Owens & Minor Reports Consolidated Financial Results for 3rd Quarter 2012, Including Results from th

Owens & Minor Reports Consolidated Financial Results for 3rdQuarter 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

RICHMOND, Va.--(BUSINESS WIRE)-- 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 SolutionsSM, 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 onwww.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., (NYS: 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 expenses

165,320

152,825

Acquisition-related and exit and realignment charges

7,831

351

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 expenses

471,179

460,119

Acquisition-related and exit and realignment charges

8,448

351

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 receivable

414

1,107

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 continuing operations

170,364

108,126

Investing activities:

Acquisition, net of cash acquired

(149,910)

-

Additions to computer software and intangible assets

(19,934)

(8,035)

Additions to property and equipment

(7,890)

(16,846)

Proceeds from the sale of property and equipment

3,237

46

Cash used for investing activities of continuing operations

(174,497)

(24,835)

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 swap

-

4,005

Excess tax benefits related to share-based compensation

1,223

1,977

Proceeds from exercise of stock options

4,114

7,937

Other, net

(4,444)

(5,127)

Cash used for financing activities of continuing operations

(53,451)

(45,488)

Discontinued operations:

Operating cash flows

-

(164)

Net cash used for discontinued operations

-

(164)

Effect of exchange rate changes on cash and cash equivalents

1,313

-

Net (decrease) increase in cash and cash equivalents

(56,271)

37,639

Cash and cash equivalents at beginning of period

135,938

159,213

Cash and cash equivalents at end of period

$

79,667

$

196,852

Owens & Minor, Inc.

Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited)