Owens & Minor completes acquisition of
Byram Healthcare for $380 million
Owens & Minor, Inc. (NYSE: OMI) today reported financial
results for the second quarter ended June 30, 2017, including
consolidated revenues of $2.27 billion, compared to revenues of
$2.48 billion in the second quarter of 2016. Quarterly net income
was $20.1 million, or $0.33 per share, compared to $27.7 million,
or $0.45 per share, for the second quarter last year. Adjusted net
income (non-GAAP) was $25.8 million, or $0.43 per share, compared
to $0.55 per share in last year’s second quarter.
With the closing of the Byram Healthcare acquisition, Owens
& Minor has adopted a revised non-GAAP presentation that
excludes amortization of acquisition-related intangible assets in
addition to items currently excluded. A reconciliation of reported
results to adjusted (non-GAAP) measures is included below. Similar
to the first quarter of 2017, the quarterly decrease in revenues
and earnings resulted primarily from the previously discussed
transition of a significant customer in 2016, as well as increased
production costs in our Proprietary Products segment and ongoing
margin pressure in our Domestic distribution business. Offsetting
these factors were benefits from cost control and productivity
initiatives, as well as a one-time benefit from the release of an
income tax valuation allowance in Europe, resulting from improved
operating performance.
Consolidated operating earnings for the second quarter of 2017
were $32.8 million, compared to $52.1 million in last year’s second
quarter. Adjusted consolidated operating earnings (non-GAAP) for
the second quarter were $41.4 million, compared to $61.3 million
for the same period last year.
“We are pleased to have successfully closed the acquisition of
Byram Healthcare, and we welcome these new teammates into our
organization. Acquiring Byram Healthcare represents an important
step toward accelerating our strategy to expand our services along
the continuum of care,” said P. Cody Phipps, chairman, president
& chief executive officer of Owens & Minor. “As we have
previously said, the first half of 2017 was challenging, but we
remain committed to improving our performance, as we continue to
execute our strategy.”
Year-to-Date 2017
Results
For the first six months of 2017, consolidated revenues were
$4.59 billion, compared to revenues of $4.94 billion in the first
six months of 2016. Net income for the first half of the year was
$38.9 million, or $0.64 per share, compared to $0.83 per share for
the same period last year. Adjusted net income (non-GAAP) was $52.3
million, or $0.86 per share, compared to $1.08 per share in the
first six months of last year.
Consolidated operating earnings for the first half of 2017 were
$68.4 million, compared to $97.0 million in the same period last
year. Adjusted consolidated operating earnings (non-GAAP) for the
first six months of 2017 were $89.1 million, compared to $119
million for the same period last year.
Acquisition of Byram
Healthcare
Owens & Minor also announced that it has closed the
previously announced acquisition of Byram Healthcare for $380
million. Byram Healthcare, a leading national distributor of
direct-to-patient medical supplies, will accelerate Owens &
Minor’s strategic plan to expand its services along the continuum
of care. As part of the transaction, Owens & Minor executed a
refinancing of its bank credit facility and expanded it to $600
million and executed a term loan of $250 million, both of which are
due in 2022. Owens & Minor expects the transaction to be
modestly accretive to earnings in 2017, and anticipates further
accretion to earnings in 2018.
Segment Results
Segment financial results for the quarter are shown in the
financial tables included with this release. Segment results
include:
- Domestic Segment quarterly
revenues were $2.13 billion, compared to $2.35 billion a year ago;
operating earnings were $29.5 million, compared to $43.5 million
for the same period last year.
- International Segment quarterly
revenues were $95.9 million, compared to $88.6 million last year;
operating earnings were $0.8 million, compared to $0.9 million in
last year’s second quarter.
- Proprietary Products Segment
quarterly revenues were $131 million, compared to $135 million in
the prior year quarter; operating earnings were $8.8 million versus
$14.3 million last year.
Revised Financial Guidance and
Outlook
As a result of the closing of the Byram Healthcare transaction
and the adoption of a revised non-GAAP presentation, Owens &
Minor is revising its guidance on an adjusted basis (non-GAAP) for
2017 and 2018. The revised outlook for non-GAAP diluted earnings
per share in 2017 is $1.90 to $2.00. For 2018, the company is
updating guidance to $2.25 to $2.35 per share on an adjusted basis
(non-GAAP). The company believes that its strategic plan and the
acquisition of Byram Healthcare will enable Owens & Minor to
achieve its stated goal of high single-digit growth rates in
subsequent years.
Although the company does provide guidance for adjusted earnings
per share (which is a non-GAAP financial measure), it is not able
to forecast the most directly comparable measure calculated and
presented in accordance with GAAP. Certain elements of the
composition of the GAAP amounts are not predictable, making it
impractical for the company to forecast. Such elements include, but
are not limited to restructuring and acquisition charges. As a
result, no GAAP guidance is provided. The outlook is based on
certain assumptions that are subject to the risk factors discussed
in the company’s filings with the Securities & Exchange
Commission.
Investors Conference Call &
Supplemental Material
Conference Call: Owens & Minor will conduct a conference
call for investors on Wednesday, August 2, 2017, at 8:00 a.m. EDT.
The access code for the conference call, international dial-in and
replay is #57721689. Participants may access the call at
866-393-1604. The international dial-in number is 224-357-2191.
Replay: A replay of the call will be available for one week by
dialing 855-859-2056. Webcast: A listen-only webcast of the call,
along with supplemental information, will be available on
www.owens-minor.com under “Investor Relations.”
Safe Harbor Statement
This release is intended to be disclosure through methods
reasonably designed to provide broad, non-exclusionary distribution
to the public in compliance with the Securities and Exchange
Commission's Fair Disclosure Regulation. This release contains
certain ''forward-looking'' statements, which are made pursuant to
the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995, including financial guidance for 2017 and 2018
and growth rates in subsequent years. Forward-looking statements
involve known and unknown risks and uncertainties that may cause
our actual results in future periods to differ materially from
those projected or contemplated in the forward-looking
statements. Investors should refer to our annual report on
Form 10-K for the year ended December 31, 2016, filed with the
Securities and Exchange Commission ("SEC") and subsequent quarterly
reports on Form 10-Q and current reports on Form 8-K filed with or
furnished to the SEC, for a discussion of certain known risk
factors that could cause our actual results to differ materially
from our current estimates. These filings are available at
www.owens-minor.com. Given these risks and uncertainties, we
can give no assurances that any forward-looking statements will, in
fact, transpire and, therefore, caution investors not to place
undue reliance on them. We specifically disclaim any obligation to
update or revise any forward-looking statements, whether as a
result of new information, future developments or otherwise.
Owens & Minor uses its Web site, www.owens-minor.com, as a
channel of distribution for material company information, including
news releases, investor presentations and financial information.
This information is routinely posted and accessible under the
Investor Relations section.
Included with the press release financial tables are
reconciliations of the differences between the non-GAAP financial
measures presented in this news release and their most directly
comparable GAAP financial measures.
About Owens & Minor,
Inc.
Owens & Minor, Inc. (NYSE: OMI) is a global healthcare
services company dedicated to Connecting the World of Medical
Products to the Point of CareSM by providing vital supply chain
services to healthcare providers and manufacturers of healthcare
products. Owens & Minor provides logistics services across the
spectrum of medical products from disposable medical supplies to
devices and implants. With logistics platforms strategically
located in the United States and Europe, Owens & Minor serves
markets where three quarters of global healthcare spending occurs.
Owens & Minor’s customers span the healthcare market from
independent hospitals to large integrated healthcare networks, as
well as group purchasing organizations, healthcare products
manufacturers, and the federal government. A FORTUNE 500 company,
Owens & Minor is headquartered in Richmond, Virginia, and has
annualized revenues exceeding $9 billion. For more information
about Owens & Minor, visit owens-minor.com, follow @Owens_Minor
on Twitter, and connect on LinkedIn at
www.linkedin.com/company/owens-&-minor.
Owens & Minor, Inc.
Consolidated Statements of Income
(unaudited)
(dollars in thousands, except per share
data)
Three Months Ended June 30, 2017
2016 Net revenue
$ 2,265,907 $
2,483,676 Cost of goods sold
1,992,374 2,184,256
Gross margin
273,533 299,420 Distribution, selling
and administrative expenses
236,615 242,914
Acquisition-related and exit and realignment charges
2,893
6,752 Other operating (income) expense, net
1,188
(2,300 ) Operating earnings
32,837 52,054 Interest expense,
net
6,736 6,765 Income before income taxes
26,101 45,289 Income tax provision
5,960
17,573
Net income $ 20,141 $
27,716
Net income per common share:
Basic $ 0.33 $ 0.45
Diluted $
0.33 $ 0.45
Six Months Ended June
30, 2017 2016 Net revenue
$
4,594,480 $ 4,939,469 Cost of goods sold
4,039,768
4,343,413 Gross margin
554,712 596,056
Distribution, selling and administrative expenses
474,308
485,639 Acquisition-related and exit and realignment charges
11,835 17,235 Other operating (income) expense, net
216 (3,842 ) Operating earnings
68,353 97,024
Interest expense, net
13,480 13,554 Income
before income taxes
54,873 83,470 Income tax provision
15,947 31,619
Net income $
38,926 $ 51,851
Net income per
common share: Basic $ 0.64 $ 0.83
Diluted $ 0.64 $ 0.83
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(dollars in thousands)
June 30, 2017
December 31, 2016
Assets Current assets Cash and cash
equivalents
$ 57,066 $ 185,488 Accounts receivable,
net
655,259 606,084 Merchandise inventories
1,004,076
916,311 Other current assets
306,452 254,156
Total current
assets 2,022,853 1,962,039 Property and equipment, net
198,442 191,718 Goodwill, net
423,107 414,936
Intangible assets, net
80,051 82,511 Other assets,
net
70,684
66,548
Total assets
$ 2,795,137 $ 2,717,752
Liabilities and equity Current liabilities Accounts
payable
$ 798,454 $ 750,750 Accrued payroll and
related liabilities
23,819 45,051 Other current
liabilities
241,091
238,837
Total current liabilities
1,063,364 1,034,638 Long-term debt, excluding current
portion
579,117 564,583 Deferred income taxes
89,812
90,383 Other liabilities
69,273 68,110
Total
liabilities 1,801,566 1,757,714
Total
equity 993,571
960,038
Total liabilities and equity
$ 2,795,137 $
2,717,752
Owens & Minor, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(dollars in thousands)
Six Months Ended June 30,
2017
2016 Operating
activities: Net income
$ 38,926 $ 51,851
Adjustments to reconcile net income to cash (used for) provided by
operating activities: Depreciation and amortization
25,206
28,343 Share-based compensation expense
5,619 5,969
Provision for losses on accounts receivable
(368 )
(27 )
Deferred income tax (benefit) expense
(5,385 ) (2,071 ) Changes in operating assets and
liabilities: Accounts receivable
(41,863 ) (29,736 )
Merchandise inventories
(86,234 ) (17,947 ) Accounts
payable
42,235 62,710 Net change in other assets and
liabilities
(66,003 ) (56,599 ) Other, net
5,371
743
Cash (used for) provided by
operating activities (82,496
) 43,236
Investing activities: Additions to property and equipment
(16,433 ) (8,857 ) Additions to computer software and
intangible assets
(7,860 ) (4,602 ) Proceeds
from sale of property and equipment
573 4,565
Cash used for investing activities
(23,720 ) (8,894 )
Financing activities: Proceeds from revolving credit
facility
15,400 — Cash dividends paid
(31,476
) (32,003 ) Repurchases of common stock
(4,998
) (20,849 ) Other, net
(5,658 ) (5,968 )
Cash used for financing activities
(26,732 ) (58,820 )
Effect of exchange rate changes on cash and
cash equivalents 4,526
2,409
Net
decrease in cash and cash equivalents (128,422 )
(22,069 )
Cash and cash equivalents at beginning of
period 185,488
161,020
Cash and cash
equivalents at end of period $
57,066 $ 138,951
Owens & Minor, Inc.
Financial Statistics and GAAP/Non-GAAP
Reconciliations (unaudited)
(dollars in thousands, except per share data)
Quarter Ended
6/30/2017 3/31/2017
12/31/2016 9/30/2016 6/30/2016
Consolidated operating results:
Net revenue
$ 2,265,907
$ 2,328,573 $ 2,368,361
$ 2,415,601 $ 2,483,676
Gross margin
$ 273,533 $ 281,180
$ 294,980 $ 296,275 $ 299,420 Gross margin as a percent of
revenue
12.07 %
12.08 % 12.46 %
12.27 % 12.06 %
Distribution, selling & administrative expenses
$
236,615 $ 237,693 $ 243,480 $ 241,305 $ 242,914
Distribution, selling & administrative expenses as a percent of
revenue
10.44 %
10.21 % 10.28 %
9.99 % 9.78 % Operating
earnings, as reported (GAAP)
$ 32,837 $ 35,517 $
49,008 $ 53,568 $ 52,054 Acquisition-related charges (1)
692
1,347 286 597 730 Exit and realignment charges (2)
2,201
7,595 4,415 2,142 6,022 Acquisition-related intangible amortization
(3)
2,347 2,319 2,450 2,489 2,538 Other (4)
3,311 922
— —
— Operating earnings, adjusted
(Non-GAAP)
$ 41,388 $ 47,700 $ 56,159 $ 58,796 $
61,344 Operating earnings as a percent of revenue (GAAP)
1.45 % 1.53 % 2.07 % 2.22 % 2.10 % Operating
earnings as a percent of revenue, adjusted (Non-GAAP)
1.83 % 2.05 %
2.37 % 2.43 %
2.47 % . Net income, as reported (GAAP)
$ 20,141 $ 18,785 $ 27,105 $ 29,831 $ 27,716
Acquisition-related charges(1)
692 1,347 286 597 730 Income
tax expense (benefit) (5)
(228 ) (450 ) 67 (221 )
(164 ) Exit and realignment charges (2)
2,201 7,595 4,415
2,142 6,022 Income tax expense (benefit) (5)
(780 )
(3,055 ) (289 ) (794 ) (2,081 ) Acquisition-related intangible
amortization (3)
2,347 2,319 2,450 2,489 2,538 Income tax
expense (benefit) (5)
(696 ) (696 ) (633 ) (645 )
(658 ) Other (4)
3,311 922 — — — Income tax expense
(benefit) (5)
(1,139 )
(354 ) —
— —
Net income, adjusted (Non-GAAP)
$
25,849 $ 26,413 $
33,401 $ 33,399 $ 34,103
Net income per share, as reported (GAAP)
$ 0.33 $ 0.31 $ 0.45 $ 0.48 $ 0.45
Acquisition-related charges, after-tax (1)
0.01 0.01 — 0.01
0.01 Exit and realignment charges, after-tax (2)
0.02 0.08
0.07 0.02 0.06 Acquisition-related intangible amortization,
after-tax (3)
0.03 0.03 0.03 0.03 0.03 Other,
after-tax (4)
0.04
0.01 —
— —
Net income per share, adjusted (Non-GAAP)
$ 0.43 $ 0.44
$ 0.55 $ 0.54 $
0.55
Financing: Cash and cash
equivalents
$ 57,066 $ 127,167 $ 185,488 $ 213,096 $
138,951 Total interest-bearing debt
$ 583,201 $ 568,565
$ 569,387 $ 570,263
$ 571,143
Stock
information: Cash dividends per common share
$ 0.2575 $ 0.2575
$ 0.255 $ 0.255
$ 0.255 Stock price at
quarter-end
$ 32.19
$ 34.60 $ 35.29
$ 34.73 $ 37.38
Owens & Minor, Inc.
Financial Statistics and GAAP/Non-GAAP
Reconciliations (unaudited)
The following items in the current quarter have been excluded in
our non-GAAP financial measures:
(1) Acquisition-related charges in the first and second quarters
of 2017 were primarily transaction and transition costs associated
with the acquisition of Byram Healthcare. The prior year amounts
related primarily to costs incurred to settle certain obligations
and address other on-going matters associated with the acquisitions
of ArcRoyal and Medical Action.
(2) Exit and realignment charges in 2017 were associated with
the write-down of information system assets which are no longer
used and severance charges from reduction in force and other
employee costs associated with the establishment of our new client
engagement center. Expenses associated with the establishment of
the client engagement center will continue to be recorded
throughout 2017. Charges in 2016 included severance activities
(including our voluntary employee separation program in the first
quarter of 2016), and other costs associated with our strategic
organizational realignment which include certain professional fees
and costs to streamline administrative functions and processes in
the United States and Europe.
(3) Acquisition-related intangible amortization includes
amortization of certain intangible assets established during
purchase accounting for business combinations. These amounts are
highly dependent on the size and frequency of acquisitions and are
being excluded to allow for a more consistent comparison with
forecasted, current and historical results and the results of our
peers. We have begun to exclude these charges from our non-GAAP
results in the second quarter of 2017 and thus prior year amounts
have been recast on the same basis. Full year 2016 intangible
amortization was $10.0 million or $0.12 per share.
(4) Software as a Service (SaaS) implementation costs associated
with significant global IT platforms in connection with the
redesign of our global information system strategy.
(5)These charges have been tax effected in the preceding table
by determining the income tax rate depending on the amount of
charges incurred in different tax jurisdictions and the
deductibility of those charges for income tax purposes.
Use of Non-GAAP
Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”). In general, the measures exclude items and
charges that (i) management does not believe reflect Owens &
Minor, Inc.’s (the “Company”) core business and relate more to
strategic, multi-year corporate activities; or (ii) relate to
activities or actions that may have occurred over multiple or in
prior periods without predictable trends. Management uses these
non-GAAP financial measures internally to evaluate the Company’s
performance, evaluate the balance sheet, engage in financial and
operational planning and determine incentive compensation.
Management provides these non-GAAP financial measures to investors
as supplemental metrics to assist readers in assessing the effects
of items and events on its financial and operating results and in
comparing the Company’s performance to that of its competitors.
However, the non-GAAP financial measures used by the Company may be
calculated differently from, and therefore may not be comparable
to, similarly titled measures used by other companies. The
non-GAAP financial measures disclosed by the Company should not be
considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and the financial results
calculated in accordance with GAAP and reconciliations to those
financial statements set forth above should be carefully evaluated.
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(dollars in thousands)
Three Months Ended June 30, 2017
2016 % of %
of
consolidated consolidated
Amount net
revenue Amount net revenue
Net revenue: Segment net
revenue Domestic
$ 2,130,468 94.02 % $
2,345,746 94.45 % International
95,899 4.23 %
88,559 3.57 % Proprietary Products
130,959
5.78 % 134,964 5.43 % Total segment net
revenue
2,357,326 2,569,269 Inter-segment revenue
Proprietary Products
(91,419 ) (4.03
)% (85,593 ) (3.45 )% Total inter-segment revenue
(91,419 ) (85,593 )
Consolidated net revenue
$ 2,265,907
100.00 % $ 2,483,676 100.00 %
% of
segment % of segment
Operating earnings (loss): net
revenue net revenue Domestic
$ 29,460 1.38
% $ 43,451 1.85 % International
752 0.78
% 893 1.01 % Proprietary Products
8,810 6.73
% 14,255 10.56 % Inter-segment eliminations
19 207
Acquisition-related and exit and realignment charges
(2,893
) (6,752 ) Other (1)
(3,311 ) —
Consolidated operating earnings
$ 32,837
1.45 % $ 52,054
2.10 %
Depreciation and amortization: Domestic
$
6,769 $ 7,497 International
3,964 4,416 Proprietary
Products
1,915 2,213
Consolidated depreciation and amortization
$ 12,648
$ 14,126
Capital expenditures: Domestic
$ 4,986 $ 2,659 International
3,431 2,860
Proprietary Products
1,105 880
Consolidated capital expenditures
$ 9,522 $
6,399
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(dollars in thousands)
Six Months Ended June 30, 2017
2016 % of %
of
consolidated consolidated
Amount net
revenue Amount net revenue
Net revenue: Segment net
revenue Domestic
$ 4,324,428 94.12 % $
4,667,455 94.49 % International
190,894 4.15 %
172,110 3.48 % Proprietary Products
268,112
5.84 % 276,317 5.59 % Total segment net
revenue
4,783,434 5,115,882 Inter-segment revenue
Proprietary Products
(188,954 ) (4.11
)% (176,413 ) (3.57 )% Total inter-segment revenue
(188,954 ) (176,413 )
Consolidated net revenue
$ 4,594,480
100.00 % $ 4,939,469 100.00 %
% of
segment % of segment
Operating earnings (loss): net
revenue net revenue Domestic
$ 66,756 1.54
% $ 85,169 1.82 % International
1,408 0.74
% 2,021 1.17 % Proprietary Products
16,938
6.32 % 27,526 9.96 % Inter-segment eliminations
(681 ) (457 ) Acquisition-related and exit and
realignment charges
(11,835 ) (17,235 ) Other (1)
(4,233 ) — Consolidated
operating earnings
$ 68,353 1.49
% $ 97,024 1.96 %
Depreciation and
amortization: Domestic
$ 13,630 $ 15,038
International
7,768 8,865 Proprietary Products
3,808 4,440 Consolidated depreciation
and amortization
$ 25,206 $ 28,343
Capital expenditures: Domestic
$ 13,804
$ 7,202 International
8,453 4,830 Proprietary Products
2,036 1,427 Consolidated capital
expenditures
$ 24,293 $ 13,459
June 30,2017
December 31,2016
Total assets: Domestic
$ 1,945,271 $ 1,778,481
International
405,020 352,898 Proprietary Products
387,780 400,885 Segment assets
2,738,071 2,532,264 Cash and cash equivalents
57,066 185,488 Consolidated total
assets
$ 2,795,137 $ 2,717,752
(1) Software as a Service (SaaS) implementation costs associated
with significant global IT platforms in connection with the
redesign of our global information system strategy.
Owens & Minor, Inc.
Net Income Per Common Share
(unaudited)
(dollars in thousands, except per share
data)
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017
2016 Numerator: Net income
$ 20,141 $ 27,716
$ 38,926 $ 51,851 Less: income allocated to unvested
restricted shares
(229 ) (281 )
(469 ) (560 ) Net income attributable to
common shareholders - basic
19,912 27,435
38,457
51,291 Add: undistributed income attributable to unvested
restricted shares -basic
27 72
51 131 Less:
undistributed income attributable to unvested restricted shares
-diluted
(27 ) (72 )
(51
) (131 )
Net income attributable to common
shareholders - diluted $ 19,912 $ 27,435
$ 38,457 $ 51,291 Denominator:
Weighted average shares outstanding
- basic and diluted 59,863 61,502
60,020 61,588
Net income per share attributable to common shareholders:
Basic
$ 0.33 $ 0.45
$ 0.64 $ 0.83
Diluted
$ 0.33 $ 0.45
$ 0.64 $ 0.83
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801006742/en/
Owens & Minor, Inc.Truitt Allcott, 804-723-7555Director,
Investor & Media Relationstruitt.allcott@owens-minor.comorChuck
Graves, 804-723-7556Director, Finance & Investor
Relationschuck.graves@owens-minor.com
Owens and Minor (NYSE:OMI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Owens and Minor (NYSE:OMI)
Historical Stock Chart
From Apr 2023 to Apr 2024