Owens & Minor, Inc. (NYSE-OMI) today reported financial
results for the fourth quarter and full-year ended December 31,
2013, including the following highlights:
- Consolidated annual revenue growth and
adjusted EPS met targeted guidance for 2013
- Adjusted consolidated net income was
$1.90 per diluted share for 2013 and $0.52 for the quarter
- 4Q 2013 adjusted consolidated operating
earnings (non-GAAP) improved by more than $11 million
- The Domestic segment achieved revenue
growth for the second consecutive quarter
- The International segment reported
positive fourth quarter operating earnings
For the quarter ended December 31, 2013, the company reported
consolidated quarterly revenues of $2.32 billion, an increase of
1.1% when compared to the fourth quarter of 2012. For the fourth
quarter of 2013, net income increased 12% to $27.9 million, or
$0.44 per diluted share, when compared to the same period last
year. For the fourth quarter, adjusted net income (non-GAAP), which
excludes after-tax charges of $5.0 million for acquisition-related
and exit and realignment activities, was $33.0 million, or $0.52
per diluted share, an increase of 26% when compared to the fourth
quarter of 2012.
Consolidated operating earnings for the fourth quarter of 2013,
were $50.9 million, improved by $5.9 million, or 13.1%, when
compared to operating earnings for the same period last year.
Adjusted consolidated operating earnings (non-GAAP) for the fourth
quarter of 2013 were $58.0 million, or 2.50% of revenues, increased
$11.2 million, in comparison to last year’s fourth quarter results.
Since the fourth quarter of 2012, quarterly adjusted operating
earnings (non-GAAP) have improved sequentially in each of the four
consecutive quarters.
“During 2013, our teams in the U.S., Europe and Asia
collaborated to achieve a successful outcome for the year,” said
Craig R. Smith, chairman & chief executive officer of Owens
& Minor. “Our teammates are creating a faster, more flexible
Owens & Minor that is well-equipped to pursue emerging
opportunities. Looking ahead, we intend to capitalize on the
investments we have made in the company to capture new market
opportunities, operate more efficiently and provide our healthcare
customers with the best logistics’ solutions in healthcare.”
In completing a year-end review of customer contracts in the
International segment, the company has revised the presentation of
a portion of its International segment revenues from a gross to a
net basis, after determining that this presentation is more
representative of the customer arrangement. This change resulted in
reductions of gross revenues of approximately $30 million to $35
million per quarter for the fourth quarter of 2012 and each of the
first three quarters of 2013. As a result of this revised
classification, International segment revenues were $105 million
for the fourth quarter of 2013 compared to $96.3 million for the
same period last year, and were $384 million for 2013 compared to
$137 million for 2012. This change did not affect gross margin,
operating earnings or net income, and had an immaterial impact
on consolidated revenues reported for 2012 and the first three
quarters of 2013. The International segment consists of Movianto, a
leading European healthcare logistics provider, which was acquired
by Owens & Minor on August 31, 2012.
2013 Annual Results
For the year ended December 31, 2013, consolidated revenues were
$9.07 billion, an increase of $203 million, or 2.3%, when compared
to 2012 revenues. The International segment contributed $384
million in revenues for 2013 and $137 million for 2012, which
represented four months of revenue contributions. Net income for
2013 improved 1.7% to $111 million, or $1.76 per diluted share, in
comparison to net income of $109 million, or $1.72 per diluted
share, in the same period last year. For the year, adjusted net
income (non-GAAP), which excludes after-tax charges of $8.9 million
for acquisition-related and exit and realignment activities, was
$120 million, or $1.90 per diluted share, an increase of 2.2% in
comparison to last year’s results.
Consolidated operating earnings for 2013 improved slightly to
$198 million, or 2.18% of revenues, compared to operating earnings
of $197 million, or 2.22% of revenues, for the same period of 2012.
Adjusted operating earnings (non-GAAP) for 2013 were $211 million,
or 2.32 % of revenues, increased 1.7% when compared to adjusted
operating earnings of $207 million, or 2.33% of revenues, for the
same period last year.
Asset Management
The balance of cash and cash equivalents was $102 million at
December 31, 2013. For the year, the company reported cash provided
by operating activities of $141 million compared to $219 million in
the same period last year. Asset management metrics for the quarter
were positive with consolidated days sales outstanding (DSO) of
22.1, as of December 31, 2013, compared to DSO of 20.8 days for the
same period last year. Consolidated inventory turns were 10.4 for
2013 versus inventory turns of 10.1 for 2012.
Segment Results
Domestic segment revenues for the fourth quarter of 2013 were
$2.21 billion, improved modestly from revenue of $2.20 billion. For
2013, Domestic segment revenue experienced a slight decline to
$8.69 billion, when compared to the prior year. Domestic revenue
growth was impeded by ongoing market trends, including lower rates
of healthcare utilization and reduced government spending, as well
as the company’s continued rationalization of smaller, less
profitable healthcare provider customers and suppliers. Despite
these market challenges, the Domestic segment achieved
year-over-year and sequential revenue growth for both the third and
fourth quarters of 2013.
For the fourth quarter of 2013, Domestic segment operating
earnings were $56.6 million, an increase of $5.0 million when
compared to same period of 2012. Quarterly operating earnings, when
compared to the prior year, benefitted from certain strategic
initiatives, including growth in fee-for-service business. In
addition, $2.0 million in legal expenses and loss contingencies
associated with California-specific litigation and compensation and
benefits requirements in 2012 did not recur in 2013. During the
quarter, certain exit and realignment activities designed to
optimize the company’s Domestic operations were accelerated; these
activities were associated with closing certain U.S.-based
distribution and logistics centers, and offsite warehouses. For the
full year, Domestic segment operating earnings were $212 million
for 2013 and 2012, representing 2.44% and 2.43% of segment revenues
respectively for each year. In addition to factors affecting fourth
quarter results, annual operating earnings benefitted from certain
California municipal sales tax incentives and supplier price
changes in the first half of the year, offset by increases in
healthcare costs, workers’ compensation and other administrative
expenses.
For the International segment, quarterly revenues increased 8.6%
to $105 million and were $384 million for the first full year as
part of Owens & Minor. For the fourth quarter of 2013, the
International segment had operating earnings of $1.4 million,
representing a $6.2 million increase over fourth quarter of 2012.
For the full-year 2013, the International segment narrowed its
operating losses by $4.0 million to $1.4 million. The comparative
improvement for 2013 resulted from increased utilization of network
capacity, continued growth, and diminishing reliance on transition
services from the former parent company. During the second half of
2013, the International segment also benefitted from seasonally
stronger customer activity.
2014 Outlook
The company reiterated the following financial guidance for
2014, which was originally issued at its December 2013 Investor
Day:
For 2014, the company is targeting revenue growth of up to 2%
and adjusted net income per diluted share of $1.95 to $2.05 for the
year, which excludes exit and realignment and transaction-related
costs.
Upcoming Investor Relations
Events
Owens & Minor will participate in the following investor
conferences in the first quarter of 2014; webcasts of executive
presentations will be available on www.owens-minor.com
- Leerink Swann Global Healthcare
Conference 2014; February 12; New York
- Citi 2014 Global Healthcare Conference;
February 26; New York
- Barclays Capital 2014 Global Healthcare
Conference; March 13; Miami
Investors Conference Call &
Supplemental Material
Conference Call: Owens & Minor’s management team will
conduct a conference call for investors on Tuesday, February 11,
2014, at 8:30 a.m. Eastern. The access code for the conference
call, international dial-in and replay is #40287606. Participants
may access the call at 866-393-1604. The international dial-in
number is 224-357-2191. Replay: A replay of the call will be
available for one week by dialing 855-859-2056. Webcast: A
listen-only webcast of the call, along with supplemental
information, will be available on www.owens-minor.com under “Investor
Relations.”
Owens & Minor uses its 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, which exclude
acquisition-related and exit and realignment charges, and their
most directly comparable GAAP financial measures.
Safe Harbor Statement
Except for historical information, the matters discussed in this
press release may constitute forward-looking statements that
involve risks and uncertainties that could cause actual results to
differ materially from those projected. These risk factors are
discussed in reports filed by the company with the Securities &
Exchange Commission. All of this information is available at
www.owens-minor.com. The company assumes no obligation, and
expressly disclaims any such obligation, to update or alter
information, whether as a result of new information, future events,
or otherwise.
Owens & Minor, Inc.,
(NYSE: OMI) a FORTUNE 500 company headquartered in Richmond,
Virginia, is a leading national provider of distribution and
logistics services to the healthcare industry and a leading
European provider of logistics services to pharmaceutical,
life-science, and medical-device manufacturers. With a diverse
product and service offering and facilities throughout the United
States and Europe, the company serves hospitals, integrated
healthcare systems, alternate site locations, group purchasing
organizations, healthcare manufacturers, and the federal
government. Owens & Minor also provides technology and
consulting programs that improve inventory management and
streamline logistics across the entire medical supply chain. For
news releases, or for more information about Owens & Minor,
visit the company website at www.owens-minor.com.
Owens & Minor, Inc.
Consolidated Statements of Income
(unaudited)
(in thousands, except per share data)
Three Months Ended December 31, 2013
2012 Net revenue
$ 2,318,524 $
2,294,208 Cost of goods sold
2,027,261 2,023,434
Gross margin
291,263 270,774 Selling, general and
administrative expenses
222,043 211,415 Acquisition-related
and exit and realignment charges
7,049 1,717 Depreciation
and amortization
13,239 12,420 Other operating expense
(income), net
(2,002 ) 181 Operating earnings
50,934 45,041 Interest expense, net
3,263
3,422 Income before income taxes
47,671 41,619 Income
tax provision
19,729 16,685
Net income
$ 27,942 $ 24,934
Net income
per common share: Basic $ 0.44 $ 0.40
Diluted $ 0.44 $ 0.39
Twelve
Months Ended December 31, 2013 2012 Net revenue
$ 9,071,532 $ 8,868,324 Cost of goods sold
7,954,457 7,943,670 Gross margin
1,117,075 924,654 Selling, general and administrative
expenses
863,656 682,595 Acquisition-related and exit and
realignment charges
12,444 10,164 Depreciation and
amortization
50,586 39,604 Other operating expense (income),
net
(7,694 ) (4,462 ) Operating earnings
198,083 196,753 Interest expense, net
13,098
13,397 Income before income taxes
184,985 183,356
Income tax provision
74,103 74,353
Net
income $ 110,882 $ 109,003
Net income per common share: Basic $
1.76 $ 1.72
Diluted $ 1.76 $ 1.72
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands)
December 31, December 31,
2013 2012
Assets Current assets
Cash and cash equivalents
$ 101,905 $ 97,888 Accounts
and notes receivable, net
572,854 537,335 Merchandise
inventories
771,663 763,756 Other current assets
279,510 231,264
Total current assets
1,725,932 1,630,243 Property and equipment, net
191,961 191,841 Goodwill, net
275,439 274,884
Intangible assets, net
40,406 42,313 Other assets, net
90,304 75,117
Total assets
$ 2,324,042 $ 2,214,398
Liabilities and equity Current liabilities Accounts
payable
$ 643,872 $ 603,137 Accrued payroll and
related liabilities
23,296 25,468 Deferred income taxes
41,613 42,107 Other current liabilities
280,398 254,924
Total current
liabilities 989,179 925,636 Long-term debt, excluding
current portion
213,815 215,383 Deferred income taxes
43,727 36,269 Other liabilities
52,278
63,454
Total liabilities 1,298,999 1,240,742
Total equity 1,025,043 973,656
Total liabilities and equity $
2,324,042 $ 2,214,398
Owens & Minor, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
Twelve Months Ended 2013
2012 Operating activities: Net
income
$ 110,882 $ 109,003 Adjustments to reconcile
net income to cash provided by operating activities: Depreciation
and amortization
50,586 39,604 Share-based compensation
expense
6,381 5,697 Deferred income tax expense
3,713
1,060 Provision for losses on accounts and notes receivable
787 1,004 Changes in operating assets and liabilities:
Accounts and notes receivable
(38,645 ) 27,161
Merchandise inventories
(7,064 ) 58,734 Accounts
payable
47,374 (18,694 ) Net change in other assets and
liabilities
(32,337 ) (4,490 ) Other, net
(1,123 ) (573 )
Cash provided by operating
activities 140,554 218,506
Investing activities: Acquisition, net of cash
acquired
— (155,210 ) Additions to computer software and
intangible assets
(32,010 ) (29,131 ) Additions to
property and equipment
(28,119 ) (9,832 ) Proceeds
from the sale of property and equipment
3,051
3,298
Cash used for investing activities
(57,078 ) (190,875 )
Financing activities: Cash dividends paid
(60,731
) (55,681 ) Repurchases of common stock
(18,876
) (15,000 ) Financing costs paid
— (1,303 ) Proceeds
from exercise of stock options
5,352 4,986 Excess tax
benefits related to share-based compensation
898 1,293
Other, net
(8,623 ) (2,710 )
Cash
used for financing activities (81,980 )
(68,415 )
Effect of exchange rate changes on cash and
cash equivalents 2,521 2,734
Net increase (decrease) in cash and cash equivalents
4,017 (38,050 )
Cash and cash equivalents at beginning of
period 97,888 135,938
Cash and cash equivalents at end of period $
101,905 $ 97,888
Owens & Minor, Inc.
Financial Statistics and GAAP/Non-GAAP
Reconciliations (unaudited)
Quarter Ended (in thousands, except
ratios and per share data)
12/31/2013
9/30/2013 6/30/2013 3/31/2013 12/31/2012
Consolidated operating results:
Domestic
$ 2,213,949 $ 2,175,663 $ 2,143,691 $
2,154,715 $ 2,197,932 International (1)
104,575
94,884 92,386 91,669
96,276 Net revenue
$
2,318,524 $ 2,270,547 $
2,236,077 $ 2,246,384 $ 2,294,208
Gross margin
$ 291,263 $ 273,329 $
273,431 $ 279,052 $ 270,774 Gross margin as a percent of revenue
12.56 % 12.04 % 12.23 %
12.42 % 11.80 % SG&A expenses
$
222,043 $ 211,344 $ 212,548 $ 217,721 $ 211,415 SG&A
expenses as a percent of revenue
9.58 %
9.31 % 9.51 % 9.69 % 9.22 % Operating
earnings, as reported (GAAP)
$ 50,934 $ 49,215 $
50,050 $ 47,884 $ 45,041 Acquisition-related and exit and
realignment charges
7,049 2,747
638 2,010 1,717 Operating
earnings, adjusted (Non-GAAP)
$ 57,983 $ 51,962 $
50,688 $ 49,894 $ 46,758 Operating earnings as a percent of
revenue, adjusted (Non-GAAP)
2.50 %
2.29 % 2.27 % 2.22 % 2.04 % Net income,
as reported (GAAP)
$ 27,942 $ 27,970 $ 28,872 $
26,098 $ 24,934 Acquisition-related and exit and realignment
charges, after-tax
5,024 1,899
412 1,521 1,237 Net income,
adjusted (Non-GAAP)
$ 32,966 $
29,869 $ 29,284 $ 27,619
$ 26,171 Net income per diluted common share, as
reported (GAAP)
$ 0.44 $ 0.44 $ 0.46 $ 0.41 $ 0.39
Acquisition-related and exit and realignment charges
0.08 0.03 —
0.03 0.02 Net income per diluted common
share, adjusted (Non-GAAP)
$ 0.52
$ 0.47 $ 0.46 $ 0.44
$ 0.41
Financing: Cash and cash
equivalents
$ 101,905 $ 153,789 $ 207,826 $ 218,563 $
97,888 Total interest-bearing debt
$ 216,243
$ 216,850 $ 216,994 $
216,414 $ 217,591
Stock
information: Cash dividends per common share
$
0.24 $ 0.24 $ 0.24
$ 0.24 $ 0.22 Stock price at quarter-end
$ 36.56 $ 34.59 $
33.83 $ 32.56 $ 28.51
(1) Revised to reflect net presentation of
revenues for certain customer contracts. Previously reported
revenues were $128,937, $122,996, $120,994 and $126,992 for the
prior four quarters from 9/30/2013 to 12/31/2012, respectively.
Use of Non-GAAP
Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP"). In general, the measures exclude items and
charges that (i) management does not believe reflect Owens &
Minor, Inc.'s (the "Company") core business and relate more to
strategic, multi-year corporate activities; or (ii) relate to
activities or actions that may have occurred over multiple or in
prior periods without predictable trends. Management uses these
non-GAAP financial measures internally to evaluate the Company's
performance, evaluate the balance sheet, engage in financial and
operational planning and determine incentive compensation.
Management provides these non-GAAP financial measures to
investors as supplemental metrics to assist readers in assessing
the effects of items and events on its financial and operating
results and in comparing the Company's performance to that of its
competitors. However, the non-GAAP financial measures used by the
Company may be calculated differently from, and therefore may not
be comparable to, similarly titled measures used by other
companies.
The non-GAAP financial measures disclosed by the Company should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and the financial
results calculated in accordance with GAAP and reconciliations to
those financial statements set forth above should be carefully
evaluated.
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(in thousands)
Three Months Ended December 31, Twelve
Months Ended December 31, 2013 2012
2013 2012 % of % of % of % of
consolidated consolidated consolidated consolidated
Amount
net revenue Amount net revenue
Amount net revenue Amount net
revenue
Net revenue: Domestic
$ 2,213,949
95.49% $ 2,197,932 95.80%
$ 8,688,018
95.77% $ 8,731,484 98.46% International
104,575
4.51% 96,276 4.20%
383,514
4.23% 136,839 1.54% Consolidated net revenue
$
2,318,524 100.00% $ 2,294,208 100.00%
$ 9,071,532 100.00% $ 8,868,323
100.00% % of segmentnet revenue % of segmentnet
revenue % of segmentnet revenue % of segmentnet revenue
Operating earnings (loss): Domestic
$ 56,568
2.56% $ 51,546 2.35%
$ 211,932 2.44% $
212,335 2.43% International
1,415 1.35% (4,788 )
(4.97)%
(1,405 ) (0.37)% (5,418 ) (3.96)%
Acquisition-related and exit and realignment charges
(7,049
) N/A (1,717 ) N/A
(12,444 ) N/A
(10,164 ) N/A Consolidated operating earnings
$
50,934 2.20% $ 45,041 1.96%
$
198,083 2.18% $ 196,753 2.22%
Depreciation and amortization: Domestic
$
9,033 $ 9,121
$ 35,808 $ 35,016 International
4,206 3,299
14,778 4,588
Consolidated depreciation and amortization
$ 13,239
$ 12,420
$ 50,586 $ 39,604
Capital expenditures: (1) Domestic
$ 8,295 $ 7,364
$ 42,802 $ 34,450
International
6,328 3,775
17,327
4,513 Consolidated capital expenditures
$
14,623 $ 11,139
$ 60,129
$ 38,963
December 31,
2013
December 31,
2012
Total assets: Domestic
$ 1,747,572 $ 1,730,396
International
474,565 386,114 Segment assets
2,222,137 2,116,510 Cash and cash equivalents
101,905
97,888 Consolidated total assets
$
2,324,042 $ 2,214,398 (1) Represents
additions to property and equipment and additions to computer
software and separately acquired intangible assets.
Owens & Minor, Inc.
Net Income Per Common Share
(unaudited)
(in thousands, except per share data)
Three Months Ended December 31, Twelve
Months Ended December 31, 2013 2012
2013 2012 Numerator: Net income
$
27,942 $ 24,934
$ 110,882 $ 109,003 Less:
income allocated to unvested restricted shares
(193 )
(173 )
(738 ) (749 ) Net income attributable to
common shareholders - basic
27,749 24,761
110,144
108,254 Add: undistributed income attributable to unvested
restricted shares -basic
67 61
257 292 Less:
undistributed income attributable to unvested restricted shares
-diluted
(67 ) (61 )
(257 ) (292 )
Net income attributable to common shareholders - diluted
$ 27,749 $ 24,761
$
110,144 $ 108,254 Denominator: Weighted
average shares outstanding — basic
62,446 62,671
62,625 62,765 Dilutive shares - stock options
21
67
36 79
Weighted average
shares outstanding — diluted 62,467 62,738
62,661 62,844 Net income per
share attributable to common shareholders: Basic
$
0.44 $ 0.40
$ 1.76 $ 1.72 Diluted
$
0.44 $ 0.39
$ 1.76 $ 1.72
Owens & Minor, Inc.Truitt Allcott, Director, Investor &
Media Relations, 804-723-7555,
truitt.allcott@owens-minor.comorChuck Graves, Director, Finance
& Investor Relations,
804-723-7556,chuck.graves@owens-minor.com
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