Owens & Minor Reports Consolidated 4th Quarter & Full-Year 2012 Financial Results OMI’s results were highlighted by strong asset management and operating cash flow Business Wire RICHMOND, Va. -- February 11, 2013 Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the fourth quarter ended December 31, 2012, including consolidated quarterly revenue of $2.32 billion, an increase of 5.9% when compared to revenue of $2.20 billion in the fourth quarter of 2011. Movianto, a leading European healthcare logistics provider acquired by Owens & Minor on August 31, 2012, contributed $127.0 million to fourth quarter revenue. Consolidated net income for the fourth quarter of 2012 was $24.9 million, or $0.39 per diluted share, a slight increase when compared to net income of $23.9 million, or $0.38 per diluted share, in the comparable period of 2011. Adjusted consolidated net income (non-GAAP), which excludes pre-tax charges of $1.7 million for acquisition-related and exit & realignment activities for the fourth quarter of 2012, was $26.2 million, or $0.41 per diluted share. In addition, pre-tax quarterly operating losses for Movianto, which comprises the company’s International segment, were approximately $4.8 million, or $0.06 per diluted share, resulting primarily from operating costs to support underutilized capacity. Also, in the fourth quarter of 2012, the company incurred legal expenses and loss contingencies of $2.0 million, or $0.02 per diluted share, associated with California-specific litigation and compensation and benefits requirements. For the fourth quarter of 2012, consolidated operating earnings were $45.0 million, increased when compared to operating earnings of $43.0 million for the same period last year. For the quarter, acquisition-related and exit & realignment charges reduced quarterly consolidated operating earnings by $1.7 million. For purposes of comparison, fourth quarter 2011 financial results included acquisition-related and exit & realignment costs of $12.8 million, or $0.13 per diluted share. “We made solid progress in 2012 on strategic investments that will support the long-term success of our company in a rapidly changing healthcare environment,” said Craig R. Smith, president & chief executive officer. “I was pleased with the overall performance of our Domestic business in a tough operating environment, as our asset management results were very strong, expense control was impressive, and we generated $219 million in operating cash flow. As we look ahead to 2013, we are focused on improving our performance with Movianto by leveraging capacity and achieving expense reductions in our European network. We are very enthusiastic about our future and the growing demand for our healthcare logistics services.” 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 & realignment charges, and their most directly comparable GAAP financial measures. 2012 Annual Results For the year ended December 31, 2012, consolidated revenue was $8.91 billion, increased 3.2% from revenue of $8.63 billion in 2011. On a year-to-date basis, Movianto contributed revenue of $176.7 million. Consolidated net income for 2012 was $109.0 million, or $1.72 per diluted share, compared to net income of $115.2 million, or $1.81 per diluted share for 2011. Adjusted earnings per diluted share (non-GAAP) declined to $1.85 in 2012 compared with $1.94 in 2011 due to a decrease in adjusted operating earnings (non-GAAP) of $9.8 million. The Domestic segment operating earnings were $212.3 million, a decrease of $4.4 million when compared to the prior year. The International segment operating losses were $5.4 million. The Domestic segment operating earnings comparability between periods was adversely affected by legal expenses and loss contingencies of $2.0 million associated with California-specific litigation and compensation and benefits requirements, offset by income of $1.1 million from the settlement of a class-action litigation. The net effect was a $0.9 million reduction in 2012 Domestic segment operating earnings. This compares to $2.2 million received from settlement of an anti-trust class action lawsuit in 2011. The effect on the comparison between 2012 and 2011 is a decline of $3.1 million. Segment Results Domestic segment revenue for the fourth quarter of 2012 was $2.20 billion, essentially unchanged from revenue in the fourth quarter of the prior year. For the full year 2012, Domestic segment revenue was $8.73 billion, an increase of $103.6 million, or 1.2%, when compared to the prior year. Factors affecting full-year Domestic segment revenue trends included a lower comparative utilization of healthcare services, reduced product price inflation, a lower comparative level of government purchasing, as well as ongoing rationalization of certain of the company’s suppliers. Domestic segment operating earnings for the fourth quarter of 2012 were $51.5 million, a decline of $4.3 million, when compared to operating earnings of $55.8 million, in the same period of 2011. For 2012, Domestic segment operating earnings were $212.3 million, or 2.43% of revenues, compared to operating earnings of $216.7 million, or 2.51% of revenues, in the prior year. For both the fourth quarter and the full-year 2012, operating earnings results were affected by lower gross margin on sales to customers and the impact of the previously discussed California-related accruals, partially offset by slightly lower Domestic segment SG&A expenses. As discussed above, the International segment contributed revenue of $127.0 million for the fourth quarter of 2012 and $176.7 million for the full year, reflecting the four months of Movianto’s contributions since the business was acquired by Owens & Minor. For the fourth quarter and the year, the International segment had operating losses of $4.8 million and $5.4 million respectively. Asset Management The balance of cash and cash equivalents at December 31, 2012, was approximately $98 million, decreased from $136 million at December 31, 2011, primarily as a result of the Movianto acquisition in 2012. For the full-year 2012, cash provided by operating activities was $219 million, compared favorably to $68 million for the same period last year. The improvement was largely due to the reduction of Domestic segment inventories and improvement in Domestic segment days sales outstanding (DSO). Domestic inventory turns for the fourth quarter were 10.5, compared to turns of 10.0 for the same period in the prior year. Domestic DSO, as of December 31, 2012, was 19.1 days, a record achievement for the company and a favorable comparison to 20.7 days for the same period last year. 2013 Outlook The company reiterated the following financial guidance for 2013, which was originally issued at its November 2012 Investor Day: For 2013, the company is targeting revenue growth of 2% to 4% and adjusted net income per diluted share of $1.90 to $2.00 for the year, which excludes acquisition-related and exit & realignment costs. Highlights & Upcoming Investor Relations Events *The Owens & Minor board of directors has approved the payment of the first quarter 2013 cash dividend in the amount of $0.24 per share, a 9% increase over the prior quarter’s dividend. The cash dividend is payable on March 29, 2013, to shareholders of record as of March 15, 2013. In 2012, the company paid nearly $56 million in dividends to shareholders and $15 million in share repurchases, under a board authorized share repurchase program, for a total of $71 million in distributions to shareholders. *The board of directors of Owens & Minor, Inc. announced on January 31, 2013, following the regularly scheduled board meeting, that G. Gilmer Minor, III, 72, who served as Chairman of the Board since 1994, will retire from the board at the conclusion of the company’s Annual Shareholders’ Meeting on April 26, 2013. As part of its succession plan, the board intends to appoint Craig R. Smith, 61, President & Chief Executive Officer of Owens & Minor, to also serve as Chairman of the Board, upon Minor’s retirement. Minor will assume the position of Chairman Emeritus. *Owens & Minor will participate in the Barclays Capital 2013 Global Healthcare Conference, on March 13, 2013 in Miami. A webcasts of the formal presentation will be available on www.owens-minor.com 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. Owens & Minor also offers global third-party logistics services to pharmaceutical, life-science, and medical-device manufacturers through its European business unit, Movianto, and through its U.S.-based service, OM HealthCare Logistics. 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 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. Investors Conference Call & Supplemental Material Conference Call: Owens & Minor will conduct a conference call for investors on Tuesday, February 12, 2013, at 8:30 a.m. Eastern. The access code for the conference call, international dial-in and replay is #93205109. 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.” Information on www.Owens-Minor.com 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. Owens & Minor, Inc. Consolidated Statements of Income (unaudited) (in thousands, except per share data) Three Months Ended December 31, 2012 2011 Net revenue $ 2,324,924 $ 2,195,890 Cost of goods sold 2,054,150 1,981,876 Gross margin 270,774 214,014 Selling, general and administrative 211,415 150,538 expenses Acquisition-related and exit and 1,717 12,817 realignment charges Depreciation and amortization 12,420 8,656 Other operating expense (income), net 181 (1,011 ) Operating earnings 45,041 43,014 Interest expense, net 3,422 3,519 Income before income taxes 41,619 39,495 Income tax provision 16,685 15,553 Net income $ 24,934 $ 23,942 Net income per common share: Basic $ 0.40 $ 0.38 Diluted $ 0.39 $ 0.38 Twelve Months Ended December 31, 2012 2011 Net revenue $ 8,908,145 $ 8,627,912 Cost of goods sold 7,983,491 7,770,375 Gross margin 924,654 857,537 Selling, general and administrative 682,595 610,657 expenses Acquisition-related and exit and 10,164 13,168 realignment charges Depreciation and amortization 39,604 34,135 Other operating income, net (4,462 ) (3,938 ) Operating earnings 196,753 203,515 Interest expense, net 13,397 13,682 Income before income taxes 183,356 189,833 Income tax provision 74,353 74,635 Net income $ 109,003 $ 115,198 Net income per common share: Basic $ 1.72 $ 1.82 Diluted $ 1.72 $ 1.81 Owens & Minor, Inc. Condensed Consolidated Balance Sheets (unaudited) (in thousands) December 31, December 31, 2012 2011 Assets Current assets Cash and cash equivalents $ 97,888 $ 135,938 Accounts and notes receivable, net 553,502 506,758 Merchandise inventories 763,756 806,366 Other current assets 213,748 76,763 Total current assets 1,628,894 1,525,825 Property and equipment, net 191,841 108,061 Goodwill, net 274,884 248,498 Intangible assets, net 42,313 22,142 Other assets, net 69,769 42,289 Total assets $ 2,207,701 $ 1,946,815 Liabilities and equity Current liabilities Accounts payable $ 603,137 $ 575,793 Accrued payroll and related liabilities 25,468 20,668 Deferred income taxes 40,758 42,296 Other current liabilities 254,924 93,608 Total current liabilities 924,287 732,365 Long-term debt, excluding current portion 215,383 212,681 Deferred income taxes 30,921 21,894 Other liabilities 63,454 60,658 Total liabilities 1,234,045 1,027,598 Total equity 973,656 919,217 Total liabilities and equity $ 2,207,701 $ 1,946,815 Owens & Minor, Inc. Consolidated Statements of Cash Flows (unaudited) (in thousands) Twelve Months Ended December 31, 2012 2011 Operating activities: Net income $ 109,003 $ 115,198 Adjustments to reconcile net income to cash provided by operating activities of continuing operations: Depreciation and amortization 39,604 34,135 Share-based compensation expense 5,697 5,674 Provision for LIFO reserve 4,194 13,700 Deferred income tax expense 1,060 14,520 Provision for losses on accounts and notes 1,004 2,176 receivable Pension contributions - (409 ) Changes in operating assets and liabilities: Accounts and notes receivable 27,161 (37,273 ) Merchandise inventories 54,540 (99,950 ) Accounts payable (18,694 ) 44,058 Net change in other assets and liabilities (4,490 ) (24,654 ) Other, net (573 ) 1,244 Cash provided by operating activities of 218,506 68,419 continuing operations Investing activities: Acquisition, net of cash acquired (155,210 ) - Additions to computer software and intangible (29,131 ) (11,334 ) assets Additions to property and equipment (9,832 ) (24,981 ) Proceeds from the sale of property and 3,298 2,430 equipment Cash used for investing activities of (190,875 ) (33,885 ) continuing operations Financing activities: Cash dividends paid (55,681 ) (50,909 ) Repurchases of common stock (15,000 ) (16,124 ) Financing costs paid (1,303 ) - Proceeds from exercise of stock options 4,986 9,179 Excess tax benefits related to share-based 1,293 2,154 compensation Proceeds from termination of interest rate - 4,005 swaps Other, net (2,710 ) (5,836 ) Cash used for financing activities of (68,415 ) (57,531 ) continuing operations Discontinued operations: Operating cash flows - (278 ) Net cash used for discontinued operations - (278 ) Effect of exchange rate changes on cash and 2,734 - cash equivalents Net decrease in cash and cash equivalents (38,050 ) (23,275 ) Cash and cash equivalents at beginning of 135,938 159,213 period Cash and cash equivalents at end of period $ 97,888 $ 135,938 Owens & Minor, Inc. Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited) Quarter Ended (in thousands, except ratios and per share 12/31/2012 9/30/2012 6/30/2012 3/31/2012 12/31/2011 data) Consolidated operating results: Net revenue $ 2,324,924 $ 2,179,895 $ 2,185,444 $ 2,217,882 $ 2,195,890 Gross margin $ 270,774 $ 228,123 $ 211,429 $ 214,328 $ 214,014 Gross margin as a percent of 11.65% 10.46% 9.67% 9.66% 9.75% revenue SG&A expenses $ 211,415 $ 165,320 $ 150,288 $ 155,572 $ 150,538 SG&A expenses as a 9.09% 7.58% 6.88% 7.01% 6.86% percent of revenue Operating earnings, as $ 45,041 $ 46,663 $ 53,177 $ 51,872 $ 43,014 reported (GAAP) Acquisition-related and exit and 1,717 7,831 617 - 12,817 realignment charges Operating earnings, $ 46,758 $ 54,494 $ 53,794 $ 51,872 $ 55,831 adjusted (Non-GAAP) Operating earnings as a percent of revenue, 2.01% 2.50% 2.46% 2.34% 2.54% adjusted (Non-GAAP) Net income, as $ 24,934 $ 24,597 $ 30,113 $ 29,360 $ 23,942 reported (GAAP) Acquisition-related and exit and 1,237 6,588 375 - 7,780 realignment charges, after-tax Net income, adjusted $ 26,171 $ 31,185 $ 30,488 $ 29,360 $ 31,722 (Non-GAAP) Net income per diluted common $ 0.39 $ 0.39 $ 0.48 $ 0.46 $ 0.38 share, as reported (GAAP) Acquisition-related and exit and 0.02 0.10 - - 0.13 realignment charges Net income per diluted common $ 0.41 $ 0.49 $ 0.48 $ 0.46 $ 0.51 share, adjusted (Non-GAAP) Financing: Cash and cash $ 97,888 $ 79,667 $ 224,937 $ 213,927 $ 135,938 equivalents Total interest-bearing $ 217,591 $ 216,924 $ 213,982 $ 214,184 $ 214,556 debt Stock information: Cash dividends $ 0.22 $ 0.22 $ 0.22 $ 0.22 $ 0.20 per common share Stock price at $ 28.51 $ 29.88 $ 30.63 $ 30.41 $ 27.79 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 December 31, Twelve Months Ended December 31, 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 $ 2,197,932 94.54 % $ 2,195,890 100.00 % $ 8,731,484 98.02 % $ 8,627,912 100.00 % International 126,992 5.46 N/A N/A 176,661 1.98 N/A N/A Consolidated $ 2,324,924 100.00 % $ 2,195,890 100.00 % $ 8,908,145 100.00 % $ 8,627,912 100.00 % net revenue % of segment % of segment % of segment % of segment Operating earnings net revenue net revenue net revenue net revenue (loss): Domestic $ 51,546 2.35 % $ 55,831 2.54 % $ 212,335 2.43 % $ 216,683 2.51 % International (4,788 ) (3.77 ) % N/A N/A (5,418 ) (3.07 ) % N/A N/A Acquisition-related and exit and (1,717 ) N/A (12,817 ) N/A (10,164 ) N/A (13,168 ) N/A realignment charges Consolidated operating $ 45,041 1.94 % $ 43,014 1.96 % $ 196,753 2.21 % $ 203,515 2.36 % earnings Depreciation and amortization: Domestic $ 9,121 $ 8,656 $ 35,016 $ 34,135 International 3,299 N/A 4,588 N/A Consolidated depreciation $ 12,420 $ 8,656 $ 39,604 $ 34,135 and amortization Capital expenditures: ^(1) Domestic $ 7,364 $ 11,434 $ 34,450 $ 36,315 International 3,775 N/A 4,513 N/A Consolidated capital $ 11,139 $ 11,434 $ 38,963 $ 36,315 expenditures December December 31, 31, 2012 2011 Total assets: Domestic $ 1,723,699 $ 1,810,877 International 386,114 N/A Segment assets 2,109,813 1,810,877 Cash and cash 97,888 135,938 equivalents $ 2,207,701 $ 1,946,815 ^(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 Twelve Months Ended December 31, December 31, 2012 2011 2012 2011 Numerator: Net income $ 24,934 $ 23,942 $ 109,003 $ 115,198 Less: income allocated to (173 ) (199 ) (749 ) (1,059 ) unvested restricted shares Net income attributable to 24,761 23,743 108,254 114,139 common shareholders - basic Add: undistributed income attributable to 61 80 292 480 unvested restricted shares - basic Less: undistributed income attributable to (61 ) (80 ) (292 ) (479 ) unvested restricted shares - diluted Net income attributable to $ 24,761 $ 23,743 $ 108,254 $ 114,140 common shareholders - diluted Denominator: Weighted average shares outstanding 62,671 62,655 62,765 62,756 — basic Dilutive shares 67 129 79 168 - stock options Weighted average shares outstanding 62,738 62,784 62,844 62,924 — diluted Net income per share attributable to common shareholders: Basic $ 0.40 $ 0.38 $ 1.72 $ 1.82 Diluted $ 0.39 $ 0.38 $ 1.72 $ 1.81 Contact: Owens & Minor, Inc. Truitt 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 4th Quarter & Full-Year 2012 Financial Results
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