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Owens & Minor Reports Third Quarter 2023 Financial Results

Top Line Expansion Led by Healthy Demand in Patient Direct and Medical Distribution

Operating Cash Flow Generation Supported $188 million in Total Debt Reduction

Owens & Minor, Inc. (NYSE: OMI) today reported financial results for the third quarter ended September 30, 2023.

Third Quarter Key Highlights:

  • Consolidated revenue of $2.59 billion
  • Net loss per common share of $(0.08) and adjusted net income per common share of $0.44
  • $188 million in total debt pay down and $117 million reduction in net debt

“Our performance in the third quarter is another strong indication that our business strategy and execution are working, and that we are beginning to realize the benefits of the Operating Model Realignment Program. Patient Direct continues to outperform the market, demonstrating the enduring strength of our go-to-market strategies and service offerings. Our Medical Distribution division again produced mid-single digit growth and continues to win new business. While the volatility of demand and pricing for PPE appears to be diminishing, we remain cautious on the long-term trajectory. The Operating Model Realignment Program not only continued to deliver economic benefits, but also enabled us to reassess how we do business every day. We are well on our way to achieving the objectives established when we launched this initiative in the first quarter,” said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor.

Pesicka continued, “Building on the progress we made in the first half of the year, the work we’ve done in the third quarter resulted in significant cash flow, enabling us to further reduce debt and increase our financial flexibility. We continue to align our balance sheet with our corporate strategy to support further investment in high growth categories and technology.”

Financial Summary (1)

 

 

 

 

 

 

 

 

($ in millions, except per share data)

 

 

3Q23

 

3Q22

 

YTD

2023

 

YTD

2022

 

 

 

 

 

 

 

 

 

Revenue

 

$2,592

 

$2,497

 

$7,678

 

$7,404

 

 

 

 

 

 

 

 

 

Operating income, GAAP

 

$23.8

 

$60.2

 

$44.5

 

$196.4

Adj. Operating Income, Non-GAAP

 

$84.2

 

$83.4

 

$193.9

 

$301.9

 

 

 

 

 

 

 

 

 

Net (loss) income, GAAP

 

$(6.4)

 

$12.5

 

$(59.1)

 

$80.4

Adj. Net Income, Non-GAAP

 

$34.1

 

$31.4

 

$51.9

 

$162.5

 

 

 

 

 

 

 

 

 

Adj. EBITDA, Non-GAAP

 

$134.7

 

$127.5

 

$356.2

 

$413.4

 

 

 

 

 

 

 

 

 

Net (loss) income per common share, GAAP

 

$(0.08)

 

$0.16

 

$(0.78)

 

$1.05

Adj. Net Income per share, Non-GAAP

 

$0.44

 

$0.41

 

$0.67

 

$2.13

(1) Reconciliations of the differences between the non-GAAP financial measures presented in this release and their most directly comparable GAAP financial measures are included in the tables below.

Results and Business Highlights

  • Consolidated revenue of $2.59 billion in the third quarter of 2023, an increase of 3.8% as compared to the third quarter of 2022
    • Patient Direct revenue of $648 million, up 9.1% compared to the third quarter of 2022
    • Products & Healthcare Services revenue of $1.94 billion, up 2% versus the prior year period with growth in the Medical Distribution division of 5% partially offset by a decline in Global Products
  • Third quarter 2023 operating income of $24 million and Adjusted Operating Income of $84 million
    • Adjusted Operating Income essentially flat with the third quarter of 2022
    • Both Patient Direct and Products & Healthcare Services delivered increases in Segment Income sequentially from the second quarter to the third quarter of 2023
  • Generated $157 million of operating cash flow in the third quarter, and $629 million year to date
    • Driven by strong working capital improvement and profitability
  • Favorable resolution of the FDA review of facial protection products, clearing the resumption of sales of Halyard face masks and respirators

2023 Financial Outlook

The Company narrowed its outlook for 2023; summarized below:

  • Revenue for 2023 to be in a range of $10.3 billion to $10.4 billion
  • Adjusted EBITDA for 2023 to be in a range of $535 million to $555 million
  • Adjusted EPS for 2023 to be in a range of $1.30 to $1.40

The Company’s outlook for 2023 contains assumptions, including current expectations regarding the impact of general economic conditions, including inflation, and the continuation of pressure on pricing and demand in our Products & Healthcare Services segment. Key assumptions supporting the Company’s 2023 financial guidance include:

  • Adjusted operating income benefit of at least $30 million from the Operating Model Realignment Program
  • Gross margin rate of ~20.5%
  • Interest expense of $157 to $160 million
  • Adjusted effective tax rate of 27% to 28%
  • Diluted weighted average shares of ~77.5 million
  • Capital expenditures of $200 to $220 million
  • Stable commodity prices
  • FX rates as of 9/30/2023

Although the Company does provide guidance for adjusted EBITDA and adjusted EPS (which are non-GAAP financial measures), it is not able to forecast the most directly comparable measures calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of the GAAP amounts are not predictable, making it impracticable for the Company to forecast. Such elements include, but are not limited to, restructuring and acquisition charges, which could have a significant and unpredictable impact on our GAAP results. As a result, no GAAP guidance or reconciliation of the Company’s adjusted EBITDA guidance or adjusted EPS guidance is provided. The outlook is based on certain assumptions that are subject to the risk factors discussed in the Company’s filings with the SEC.

Investor Conference Call for Third Quarter 2023 Financial Results

Owens & Minor executives will host a conference call for investors and analysts at 8:00 a.m. ET on the same day. Participants may access the call via the toll-free dial-in number at 1-888-300-2035, or the toll dial-in number at 1-646-517-7437. The conference ID access code is 1058917.

All interested stakeholders are encouraged to access the simultaneous live webcast by visiting the investor relations page of the Owens & Minor website available at investors.owens-minor.com/events-and-presentations/. A replay of the webcast can be accessed following the presentation at the link provided above.

Safe Harbor

This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the SEC's Fair Disclosure Regulation. This release contains certain ''forward-looking'' statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the statements in this release regarding our future prospects and performance, including our expectations with respect to our 2023 financial performance, our Operating Model Realignment Program and other cost-saving initiatives, future indebtedness and growth, industry trends, as well as statements related to our expectations regarding the performance of its business, including the results of our Operating Model Realignment Program and our ability to address macro and market conditions. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. Investors should refer to Owens & Minor’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC including the sections captioned “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with or furnished to the SEC, for a discussion of certain known risk factors that could cause the Company’s actual results to differ materially from its current estimates. These filings are available at www.owens-minor.com. Given these risks and uncertainties, Owens & Minor can give no assurance that any forward-looking statements will, in fact, transpire and, therefore, cautions investors not to place undue reliance on them. Owens & Minor specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

About Owens & Minor

Owens & Minor, Inc. (NYSE: OMI) is a Fortune 500 global healthcare solutions company integrating product manufacturing and delivery, home health supply and perioperative services to support care through the hospital and into the home. Owens & Minor drives visibility, control and efficiency for patients, providers and healthcare professionals across the supply chain with proprietary technology and solutions, an extensive product portfolio, an Americas-based manufacturing footprint for personal protective equipment and surgical products, as well as a robust portfolio of products and services for patients managing chronic and acute conditions in the home setting. Operating continuously since 1882 from its headquarters in Richmond, Va., Owens & Minor is a 140-year-old company powered by more than 20,000 global teammates. Learn more at https://www.owens-minor.com, follow @Owens_Minor on Twitter and connect on LinkedIn at www.linkedin.com/company/owens-&-minor.

Owens & Minor, Inc.

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

 

2023

 

2022

Net revenue

 

$

2,591,742

 

 

$

2,497,401

 

Cost of goods sold

 

 

2,053,244

 

 

 

1,984,122

 

Gross margin

 

 

538,498

 

 

 

513,279

 

Distribution, selling and administrative expenses

 

 

452,583

 

 

 

430,957

 

Acquisition-related charges and intangible amortization

 

 

30,217

 

 

 

21,217

 

Exit and realignment charges

 

 

30,180

 

 

 

1,983

 

Other operating expense (income), net

 

 

1,677

 

 

 

(1,125

)

Operating income

 

 

23,841

 

 

 

60,247

 

Interest expense, net

 

 

38,127

 

 

 

39,869

 

Other (income) expense, net

 

 

(3,302

)

 

 

783

 

(Loss) income before income taxes

 

 

(10,984

)

 

 

19,595

 

Income tax (benefit) provision

 

 

(4,558

)

 

 

7,098

 

Net (loss) income

 

$

(6,426

)

 

$

12,497

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.17

 

Diluted

 

$

(0.08

)

 

$

0.16

 

Owens & Minor, Inc.

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except per share data)

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

Net revenue

 

$

7,677,817

 

 

$

7,404,368

 

Cost of goods sold

 

 

6,122,579

 

 

 

5,985,136

 

Gross margin

 

 

1,555,238

 

 

 

1,419,232

 

Distribution, selling and administrative expenses

 

 

1,356,334

 

 

 

1,122,353

 

Acquisition-related charges and intangible amortization

 

 

74,609

 

 

 

100,628

 

Exit and realignment charges

 

 

74,817

 

 

 

4,879

 

Other operating expense (income), net

 

 

4,991

 

 

 

(5,020

)

Operating income

 

 

44,487

 

 

 

196,392

 

Interest expense, net

 

 

121,053

 

 

 

87,727

 

Other (income) expense, net

 

 

(843

)

 

 

2,347

 

(Loss) income before income taxes

 

 

(75,723

)

 

 

106,318

 

Income tax (benefit) provision

 

 

(16,638

)

 

 

25,937

 

Net (loss) income

 

$

(59,085

)

 

$

80,381

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

Basic

 

$

(0.78

)

 

$

1.08

 

Diluted

 

$

(0.78

)

 

$

1.05

 

Owens & Minor, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(dollars in thousands)

 

 

 

September 30,

 

December 31,

 

 

2023

 

2022

Assets

 

 

 

 

Current assets

 

 

 

 

Cash and cash equivalents

 

$

215,191

 

$

69,467

Accounts receivable, net of allowances of $9,196 and $9,063

 

 

682,682

 

 

763,497

Merchandise inventories

 

 

1,084,350

 

 

1,333,585

Other current assets

 

 

148,046

 

 

128,636

Total current assets

 

 

2,130,269

 

 

2,295,185

Property and equipment, net of accumulated depreciation of $532,399 and $450,286

 

 

540,419

 

 

578,269

Operating lease assets

 

 

300,264

 

 

280,665

Goodwill

 

 

1,635,010

 

 

1,636,705

Intangible assets, net

 

 

381,557

 

 

445,042

Other assets, net

 

 

136,544

 

 

150,417

Total assets

 

$

5,124,063

 

$

5,386,283

Liabilities and equity

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

 

$

1,182,408

 

$

1,147,414

Accrued payroll and related liabilities

 

 

106,194

 

 

93,296

Other current liabilities

 

 

443,579

 

 

325,756

Total current liabilities

 

 

1,732,181

 

 

1,566,466

Long-term debt, excluding current portion

 

 

2,113,602

 

 

2,482,968

Operating lease liabilities, excluding current portion of $85,149 and $76,805

 

 

225,208

 

 

215,469

Deferred income taxes

 

 

45,616

 

 

60,833

Other liabilities

 

 

120,596

 

 

114,943

Total liabilities

 

 

4,237,203

 

 

4,440,679

Total equity

 

 

886,860

 

 

945,604

Total liabilities and equity

 

$

5,124,063

 

$

5,386,283

Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

 

 

 

Three Months Ended

September 30,

 

 

2023

 

2022

Operating activities:

 

 

 

 

Net (loss) income

 

$

(6,426

)

 

$

12,497

 

Adjustments to reconcile net (loss) income to cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

73,652

 

 

 

58,151

 

Share-based compensation expense

 

 

5,742

 

 

 

4,555

 

Provision for losses on accounts receivable

 

 

413

 

 

 

777

 

Gain on extinguishment of debt

 

 

(5,222

)

 

 

 

Deferred income tax (benefit) provision

 

 

(9,557

)

 

 

1,390

 

Changes in operating lease right-of-use assets and lease liabilities

 

 

1,560

 

 

 

316

 

Gain on sale and dispositions of property and equipment

 

 

(7,899

)

 

 

(17,228

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

 

(13,006

)

 

 

(8,858

)

Merchandise inventories

 

 

81,406

 

 

 

17,615

 

Accounts payable

 

 

(5,821

)

 

 

18,075

 

Net change in other assets and liabilities

 

 

39,913

 

 

 

(21,478

)

Other, net

 

 

2,680

 

 

 

2,709

 

Cash provided by operating activities

 

 

157,435

 

 

 

68,521

 

Investing activities:

 

 

 

 

Additions to property and equipment

 

 

(47,728

)

 

 

(47,039

)

Additions to computer software

 

 

(2,860

)

 

 

(2,410

)

Proceeds from sale of property and equipment

 

 

17,916

 

 

 

23,874

 

Other, net

 

 

 

 

 

(831

)

Cash used for investing activities

 

 

(32,672

)

 

 

(26,406

)

Financing activities:

 

 

 

 

Borrowings under amended Receivables Financing Agreement

 

 

127,800

 

 

 

349,900

 

Repayments under amended Receivables Financing Agreement

 

 

(127,800

)

 

 

(367,900

)

Repayments of debt

 

 

(191,888

)

 

 

(1,500

)

Financing costs paid

 

 

 

 

 

(1,123

)

Other, net

 

 

8,893

 

 

 

575

 

Cash used for financing activities

 

 

(182,995

)

 

 

(20,048

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(711

)

 

 

(1,888

)

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(58,943

)

 

 

20,179

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

309,103

 

 

 

73,029

 

Cash, cash equivalents and restricted cash at end of period(1)

 

$

250,160

 

 

$

93,208

 

Supplemental disclosure of cash flow information:

 

 

 

 

Income taxes paid, net

 

$

3,708

 

 

$

7,786

 

Interest paid

 

$

22,454

 

 

$

29,472

 

Noncash investing activity:

 

 

 

 

 

Unpaid purchases of property and equipment and computer software at end of period

 

$

60,870

 

 

$

63,158

 

(1) Restricted cash, as of September 30, 2023 and June 30, 2023 was $35.0 million and $22.8 million, includes amounts held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5. Restricted cash as of September 30, 2023 and June 30, 2023 also includes $18.6 million and $6.4 million of restricted cash deposits received under the Master Receivables Purchase Agreement to be remitted to a third-party financial institution.

Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

Operating activities:

 

 

 

 

Net (loss) income

 

$

(59,085

)

 

$

80,381

 

Adjustments to reconcile net (loss) income to cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

216,640

 

 

 

155,438

 

Share-based compensation expense

 

 

17,417

 

 

 

15,765

 

(Benefit) provision for losses on accounts receivable

 

 

(487

)

 

 

5,289

 

Gain on extinguishment of debt

 

 

(4,379

)

 

 

 

Deferred income tax (benefit) provision

 

 

(16,315

)

 

 

2,991

 

Changes in operating lease right-of-use assets and lease liabilities

 

 

(1,517

)

 

 

922

 

Gain on sale and dispositions of property and equipment

 

 

(26,462

)

 

 

(17,002

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Accounts receivable

 

 

77,197

 

 

 

7,417

 

Merchandise inventories

 

 

247,057

 

 

 

(6,823

)

Accounts payable

 

 

46,338

 

 

 

30,424

 

Net change in other assets and liabilities

 

 

122,867

 

 

 

(45,423

)

Other, net

 

 

9,674

 

 

 

8,666

 

Cash provided by operating activities

 

 

628,945

 

 

 

238,045

 

Investing activities:

 

 

 

 

Acquisition, net of cash acquired

 

 

 

 

 

(1,684,607

)

Additions to property and equipment

 

 

(140,478

)

 

 

(109,275

)

Additions to computer software

 

 

(11,089

)

 

 

(5,873

)

Proceeds from sale of property and equipment

 

 

53,645

 

 

 

29,720

 

Other, net

 

 

(418

)

 

 

(1,670

)

Cash used for investing activities

 

 

(98,340

)

 

 

(1,771,705

)

Financing activities:

 

 

 

 

Borrowings under amended Receivables Financing Agreement

 

 

476,000

 

 

 

697,700

 

Repayments under amended Receivables Financing Agreement

 

 

(572,000

)

 

 

(770,700

)

Repayments of debt

 

 

(270,189

)

 

 

(3,000

)

Proceeds from issuance of debt

 

 

 

 

 

1,691,000

 

Borrowings under revolving credit facility, net and Receivables Financing Agreement

 

 

 

 

 

30,000

 

Financing costs paid

 

 

 

 

 

(42,602

)

Other, net

 

 

74

 

 

 

(41,813

)

Cash (used for) provided by financing activities

 

 

(366,115

)

 

 

1,560,585

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(515

)

 

 

(5,752

)

Net increase in cash, cash equivalents and restricted cash

 

 

163,975

 

 

 

21,173

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

86,185

 

 

 

72,035

 

Cash, cash equivalents and restricted cash at end of period(1)

 

$

250,160

 

 

$

93,208

 

Supplemental disclosure of cash flow information:

 

 

 

 

Income taxes (received) paid, net

 

$

(6,798

)

 

$

33,568

 

Interest paid

 

$

101,079

 

 

$

61,889

 

Noncash investing activity:

 

 

 

 

Unpaid purchases of property and equipment and computer software at end of period

 

$

60,870

 

 

$

63,158

 

(1) Restricted cash, as of September 30, 2023 and December 31, 2022 was $35.0 million and $16.7 million, includes amounts held in an escrow account as required by the CMS in conjunction with the BPCI initiatives related to wind-down costs of Fusion5. Restricted cash as of September 30, 2023 also includes $18.6 million of restricted cash deposits received under the Master Receivables Purchase Agreement to be remitted to a third-party financial institution.

Owens & Minor, Inc.

Summary Segment Information (unaudited)

(dollars in thousands)

   

 

 

Three Months Ended September 30,

 

 

2023

 

2022

 

 

 

 

% of

 

 

 

% of

 

 

 

 

consolidated

 

 

 

consolidated

 

 

Amount

 

net revenue

 

Amount

 

net revenue

Net revenue:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

1,943,467

 

 

74.99

%

 

$

1,903,356

 

 

76.21

%

Patient Direct

 

 

648,275

 

 

25.01

%

 

 

594,045

 

 

23.79

%

Consolidated net revenue

 

$

2,591,742

 

 

100.00

%

 

$

2,497,401

 

 

100.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

% of segment

 

 

 

% of segment

Operating income:

 

 

 

net revenue

 

 

 

net revenue

Products & Healthcare Services

 

$

19,803

 

 

1.02

%

 

$

23,781

 

 

1.25

%

Patient Direct

 

 

64,435

 

 

9.94

%

 

 

59,666

 

 

10.04

%

Acquisition-related charges and intangible amortization

 

 

(30,217

)

 

 

 

 

(21,217

)

 

 

Exit and realignment charges

 

 

(30,180

)

 

 

 

 

(1,983

)

 

 

Consolidated operating income

 

$

23,841

 

 

0.92

%

 

$

60,247

 

 

2.41

%

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

20,021

 

 

 

 

$

19,121

 

 

 

Patient Direct

 

 

53,631

 

 

 

 

 

39,030

 

 

 

Consolidated depreciation and amortization

 

$

73,652

 

 

 

 

$

58,151

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

5,023

 

 

 

 

$

9,743

 

 

 

Patient Direct

 

 

45,565

 

 

 

 

 

39,706

 

 

 

Consolidated capital expenditures

 

$

50,588

 

 

 

 

$

49,449

 

 

 

Owens & Minor, Inc.

Summary Segment Information (unaudited)

(dollars in thousands)

 

 

 

Nine Months Ended September 30,

 

 

2023

 

2022

 

 

 

 

% of

 

 

 

% of

 

 

 

 

consolidated

 

 

 

consolidated

 

 

Amount

 

net revenue

 

Amount

 

net revenue

Net revenue:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

5,789,679

 

 

75.41

%

 

$

5,964,784

 

 

80.56

%

Patient Direct

 

 

1,888,138

 

 

24.59

%

 

 

1,439,584

 

 

19.44

%

Consolidated net revenue

 

$

7,677,817

 

 

100.00

%

 

$

7,404,368

 

 

100.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

% of segment

 

 

 

% of segment

Operating income:

 

 

 

net revenue

 

 

 

net revenue

Products & Healthcare Services

 

$

24,564

 

 

0.42

%

 

$

174,108

 

 

2.92

%

Patient Direct

 

 

169,349

 

 

8.97

%

 

 

127,791

 

 

8.88

%

Acquisition-related charges and intangible amortization

 

 

(74,609

)

 

 

 

 

(100,628

)

 

 

Exit and realignment charges

 

 

(74,817

)

 

 

 

 

(4,879

)

 

 

Consolidated operating income

 

$

44,487

 

 

0.58

%

 

$

196,392

 

 

2.65

%

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

57,360

 

 

 

 

$

57,325

 

 

 

Patient Direct

 

 

159,280

 

 

 

 

 

98,113

 

 

 

Consolidated depreciation and amortization

 

$

216,640

 

 

 

 

$

155,438

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

17,957

 

 

 

 

$

38,804

 

 

 

Patient Direct

 

 

133,610

 

 

 

 

 

76,344

 

 

 

Consolidated capital expenditures

 

$

151,567

 

 

 

 

$

115,148

 

 

 

Owens & Minor, Inc.

Net (Loss) Income Per Common Share (unaudited)

(dollars in thousands, except per share data)

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

Net (loss) income

 

$

(6,426

)

 

$

12,497

 

$

(59,085

)

 

$

80,381

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

76,203

 

 

 

74,905

 

 

75,691

 

 

 

74,376

Dilutive shares

 

 

 

 

 

1,510

 

 

 

 

 

1,835

Weighted average shares outstanding - diluted

 

 

76,203

 

 

 

76,415

 

 

75,691

 

 

 

76,211

 

 

 

 

 

 

 

 

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

$

0.17

 

$

(0.78

)

 

$

1.08

Diluted

 

$

(0.08

)

 

$

0.16

 

$

(0.78

)

 

$

1.05

Share-based awards for the three and nine months ended September 30, 2023 of approximately 1.5 million and 1.6 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Owens & Minor, Inc.

GAAP/Non-GAAP Reconciliations (unaudited)

(dollars in thousands, except per share data)

 

The following table provides a reconciliation of reported operating income, net (loss) income and net (loss) income per share to non-GAAP measures used by management.

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

Operating income, as reported (GAAP)

 

$

23,841

 

 

$

60,247

 

 

$

44,487

 

 

$

196,392

 

Acquisition-related charges and intangible amortization (1)

 

 

30,217

 

 

 

21,217

 

 

 

74,609

 

 

 

100,628

 

Exit and realignment charges (2)

 

 

30,180

 

 

 

1,983

 

 

 

74,817

 

 

 

4,879

 

Operating income, adjusted (non-GAAP) (Adjusted Operating Income)

 

$

84,238

 

 

$

83,447

 

 

$

193,913

 

 

$

301,899

 

Operating income as a percent of net revenue (GAAP)

 

 

0.92

%

 

 

2.41

%

 

 

0.58

%

 

 

2.65

%

Adjusted operating income as a percent of net revenue (non-GAAP)

 

 

3.25

%

 

 

3.34

%

 

 

2.53

%

 

 

4.08

%

 

 

 

 

 

 

 

 

 

Net (loss) income, as reported (GAAP)

 

$

(6,426

)

 

$

12,497

 

 

$

(59,085

)

 

$

80,381

 

Pre-tax adjustments:

 

 

 

 

 

 

 

 

Acquisition-related charges and intangible amortization (1)

 

 

30,217

 

 

 

21,217

 

 

 

74,609

 

 

 

100,628

 

Exit and realignment charges (2)

 

 

30,180

 

 

 

1,983

 

 

 

74,817

 

 

 

4,879

 

Other (3)

 

 

(4,657

)

 

 

525

 

 

 

(2,685

)

 

 

1,574

 

Income tax benefit on pre-tax adjustments (4)

 

 

(15,180

)

 

 

(4,776

)

 

 

(35,711

)

 

 

(25,002

)

Net income, adjusted (non-GAAP) (Adjusted Net Income)

 

$

34,134

 

 

$

31,446

 

 

$

51,945

 

 

$

162,460

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share, as reported (GAAP)

 

$

(0.08

)

 

$

0.16

 

 

$

(0.78

)

 

$

1.05

 

After-tax adjustments:

 

 

 

 

 

 

 

 

Acquisition-related charges and intangible amortization (1)

 

 

0.28

 

 

 

0.22

 

 

 

0.74

 

 

 

1.01

 

Exit and realignment charges (2)

 

 

0.28

 

 

 

0.02

 

 

 

0.74

 

 

 

0.05

 

Other (3)

 

 

(0.04

)

 

 

0.01

 

 

 

(0.03

)

 

 

0.02

 

Net income per common share, adjusted (non-GAAP) (Adjusted EPS)

 

$

0.44

 

 

$

0.41

 

 

$

0.67

 

 

$

2.13

 

Owens & Minor, Inc.

GAAP/Non-GAAP Reconciliations (unaudited), continued

(dollars in thousands)

 

The following tables provide reconciliations of net (loss) income and total debt to non-GAAP measures used by management.

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

Net (loss) income, as reported (GAAP)

 

$

(6,426

)

 

$

12,497

 

 

$

(59,085

)

 

$

80,381

 

Income tax (benefit) provision

 

 

(4,558

)

 

 

7,098

 

 

 

(16,638

)

 

 

25,937

 

Interest expense, net

 

 

38,127

 

 

 

39,869

 

 

 

121,053

 

 

 

87,727

 

Acquisition-related charges and intangible amortization (1)

 

 

30,217

 

 

 

21,217

 

 

 

74,609

 

 

 

100,628

 

Exit and realignment charges (2)

 

 

30,180

 

 

 

1,983

 

 

 

74,817

 

 

 

4,879

 

Other depreciation and amortization (5)

 

 

50,909

 

 

 

43,849

 

 

 

151,635

 

 

 

99,979

 

Stock compensation (6)

 

 

4,616

 

 

 

5,374

 

 

 

15,761

 

 

 

15,593

 

LIFO credits (7)

 

 

(3,660

)

 

 

(4,957

)

 

 

(3,253

)

 

 

(3,331

)

Other (3)

 

 

(4,657

)

 

 

525

 

 

 

(2,685

)

 

 

1,574

 

Adjusted EBITDA (non-GAAP)

 

$

134,748

 

 

$

127,455

 

 

$

356,214

 

 

$

413,367

 

 

 

September 30,

 

 

2023

Total debt, as reported (GAAP)

 

$

2,146,037

 

Cash and cash equivalents

 

 

(215,191

)

Net debt (non-GAAP)

 

$

1,930,846

 

Owens & Minor, Inc.

GAAP/Non-GAAP Reconciliations (unaudited), continued

The following items have been excluded in our non-GAAP financial measures:

(1) Acquisition-related charges and intangible amortization includes acquisition-related charges of $9.4 million and $6.9 million for the three months ended September 30, 2023 and 2022 and $11.9 million and $45.2 million for the nine months ended September 30, 2023 and 2022, as well as amortization of intangible assets established during acquisition method of accounting for business combinations. Acquisition-related charges consist primarily of one-time costs related to the Apria Acquisition, including transaction costs necessary to consummate the acquisition, which consisted of investment banking advisory fees and legal fees, director and officer tail insurance expense, severance and retention bonuses, and professional fees. These amounts are highly dependent on the size and frequency of acquisitions and are being excluded to allow for a more consistent comparison with forecasted, current and historical results.

(2) During the three and nine months ended September 30, 2023 exit and realignment charges were $30.2 million and $74.8 million. These charges primarily related to our (1) Operating Model Realignment Program of $24.5 million and $63.9 million, including professional fees, severance and other costs to streamline functions and processes, (2) IT restructuring charges such as converting to common IT systems of $3.3 million and $6.7 million and, (3) other costs associated with strategic initiatives of $2.4 million and $4.1 million for the three and nine months ended September 30, 2023. Exit and realignment charges were $2.0 million and $4.9 million for the three and nine months ended September 30, 2022 and consisted primarily of severance and other charges associated with the reorganization of our segments. These costs are not normal recurring, cash operating expenses necessary for the Company to operate its business on an ongoing basis.

(3) For the three and nine months ended September 30, 2023 other includes gain on extinguishment of debt of $5.2 million and $4.4 million associated with the early retirement of indebtedness of $195 million and $268 million. Additionally, for the three and nine months ended September 30, 2023 and 2022, other includes interest costs and net actuarial losses related to our frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S.).

(4) These charges have been tax effected by determining the income tax rate depending on the amount of charges incurred in different tax jurisdictions and the deductibility of those charges for income tax purposes.

(5) Other depreciation and amortization relates to property and equipment and capitalized computer software, excluding such amounts captured within exit and realignment charges or acquisition-related charges.

(6) Stock compensation includes share-based compensation expense related to our share-based compensation plans, excluding such amounts captured within exit and realignment charges or acquisition-related charges.

(7) LIFO credits includes non-cash adjustments to merchandise inventories valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S. within our Products & Healthcare Services segment.

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 substitutes 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.

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