 Notes and the 2024 Notes to fund the early retirement of all of our
$200 million
of
6.35%
senior notes due in 2016 (2016 Notes), which included the payment of a
$17.4 million
redemption premium. We recorded a net loss on the early retirement of our 2016 Notes of
$14.9 million
, which includes the redemption premium offset by the recognition of a gain on previously settled interest rate swaps.
On September 17, 2014, we amended our existing Credit Agreement, increasing our borrowing capacity from
$350 million
to
$450 million
and extending the term through
September 2019
(the Amended Credit Agreement). Under the Amended 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 Amended Credit Agreement, which is subject to adjustment quarterly, is based on the London Interbank Offered Rate (LIBOR), 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 Amended 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 Amended 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 leverage ratio at
December 31, 2016
, the interest rate under the credit facility is LIBOR plus
1.375%
.
At
December 31, 2016
we had
no
borrowings and letters of credit of approximately
$4.9 million
outstanding under the Amended Credit Agreement, leaving
$445 million
available for borrowing. We also have a
$1.1 million
and
$1.2 million
letter of credit outstanding as of
December 31, 2016
and
2015
, which supports our facilities leased in Europe.
The Amended 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
December 31, 2016
.
Cash payments for interest during
2016
,
2015
and
2014
were
$27.9 million
,
$27.7 million
and
$18.5 million
.
We enter into long-term non-cancellable leases for certain warehouse equipment and vehicles which, for accounting purposes, are classified as capital leases. We also operate a kitting facility acquired with Medical Action which is subject to a long-term capital lease. As of
December 31, 2016
, we were obligated under capital leases for minimum annual rental payments as follows:
|
|
|
|
|
Year
|
|
|
|
2017
|
$
|
6,625
|
|
2018
|
5,433
|
|
2019
|
3,688
|
|
2020
|
2,624
|
|
2021
|
2,139
|
|
Thereafter
|
14,303
|
|
Total minimum lease payments
|
34,812
|
|
Less: Amounts representing interest
|
(10,263
|
)
|
Present value of total minimum lease payments
|
24,549
|
|
Less: Current portion of capital lease obligations
|
(4,804
|
)
|
Long-term portion of capital lease obligations
|
$
|
19,745
|
|
Note 11—Derivative Financial Instruments
We are directly and indirectly affected by changes in certain market conditions, which may adversely impact our financial performance. These are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. The primary market risk managed through the use of derivative instruments is foreign currency exchange risk.
We use forward contracts which are agreements to buy or sell a quantity of a currency or commodity at a predetermined future date, and at a predetermined rate or price. We do not enter into derivative financial instruments for trading purposes.
At December 31, 2016 we did not have any derivatives outstanding. The total notional value of our foreign currency derivatives as of December 31,
2015
was
$2.0 million
. The notional amounts of the derivative instruments do not necessarily represent the amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the financial risks described above. The amounts are calculated by reference to the notional amounts and by other terms of the derivative, such as foreign currency exchange rates. We determine the fair value of our derivatives based on quoted market prices. We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure. Our derivatives are straightforward over-the-counter instruments with liquid markets.
All derivatives are carried at fair value in our consolidated balance sheets in other assets and other liabilities line items. In 2016, 2015 and 2014, we did not have any derivatives designated as hedging instruments and all gains and losses resulting from changes in the fair value of derivative instruments were immediately recognized into earnings. At December 31,
2015
the fair value of our foreign currency contracts included in other assets on the consolidated balance sheet was
$0.4 million
. The impact from changes in the fair value of these foreign currency derivatives included in other operating income, net was
$0.4 million
expense for
2016
,
$0.3 million
expense for
2015
and
$0.2 million
income for 2014. We consider the risk of counterparty default to be minimal.
Note 12—Share-Based Compensation
We maintain a share-based compensation plan (the Plan) that is administered by the Compensation and Benefits Committee of the Board of Directors. The Plan allows us to award or grant to officers, directors and employees incentive, non-qualified and deferred compensation stock options, stock appreciation rights (SARs), performance shares, and restricted and unrestricted stock. We use authorized and unissued common shares for grants of restricted stock or for stock option exercises. At
December 31, 2016
approximately
2.3 million
common shares were available for issuance under the Plan.
Restricted stock awarded under the Plan generally vests over
one
,
three
or
five
years. Certain restricted stock grants contain accelerated vesting provisions, based on the satisfaction of certain performance criteria related to the achievement of certain financial and operational results. Performance shares awarded under the Plan are issuable as restricted stock upon meeting performance goals and generally have a total performance and vesting period of
three
years. Stock options awarded under the Plan are generally subject to graded vesting over
three
years and expire
seven
to
ten
years from the date of grant. The options are granted at a price equal to fair market value at the date of grant. We did not grant any stock options in 2016, 2015, or 2014.
We recognize the fair value of stock-based compensation awards, which is based upon the market price of the underlying common stock at the grant date, on a straight-line basis over the estimated requisite service period, which may be based on a service condition, a performance condition, or a combination of both. The fair value of performance shares as of the date of grant is estimated assuming that performance goals will be achieved at target levels. If such goals are not probable of being met, or are probable of being met at different levels, recognized compensation cost is adjusted to reflect the change in estimated fair value of restricted stock to be issued at the end of the performance period.
Total share-based compensation expense for
December 31, 2016
,
2015
and
2014
, was
$12.0 million
,
$11.3 million
and
$8.2 million
, with recognized tax benefits of
$4.5 million
,
$4.4 million
and
$3.2 million
. Unrecognized compensation cost related to nonvested restricted stock awards, net of estimated forfeitures, was
$19.2 million
at
December 31, 2016
. This amount is expected to be recognized over a weighted-average period of
2.4 years
, based on the maximum remaining vesting period required under the awards, and the amount that would be recognized over a shorter period based on accelerated vesting provisions, is approximately
$0.7 million
. Unrecognized compensation cost related to nonvested performance share awards as of
December 31, 2016
was
$0.8 million
and will be recognized primarily in 2017 if the related performance targets are met.
The following table summarizes the activity and value of nonvested restricted stock and performance share awards for the years ended
December 31, 2016
,
2015
and
2014
,:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Number of
Shares
|
|
Weighted
Average
Grant-date
Value
Per Share
|
|
Number of
Shares
|
|
Weighted
Average
Grant-date
Value
Per Share
|
|
Number of
Shares
|
|
Weighted
Average
Grant-date
Value
Per Share
|
Nonvested awards at beginning of year
|
1,104
|
|
|
$
|
40.02
|
|
|
814
|
|
|
$
|
33.29
|
|
|
738
|
|
|
$
|
30.81
|
|
Granted
|
572
|
|
|
34.75
|
|
|
545
|
|
|
34.25
|
|
|
371
|
|
|
33.69
|
|
Vested
|
(337
|
)
|
|
32.65
|
|
|
(195
|
)
|
|
29.90
|
|
|
(201
|
)
|
|
31.01
|
|
Forfeited
|
(248
|
)
|
|
34.06
|
|
|
(60
|
)
|
|
33.27
|
|
|
(94
|
)
|
|
30.89
|
|
Nonvested awards at end of year
|
1,091
|
|
|
44.15
|
|
|
1,104
|
|
|
40.02
|
|
|
814
|
|
|
33.29
|
|
The total value of restricted stock vesting during the years ended
December 31, 2016
,
2015
and
2014
, was
$11.0 million
,
$5.8 million
and
$6.2 million
.
The following table summarizes the activity and terms of outstanding options at
December 31, 2016
, and for each of the years in the three-year period then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
Weighted Average
Exercise Price
Per Share
|
|
Weighted Average
Remaining
Contractual Life
(years)
|
|
Aggregate
Intrinsic Value
|
Options outstanding at December 31, 2013
|
64
|
|
|
$
|
23.33
|
|
|
|
|
|
Exercised
|
(49
|
)
|
|
24.21
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
Options outstanding at December 31, 2014
|
15
|
|
|
20.49
|
|
|
|
|
|
Exercised
|
(15
|
)
|
|
20.49
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
Options outstanding at December 31, 2015
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
Options outstanding at December 31, 2016
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
The total intrinsic value of stock options exercised during the years ended
December 31, 2016
,
2015
and
2014
, was
$0.0 million
,
$0.2 million
and
$0.5 million
. No options were granted in 2016, 2015 or 2014.
No
options were outstanding as of December 31, 2016.
Note 13—Retirement Plans
Savings and Retirement Plans.
We maintain a voluntary 401(k) savings and retirement plan covering substantially all full-time and certain part-time employees in the United States who have completed
one month of service and have attained age 18
. We match a certain percentage of each employee’s contribution. The plan also provides for a discretionary contribution by us to the plan for all eligible employees of
1%
of their salary, subject to certain limits, and discretionary profit-sharing contributions. We may increase or decrease our contributions at our discretion, on a prospective basis. We incurred
$12.5 million
,
$12.3 million
, and
$10.8 million
of expense related to this plan in
2016
,
2015
and
2014
. We also maintain defined contribution plans in some of the European countries in which we operate. Expenses related to these plans were not material in
2016
,
2015
and
2014
.
U.S. Retirement Plans.
We have a noncontributory, unfunded retirement plan for certain officers and other key employees in the United States (U.S. Retirement Plan). In February 2012, our Board of Directors amended the U.S. Retirement Plan to freeze benefit levels and modify vesting provisions under the plan effective as of March 31, 2012.
The following table sets forth the U.S. Retirement Plan’s financial status and the amounts recognized in our consolidated balance sheets:
|
|
|
|
|
|
|
|
|
December 31,
|
2016
|
|
2015
|
Change in benefit obligation
|
|
|
|
Benefit obligation, beginning of year
|
$
|
51,023
|
|
|
$
|
49,055
|
|
Interest cost
|
1,980
|
|
|
1,806
|
|
Actuarial (gain) loss
|
2,616
|
|
|
1,855
|
|
Benefits paid
|
(3,568
|
)
|
|
(1,693
|
)
|
Benefit obligation, end of year
|
$
|
52,051
|
|
|
$
|
51,023
|
|
Change in plan assets
|
|
|
|
Fair value of plan assets, beginning of year
|
$
|
—
|
|
|
$
|
—
|
|
Employer contribution
|
3,568
|
|
|
1,693
|
|
Benefits paid
|
(3,568
|
)
|
|
(1,693
|
)
|
Fair value of plan assets, end of year
|
$
|
—
|
|
|
$
|
—
|
|
Funded status, end of year
|
$
|
(52,051
|
)
|
|
$
|
(51,023
|
)
|
Amounts recognized in the consolidated balance sheets
|
|
|
|
Other current liabilities
|
$
|
(3,405
|
)
|
|
$
|
(2,977
|
)
|
Other liabilities
|
(48,644
|
)
|
|
(48,023
|
)
|
Accumulated other comprehensive loss
|
18,071
|
|
|
17,102
|
|
Net amount recognized
|
$
|
(33,978
|
)
|
|
$
|
(33,898
|
)
|
Accumulated benefit obligation
|
$
|
52,051
|
|
|
$
|
51,023
|
|
Weighted average assumptions used to determine benefit obligation
|
|
|
|
Discount rate
|
3.75
|
%
|
|
4.00
|
%
|
Rate of increase in compensation levels
|
N/A
|
|
|
N/A
|
|
Plan benefit obligations of the U.S. Retirement Plan were measured as of
December 31, 2016
and
2015
. Plan benefit obligations are determined using assumptions developed at the measurement date. The weighted average discount rate, which is used to calculate the present value of plan liabilities, is an estimate of the interest rate at which the plan liabilities could be effectively settled at the measurement date. When estimating the discount rate, we review yields available on high-quality, fixed-income debt instruments and use a yield curve model from which the discount rate is derived by applying the projected benefit payments under the plan to points on a published yield curve.
The components of net periodic benefit cost for the U.S. Retirement Plan, which is included in distribution, selling, and administrative expenses in the consolidated statements of income, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Interest cost
|
$
|
1,980
|
|
|
$
|
1,806
|
|
|
$
|
1,849
|
|
Recognized net actuarial loss
|
1,646
|
|
|
1,606
|
|
|
816
|
|
Net periodic benefit cost
|
$
|
3,626
|
|
|
$
|
3,412
|
|
|
$
|
2,665
|
|
Weighted average assumptions used to determine net periodic benefit cost
|
|
|
|
|
|
Discount rate
|
4.00
|
%
|
|
3.75
|
%
|
|
4.50
|
%
|
Rate of increase in future compensation levels
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Amounts recognized for the U.S. Retirement Plan as a component of accumulated other comprehensive loss as of the end of the year that have not been recognized as a component of the net periodic benefit cost are presented in the following table. We expect to recognize approximately
$1.8 million
of the net actuarial loss reported in the following table as of
December 31, 2016
, as a component of net periodic benefit cost during 2017.
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
Net actuarial loss
|
$
|
(18,071
|
)
|
|
$
|
(17,102
|
)
|
Deferred tax benefit
|
7,048
|
|
|
6,663
|
|
Amounts included in accumulated other comprehensive income (loss), net of tax
|
$
|
(11,023
|
)
|
|
$
|
(10,439
|
)
|
As of
December 31, 2016
, the expected benefit payments required for each of the next five years and the five-year period thereafter for the U.S. Retirement Plan were as follows:
|
|
|
|
|
Year
|
|
2017
|
$
|
3,374
|
|
2018
|
3,269
|
|
2019
|
3,034
|
|
2020
|
2,968
|
|
2021
|
2,825
|
|
2022-2026
|
12,423
|
|
International Retirement Plans.
Certain of our foreign subsidiaries have defined benefit pension plans covering substantially all of their respective employees. As of
December 31, 2016
and
2015
, the accumulated benefit obligation under these plans was
$2.0 million
and
$1.9 million
. We recorded
$0.1 million
,
$0.1 million
and
$0.2 million
in net periodic benefit cost in distribution, selling and administrative expenses for the years ended
December 31, 2016
,
2015
and
2014
.
Note 14—Income Taxes
The components of income (loss) before income taxes consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Income (loss) before income taxes:
|
|
|
|
|
|
U.S.
|
$
|
150,942
|
|
|
$
|
167,444
|
|
|
$
|
155,132
|
|
Foreign
|
21,600
|
|
|
5,766
|
|
|
(28,649
|
)
|
Income before income taxes
|
$
|
172,542
|
|
|
$
|
173,210
|
|
|
$
|
126,483
|
|
The income tax provision consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Current tax provision (benefit):
|
|
|
|
|
|
Federal
|
$
|
46,846
|
|
|
$
|
60,757
|
|
|
$
|
52,178
|
|
State
|
8,512
|
|
|
11,431
|
|
|
9,801
|
|
Foreign
|
4,179
|
|
|
3,714
|
|
|
1,386
|
|
Total current tax provision
|
59,537
|
|
|
75,902
|
|
|
63,365
|
|
Deferred tax provision (benefit):
|
|
|
|
|
|
Federal
|
5,303
|
|
|
(4,744
|
)
|
|
282
|
|
State
|
885
|
|
|
(376
|
)
|
|
295
|
|
Foreign
|
(1,970
|
)
|
|
(981
|
)
|
|
(3,962
|
)
|
Total deferred tax provision
|
4,218
|
|
|
(6,101
|
)
|
|
(3,385
|
)
|
Total income tax provision
|
$
|
63,755
|
|
|
$
|
69,801
|
|
|
$
|
59,980
|
|
A reconciliation of the federal statutory rate to our effective income tax rate is shown below:
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Federal statutory rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increases (decreases) in the rate resulting from:
|
|
|
|
|
|
State income taxes, net of federal income tax impact
|
3.7
|
%
|
|
4.1
|
%
|
|
5.2
|
%
|
Foreign income taxes
|
(4.3
|
)%
|
|
(2.8
|
)%
|
|
1.7
|
%
|
Valuation allowance
|
0.5
|
%
|
|
1.2
|
%
|
|
3.2
|
%
|
Other
|
2.1
|
%
|
|
2.8
|
%
|
|
2.3
|
%
|
Effective income tax rate
|
37.0
|
%
|
|
40.3
|
%
|
|
47.4
|
%
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
|
|
|
|
|
|
|
|
|
December 31,
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
Employee benefit plans
|
$
|
35,540
|
|
|
$
|
36,903
|
|
Accrued liabilities not currently deductible
|
15,693
|
|
|
15,268
|
|
Finance charges
|
3,803
|
|
|
6,128
|
|
Capital leases
|
6,607
|
|
|
7,363
|
|
Allowance for losses on accounts and notes receivable
|
4,069
|
|
|
3,852
|
|
Net operating loss carryforwards
|
12,722
|
|
|
12,395
|
|
Other
|
4,183
|
|
|
2,475
|
|
Total deferred tax assets
|
82,617
|
|
|
84,384
|
|
Less: valuation allowances
|
(12,332
|
)
|
|
(10,798
|
)
|
Net deferred tax assets
|
70,285
|
|
|
73,586
|
|
Deferred tax liabilities:
|
|
|
|
Merchandise inventories
|
71,035
|
|
|
67,013
|
|
Goodwill
|
37,854
|
|
|
36,613
|
|
Property and equipment
|
14,910
|
|
|
14,651
|
|
Computer software
|
15,363
|
|
|
17,870
|
|
Insurance
|
368
|
|
|
268
|
|
Intangible assets
|
18,887
|
|
|
22,048
|
|
Other
|
230
|
|
|
206
|
|
Total deferred tax liabilities
|
158,647
|
|
|
158,669
|
|
Net deferred tax liability
|
$
|
(88,362
|
)
|
|
$
|
(85,083
|
)
|
The valuation allowances relate to deferred tax assets in various state and non-U.S. jurisdictions. Based on management’s judgments using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at
December 31, 2016
. The valuation allowances primarily relate to net operating loss carryforwards in non-U.S. jurisdictions which have various expiration dates ranging from
five
years to an unlimited carryforward period.
It is our intention to permanently reinvest the earnings of our non-U.S. subsidiaries in those operations. As of
December 31, 2016
, we have not made a provision for U.S. or additional foreign withholding taxes on investments in foreign subsidiaries that are permanently reinvested. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable.
Cash payments for income taxes, including interest, for
2016
,
2015
and
2014
were
$74.1 million
,
$52.4 million
and
$81.6 million
.
At
December 31, 2016
and
2015
, the liability for unrecognized tax benefits was
$10.7 million
and
$7.7 million
. A reconciliation of the changes in unrecognized tax benefits from the beginning to the end of the reporting period is as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Unrecognized tax benefits at January 1,
|
$
|
7,657
|
|
|
$
|
6,684
|
|
Increases for positions taken during current period
|
2,322
|
|
|
1,968
|
|
Increases for positions taken during prior periods
|
1,135
|
|
|
481
|
|
Decreases for positions taken during prior periods
|
(242
|
)
|
|
(1,476
|
)
|
Lapse of statute of limitations
|
(21
|
)
|
|
—
|
|
Settlements with taxing authorities
|
(126
|
)
|
|
—
|
|
Unrecognized tax benefits at December 31,
|
$
|
10,725
|
|
|
$
|
7,657
|
|
Included in the liability for unrecognized tax benefits at
December 31, 2016
and
2015
, were
$4.7 million
and
$4.1 million
of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. These tax positions are temporary differences which do not impact the annual effective tax rate under deferred tax accounting. Any change in the deductibility period of these tax positions would impact the timing of cash payments to taxing jurisdictions. Unrecognized tax benefits of
$4.8 million
and
$3.0 million
at
December 31, 2016
and
2015
, would impact our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest at
December 31, 2016
and
2015
was
$0.4 million
and
$0.2 million
. We recognized
$0.2 million
in interest income in 2016,
$0.1 million
in interest expense in 2015 and
$0.1 million
of interest expense in 2014. There were
no
penalties accrued at
December 31, 2016
and
2015
or recognized in 2016, 2015 and 2014.
We file income tax returns in the U.S. federal and various state and foreign jurisdictions. Our U.S. federal income tax returns for the years 2014 and 2015 are subject to examination. Our income tax returns for U.S. state and local jurisdictions are generally open for the years 2013 through 2015; however, certain returns may be subject to examination for differing periods. The former owner is contractually obligated to indemnify us for all income tax liabilities incurred by the Movianto business prior to its acquisition on August 31, 2012.
Note 15—Net Income per Common Share
The following table summarizes the calculation of net income per share attributable to common shareholders for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Numerator:
|
|
|
|
|
|
Net income
|
$
|
108,787
|
|
|
$
|
103,409
|
|
|
$
|
66,503
|
|
Less: income allocated to unvested restricted shares
|
(1,147
|
)
|
|
(925
|
)
|
|
(597
|
)
|
Net income attributable to common shareholders—basic
|
107,640
|
|
|
102,484
|
|
|
65,906
|
|
Add: undistributed income attributable to unvested restricted shares—basic
|
297
|
|
|
235
|
|
|
18
|
|
Less: undistributed income attributable to unvested restricted shares—diluted
|
(297
|
)
|
|
(235
|
)
|
|
(18
|
)
|
Net income attributable to common shareholders—diluted
|
$
|
107,640
|
|
|
$
|
102,484
|
|
|
$
|
65,906
|
|
Denominator:
|
|
|
|
|
|
Weighted average shares outstanding—basic
|
61,093
|
|
|
62,116
|
|
|
62,220
|
|
Dilutive shares—stock options
|
—
|
|
|
1
|
|
|
6
|
|
Weighted average shares outstanding—diluted
|
61,093
|
|
|
62,117
|
|
|
62,226
|
|
Net income attributable to common shareholders:
|
|
|
|
|
|
Basic
|
$
|
1.76
|
|
|
$
|
1.65
|
|
|
$
|
1.06
|
|
Diluted
|
$
|
1.76
|
|
|
$
|
1.65
|
|
|
$
|
1.06
|
|
Note 16—Shareholders’ Equity
We had a shareholder rights agreement that expired on April 30, 2014 and was not renewed or replaced. All Rights attendant to outstanding shares of our common stock under the agreement also expired on April 30, 2014.
In February 2014 our Board of Directors 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
February 2017
. The program was intended, in part, to offset shares issued in conjunction with our stock incentive plans and return capital to shareholders. The authorized repurchases under this program were completed in December 2016.
In October 2016, our Board of Directors authorized a new share repurchase program of up to
$100 million
of the company’s outstanding common stock to be executed at the discretion of management over a
three
-year period. The new authorization took effect in December 2016 upon the completion of the previous authorization. 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.
During the year ended December 31, 2016, we repurchased in open-market transactions and retired approximately
2.0 million
shares of our common stock for an aggregate of
$71.0 million
, or an average price per share of
$34.72
. As of December 31, 2016, we have
$99.0 million
in remaining authorization available under the repurchase program. We have elected to allocate any excess of share repurchase price over par value to retained earnings.
During the year ended December 31, 2015, we repurchased in open-market transactions and retired approximately
0.6 million
shares of our common stock for an aggregate of
$20.0 million
, or an average price per share of
$34.04
.
During the year ended December 31, 2014, we repurchased in open-market transactions and retired approximately
0.3 million
shares of our common stock for an aggregate of
$9.9 million
, or an average price per share of
$34.31
.
During 2014, we purchased the remaining outside stockholder's interest in a consolidated subsidiary that was partially owned for
$1.5 million
. Therefore we do not present a noncontrolling interest as a component of shareholders' equity as of December 31, 2016 or 2015. The noncontrolling interest in net income was not material in 2014.
Note 17 — Accumulated Other Comprehensive Income
The following tables show the changes in accumulated other comprehensive income (loss) by component for the years ended
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
Currency Translation Adjustments
|
|
Other
|
|
Total
|
Accumulated other comprehensive income (loss), December 31, 2015
|
$
|
(10,482
|
)
|
|
$
|
(41,228
|
)
|
|
$
|
(115
|
)
|
|
$
|
(51,825
|
)
|
Other comprehensive income (loss) before reclassifications
|
(2,716
|
)
|
|
(15,017
|
)
|
|
86
|
|
|
(17,647
|
)
|
Income tax
|
869
|
|
|
—
|
|
|
—
|
|
|
869
|
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(1,847
|
)
|
|
(15,017
|
)
|
|
86
|
|
|
(16,778
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
1,646
|
|
|
—
|
|
|
—
|
|
|
1,646
|
|
Income tax
|
(526
|
)
|
|
—
|
|
|
—
|
|
|
(526
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
1,120
|
|
|
—
|
|
|
—
|
|
|
1,120
|
|
Other comprehensive income (loss)
|
(727
|
)
|
|
(15,017
|
)
|
|
86
|
|
|
(15,658
|
)
|
Accumulated other comprehensive income (loss), December 31, 2016
|
$
|
(11,209
|
)
|
|
$
|
(56,245
|
)
|
|
$
|
(29
|
)
|
|
$
|
(67,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
Currency Translation Adjustments
|
|
Other
|
|
Total
|
Accumulated other comprehensive income (loss), December 31, 2014
|
$
|
(10,323
|
)
|
|
$
|
(13,647
|
)
|
|
$
|
(31
|
)
|
|
$
|
(24,001
|
)
|
Other comprehensive income (loss) before reclassifications
|
(1,855
|
)
|
|
(27,581
|
)
|
|
(84
|
)
|
|
(29,520
|
)
|
Income tax
|
670
|
|
|
—
|
|
|
—
|
|
|
670
|
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(1,185
|
)
|
|
(27,581
|
)
|
|
(84
|
)
|
|
(28,850
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
1,606
|
|
|
—
|
|
|
—
|
|
|
1,606
|
|
Income tax
|
(580
|
)
|
|
—
|
|
|
—
|
|
|
(580
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
1,026
|
|
|
—
|
|
|
—
|
|
|
1,026
|
|
Other comprehensive income (loss)
|
(159
|
)
|
|
(27,581
|
)
|
|
(84
|
)
|
|
(27,824
|
)
|
Accumulated other comprehensive income (loss), December 31, 2015
|
$
|
(10,482
|
)
|
|
$
|
(41,228
|
)
|
|
$
|
(115
|
)
|
|
$
|
(51,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Plans
|
|
Currency Translation Adjustments
|
|
Other
|
|
Total
|
Accumulated other comprehensive income (loss), December 31, 2013
|
$
|
(6,479
|
)
|
|
$
|
15,892
|
|
|
$
|
155
|
|
|
$
|
9,568
|
|
Other comprehensive income (loss) before reclassifications
|
(7,021
|
)
|
|
(29,539
|
)
|
|
(73
|
)
|
|
(36,633
|
)
|
Income tax
|
2,671
|
|
|
—
|
|
|
—
|
|
|
2,671
|
|
Other comprehensive income before reclassifications, net of tax
|
(4,350
|
)
|
|
(29,539
|
)
|
|
(73
|
)
|
|
(33,962
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
816
|
|
|
—
|
|
|
(185
|
)
|
|
631
|
|
Income tax
|
(310
|
)
|
|
—
|
|
|
72
|
|
|
(238
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
506
|
|
|
—
|
|
|
(113
|
)
|
|
393
|
|
Other comprehensive income (loss)
|
(3,844
|
)
|
|
(29,539
|
)
|
|
(186
|
)
|
|
(33,569
|
)
|
Accumulated other comprehensive income (loss), December 31, 2014
|
$
|
(10,323
|
)
|
|
$
|
(13,647
|
)
|
|
$
|
(31
|
)
|
|
$
|
(24,001
|
)
|
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 selling, general and administrative expenses. For the years ended December 31,
2016
,
2015
and
2014
we reclassified
$1.6 million
,
$1.6 million
and
$0.8 million
of actuarial net losses.
Note 18—Commitments and Contingencies
We have a contractual commitment to outsource information technology operations, including the management and operation of our information technology systems and distributed services processing, as well as application support, development and enhancement services. This agreement expires in October 2017, with
two
optional
one year
extensions. The commitment is cancelable with
180
days notice and payment of a termination fee based upon certain costs which would be incurred by the vendor as a direct result of the early termination.
We pay scheduled fees under the agreement, which can vary based on changes in the Consumer Price Index and the level of support required. Assuming no early termination of the contract, our estimated remaining annual obligations under this agreement are
$29.8 million
in 2017. We paid
$35.8 million
,
$35.9 million
and
$36.6 million
under this contract in
2016
,
2015
and
2014
.
We have entered into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from
one
to
20
years. Certain leases include renewal options, generally for
five
-year increments. We also lease most of our transportation and material handling equipment for terms generally ranging from
three
to
ten
years. At December 31, 2016, future minimum annual payments under non-cancelable lease agreements with original terms in excess of one year, and including payments required under operating leases for facilities we have vacated, are as follows:
|
|
|
|
|
|
Total
|
2017
|
$
|
59,249
|
|
2018
|
53,684
|
|
2019
|
43,168
|
|
2020
|
32,146
|
|
2021
|
22,783
|
|
Thereafter
|
50,341
|
|
Total minimum payments
|
$
|
261,371
|
|
Rent expense for all operating leases for the years ended December 31,
2016
,
2015
and
2014
, was
$70.0 million
,
$70.8 million
and
$77.8 million
.
Note 19—Legal Proceedings
We are subject to various legal actions that are ordinary and incidental to our business, including contract disputes, employment, workers’ compensation, product liability, regulatory and other matters. We have insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. We establish reserves from time to time based upon periodic assessment of the potential outcomes of pending matters.
Based on current knowledge and the advice of counsel, we believe that the accrual as of December 31, 2016 for currently pending matters considered probable of loss, which is not material, is sufficient. In addition, we believe that other currently pending matters are not reasonably likely to result in a material loss, as payment of the amounts claimed is remote, the claims are insignificant, individually and in the aggregate, or the claims are expected to be adequately covered by insurance.
Note 20—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
three
segments: Domestic, International and CPS. The Domestic segment includes our United States distribution, logistics and value-added services business. The International segment consists of our European distribution, logistics and value-added services business. CPS provides product-related solutions, including surgical and procedural kitting and sourcing.
We evaluate the performance of our segments based on their operating earnings 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Net revenue:
|
|
|
|
|
|
Segment net revenue
|
|
|
|
|
|
Domestic
|
$
|
9,191,574
|
|
|
$
|
9,176,855
|
|
|
$
|
8,910,733
|
|
International
|
343,674
|
|
|
372,638
|
|
|
481,402
|
|
CPS
|
539,580
|
|
|
561,812
|
|
|
294,358
|
|
Total segment net revenue
|
10,074,828
|
|
|
10,111,305
|
|
|
9,686,493
|
|
Inter-segment net revenue
|
|
|
|
|
|
CPS
|
(351,397
|
)
|
|
(338,359
|
)
|
|
(246,311
|
)
|
Total inter-segment net revenue
|
(351,397
|
)
|
|
(338,359
|
)
|
|
(246,311
|
)
|
Consolidated net revenue
|
$
|
9,723,431
|
|
|
$
|
9,772,946
|
|
|
$
|
9,440,182
|
|
|
|
|
|
|
|
Operating earnings (loss):
|
|
|
|
|
|
Domestic
|
$
|
165,495
|
|
|
$
|
162,944
|
|
|
$
|
165,769
|
|
International
|
5,596
|
|
|
3,198
|
|
|
(6,808
|
)
|
CPS
|
53,799
|
|
|
61,932
|
|
|
46,527
|
|
Inter-segment eliminations
|
(616
|
)
|
|
(811
|
)
|
|
(2,950
|
)
|
Acquisition-related and exit and realignment charges
(1)
|
(24,675
|
)
|
|
(28,404
|
)
|
|
(42,801
|
)
|
Fair value adjustments related to purchase accounting
|
—
|
|
|
—
|
|
|
3,706
|
|
Other
(2)
|
—
|
|
|
1,500
|
|
|
(3,907
|
)
|
Consolidated operating earnings
|
$
|
199,599
|
|
|
$
|
200,359
|
|
|
$
|
159,536
|
|
|
|
|
|
|
|
Depreciation and amortization:
|
|
|
|
|
|
Domestic
|
$
|
29,469
|
|
|
$
|
34,425
|
|
|
$
|
35,499
|
|
International
|
17,117
|
|
|
18,903
|
|
|
19,837
|
|
CPS
|
8,807
|
|
|
8,180
|
|
|
1,790
|
|
Consolidated depreciation and amortization
|
$
|
55,393
|
|
|
$
|
61,508
|
|
|
$
|
57,126
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
Domestic
|
$
|
14,333
|
|
|
$
|
17,310
|
|
|
$
|
52,529
|
|
International
|
12,874
|
|
|
18,158
|
|
|
18,279
|
|
CPS
|
2,914
|
|
|
1,148
|
|
|
—
|
|
Consolidated capital expenditures
|
$
|
30,121
|
|
|
$
|
36,616
|
|
|
$
|
70,808
|
|
(1)
The years ended December 31, 2015 and 2014 included
$4.5 million
and
$6.0 million
, respectively of accelerated amortization related to an information system that was replaced.
(2)
Contract claim settlement for
$3.9 million
with a customer in the U.K. in 2014, of which
$1.5 million
was recovered through insurance in 2015.
|
|
|
|
|
|
|
|
|
December 31,
|
2016
|
|
2015
|
Total assets:
|
|
|
|
Domestic
|
$
|
1,778,481
|
|
|
$
|
1,785,676
|
|
International
|
352,898
|
|
|
406,787
|
|
CPS
|
400,885
|
|
|
420,293
|
|
Segment assets
|
2,532,264
|
|
|
2,612,756
|
|
Cash and cash equivalents
|
185,488
|
|
|
161,020
|
|
Consolidated total assets
|
$
|
2,717,752
|
|
|
$
|
2,773,776
|
|
The following tables present information by geographic area. Net revenues were attributed to geographic areas based on the locations from which we ship products or provide services. International operations consist primarily of Movianto’s operations in the United Kingdom, Germany, France, and other European countries.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
2016
|
|
2015
|
|
2014
|
Net revenue:
|
|
|
|
|
|
United States
|
$
|
9,338,543
|
|
|
$
|
9,356,140
|
|
|
$
|
8,951,852
|
|
United Kingdom
|
169,874
|
|
|
192,818
|
|
|
253,527
|
|
Ireland
|
41,214
|
|
|
44,168
|
|
|
6,928
|
|
France
|
38,761
|
|
|
44,592
|
|
|
54,656
|
|
Germany
|
47,514
|
|
|
46,848
|
|
|
47,682
|
|
Other European countries
|
87,525
|
|
|
88,380
|
|
|
125,537
|
|
Consolidated net revenue
|
$
|
9,723,431
|
|
|
$
|
9,772,946
|
|
|
$
|
9,440,182
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
2016
|
|
2015
|
Long-lived assets:
|
|
|
|
United States
|
$
|
217,985
|
|
|
$
|
237,641
|
|
Germany
|
39,734
|
|
|
43,917
|
|
United Kingdom
|
32,349
|
|
|
41,594
|
|
Ireland
|
21,567
|
|
|
24,316
|
|
France
|
5,173
|
|
|
5,397
|
|
Other European countries
|
16,643
|
|
|
19,718
|
|
Consolidated long-lived assets
|
$
|
333,451
|
|
|
$
|
372,583
|
|
Note 21—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.
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
—
|
|
|
$
|
9,190,660
|
|
|
$
|
697,559
|
|
|
$
|
(164,788
|
)
|
|
$
|
9,723,431
|
|
Cost of goods sold
|
—
|
|
|
8,330,960
|
|
|
370,594
|
|
|
(165,433
|
)
|
|
8,536,121
|
|
Gross margin
|
—
|
|
|
859,700
|
|
|
326,965
|
|
|
645
|
|
|
1,187,310
|
|
Distribution, selling and administrative expenses
|
1,127
|
|
|
670,800
|
|
|
298,497
|
|
|
—
|
|
|
970,424
|
|
Acquisition-related and exit and realignment charges
|
—
|
|
|
15,611
|
|
|
9,064
|
|
|
—
|
|
|
24,675
|
|
Other operating (income) expense, net
|
—
|
|
|
(5,066
|
)
|
|
(2,322
|
)
|
|
—
|
|
|
(7,388
|
)
|
Operating (loss) earnings
|
(1,127
|
)
|
|
178,355
|
|
|
21,726
|
|
|
645
|
|
|
199,599
|
|
Interest expense (income), net
|
28,901
|
|
|
(4,744
|
)
|
|
2,900
|
|
|
—
|
|
|
27,057
|
|
Income (loss) before income taxes
|
(30,028
|
)
|
|
183,099
|
|
|
18,826
|
|
|
645
|
|
|
172,542
|
|
Income tax (benefit) provision
|
—
|
|
|
61,545
|
|
|
2,210
|
|
|
—
|
|
|
63,755
|
|
Equity in earnings of subsidiaries
|
138,815
|
|
|
—
|
|
|
—
|
|
|
(138,815
|
)
|
|
—
|
|
Net income (loss)
|
108,787
|
|
|
121,554
|
|
|
16,616
|
|
|
(138,170
|
)
|
|
108,787
|
|
Other comprehensive income (loss), net of tax
|
(15,658
|
)
|
|
(640
|
)
|
|
(15,017
|
)
|
|
15,657
|
|
|
(15,658
|
)
|
Comprehensive income (loss)
|
$
|
93,129
|
|
|
$
|
120,914
|
|
|
$
|
1,599
|
|
|
$
|
(122,513
|
)
|
|
$
|
93,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
—
|
|
|
$
|
9,176,855
|
|
|
$
|
751,442
|
|
|
$
|
(155,351
|
)
|
|
$
|
9,772,946
|
|
Cost of goods sold
|
—
|
|
|
8,305,734
|
|
|
410,009
|
|
|
(157,370
|
)
|
|
8,558,373
|
|
Gross margin
|
—
|
|
|
871,121
|
|
|
341,433
|
|
|
2,019
|
|
|
1,214,573
|
|
Distribution, selling and administrative expenses
|
1,229
|
|
|
684,021
|
|
|
308,533
|
|
|
—
|
|
|
993,783
|
|
Acquisition-related and exit and realignment charges
|
—
|
|
|
8,877
|
|
|
19,527
|
|
|
—
|
|
|
28,404
|
|
Other operating (income) expense, net
|
—
|
|
|
(2,621
|
)
|
|
(5,352
|
)
|
|
—
|
|
|
(7,973
|
)
|
Operating (loss) earnings
|
(1,229
|
)
|
|
180,844
|
|
|
18,725
|
|
|
2,019
|
|
|
200,359
|
|
Interest expense (income), net
|
27,457
|
|
|
(3,371
|
)
|
|
3,063
|
|
|
—
|
|
|
27,149
|
|
Income (loss) before income taxes
|
(28,686
|
)
|
|
184,215
|
|
|
15,662
|
|
|
2,019
|
|
|
173,210
|
|
Income tax (benefit) provision
|
(9,837
|
)
|
|
71,807
|
|
|
7,831
|
|
|
—
|
|
|
69,801
|
|
Equity in earnings of subsidiaries
|
122,258
|
|
|
—
|
|
|
—
|
|
|
(122,258
|
)
|
|
—
|
|
Net income (loss)
|
103,409
|
|
|
112,408
|
|
|
7,831
|
|
|
(120,239
|
)
|
|
103,409
|
|
Other comprehensive income (loss), net of tax
|
(27,824
|
)
|
|
(243
|
)
|
|
(27,581
|
)
|
|
27,824
|
|
|
(27,824
|
)
|
Comprehensive income (loss)
|
$
|
75,585
|
|
|
$
|
112,165
|
|
|
$
|
(19,750
|
)
|
|
$
|
(92,415
|
)
|
|
$
|
75,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Income
|
|
|
|
|
|
|
|
|
|
Net revenue
|
$
|
—
|
|
|
$
|
8,910,274
|
|
|
$
|
626,044
|
|
|
$
|
(96,136
|
)
|
|
$
|
9,440,182
|
|
Cost of goods sold
|
—
|
|
|
8,051,350
|
|
|
311,947
|
|
|
(93,081
|
)
|
|
8,270,216
|
|
Gross margin
|
—
|
|
|
858,924
|
|
|
314,097
|
|
|
(3,055
|
)
|
|
1,169,966
|
|
Distribution, selling and administrative expenses
|
954
|
|
|
659,453
|
|
|
323,695
|
|
|
—
|
|
|
984,102
|
|
Acquisition-related and exit and realignment charges
|
—
|
|
|
15,065
|
|
|
27,736
|
|
|
—
|
|
|
42,801
|
|
Other operating (income) expense, net
|
—
|
|
|
(10,261
|
)
|
|
(6,212
|
)
|
|
—
|
|
|
(16,473
|
)
|
Operating (loss) earnings
|
(954
|
)
|
|
194,667
|
|
|
(31,122
|
)
|
|
(3,055
|
)
|
|
159,536
|
|
Loss on early retirement of debt
|
14,890
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,890
|
|
Interest expense (income), net
|
15,737
|
|
|
1,520
|
|
|
906
|
|
|
—
|
|
|
18,163
|
|
Income (loss) before income taxes
|
(31,581
|
)
|
|
193,147
|
|
|
(32,028
|
)
|
|
(3,055
|
)
|
|
126,483
|
|
Income tax (benefit) provision
|
(1,700
|
)
|
|
65,983
|
|
|
(4,303
|
)
|
|
—
|
|
|
59,980
|
|
Equity in earnings of subsidiaries
|
96,384
|
|
|
—
|
|
|
—
|
|
|
(96,384
|
)
|
|
—
|
|
Net income (loss)
|
66,503
|
|
|
127,164
|
|
|
(27,725
|
)
|
|
(99,439
|
)
|
|
66,503
|
|
Other comprehensive income (loss), net of tax
|
(33,569
|
)
|
|
(3,846
|
)
|
|
(29,539
|
)
|
|
33,385
|
|
|
(33,569
|
)
|
Comprehensive income (loss)
|
$
|
32,934
|
|
|
$
|
123,318
|
|
|
$
|
(57,264
|
)
|
|
$
|
(66,054
|
)
|
|
$
|
32,934
|
|
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Balance Sheets
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
38,015
|
|
|
$
|
61,266
|
|
|
$
|
86,207
|
|
|
$
|
—
|
|
|
$
|
185,488
|
|
Accounts and notes receivable, net
|
—
|
|
|
526,170
|
|
|
90,016
|
|
|
(10,102
|
)
|
|
606,084
|
|
Merchandise inventories
|
—
|
|
|
856,566
|
|
|
61,505
|
|
|
(1,760
|
)
|
|
916,311
|
|
Other current assets
|
106
|
|
|
86,907
|
|
|
167,143
|
|
|
—
|
|
|
254,156
|
|
Total current assets
|
38,121
|
|
|
1,530,909
|
|
|
404,871
|
|
|
(11,862
|
)
|
|
1,962,039
|
|
Property and equipment, net
|
—
|
|
|
97,725
|
|
|
93,993
|
|
|
—
|
|
|
191,718
|
|
Goodwill, net
|
—
|
|
|
180,006
|
|
|
234,930
|
|
|
—
|
|
|
414,936
|
|
Intangible assets, net
|
—
|
|
|
11,655
|
|
|
70,856
|
|
|
—
|
|
|
82,511
|
|
Due from O&M and subsidiaries
|
—
|
|
|
573,395
|
|
|
—
|
|
|
(573,395
|
)
|
|
—
|
|
Advances to and investments in consolidated subsidiaries
|
2,044,963
|
|
|
—
|
|
|
—
|
|
|
(2,044,963
|
)
|
|
—
|
|
Other assets, net
|
—
|
|
|
49,887
|
|
|
16,661
|
|
|
—
|
|
|
66,548
|
|
Total assets
|
$
|
2,083,084
|
|
|
$
|
2,443,577
|
|
|
$
|
821,311
|
|
|
$
|
(2,630,220
|
)
|
|
$
|
2,717,752
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
683,189
|
|
|
$
|
75,512
|
|
|
$
|
(7,951
|
)
|
|
$
|
750,750
|
|
Accrued payroll and related liabilities
|
—
|
|
|
32,814
|
|
|
12,237
|
|
|
—
|
|
|
45,051
|
|
Other current liabilities
|
7,106
|
|
|
93,327
|
|
|
138,404
|
|
|
—
|
|
|
238,837
|
|
Total current liabilities
|
7,106
|
|
|
809,330
|
|
|
226,153
|
|
|
(7,951
|
)
|
|
1,034,638
|
|
Long-term debt, excluding current portion
|
544,838
|
|
|
3,219
|
|
|
16,526
|
|
|
—
|
|
|
564,583
|
|
Due to O&M and subsidiaries
|
571,102
|
|
|
—
|
|
|
48,044
|
|
|
(619,146
|
)
|
|
—
|
|
Intercompany debt
|
—
|
|
|
138,890
|
|
|
—
|
|
|
(138,890
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
70,280
|
|
|
20,103
|
|
|
—
|
|
|
90,383
|
|
Other liabilities
|
—
|
|
|
60,578
|
|
|
7,532
|
|
|
—
|
|
|
68,110
|
|
Total liabilities
|
1,123,046
|
|
|
1,082,297
|
|
|
318,358
|
|
|
(765,987
|
)
|
|
1,757,714
|
|
Equity
|
|
|
|
|
|
|
|
|
—
|
|
Common stock
|
122,062
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122,062
|
|
Paid-in capital
|
219,955
|
|
|
174,614
|
|
|
583,872
|
|
|
(758,486
|
)
|
|
219,955
|
|
Retained earnings (deficit)
|
685,504
|
|
|
1,196,341
|
|
|
(42,032
|
)
|
|
(1,154,309
|
)
|
|
685,504
|
|
Accumulated other comprehensive income (loss)
|
(67,483
|
)
|
|
(9,675
|
)
|
|
(38,887
|
)
|
|
48,562
|
|
|
(67,483
|
)
|
Total equity
|
960,038
|
|
|
1,361,280
|
|
|
502,953
|
|
|
(1,864,233
|
)
|
|
960,038
|
|
Total liabilities and equity
|
$
|
2,083,084
|
|
|
$
|
2,443,577
|
|
|
$
|
821,311
|
|
|
$
|
(2,630,220
|
)
|
|
$
|
2,717,752
|
|
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Balance Sheets
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
103,284
|
|
|
$
|
5,614
|
|
|
$
|
52,122
|
|
|
$
|
—
|
|
|
$
|
161,020
|
|
Accounts and notes receivable, net
|
—
|
|
|
507,673
|
|
|
89,895
|
|
|
(9,633
|
)
|
|
587,935
|
|
Merchandise inventories
|
—
|
|
|
883,232
|
|
|
59,930
|
|
|
(2,387
|
)
|
|
940,775
|
|
Other current assets
|
104
|
|
|
72,683
|
|
|
212,183
|
|
|
—
|
|
|
284,970
|
|
Total current assets
|
103,388
|
|
|
1,469,202
|
|
|
414,130
|
|
|
(12,020
|
)
|
|
1,974,700
|
|
Property and equipment, net
|
—
|
|
|
103,219
|
|
|
105,711
|
|
|
—
|
|
|
208,930
|
|
Goodwill, net
|
—
|
|
|
180,006
|
|
|
239,613
|
|
|
—
|
|
|
419,619
|
|
Intangible assets, net
|
—
|
|
|
13,731
|
|
|
81,519
|
|
|
—
|
|
|
95,250
|
|
Due from O&M and subsidiaries
|
—
|
|
|
518,473
|
|
|
—
|
|
|
(518,473
|
)
|
|
—
|
|
Advances to and investments in consolidated subsidiaries
|
1,967,176
|
|
|
—
|
|
|
—
|
|
|
(1,967,176
|
)
|
|
—
|
|
Other assets, net
|
—
|
|
|
57,409
|
|
|
17,868
|
|
|
—
|
|
|
75,277
|
|
Total assets
|
$
|
2,070,564
|
|
|
$
|
2,342,040
|
|
|
$
|
858,841
|
|
|
$
|
(2,497,669
|
)
|
|
$
|
2,773,776
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
662,909
|
|
|
$
|
56,073
|
|
|
$
|
(8,373
|
)
|
|
$
|
710,609
|
|
Accrued payroll and related liabilities
|
—
|
|
|
32,094
|
|
|
13,813
|
|
|
—
|
|
|
45,907
|
|
Other current liabilities
|
6,924
|
|
|
109,137
|
|
|
191,012
|
|
|
—
|
|
|
307,073
|
|
Total current liabilities
|
6,924
|
|
|
804,140
|
|
|
260,898
|
|
|
(8,373
|
)
|
|
1,063,589
|
|
Long-term debt, excluding current portion
|
543,982
|
|
|
4,527
|
|
|
19,986
|
|
|
—
|
|
|
568,495
|
|
Due to O&M and subsidiaries
|
527,068
|
|
|
—
|
|
|
70,089
|
|
|
(597,157
|
)
|
|
—
|
|
Intercompany debt
|
—
|
|
|
138,890
|
|
|
—
|
|
|
(138,890
|
)
|
|
—
|
|
Deferred income taxes
|
—
|
|
|
67,562
|
|
|
18,764
|
|
|
—
|
|
|
86,326
|
|
Other liabilities
|
—
|
|
|
57,573
|
|
|
5,203
|
|
|
—
|
|
|
62,776
|
|
Total liabilities
|
1,077,974
|
|
|
1,072,692
|
|
|
374,940
|
|
|
(744,420
|
)
|
|
1,781,186
|
|
Equity
|
|
|
|
|
|
|
|
|
—
|
|
Common stock
|
125,606
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,606
|
|
Paid-in capital
|
211,943
|
|
|
174,612
|
|
|
583,873
|
|
|
(758,485
|
)
|
|
211,943
|
|
Retained earnings (deficit)
|
706,866
|
|
|
1,104,787
|
|
|
(58,648
|
)
|
|
(1,046,139
|
)
|
|
706,866
|
|
Accumulated other comprehensive income (loss)
|
(51,825
|
)
|
|
(10,051
|
)
|
|
(41,324
|
)
|
|
51,375
|
|
|
(51,825
|
)
|
Total equity
|
992,590
|
|
|
1,269,348
|
|
|
483,901
|
|
|
(1,753,249
|
)
|
|
992,590
|
|
Total liabilities and equity
|
$
|
2,070,564
|
|
|
$
|
2,342,040
|
|
|
$
|
858,841
|
|
|
$
|
(2,497,669
|
)
|
|
$
|
2,773,776
|
|
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
108,787
|
|
|
$
|
121,554
|
|
|
$
|
16,616
|
|
|
$
|
(138,170
|
)
|
|
$
|
108,787
|
|
Adjustments to reconcile net income to cash (used for) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
(138,815
|
)
|
|
—
|
|
|
—
|
|
|
138,815
|
|
|
—
|
|
Depreciation and amortization
|
—
|
|
|
29,589
|
|
|
25,804
|
|
|
—
|
|
|
55,393
|
|
Share-based compensation expense
|
—
|
|
|
12,042
|
|
|
—
|
|
|
—
|
|
|
12,042
|
|
Provision for losses on accounts and notes receivable
|
—
|
|
|
84
|
|
|
293
|
|
|
—
|
|
|
377
|
|
Deferred income tax (benefit) expense
|
—
|
|
|
6,245
|
|
|
(2,027
|
)
|
|
—
|
|
|
4,218
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
—
|
|
|
(18,581
|
)
|
|
(6,358
|
)
|
|
(305
|
)
|
|
(25,244
|
)
|
Merchandise inventories
|
—
|
|
|
26,666
|
|
|
(3,449
|
)
|
|
(628
|
)
|
|
22,589
|
|
Accounts payable
|
—
|
|
|
20,280
|
|
|
22,862
|
|
|
288
|
|
|
43,430
|
|
Net change in other assets and liabilities
|
180
|
|
|
(26,397
|
)
|
|
(11,342
|
)
|
|
—
|
|
|
(37,559
|
)
|
Other, net
|
854
|
|
|
999
|
|
|
1,048
|
|
|
—
|
|
|
2,901
|
|
Cash provided by (used for) operating activities of continuing operations
|
(28,994
|
)
|
|
172,481
|
|
|
43,447
|
|
|
—
|
|
|
186,934
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Additions to computer software and intangible assets
|
—
|
|
|
(4,004
|
)
|
|
(5,815
|
)
|
|
—
|
|
|
(9,819
|
)
|
Additions to property and equipment
|
—
|
|
|
(10,329
|
)
|
|
(9,973
|
)
|
|
—
|
|
|
(20,302
|
)
|
Proceeds from sale of property and equipment
|
—
|
|
|
125
|
|
|
5,250
|
|
|
—
|
|
|
5,375
|
|
Cash used for investing activities of continuing operations
|
—
|
|
|
(14,208
|
)
|
|
(10,538
|
)
|
|
—
|
|
|
(24,746
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Change in intercompany advances
|
101,424
|
|
|
(100,308
|
)
|
|
(1,116
|
)
|
|
—
|
|
|
—
|
|
Cash dividends paid
|
(63,382
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,382
|
)
|
Repurchases of common stock
|
(71,028
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(71,028
|
)
|
Excess tax benefits related to share-based compensation
|
761
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
761
|
|
Other, net
|
(4,050
|
)
|
|
(2,313
|
)
|
|
(1,931
|
)
|
|
—
|
|
|
(8,294
|
)
|
Cash provided by (used for) financing activities
|
(36,275
|
)
|
|
(102,621
|
)
|
|
(3,047
|
)
|
|
—
|
|
|
(141,943
|
)
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
4,223
|
|
|
—
|
|
|
4,223
|
|
Net increase (decrease) in cash and cash equivalents
|
(65,269
|
)
|
|
55,652
|
|
|
34,085
|
|
|
—
|
|
|
24,468
|
|
Cash and cash equivalents at beginning of year
|
103,284
|
|
|
5,614
|
|
|
52,122
|
|
|
—
|
|
|
161,020
|
|
Cash and cash equivalents at end of year
|
$
|
38,015
|
|
|
$
|
61,266
|
|
|
$
|
86,207
|
|
|
$
|
—
|
|
|
$
|
185,488
|
|
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2015
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
103,409
|
|
|
$
|
112,408
|
|
|
$
|
7,831
|
|
|
$
|
(120,239
|
)
|
|
$
|
103,409
|
|
Adjustments to reconcile net income to cash (used for) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
(122,258
|
)
|
|
—
|
|
|
—
|
|
|
122,258
|
|
|
—
|
|
Depreciation and amortization
|
—
|
|
|
34,497
|
|
|
31,485
|
|
|
—
|
|
|
65,982
|
|
Share-based compensation expense
|
—
|
|
|
11,306
|
|
|
—
|
|
|
—
|
|
|
11,306
|
|
Provision for losses on accounts and notes receivable
|
—
|
|
|
202
|
|
|
(226
|
)
|
|
—
|
|
|
(24
|
)
|
Deferred income tax (benefit) expense
|
—
|
|
|
(5,267
|
)
|
|
(834
|
)
|
|
—
|
|
|
(6,101
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
—
|
|
|
12,076
|
|
|
(27,274
|
)
|
|
33,531
|
|
|
18,333
|
|
Merchandise inventories
|
—
|
|
|
(66,317
|
)
|
|
(1,277
|
)
|
|
(2,133
|
)
|
|
(69,727
|
)
|
Accounts payable
|
—
|
|
|
95,624
|
|
|
13,418
|
|
|
4,969
|
|
|
114,011
|
|
Net change in other assets and liabilities
|
666
|
|
|
61,454
|
|
|
6,443
|
|
|
(38,386
|
)
|
|
30,177
|
|
Other, net
|
855
|
|
|
920
|
|
|
456
|
|
|
—
|
|
|
2,231
|
|
Cash provided by (used for) operating activities of continuing operations
|
(17,328
|
)
|
|
256,903
|
|
|
30,022
|
|
|
—
|
|
|
269,597
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
Additions to computer software and intangible assets
|
—
|
|
|
(13,688
|
)
|
|
(2,397
|
)
|
|
—
|
|
|
(16,085
|
)
|
Additions to property and equipment
|
—
|
|
|
(3,621
|
)
|
|
(16,910
|
)
|
|
—
|
|
|
(20,531
|
)
|
Proceeds from sale of property and equipment
|
—
|
|
|
87
|
|
|
56
|
|
|
—
|
|
|
143
|
|
Cash used for investing activities of continuing operations
|
—
|
|
|
(17,222
|
)
|
|
(19,251
|
)
|
|
—
|
|
|
(36,473
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from (repayment of) revolver
|
—
|
|
|
(33,700
|
)
|
|
—
|
|
|
—
|
|
|
(33,700
|
)
|
Change in intercompany advances
|
183,688
|
|
|
(201,851
|
)
|
|
18,163
|
|
|
—
|
|
|
—
|
|
Cash dividends paid
|
(63,651
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,651
|
)
|
Repurchases of common stock
|
(20,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,000
|
)
|
Excess tax benefits related to share-based compensation
|
646
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
646
|
|
Other, net
|
(2,084
|
)
|
|
(2,428
|
)
|
|
(3,016
|
)
|
|
—
|
|
|
(7,528
|
)
|
Cash provided by (used for) financing activities
|
98,599
|
|
|
(237,979
|
)
|
|
15,147
|
|
|
—
|
|
|
(124,233
|
)
|
Effect of exchange rates on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(4,643
|
)
|
|
—
|
|
|
(4,643
|
)
|
Net increase (decrease) in cash and cash equivalents
|
81,271
|
|
|
1,702
|
|
|
21,275
|
|
|
—
|
|
|
104,248
|
|
Cash and cash equivalents at beginning of year
|
22,013
|
|
|
3,912
|
|
|
30,847
|
|
|
—
|
|
|
56,772
|
|
Cash and cash equivalents at end of year
|
$
|
103,284
|
|
|
$
|
5,614
|
|
|
$
|
52,122
|
|
|
$
|
—
|
|
|
$
|
161,020
|
|
Condensed Consolidating Financial Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2014
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
66,503
|
|
|
$
|
127,164
|
|
|
$
|
(27,725
|
)
|
|
$
|
(99,439
|
)
|
|
$
|
66,503
|
|
Adjustments to reconcile net income to cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
|
Equity in earnings of subsidiaries
|
(96,384
|
)
|
|
—
|
|
|
—
|
|
|
96,384
|
|
|
—
|
|
Depreciation and amortization
|
2
|
|
|
35,879
|
|
|
27,526
|
|
|
—
|
|
|
63,407
|
|
Loss on early retirement of debt
|
14,890
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,890
|
|
Share-based compensation expense
|
—
|
|
|
8,369
|
|
|
(162
|
)
|
|
—
|
|
|
8,207
|
|
Provision for losses on accounts and notes receivable
|
—
|
|
|
(36
|
)
|
|
484
|
|
|
—
|
|
|
448
|
|
Deferred income tax (benefit) expense
|
—
|
|
|
1,292
|
|
|
(4,677
|
)
|
|
—
|
|
|
(3,385
|
)
|
Changes in operating assets and liabilities:
|
—
|
|
|
|
|
|
|
—
|
|
|
—
|
|
Accounts and notes receivable
|
—
|
|
|
(24,440
|
)
|
|
6,185
|
|
|
452
|
|
|
(17,803
|
)
|
Merchandise inventories
|
—
|
|
|
(65,916
|
)
|
|
8,308
|
|
|
279
|
|
|
(57,329
|
)
|
Accounts payable
|
—
|
|
|
(28,580
|
)
|
|
(24,613
|
)
|
|
1,045
|
|
|
(52,148
|
)
|
Net change in other assets and liabilities
|
(455
|
)
|
|
(12,341
|
)
|
|
(14,311
|
)
|
|
1,279
|
|
|
(25,828
|
)
|
Other, net
|
(1,161
|
)
|
|
(9
|
)
|
|
447
|
|
|
—
|
|
|
(723
|
)
|
Cash provided by (used for) operating activities
|
(16,605
|
)
|
|
41,382
|
|
|
|
(28,538
|
)
|
|
—
|
|
|
(3,761
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
—
|
|
|
(248,536
|
)
|
|
—
|
|
|
(248,536
|
)
|
Additions to computer software and intangible assets
|
—
|
|
|
(18,054
|
)
|
|
(4,330
|
)
|
|
—
|
|
|
(22,384
|
)
|
Additions to property and equipment
|
—
|
|
|
(34,475
|
)
|
|
(13,949
|
)
|
|
—
|
|
|
(48,424
|
)
|
Proceeds from the sale of investments
|
—
|
|
|
1,937
|
|
|
—
|
|
|
—
|
|
|
1,937
|
|
Proceeds from sale of property and equipment
|
—
|
|
|
156
|
|
|
—
|
|
|
—
|
|
|
156
|
|
Cash used for investing activities of continuing operations
|
—
|
|
|
(50,436
|
)
|
|
(266,815
|
)
|
|
—
|
|
|
(317,251
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
—
|
|
Proceeds from issuance of debt
|
547,693
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
547,693
|
|
Proceeds from revolver
|
—
|
|
|
33,700
|
|
|
—
|
|
|
—
|
|
|
33,700
|
|
Repayment of debt
|
(217,352
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(217,352
|
)
|
Change in intercompany advances
|
(287,275
|
)
|
|
(21,106
|
)
|
|
308,381
|
|
|
—
|
|
|
—
|
|
Cash dividends paid
|
(63,104
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63,104
|
)
|
Repurchases of common stock
|
(9,934
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,934
|
)
|
Financing costs paid
|
(4,780
|
)
|
|
(611
|
)
|
—
|
|
—
|
|
|
—
|
|
|
(5,391
|
)
|
Excess tax benefits related to share-based compensation
|
582
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
582
|
|
Proceeds from exercise of stock options
|
1,180
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,180
|
|
Purchase of noncontrolling interest
|
—
|
|
|
—
|
|
|
(1,500
|
)
|
|
—
|
|
|
(1,500
|
)
|
Other, net
|
(2,783
|
)
|
|
(1,029
|
)
|
|
(3,502
|
)
|
|
—
|
|
|
(7,314
|
)
|
Cash provided by (used for) financing activities
|
(35,773
|
)
|
|
10,954
|
|
|
303,379
|
|
|
—
|
|
|
278,560
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(2,681
|
)
|
|
—
|
|
|
(2,681
|
)
|
Net increase (decrease) in cash and cash equivalents
|
(52,378
|
)
|
|
1,900
|
|
|
5,345
|
|
|
—
|
|
|
(45,133
|
)
|
Cash and cash equivalents at beginning of year
|
74,391
|
|
|
2,012
|
|
|
25,502
|
|
|
—
|
|
|
101,905
|
|
Cash and cash equivalents at end of year
|
$
|
22,013
|
|
|
$
|
3,912
|
|
|
$
|
30,847
|
|
|
$
|
—
|
|
|
$
|
56,772
|
|