Owens & Minor Reports Consolidated 4 th Quarter & Full-Year 2012 Financial Results
OMI's results were highlighted by strong asset management and operating cash flow
RICHMOND, Va.--(BUSINESS WIRE)-- 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.
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.
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.
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., (NYS: 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,|
|Cost of goods sold||2,054,150||1,981,876|
|Selling, general and administrative expenses||211,415||150,538|
|Acquisition-related and exit and realignment charges||1,717||12,817|
|Depreciation and amortization||12,420||8,656|
|Other operating expense (income), net||181||(1,011||)|
|Interest expense, net||3,422||3,519|
|Income before income taxes||41,619||39,495|
|Income tax provision||16,685||15,553|
|Net income per common share:|
|Twelve Months Ended December 31,|
|Cost of goods sold||7,983,491||7,770,375|
|Selling, general and administrative expenses||682,595||610,657|
|Acquisition-related and exit and realignment charges||10,164||13,168|
|Depreciation and amortization||39,604||34,135|
|Other operating income, net||(4,462||)||(3,938||)|
|Interest expense, net||13,397||13,682|
|Income before income taxes||183,356||189,833|
|Income tax provision||74,353||74,635|
|Net income per common share:|
|Owens & Minor, Inc.|
|Condensed Consolidated Balance Sheets (unaudited)|
|December 31,||December 31,|
|Cash and cash equivalents||$||97,888||$||135,938|
|Accounts and notes receivable, net||553,502||506,758|
|Other current assets||213,748||76,763|
|Total current assets||1,628,894||1,525,825|
|Property and equipment, net||191,841||108,061|
|Intangible assets, net||42,313||22,142|
|Other assets, net||69,769||42,289|
|Liabilities and equity|
|Accrued payroll and related liabilities||25,468||20,668|
|Deferred income taxes||40,758||42,296|
|Other current liabilities||254,924||93,608|
|Total current liabilities||924,287||732,365|
|Long-term debt, excluding current portion||215,383||212,681|
|Deferred income taxes||30,921||21,894|
|Total liabilities and equity||$||2,207,701||$||1,946,815|