Owens & Minor confirms earnings guidance
for the year
Owens & Minor, Inc. (NYSE: OMI) today reported financial
results for the first quarter of 2020, as summarized in the table
below.
“I am pleased with the way that our teams performed in a very
challenging environment in response to the COVID-19 pandemic. I
have seen our values play out in real life as our teams worked with
customers, suppliers, and various agencies of state and federal
governments to provide creative solutions to these challenges. We
recognize our responsibilities and required leadership in
supporting the Nation’s response to protect those on the front
line. Our distribution, products, and services teams have rallied
around our mission to Empower Our Customers to Advance Healthcare,”
said Edward A. Pesicka, President & Chief Executive Officer of
Owens & Minor.
“The decisive actions we took this quarter enabled us to quickly
pivot and leverage the strength of our Americas based PPE
manufacturing footprint. While we expect the second quarter to be
very challenging due to the significant reduction in elective
procedures, we are well positioned to partially offset this impact
due to the increased demand for our PPE products.” In addition,
Pesicka added, “During the second quarter, we will continue to
invest in a disciplined manner to meet the needs of our customers
as their demand for our services and products grows throughout the
third and fourth quarter as elective procedures ramp back up. While
2020 is expected to continue to be very fluid, with downs and ups,
our demonstrated ability to quickly pivot and leverage our
strengths to best serve our customers provides us with the
confidence to re-confirm our full year adjusted EPS guidance of
$0.50 to $0.60.”
Financial
Summary1
($ in millions, except per share data)
1Q20
1Q19
Revenue
$2,123
$2,351
Operating Income, GAAP2
$10.8
$16.6
Adj. Operating Income, Non-GAAP2
$27.4
$31.1
Income (Loss) from continuing operations,
GAAP2
($8.9
)
($10.9
)
Adj. Net Income, Non-GAAP2
$2.4
$3.7
Income (Loss) from continuing operations
per share, GAAP2
($0.15
)
($0.18
)
Adj. Net income per share, Non-GAAP2
$0.04
$0.06
Adj. Net Income per share, Non-GAAP,
constant currency2,3
$0.08
$0.06
1. Adjusted net income and Adjusted net
income per share relate to continuing operations.
2. Reconciliations of the differences
between the non-GAAP financial measures presented in this release
and their most
directly comparable GAAP financial
measures are included in the tables below.
3. Adjusted net income per share, non-GAAP
at foreign currency exchange rates as of December 31, 2019.
1st Quarter 2020
Highlights
- On a constant currency basis, adjusted net income per share
increased by $0.02 to $0.08 compared to the prior year quarter, a
33% increase.
- Operating results reflect favorable revenue mix combined with
continued operating efficiencies resulting in gross margin
expansion of 88 basis points compared to in the first quarter of
2019.
- The Company generated $93 million of operating cash flow in the
first quarter, primarily from working capital improvements.
- Total debt was reduced by $24 million in the first quarter,
bringing the total for the last four quarters to $195 million.
- The change in revenue compared to prior year was driven by
lower sales as a result of customer non-renewals that occurred in
early 2019 and reduced surgical procedures as a result of COVID-19
in our Medical Distribution business. These changes were partially
offset by increased sales of personal protective equipment (PPE)
and revenue growth in the Home Healthcare business.
- On April 6, 2020, the Company announced that it had entered
into a purchase agreement for the pending sale of its European
logistics business, Movianto, to EHDH Holding Group, a privately
held French company. The Company continues to believe that the
transaction, which is subject to certain customary approvals and
conditions to close, will close in the first half of 2020.
COVID-19 Update
- The significant reduction in elective surgical procedures,
which began mid-March, is expected to continue through the end of
the 2nd quarter of 2020. This reduction in surgical procedures will
negatively impact our revenue and profit for the second quarter.
However, elective procedures are assumed to recover at an
accelerated rate during the 3rd and 4th quarter of 2020, partially
offsetting the 2nd quarter impact.
- Owens & Minor expects to continue the production of our
Americas based PPE at or near full capacity through the end of 2020
due to:
- Continued demand related to COVID-19
- Rebuilding of safety stock by our customers and government
agencies in the event COVID-19 demand slows
- The need for PPE products as elective procedures ramp up
- Owens & Minor being named by the U.S. Department of Health
and Human Services as one of five manufacturers to collectively
provide approximately 600 million N95 respirator masks over the
next 18 months.
- New operating protocols requiring PPE in non-healthcare related
industries
- Owens & Minor participated in Operation Local Production in
which teammates in our Lexington, NC facility manufactured nearly 1
million cubic yards of fabric for delivery to New York City garment
workers to make medical gowns for NYC hospitals.
- Owens & Minor worked closely with FEMA’s Supply Chain Task
Force on Project Air Bridge to accelerate the distribution of
critical PPE to areas of greatest need and reduce the transit time
of these supplies.
- Owens & Minor reaches a milestone in the COVID-19 fight
with nearly two billion units of PPE shipped during February and
March 2020.
Financial Outlook
Key assumptions supporting guidance:
- Elective procedures will not return to normal levels until Q3,
negatively impacting revenues in our Global Solutions segment
during Q2.
- Hospitals will increase surgical capacity in Q3 and Q4 to
partially recover from elective procedures that were postponed
during Q2, driving incremental demand in both our Global Solutions
and Global Products segments in the second half of the year.
- Global Products production of PPE will continue to run at or
near full capacity for the balance of the year to meet market
demand and to satisfy federal government stockpiling
commitments.
- Additional favorability in commodity pricing for the remainder
of the year.
- Continued foreign exchange headwinds assumed for the balance of
the year.
Based on the above assumptions, the Company continues to expect
adjusted net income for 2020 to be in a range of $0.50 to $0.601
per share, on a constant currency basis, despite being challenged
in the 2nd quarter to achieve breakeven. The Company believes that
it remains positioned to deliver sustained double-digit earnings
growth beyond 2020.
- On a continuing operations basis; based on foreign currency
rates in effect December 31, 2019.
Although the Company does provide guidance for adjusted net
income 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 without unreasonable effort.
Certain elements of the composition of the GAAP amount are not
predictable, making it impracticable for the Company to forecast.
Such elements include, but are not limited to restructuring and
acquisition charges. As a result, no GAAP guidance or
reconciliation of the Company’s adjusted net income per share
guidance is provided. For the same reasons, the Company is unable
to assess the probable significance of the unavailable information,
which could have a potentially significant impact on its future
GAAP financial results. The outlook is based on certain assumptions
that are subject to the risk factors discussed in the Company’s
filings with the Securities and Exchange Commission (“SEC”).
Dividend Information
The Board of Directors approved a second quarter 2020 dividend
payment of $0.0025 per share, payable on June 30, 2020, to
shareholders of record as of June 15, 2020.
Investor Conference Call for 1st Quarter Financial
Results
Owens & Minor executives will host a conference call at 8:30
a.m. EDT on Wednesday, May 6, 2020, to discuss the results.
Participants may access the call at 866-393-1604. The international
dial-in number is 224-357-2191. A replay of the call will be
available for one week by dialing 855-859-2056. The access code for
the conference call, international dial-in and replay is 1874047. A
webcast of the event will be available at www.owens-minor.com under
the Investor Relations section.
Safe Harbor
This release is intended to be disclosure through methods
reasonably designed to provide broad, non-exclusionary distribution
to the public in compliance with the SEC's Fair Disclosure
Regulation. This release contains certain ''forward-looking''
statements made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, the statements in this release
regarding our expectations with respect to our 2020 financial
performance, earnings growth beyond 2020, the closing of the sale
of the Company’s Movianto business, the impact of COVID-19 on the
Company’s results and operations, as well as other statements
related to the Company’s expectations regarding the performance of
its business and improvement of operational performance.
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 Owens &
Minor’s Annual Report on Form 10-K for the year ended December 31,
2019, filed with the SEC including the sections captioned
“Cautionary Note Regarding Forward-Looking Statements” and “Item
1A. Risk Factors,” and subsequent annual reports on Form 10-K,
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 the Company’s actual results to
differ materially from its current estimates. These filings are
available at www.owens-minor.com. Given these risks and
uncertainties, Owens & Minor can give no assurance that any
forward-looking statements will, in fact, transpire and, therefore,
cautions investors not to place undue reliance on them. Owens &
Minor specifically disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future developments or otherwise.
About Owens & Minor
Owens & Minor, Inc. (NYSE: OMI) is a global healthcare
solutions company with integrated technologies, products, and
services aligned to deliver significant and sustained value for
healthcare providers and manufacturers across the continuum of
care. With 17,000 dedicated teammates serving healthcare industry
customers in 90 countries, Owens & Minor helps to reduce total
costs across the supply chain by optimizing episode and
point-of-care performance, freeing up capital and clinical
resources, and managing contracts to optimize financial
performance. A FORTUNE 500 company, Owens & Minor was founded
in 1882 in Richmond, Virginia, where it remains headquartered
today. The Company has distribution, production, customer service
and sales facilities located across the Asia Pacific region,
Europe, Latin America, and North America. 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 Operations
(unaudited)
(dollars in thousands, except per share
data)
Three Months Ended March
31,
2020
2019
Net revenue
$
2,122,693
$
2,350,840
Cost of goods sold
1,854,134
2,074,219
Gross margin
268,559
276,621
Distribution, selling and administrative
expenses
254,048
255,112
Acquisition-related and exit and
realignment charges
6,064
4,863
Other operating (income) expense, net
(2,309
)
42
Operating income
10,756
16,604
Interest expense, net
23,342
25,458
Other expense, net
4,846
2,734
Loss from continuing operations before
income taxes
(17,432
)
(11,588
)
Income tax benefit
(8,523
)
(670
)
Loss from continuing operations, net of
tax
(8,909
)
(10,918
)
Loss from discontinued operations, net of
tax
(2,415
)
(3,178
)
Net loss
$
(11,324
)
$
(14,096
)
Loss from continuing operations per common
share: basic and diluted
$
(0.15
)
$
(0.18
)
Loss from discontinued operations per
common share: basic and diluted
(0.04
)
(0.05
)
Net loss per common share: basic and
diluted
$
(0.19
)
$
(0.23
)
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(dollars in thousands)
March 31,
2020
December 31,
2019
Assets
Current assets
Cash and cash equivalents
$
92,315
$
67,030
Accounts receivable, net of allowances of
$23,971 and $21,015
667,607
674,706
Merchandise inventories
1,108,844
1,146,192
Other current assets
151,635
79,372
Current assets of discontinued
operations
499,410
439,983
Total current assets
2,519,811
2,407,283
Property and equipment, net of accumulated
depreciation of $254,054 and $245,718
301,335
315,427
Operating lease assets
133,738
142,219
Goodwill
388,000
393,181
Intangible assets, net
271,513
285,018
Other assets, net
100,473
99,956
Total assets
$
3,714,870
$
3,643,084
Liabilities and equity
Current liabilities
Accounts payable
$
891,542
$
808,035
Accrued payroll and related
liabilities
44,722
53,584
Other current liabilities
229,824
231,029
Current liabilities of discontinued
operations
383,586
323,511
Total current liabilities
1,549,674
1,416,159
Long-term debt, excluding current
portion
1,484,340
1,508,415
Operating lease liabilities, excluding
current portion
109,381
117,080
Deferred income taxes
42,962
40,550
Other liabilities
112,175
98,726
Total liabilities
3,298,532
3,180,930
Total equity
416,338
462,154
Total liabilities and equity
$
3,714,870
$
3,643,084
Owens & Minor, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(dollars in thousands)
Three Months Ended March
31,
2020
2019
Operating activities:
Net loss
$
(11,324
)
$
(14,096
)
Adjustments to reconcile net loss to cash
provided by (used for) operating activities:
Depreciation and amortization
23,913
28,720
Share-based compensation expense
3,941
4,505
Impairment charges
9,080
—
Provision for losses on accounts
receivable
5,213
3,619
Deferred income tax expense (benefit)
6,348
(8,613
)
Changes in operating lease right-of-use
assets and lease liabilities
(714
)
(190
)
Changes in operating assets and
liabilities:
Accounts receivable
(7,942
)
(22,573
)
Merchandise inventories
39,340
80,194
Accounts payable
98,743
(120,480
)
Net change in other assets and
liabilities
(77,178
)
(15,668
)
Other, net
4,034
3,678
Cash provided by (used for) operating
activities
93,454
(60,904
)
Investing activities:
Additions to property and equipment
(4,771
)
(11,674
)
Additions to computer software
(942
)
(2,605
)
Proceeds from sale of property and
equipment
33
271
Cash used for investing
activities
(5,680
)
(14,008
)
Financing activities:
Proceeds from issuance of debt
150,000
—
(Repayments) borrowings under revolving
credit facility
(6,200
)
72,100
Repayments of debt
(166,798
)
(12,394
)
Financing costs paid
(5,785
)
(4,313
)
Cash dividends paid
(155
)
(4,764
)
Other, net
(2,468
)
(1,124
)
Cash (used for) provided by financing
activities
(31,406
)
49,505
Effect of exchange rate changes on cash
and cash equivalents
(62
)
(2,721
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
56,306
(28,128
)
Cash, cash equivalents and restricted
cash at beginning of period
84,687
103,367
Cash, cash equivalents and restricted
cash at end of period (1)
$
140,993
$
75,239
Supplemental disclosure of cash flow
information:
Income taxes paid (received), net of
refunds
$
2,695
$
(12,388
)
Interest paid
$
21,431
$
24,504
(1) Restricted cash represents $16.3 million held in an escrow
account as of March 31, 2020 as required by the Centers for
Medicare & Medicaid Services (CMS) in conjunction with the
Bundled Payments for Care Improvement (BPCI) Advanced Program.
Cash, cash equivalents and restricted cash also includes $32.4
million in cash of discontinued operations as of March 31,
2020.
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(dollars in thousands)
Three Months Ended March
31,
2020
2019
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Segment net revenue
Global Solutions
$
1,847,593
87.04
%
$
2,123,599
90.34
%
Global Products
391,192
18.43
%
347,085
14.76
%
Total segment net revenue
2,238,785
2,470,684
Inter-segment revenue
Global Products
(116,092
)
(5.47
)%
(119,844
)
(5.10
)%
Total inter-segment revenue
(116,092
)
(119,844
)
Consolidated net revenue
$
2,122,693
100.00
%
$
2,350,840
100.00
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Global Solutions
$
7,691
0.42
%
$
21,642
1.02
%
Global Products
18,571
4.75
%
7,724
2.23
%
Inter-segment eliminations
1,169
1,746
Intangible amortization
(10,611
)
(10,026
)
Acquisition-related and exit and
realignment charges
(6,064
)
(4,863
)
Other (1)
—
381
Consolidated operating income
$
10,756
0.51
%
$
16,604
0.71
%
Depreciation and amortization:
Global Solutions
$
10,636
$
10,500
Global Products
13,277
12,607
Discontinued operations
—
5,613
Consolidated depreciation and
amortization
$
23,913
$
28,720
Capital expenditures:
Global Solutions
$
1,032
$
3,341
Global Products
3,017
2,903
Discontinued operations
1,664
8,035
Consolidated capital expenditures
$
5,713
$
14,279
(1) 2019 included interest cost and net actuarial losses related
to the U.S. Retirement Plan as well as Software as a Service (SaaS)
implementation costs associated with the upgrading of our global IT
platforms in connection with the redesign of our global information
system strategy.
Owens & Minor, Inc.
Net Loss per Common Share
(unaudited)
(dollars in thousands, except per share
data)
Three Months Ended March
31,
2020
2019
Weighted average shares outstanding -
basic and diluted
60,571,000
60,376,000
Loss from continuing operations
$
(8,909
)
$
(10,918
)
Basic and diluted per share
$
(0.15
)
$
(0.18
)
Loss from discontinued operations
$
(2,415
)
$
(3,178
)
Basic and diluted per share
$
(0.04
)
$
(0.05
)
Net loss
$
(11,324
)
$
(14,096
)
Basic and diluted per share
$
(0.19
)
$
(0.23
)
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations
(unaudited)
The following table provides a
reconciliation of reported operating income and loss from
continuing operations to non-GAAP measures used by management.
Three Months Ended March
31,
(Dollars in
thousands except per share data)
2020
2019
Operating income, as reported (GAAP)
$
10,756
$
16,604
Intangible amortization (1)
10,611
10,026
Acquisition-related and exit and
realignment charges(2)
6,064
4,863
Software as a Service implementation costs
(3)
—
351
Other (4)
—
(731
)
Operating income, adjusted (non-GAAP)
(Adjusted Operated Income)
$
27,431
$
31,113
Operating income as a percent of revenue
(GAAP)
0.51
%
0.71
%
Adjusted operating income as a percent of
revenue (non-GAAP)
1.29
%
1.32
%
Loss from continuing operations, as
reported (GAAP)
$
(8,909
)
$
(10,918
)
Intangible amortization (1)
10,611
10,026
Income tax expense (benefit) (7)
(2,544
)
(1,350
)
Acquisition-related and exit and
realignment charges(2)
6,064
4,863
Income tax expense (benefit) (7)
(1,250
)
(735
)
Software as a Service implementation costs
(3)
—
351
Income tax expense (benefit) (7)
—
(51
)
(Gain) loss on extinguishment and
modification of debt (5)
4,127
2,003
Income tax expense (benefit) (7)
(989
)
(524
)
Other (4)
577
—
Income tax expense (benefit) (7)
(138
)
—
Tax adjustment (6)
(5,187
)
—
Income from continuing operations,
adjusted (non-GAAP) (Adjusted Net Income)
$
2,362
$
3,665
Loss from continuing operations per
diluted common share, as reported (GAAP)
$
(0.15
)
$
(0.18
)
Intangible amortization (1)
0.14
0.14
Acquisition-related and exit and
realignment charges(2)
0.08
0.07
Software as a Service implementation costs
(3)
—
0.01
(Gain) loss on extinguishment and
modification of debt (5)
0.05
0.02
Other (4)
0.01
—
Tax adjustment (6)
(0.09
)
—
Income from continuing operations per
diluted common share, adjusted (non-GAAP) (Adjusted EPS)
$
0.04
$
0.06
Impact of currency at 2019 foreign
currency exchange rates
0.04
—
Adjusted EPS, on a constant currency basis
(8)
$
0.08
$
0.06
Owens & Minor, Inc. GAAP/Non-GAAP Reconciliations
(unaudited), continued
The following items have been excluded in our non-GAAP financial
measures:
(1) Intangible amortization includes amortization of 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.
(2) Acquisition-related charges were $4.2 million and $4.2
million for the three months ended March 31, 2020 and 2019,
respectively, and consisted primarily of transition costs for the
Halyard acquisition. Exit and realignment charges were $1.8 million
and $0.7 million for the three months ended March 31, 2020 and
2019, respectively. Exit and realignment charges in the first
quarter of 2020 were associated with severance from reduction in
force and other costs related to the reorganization of the U.S.
commercial, operations and executive teams. Exit and realignment
charges in the first quarter of 2019 were associated with severance
from reduction in force and other employee costs associated with
the establishment of our client engagement center and other IT
restructuring charges.
(3) Software as a Service (SaaS) implementation costs were
associated with significant global IT platforms in connection with
the redesign of our global information system strategy.
(4) Other includes interest costs and net actuarial losses
related to the U.S. Retirement Plan.
(5) (Gain) loss on extinguishment and modification of debt in
2020 includes the write-off of deferred financing costs associated
with the paydown of our Term A loans of $2.1 million and third
party fees expensed as a result of the Fifth Amendment to the
Credit Agreement in February 2020 of $2.2 million, which was offset
by a gain on extinguishment of debt related to the partial
repurchase of our 2021 Notes in March 2020 of $0.2 million. (Gain)
loss on extinguishment and modification of debt in 2019 includes
the write-off of deferred financing costs associated with the
revolving credit facility as a result of the Fourth Amendment to
the Credit Agreement in February 2019 of $2.0 million.
(6) Includes a tax adjustment associated with the estimated
benefits under the Coronavirus Aid, Relief, and Economic Security
(CARES) Act.
(7) 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.
(8) Excludes the impact of translational currency, which assumes
2020 results at 2019 rates.
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 substitutes 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506005127/en/
Chuck Graves, Director, Finance & Investor Relations,
804-723-7556, Chuck.Graves@owens-minor.com
Owens and Minor (NYSE:OMI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Owens and Minor (NYSE:OMI)
Historical Stock Chart
From Sep 2023 to Sep 2024