Owens & Minor Reports Consolidated Financial Results for 3rd Quarter 2012, Including Results from the Movianto Acquisition *Owens & Minor to host Annual Investor Day on November 29, 2012 in New York *Company completes acquisition of the Movianto Group, a leading European 3PL provider Business Wire RICHMOND, Va. -- October 29, 2012 Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the third quarter ended September 30, 2012, including consolidated quarterly revenue of $2.18 billion, unchanged when compared to revenue in the third quarter of 2011. The company’s August 31, 2012, acquisition of the Movianto Group (Movianto) from Celesio AG contributed $49.7 million to revenue for the quarter, representing one month’s revenue. Consolidated net income for the third quarter of 2012 was $24.6 million, or $0.39 per diluted share, compared to $33.4 million, or $0.53 per share, in the same period of 2011. Pre-tax costs associated with the Movianto acquisition were approximately $7.8 million for the third quarter of 2012, which reduced quarterly net income per diluted share by approximately $0.10. “With the third party logistics capabilities of the Movianto acquisition and our core U.S. hospital distribution and supply chain services business, Owens & Minor now has global reach with a solid platform for providing third party logistics and other supply chain services,” said Craig R. Smith, president & chief executive officer of Owens & Minor. “We believe this acquisition will improve the capacity of our company to serve healthcare providers and manufacturers with efficiency and innovation in a rapidly changing industry. We see emerging opportunity in healthcare and a widening path for Owens & Minor, as we position ourselves for the future.” Adjusted consolidated operating earnings for the third quarter of 2012, which exclude $7.8 million of costs associated with the Movianto acquisition, were $54.5 million, or 2.50% of revenues, a decrease of $4.3 million, when compared to $58.8 million, or 2.70% of revenues, in the prior-year third quarter. 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 expenses, and their most directly comparable GAAP financial measures. Year-to-Date Results For the nine months ended September 30, 2012, consolidated revenue was $6.58 billion, increased $151.2 million, or 2.4%, when compared to revenue of $6.43 billion for the same period of 2011. On a year-to-date basis, Movianto contributed revenues of $49.7 million. Consolidated net income for the first nine months of 2012 was $84.1 million, or $1.33 per diluted share, a decrease of $7.2 million when compared to net income of $91.3 million, or $1.44 per diluted share, for the same period of 2011. On a year-to-date basis, costs associated with the Movianto acquisition were approximately $8.4 million, which reduced net income by approximately $0.11 per diluted share. For the first nine months of 2012, adjusted consolidated operating earnings, excluding Movianto acquisition-related costs, were $160.2 million, or 2.43% of revenues, essentially unchanged, when compared to operating earnings of $160.9 million, or 2.50% of revenues, for the same period last year. “As we reflect on the third quarter 2012 results, we are targeting the fourth quarter 2012 adjusted operating results to be similar to those reported this quarter,” said James L. Bierman, executive vice president & chief operating officer of Owens & Minor. “As our outlook further evolves, we will provide additional details at our annual Investor Day.” Segment Discussion As a result of the August 31, 2012 acquisition of Movianto, Owens & Minor will now report Movianto as a separate International business segment. Prior to the acquisition, Owens & Minor had one reportable business segment, which now comprises the Domestic business segment. Accordingly, the Domestic business segment includes traditional distribution, OM HealthCare Logistics, and other supply-chain management services, such as OM Solutions^SM, which provide solutions to healthcare providers and suppliers of medical and surgical products in the United States. Additional information on segment results is provided in the accompanying financial tables. Domestic Segment In the third quarter of 2012, Domestic revenues were $2.13 billion, a decrease of $46.5 million compared to the same quarter of 2011. The decline resulted from a combination of factors, including: one less sales day in the quarter, lower comparative utilization of healthcare services coupled with reduced product price inflation, and a lower level of government purchasing, as well as ongoing rationalization of the company’s supplier base. Operating earnings for the Domestic segment for the third quarter of 2012 were $55.1 million compared to $58.8 million in the same period of 2011, a decrease of $3.7 million. The quarterly decrease in Domestic operating earnings is attributable to lower Domestic segment revenues and gross margin, partially offset by a $6.6 million improvement in SG&A expenses, when compared to the third quarter of 2011. As a percentage of revenues, Domestic operating earnings were 2.59% for the third quarter of 2012, representing a quarter-over-quarter decline of 11 basis points when compared to the same period of 2011, but also representing a 13 basis-point sequential improvement when compared to the second quarter of 2012. International Segment Revenues in the International segment were $49.7 million for the third quarter of 2012, reflecting one month’s contribution to the third quarter results, which were not included in results in the same quarter one year ago. For the third quarter of 2012, the International segment had an operating loss of less than $1 million. Movianto Update After completing the acquisition of Movianto, a leading European healthcare third-party logistics (3PL) business, Owens & Minor immediately launched the transition process. These activities include transitioning corporate functions previously handled by Movianto’s parent company. With the acquisition, Owens & Minor secured a third-party-logistics (3PL) platform that currently serves approximately 600 pharmaceutical and medical device manufacturer customers globally from 23 logistics centers in 11 European countries with approximately 1,800 teammates. Movianto provides a range of 3PL services including, warehousing, transportation, and cold chain logistics, as well as value-added services such as order-to-cash, repackaging and relabeling of products. Movianto’s operational capabilities and services are highly complementary to those of OM HealthCare Logistics, Owens & Minor’s domestic healthcare 3PL service, and the combination will enable Owens & Minor to offer healthcare manufacturers in the U.S. and Europe expanded global reach. Asset Management The balance of cash and cash equivalents at September 30, 2012, was $79.7 million, decreased from $135.9 million at December 31, 2011. The acquisition of Movianto used cash of approximately $150 million, net of cash acquired. Total interest-bearing debt as of September 30, 2012, was $217 million, compared to $215 million as of December 31, 2011. Domestic days sales outstanding (DSO) as of September 30, 2012, was 20.7, compared to DSO of 20.6 days at the end of the prior year’s third quarter. Domestic inventory turns were 10.2 compared to turns of 10.3 for the same period last year. Highlights & Upcoming Events *The Owens & Minor board of directors declared a fourth quarter 2012 dividend of $0.22 per diluted share. The dividend is payable on December 31, 2012, to shareholders of record on December 14, 2012. Owens & Minor views dividends as an important component of total return to shareholders. *Effective October 18, 2012, the Owens & Minor board of directors has named Martha Marsh, retired president & chief executive officer of Stanford Hospital and Clinics, to serve on the company’s board of directors. Marsh brings more than 30 years of experience as a hospital executive to the Owens & Minor board. *Owens & Minor is scheduled to participate in the 2012 Credit Suisse Healthcare Conference on November 15, 2012 in Phoenix. The presentation is scheduled for 11:00 a.m. Mountain Time. *Owens & Minor has scheduled its Annual Investor Day in New York for Thursday, November 29, 2012. Owens & Minor executives will provide an operational and strategic overview, as well as the company’s financial outlook for 2013. The meeting is scheduled to begin at 8:00 a.m. EST and conclude at approximately 10:30 a.m. EST. A live, listen-only webcast of the briefing can be accessed on the company website at www.owens-minor.com under the Investor Relations Section. Professional Wall Street analysts and investors may register via http://investors.owens-minor.com/registration.cfm. Investors’ 3Q 2012 Conference Call & Supplemental Material Owens & Minor’s management team will conduct a conference call to discuss the third quarter financial results on Tuesday, October 30, 2012, at 8:30 a.m. EDT. The access code for the conference call, international dial-in, and replay is #37884301. 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. A webcast of the call, along with supplemental information, will be available on www.owens-minor.com under the Investor Relations section. Information on www.Owens-Minor.com Owens & Minor uses its website, 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. 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 distributor of name-brand medical and surgical supplies and a healthcare supply-chain management company. Owens & Minor also offers global third-party logistics services to pharmaceutical and medical device manufacturers through its European business unit, Movianto, and through its U.S.-based service, OM HealthCare Logistics. Owens & Minor is also a member of the Russell 2000^® Index, which measures the performance of the small-cap segment of the U.S. equity universe, as well as the S&P MidCap 400, which includes companies with a market capitalization of $1 billion to $4.4 billion that meet certain financial standards. With a diverse product and service offering and distribution centers throughout the United States, the company serves hospitals, integrated healthcare systems, alternate site locations, group purchasing organizations, healthcare suppliers and the federal government. Owens & Minor provides technology and consulting programs that improve inventory management and streamline logistics across the entire medical supply chain from origin of product to patient bedside. For news releases, or for more information about Owens & Minor, visit the company website at www.owens-minor.com. Owens & Minor, Inc. Condensed Consolidated Statements of Income (unaudited) (in thousands, except per share data) Three Months Ended September 30, 2012 2011 Net revenue $ 2,179,895 $ 2,176,759 Cost of goods sold 1,951,772 1,960,077 Gross margin 228,123 216,682 Selling, general and administrative 165,320 152,825 expenses Acquisition-related and exit and 7,831 351 realignment charges Depreciation and amortization 10,090 8,463 Other operating income, net (1,781) (3,422) Operating earnings 46,663 58,465 Interest expense, net 3,066 3,426 Income before income taxes 43,597 55,039 Income tax provision 19,000 21,687 Net income $ 24,597 $ 33,352 Net income per common share: Basic $ 0.39 $ 0.53 Diluted $ 0.39 $ 0.53 Nine Months Ended September 30, 2012 2011 Net revenue $ 6,583,221 $ 6,432,022 Cost of goods sold 5,929,341 5,788,499 Gross margin 653,880 643,523 Selling, general and administrative 471,179 460,119 expenses Acquisition-related and exit and 8,448 351 realignment charges Depreciation and amortization 27,184 25,479 Other operating income, net (4,643) (2,927) Operating earnings 151,712 160,501 Interest expense, net 9,975 10,163 Income before income taxes 141,737 150,338 Income tax provision 57,667 59,082 Net income $ 84,070 $ 91,256 Net income per common share: Basic $ 1.33 $ 1.44 Diluted $ 1.33 $ 1.44 Owens & Minor, Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands) September 30, December 31, 2012 2011 Assets Current assets Cash and cash equivalents $ 79,667 $ 135,938 Accounts and notes receivable, net 582,994 506,758 Merchandise inventories 776,898 806,366 Other current assets 211,967 76,763 Total current assets 1,651,526 1,525,825 Property and equipment, net 176,035 108,061 Goodwill, net 285,363 248,498 Intangible assets, net 44,540 22,142 Other assets, net 64,285 42,289 Total assets $ 2,221,749 $ 1,946,815 Liabilities and equity Current liabilities Accounts payable $ 642,123 $ 575,793 Accrued payroll and related liabilities 18,033 20,668 Deferred income taxes 36,982 42,296 Other current liabilities 252,131 93,608 Total current liabilities 949,269 732,365 Long-term debt, excluding current portion 214,795 212,681 Deferred income taxes 31,311 21,894 Other liabilities 66,312 60,658 Total liabilities 1,261,687 1,027,598 Total equity 960,062 919,217 Total liabilities and equity $ 2,221,749 $ 1,946,815 Owens & Minor, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands) Nine Months Ended September 30, 2012 2011 Operating activities: Net income $ 84,070 $ 91,256 Adjustments to reconcile net income to cash provided by operating activities of continuing operations: Depreciation and amortization 27,184 25,479 Provision for LIFO reserve 5,223 11,265 Share-based compensation expense 4,844 4,335 Deferred income tax expense 1,098 908 Provision for losses on accounts and notes 414 1,107 receivable Pension contributions - (543) Changes in operating assets and liabilities: Accounts and notes receivable (7,886) (36,598) Merchandise inventories 40,078 (52,141) Accounts payable 32,467 81,188 Net change in other assets and liabilities (16,355) (18,465) Other, net (773) 335 Cash provided by operating activities of 170,364 108,126 continuing operations Investing activities: Acquisition, net of cash acquired (149,910) - Additions to computer software and intangible (19,934) (8,035) assets Additions to property and equipment (7,890) (16,846) Proceeds from the sale of property and 3,237 46 equipment Cash used for investing activities of (174,497) (24,835) continuing operations Financing activities: Cash dividends paid (41,791) (38,156) Repurchases of common stock (11,250) (16,124) Financing costs paid (1,303) - Proceeds from termination of interest rate - 4,005 swap Excess tax benefits related to share-based 1,223 1,977 compensation Proceeds from exercise of stock options 4,114 7,937 Other, net (4,444) (5,127) Cash used for financing activities of (53,451) (45,488) continuing operations Discontinued operations: Operating cash flows - (164) Net cash used for discontinued operations - (164) Effect of exchange rate changes on cash and 1,313 - cash equivalents Net (decrease) increase in cash and cash (56,271) 37,639 equivalents Cash and cash equivalents at beginning of 135,938 159,213 period Cash and cash equivalents at end of period $ 79,667 $ 196,852 Owens & Minor, Inc. Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) Quarter Ended (in thousands, except ratios and per share 9/30/2012 6/30/2012 3/31/2012 12/31/2011 9/30/2011 data) Consolidated operating results: Net revenue $ 2,179,895 $ 2,185,444 $ 2,217,882 $ 2,195,890 $ 2,176,759 Gross margin $ 228,123 $ 211,429 $ 214,328 $ 214,014 $ 216,682 Gross margin as a percent of 10.46% 9.67% 9.66% 9.75% 9.95% revenue SG&A expenses $ 165,320 $ 150,288 $ 155,572 $ 150,538 $ 152,825 SG&A expenses as a 7.58% 6.88% 7.01% 6.86% 7.02% percent of revenue Operating earnings, as $ 46,663 $ 53,177 $ 51,872 $ 43,014 $ 58,465 reported (GAAP) Acquisition-related and exit and 7,831 617 - 12,708 351 realignment charges Operating earnings, $ 54,494 $ 53,794 $ 51,872 $ 55,722 $ 58,816 adjusted (Non-GAAP) Operating earnings as a percent of revenue, 2.50% 2.46% 2.34% 2.54% 2.70% adjusted (Non-GAAP) Net income, as $ 24,597 $ 30,113 $ 29,360 $ 23,942 $ 33,352 reported (GAAP) Acquisition-related and exit and 6,588 375 - 7,714 213 realignment charges, after-tax Net income, adjusted $ 31,185 $ 30,488 $ 29,360 $ 31,656 $ 33,565 (Non-GAAP) Net income per diluted common share, as $ 0.39 $ 0.48 $ 0.46 $ 0.38 $ 0.53 reported (GAAP) Acquisition-related and exit and 0.10 - - 0.13 - realignment charges Net income per diluted common share, adjusted $ 0.49 $ 0.48 $ 0.46 $ 0.51 $ 0.53 (Non-GAAP) Financing: Cash and cash $ 79,667 $ 224,937 $ 213,927 $ 135,938 $ 196,852 equivalents Total interest-bearing $ 216,924 $ 213,982 $ 214,184 $ 214,556 $ 215,037 debt Stock information: Cash dividends $ 0.22 $ 0.22 $ 0.22 $ 0.20 $ 0.20 per common share Stock price at $ 29.88 $ 30.63 $ 30.41 $ 27.79 $ 28.48 quarter-end 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, except ratios) Three Months Ended September 30, Nine Months Ended September 30, 2012 2011 2012 2011 % of % of % of % of consolidated consolidated consolidated consolidated Amount net revenue Amount net revenue Amount net revenue Amount net revenue Net revenue: Domestic $ 2,130,226 97.72 % $ 2,176,759 100.00 % $ 6,533,552 99.25 % $ 6,432,022 100.00 % International 49,669 2.28 % N/A N/A 49,669 0.75 % N/A N/A Consolidated $ 2,179,895 100.00 % $ 2,176,759 100.00 % $ 6,583,221 100.00 % $ 6,432,022 100.00 % net revenue Operating earnings (loss): Domestic $ 55,120 2.53 % $ 58,816 2.70 % $ 160,786 2.44 % $ 160,852 2.50 % International (626) (0.03) % N/A N/A (626) (0.01) N/A N/A Acquisition-related and exit and - realignment (7,831) (0.36) % (351) (0.01) % (8,448) (0.13) % (351) - % charges Consolidated operating $ 46,663 2.14 % $ 58,465 2.69 % $ 151,712 2.30 % $ 160,501 2.50 % earnings Depreciation and amortization: Domestic $ 8,801 $ 8,463 $ 25,895 $ 25,479 International 1,289 N/A 1,289 N/A Consolidated depreciation $ 10,090 $ 8,463 $ 27,184 $ 25,479 and amortization Capital expenditures: ^(1) Domestic $ 8,929 $ 11,133 $ 27,086 $ 24,881 International 738 N/A 738 N/A Consolidated capital $ 9,667 $ 11,133 $ 27,824 $ 24,881 expenditures September December 30, 31, 2012 2011 Total assets: Domestic $ 1,732,460 $ 1,810,877 International 409,622 N/A Segment assets 2,142,082 1,810,877 Cash and cash 79,667 135,938 equivalents Consolidated $ 2,221,749 $ 1,946,815 total assets ^(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 Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Numerator: Net income $ 24,597 $ 33,352 $ 84,070 $ 91,256 Less: income allocated to (153) (252) (574) (856) unvested restricted shares Net income attributable to 24,444 33,100 83,496 90,400 common shareholders - basic Add: undistributed income attributable to unvested 53 136 229 397 restricted shares - basic Less: undistributed income attributable to unvested (53) (135) (228) (396) restricted shares - diluted Net income attributable to $ 24,444 $ 33,101 $ 83,497 $ 90,401 common shareholders - diluted Denominator: Weighted average shares 62,763 62,802 62,806 62,801 outstanding — basic Dilutive shares - stock 78 145 84 183 options Weighted average shares 62,841 62,947 62,890 62,984 outstanding — diluted Net income per share attributable to common shareholders: Basic $ 0.39 $ 0.53 $ 1.33 $ 1.44 Diluted $ 0.39 $ 0.53 $ 1.33 $ 1.44 Contact: Owens & Minor, Inc. Trudi Allcott, 804-723-7555 Director, Investor & Media Relations email@example.com or Chuck Graves, 804-723-7556 Director, Finance & Investor Relations firstname.lastname@example.org
Owens & Minor Reports Consolidated Financial Results for 3rd Quarter 2012, Including Results from the Movianto Acquisition
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