8-K
ACCENDRA HEALTH INC/VA/ (ACH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 2, 2022
Owens & Minor, Inc.
(Exact name of registrant as specified in its charter)
| Virginia | 001-09810 | 54-1701843 | |
|---|---|---|---|
| (State or other jurisdiction of<br><br>incorporation or organization) | (Commission<br>File Number) | (I.R.S. Employer<br><br>Identification No.) | |
| 9120 Lockwood Boulevard, | Mechanicsville | Virginia | 23116 |
| (Address of principal executive offices) | (Zip Code) | ||
| Post Office Box 27626,<br><br>Richmond, Virginia | 23261-7626 | ||
| (Mailing address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (804) 723-7000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $2 par value per share | OMI | New York Stock Exchange |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
On November 2, 2022, Owens & Minor, Inc. (the “Company”) issued a press release regarding its financial results for the third quarter and nine months ended September 30, 2022. The Company is furnishing the press release attached hereto as Exhibit 99.1 pursuant to Item 2.02 of Form 8-K. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
| Item 7.01 | Regulation FD Disclosure. |
|---|
On November 2, 2022, the Company posted an earnings presentation on the Investor Relations section of its website. The Company is furnishing the earnings presentation attached hereto as Exhibit 99.2 pursuant to Item 7.01 of Form 8-K. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 7.01, including Exhibit 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| 99.1 | Press Release issued by the Company on November 2, 2022 announcing third quarter results (furnished pursuant to Item 2.02) |
|---|---|
| 99.2 | Earnings Presentation dated November 2, 2022 (furnished pursuant to Item 7.01) |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| OWENS & MINOR, INC. | |||
|---|---|---|---|
| Date: November 2, 2022 | By: | /s/ Nicholas J. Pace | |
| Name: | Nicholas J. Pace | ||
| Title: | Executive Vice President, General Counsel and Corporate Secretary |
Document
Owens & Minor Reports Third Quarter 2022 Financial Results
Adjusted EBITDA of $127 million, margin up 140 basis points
Patient Direct Revenue Growth of 142%, or 11.4% on a Pro Forma Basis for the Apria Acquisition
Generated $69 million of cash from operations in the quarter
RICHMOND, VA – November 2, 2022 – Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the third quarter ended September 30, 2022, as summarized in the table below.
“In the third quarter we saw greater than expected macro-economic and industry-related forces that continue to challenge our Products & Healthcare Services segment and as the quarter progressed, we saw more of our acute care customers delay reorders utilizing their stockpiled items,” said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor. “To better address these challenges and capitalize on opportunities, we are accelerating execution of key initiatives to improve the segment’s performance.”
Pesicka added, “I am very pleased with the performance and operational execution throughout all aspects of the Patient Direct Segment, including the capture of increased CPAP opportunities, and overachievement of acquisition synergies. This exceptional performance was supported by deep adoption of the Owens & Minor Business System and led to nearly 100 basis point margin expansion sequentially and year-over-year revenue growth of 11.4% on a pro forma basis for the Apria acquisition.”
“Overall, our core business fundamentals remain strong, we have the right strategy, and our portfolio is well positioned to capitalize on opportunities as our execution and market conditions improve,” Pesicka concluded.
| Financial Summary (1) | ||||
|---|---|---|---|---|
| ($ in millions, except per share data) | 3Q22 | 3Q21 | YTD<br><br>2022 | YTD<br><br>2021 |
| Revenue | $2,497 | $2,502 | $7,404 | $7,318 |
| Operating income, GAAP | $60.2 | $62.9 | $196.4 | $306.5 |
| Adj. Operating Income, Non-GAAP | $83.4 | $79.3 | $301.9 | $357.5 |
| Net income, GAAP | $12.5 | $44.1 | $80.4 | $179.6 |
| Adj. Net Income, Non-GAAP | $31.4 | $56.5 | $162.5 | $248.0 |
| Adj. EBITDA, Non-GAAP | $127.0 | $91.7 | $401.1 | $394.9 |
| Net income per common share, GAAP | $0.16 | $0.58 | $1.05 | $2.38 |
| Adj. Net Income per share, Non-GAAP(2) | $0.41 | $0.74 | $2.13 | $3.29 |
(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.
(2) Adjusted Net Income per share, Non-GAAP for Q3 2022 was unfavorably impacted as compared to prior year by foreign currency translation in the amount of $0.04 and $0.13 for the 2022 year-to-date period.
Q3 Results & Highlights
•Consolidated revenue of $2.5 billion
◦Patient Direct revenue of $594 million, up 142%, or 11.4% on a pro forma basis for the Apria acquisition
◦Unfavorable FX of $12 million
•Adjusted EBITDA of $127 million, up $35 million, with margin expansion of 140 basis points to 5.1%
◦Unfavorable FX of $5 million
•Balance Sheet and Cash Flow
◦Generated $69 million of cash from operations in the quarter and $238 million year-to-date
◦Free cash flow (adjusted EBITDA less capital expenditures, net) of $84 million and $299 million year-to-date
•Business Highlights
◦Awarded Vizient’s Medical/Surgical Supplier Excellence Award and its Committed Program Excellence Award
◦Expanded partnership and strategic collaboration with Allina Health to strengthen supply chain resiliency
◦Hired Snehashish Sarkar as our new Chief Information Officer. Snehashish was formerly SVP, CIO & Chief Transformation Officer of Varian, a Siemens Healthcare company.
Financial Outlook
The Company’s outlook for 2022 is summarized below:
•Revenue for 2022 to be in a range of $9.8 billion to $10.0 billion, reflecting:
◦Contribution in excess of $0.9 billion from Apria
•Adjusted EBITDA for 2022 to be in a range of $527 million to $537 million
•Adjusted EPS for 2022 to be in a range of $2.50 to $2.60
Investor Conference Call for Third Quarter 2022 Financial Results
Owens & Minor executives will host a conference call at 8:30 am. ET today, November 2, 2022, to discuss the results. The live webcast will be available on Owens & Minor’s Investor Relations website in the Events & Presentations section. Conference call participants are required to register in advance to obtain call-in information prior to the start of the call.
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 2022 financial performance, the Apria transaction, including related synergies and the expected performance of the Apria business, as well as statements related to the Company’s expectations regarding the performance of its business including its 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, 2021, 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 and an Americas-based manufacturing footprint for personal protective equipment (PPE) 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.
CONTACT:
Alex Jost, CPA
Director, Investor Relations
Investor.Relations@owens-minor.com
SOURCE: Owens & Minor, Inc.
Owens & Minor, Inc.
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share data)
| Three Months Ended<br> September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Net revenue | $ | 2,497,401 | $ | 2,502,175 |
| Cost of goods sold | 1,984,122 | 2,173,336 | ||
| Gross margin | 513,279 | 328,839 | ||
| Distribution, selling and administrative expenses | 445,259 | 262,457 | ||
| Acquisition-related and exit and realignment charges | 8,898 | 6,380 | ||
| Other operating income, net | (1,125) | (2,873) | ||
| Operating income | 60,247 | 62,875 | ||
| Interest expense, net | 39,869 | 11,572 | ||
| Other expense, net | 783 | 799 | ||
| Income before income taxes | 19,595 | 50,504 | ||
| Income tax provision | 7,098 | 6,375 | ||
| Net income | $ | 12,497 | $ | 44,129 |
| Net income per common share: | ||||
| Basic | $ | 0.17 | $ | 0.60 |
| Diluted | $ | 0.16 | $ | 0.58 |
Owens & Minor, Inc.
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share data)
| Nine Months Ended<br> September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Net revenue | $ | 7,404,368 | $ | 7,318,169 |
| Cost of goods sold | 5,985,136 | 6,146,511 | ||
| Gross margin | 1,419,232 | 1,171,658 | ||
| Distribution, selling and administrative expenses | 1,177,812 | 849,255 | ||
| Acquisition-related and exit and realignment charges | 50,048 | 20,967 | ||
| Other operating income, net | (5,020) | (5,016) | ||
| Operating income | 196,392 | 306,452 | ||
| Interest expense, net | 87,727 | 36,784 | ||
| Loss on extinguishment of debt | — | 40,433 | ||
| Other expense, net | 2,347 | 2,397 | ||
| Income before income tax | 106,318 | 226,838 | ||
| Income tax provision | 25,937 | 47,224 | ||
| Net income | $ | 80,381 | $ | 179,614 |
| Net income per common share: | ||||
| Basic | $ | 1.08 | $ | 2.47 |
| Diluted | $ | 1.05 | $ | 2.38 |
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands)
| September 30, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 76,770 | $ | 55,712 |
| Accounts receivable, net of allowances of $11,016 and $18,003 | 751,970 | 681,564 | ||
| Merchandise inventories | 1,508,443 | 1,495,972 | ||
| Other current assets | 104,734 | 88,564 | ||
| Total current assets | 2,441,917 | 2,321,812 | ||
| Property and equipment, net of accumulated depreciation of $414,920 and $334,500 | 575,799 | 317,235 | ||
| Operating lease assets | 275,833 | 194,006 | ||
| Goodwill | 1,631,336 | 390,185 | ||
| Intangible assets, net | 464,077 | 209,745 | ||
| Other assets, net | 149,620 | 103,568 | ||
| Total assets | $ | 5,538,582 | $ | 3,536,551 |
| Liabilities and equity | ||||
| Current liabilities | ||||
| Accounts payable | $ | 1,156,230 | $ | 1,001,959 |
| Accrued payroll and related liabilities | 106,618 | 115,858 | ||
| Other current liabilities | 339,526 | 226,204 | ||
| Total current liabilities | 1,602,374 | 1,344,021 | ||
| Long-term debt, excluding current portion | 2,547,059 | 947,540 | ||
| Operating lease liabilities, excluding current portion | 215,022 | 162,241 | ||
| Deferred income taxes | 83,473 | 35,310 | ||
| Other liabilities | 123,817 | 108,938 | ||
| Total liabilities | 4,571,745 | 2,598,050 | ||
| Total equity | 966,837 | 938,501 | ||
| Total liabilities and equity | $ | 5,538,582 | $ | 3,536,551 |
Owens & Minor, Inc.
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
| Nine Months Ended September 30, | ||||
|---|---|---|---|---|
| 2022 | 2021 | |||
| Operating activities: | ||||
| Net income | $ | 80,381 | $ | 179,614 |
| Adjustments to reconcile net income to cash provided by operating activities: | ||||
| Depreciation and amortization | 155,438 | 68,142 | ||
| Share-based compensation expense | 15,765 | 19,078 | ||
| Loss on extinguishment of debt | — | 40,433 | ||
| Provision for losses on accounts receivable | 5,289 | 19,270 | ||
| Deferred income tax expense (benefit) | 2,991 | (18,286) | ||
| Changes in operating lease right-of-use assets and lease liabilities | 922 | 1,190 | ||
| Gain on sale and dispositions of property and equipment | (17,002) | — | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | 7,417 | (84,381) | ||
| Merchandise inventories | (6,823) | (284,188) | ||
| Accounts payable | 30,424 | 120,821 | ||
| Net change in other assets and liabilities | (45,423) | (8,341) | ||
| Other, net | 8,666 | 20,484 | ||
| Cash provided by operating activities | 238,045 | 73,836 | ||
| Investing activities: | ||||
| Acquisition, net of cash acquired | (1,684,607) | — | ||
| Additions to property and equipment | (109,275) | (26,446) | ||
| Additions to computer software | (5,873) | (6,179) | ||
| Proceeds from sale of property and equipment | 29,720 | 41 | ||
| Other, net | (1,670) | — | ||
| Cash used for investing activities | (1,771,705) | (32,584) | ||
| Financing activities: | ||||
| Proceeds from issuance of debt | 1,691,000 | 574,900 | ||
| Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program | 30,000 | (90,900) | ||
| Repayments of debt | (3,000) | (553,140) | ||
| Borrowings under amended accounts receivable securitization program | 697,700 | — | ||
| Repayments under amended accounts receivable securitization program | (770,700) | — | ||
| Financing costs paid | (42,602) | (13,912) | ||
| Cash dividends paid | — | (548) | ||
| Payment for termination of interest rate swaps | — | (15,434) | ||
| Other, net | (41,813) | (18,188) | ||
| Cash provided by (used for) financing activities | 1,560,585 | (117,222) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (5,752) | (2,454) | ||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 21,173 | (78,424) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 72,035 | 134,506 | ||
| Cash, cash equivalents and restricted cash at end of period (1) | $ | 93,208 | $ | 56,082 |
| Supplemental disclosure of cash flow information: | ||||
| Income taxes paid, net of refunds | $ | 33,568 | $ | 83,606 |
| Interest paid | $ | 61,889 | $ | 32,035 |
| Noncash investing activity: | ||||
| Unpaid purchases of property and equipment and software at end of period | $ | 63,158 | $ | — |
(1) Restricted cash included in Other assets, net as of September 30, 2022 and December 31, 2021 primarily represents cash 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.
Owens & Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
| Three Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||
| % of | % of | |||||||
| consolidated | consolidated | |||||||
| Amount | net revenue | Amount | net revenue | |||||
| Net revenue: | ||||||||
| Products & Healthcare Services | $ | 1,903,356 | 76.21 | % | $ | 2,256,295 | 90.17 | % |
| Patient Direct | 594,045 | 23.79 | % | 245,880 | 9.83 | % | ||
| Consolidated net revenue | $ | 2,497,401 | 100.00 | % | $ | 2,502,175 | 100.00 | % |
| % of segment | % of segment | |||||||
| Operating income: | net revenue | net revenue | ||||||
| Products & Healthcare Services | $ | 23,781 | 1.25 | % | $ | 64,415 | 2.85 | % |
| Patient Direct | 59,666 | 10.04 | % | 14,865 | 6.05 | % | ||
| Intangible amortization | (14,302) | (10,025) | ||||||
| Acquisition-related and exit and realignment charges | (8,898) | (6,380) | ||||||
| Consolidated operating income | $ | 60,247 | 2.41 | % | $ | 62,875 | 2.51 | % |
| Depreciation and amortization: | ||||||||
| Products & Healthcare Services | $ | 19,121 | $ | 18,868 | ||||
| Patient Direct | 39,030 | 3,774 | ||||||
| Consolidated depreciation and amortization | $ | 58,151 | $ | 22,642 | ||||
| Capital expenditures: | ||||||||
| Products & Healthcare Services | $ | 9,743 | $ | 13,498 | ||||
| Patient Direct | 39,706 | 446 | ||||||
| Consolidated capital expenditures | $ | 49,449 | $ | 13,944 |
Owens & Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||
| % of | % of | |||||||
| consolidated | consolidated | |||||||
| Amount | net revenue | Amount | net revenue | |||||
| Net revenue: | ||||||||
| Products & Healthcare Services | $ | 5,964,784 | 80.56 | % | $ | 6,621,560 | 90.48 | % |
| Patient Direct | 1,439,584 | 19.44 | % | 696,609 | 9.52 | % | ||
| Consolidated net revenue | $ | 7,404,368 | 100.00 | % | $ | 7,318,169 | 100.00 | % |
| % of segment | % of segment | |||||||
| Operating income: | net revenue | net revenue | ||||||
| Products & Healthcare Services | $ | 174,108 | 2.92 | % | $ | 316,062 | 4.77 | % |
| Patient Direct | 127,791 | 8.88 | % | 41,434 | 5.95 | % | ||
| Intangible amortization | (55,459) | (30,077) | ||||||
| Acquisition-related and exit and realignment charges | (50,048) | (20,967) | ||||||
| Consolidated operating income | $ | 196,392 | 2.65 | % | $ | 306,452 | 4.19 | % |
| Depreciation and amortization: | ||||||||
| Products & Healthcare Services | $ | 57,325 | $ | 56,874 | ||||
| Patient Direct | 98,113 | 11,268 | ||||||
| Consolidated depreciation and amortization | $ | 155,438 | $ | 68,142 | ||||
| Capital expenditures: | ||||||||
| Products & Healthcare Services | $ | 38,804 | $ | 31,768 | ||||
| Patient Direct | 76,344 | 857 | ||||||
| Consolidated capital expenditures | $ | 115,148 | $ | 32,625 |
Owens & Minor, Inc.
Net Income Per Common Share (unaudited)
(dollars in thousands, except per share data)
| Three Months Ended<br> September 30, | Nine Months Ended<br> September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Net income | $ | 12,497 | $ | 44,129 | $ | 80,381 | $ | 179,614 |
| Weighted average shares outstanding - basic | 74,905 | 73,215 | 74,376 | 72,649 | ||||
| Dilutive shares | 1,510 | 2,743 | 1,835 | 2,754 | ||||
| Weighted average shares outstanding - diluted | 76,415 | 75,958 | 76,211 | 75,403 | ||||
| Net income per common share: | ||||||||
| Basic | $ | 0.17 | $ | 0.60 | $ | 1.08 | $ | 2.47 |
| Diluted | $ | 0.16 | $ | 0.58 | $ | 1.05 | $ | 2.38 |
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 income and net income per share to non-GAAP measures used by management.
| Three Months Ended<br>September 30, | Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Operating income, as reported (GAAP) | $ | 60,247 | $ | 62,875 | $ | 196,392 | $ | 306,452 |
| Intangible amortization (1) | 14,302 | 10,025 | 55,459 | 30,077 | ||||
| Acquisition-related and exit and realignment charges(2) | 8,898 | 6,380 | 50,048 | 20,967 | ||||
| Operating income, adjusted (non-GAAP) (Adjusted Operating Income) | $ | 83,447 | $ | 79,280 | $ | 301,899 | $ | 357,496 |
| Operating income as a percent of net revenue (GAAP) | 2.41% | 2.51% | 2.65% | 4.19% | ||||
| Adjusted operating income as a percent of net revenue (non-GAAP) | 3.34% | 3.17% | 4.08% | 4.89% | ||||
| Net income, as reported (GAAP) | $ | 12,497 | $ | 44,129 | $ | 80,381 | $ | 179,614 |
| Intangible amortization (1) | 14,302 | 10,025 | 55,459 | 30,077 | ||||
| Income tax benefit (5) | (2,878) | (2,729) | (12,948) | (7,864) | ||||
| Acquisition-related and exit and realignment charges(2) | 8,898 | 6,380 | 50,048 | 20,967 | ||||
| Income tax benefit (5) | (1,791) | (1,736) | (11,686) | (5,483) | ||||
| Loss on extinguishment of debt (3) | — | — | — | 40,433 | ||||
| Income tax benefit (5) | — | — | — | (10,574) | ||||
| Other (4) | 525 | 570 | 1,574 | 1,709 | ||||
| Income tax benefit (5) | (107) | (155) | (368) | (447) | ||||
| Tax adjustment (7) | — | — | — | (402) | ||||
| Net income, adjusted (non-GAAP) (Adjusted Net Income) | $ | 31,446 | $ | 56,484 | $ | 162,460 | $ | 248,030 |
| Net income per diluted common share, as reported (GAAP) | $ | 0.16 | $ | 0.58 | $ | 1.05 | $ | 2.38 |
| Intangible amortization (1) | 0.15 | 0.09 | 0.56 | 0.29 | ||||
| Acquisition-related and exit and realignment charges(2) | 0.09 | 0.06 | 0.50 | 0.21 | ||||
| Loss on extinguishment of debt (3) | — | — | — | 0.40 | ||||
| Other (4) | 0.01 | 0.01 | 0.02 | 0.02 | ||||
| Tax adjustment (7) | — | — | — | (0.01) | ||||
| Net income per diluted common share, adjusted (non-GAAP) (Adjusted EPS) | $ | 0.41 | $ | 0.74 | $ | 2.13 | $ | 3.29 |
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited), continued
(dollars in thousands)
The following tables provide reconciliations of net income and total debt to non-GAAP measures used by management.
| Three Months Ended <br>September 30, | Nine Months Ended September 30, | Trailing Twelve Months Ended <br>September 30, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||
| Net income, as reported (GAAP) | $ | 12,497 | $ | 44,129 | $ | 80,381 | $ | 179,614 | $ | 122,356 |
| Income tax provision | 7,098 | 6,375 | 25,937 | 47,224 | 33,877 | |||||
| Interest expense, net | 39,869 | 11,572 | 87,727 | 36,784 | 99,033 | |||||
| Intangible amortization (1) | 14,302 | 10,025 | 55,459 | 30,077 | 65,189 | |||||
| Other depreciation and amortization (6) | 43,849 | 12,617 | 99,979 | 38,066 | 112,726 | |||||
| EBITDA (non-GAAP) | $ | 117,615 | $ | 84,718 | $ | 349,483 | $ | 331,765 | $ | 433,181 |
| Acquisition-related and exit and realignment charges (2) | 8,898 | 6,380 | 50,048 | 20,967 | 63,156 | |||||
| Loss on extinguishment of debt (3) | — | — | — | 40,433 | — | |||||
| Other (4) | 525 | 570 | 1,574 | 1,709 | 2,144 | |||||
| EBITDA, adjusted (non-GAAP) (Adjusted EBITDA) | $ | 127,038 | $ | 91,668 | $ | 401,105 | $ | 394,874 | $ | 498,481 |
| Three Months Ended <br>September 30, 2022 | Nine Months Ended September 30, 2022 | |||||||||
| --- | --- | --- | --- | --- | ||||||
| EBITDA, adjusted (non-GAAP) (Adjusted EBITDA) | $ | 127,038 | $ | 401,103 | ||||||
| Capital expenditures, net (8) | (42,803) | (102,430) | ||||||||
| Free Cash Flow (non-GAAP) | $ | 84,235 | $ | 298,673 | ||||||
| September 30, | ||||||||||
| --- | --- | --- | ||||||||
| 2022 | ||||||||||
| Total debt, as reported (GAAP) | $ | 2,561,779 | ||||||||
| Cash and cash equivalents | 76,770 | |||||||||
| Net debt (non-GAAP) | $ | 2,485,009 |
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited), continued
The following items have been excluded in our non-GAAP financial measures:
(1) Intangible amortization includes amortization of intangible assets established during purchase accounting for business combinations. 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 and the results of our peers.
(2) Acquisition-related charges were $6.9 million and $45.2 million for the three and nine months ended September 30, 2022 as compared to no acquisition-related charges for the three and nine months ended September 30, 2021. Acquisition-related costs in 2022 consisted primarily of costs related to the Apria acquisition. Acquisition-related charges for the twelve months ended September 30, 2022 were $48.2 million and consisted primarily of costs related to the Apria acquisition. 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. Exit and realignment charges were $6.4 million and $21.0 million for the three and nine months ended September 30, 2021 and consisted primarily of an increase in reserves associated with certain retained assets of Fusion5, IT restructuring charges and other costs related to the reorganization of our U.S. operations. Exit and realignment charges for the twelve months ended September 30, 2022 were $15.0 million and consisted of costs associated with our strategic organizational realignment, wind-down costs related to Fusion5, IT restructuring charges and other items.
(3) Loss on extinguishment of debt for the nine months ended September 30, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in March 2021 of $15.3 million and amounts reclassified from accumulated other comprehensive loss as a result of the termination of our interest rate swaps of $25.1 million.
(4) Other includes interest costs and net actuarial losses related to our retirement plans for the three and nine months ended September 30, 2022 and 2021, as well as the twelve months ended September 30, 2022.
(5) 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.
(6) Other depreciation and amortization includes depreciation expense for property and equipment and amortization for capitalized computer software.
(7) Includes tax adjustments associated with the estimated benefits under the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
(8) Capital expenditures, net is defined as capital expenditures less the net book value of dispositions of property and equipment during the accounting period.
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.
13
omi_3q22supplementalearn
1 Third Quarter 2022 Supplemental Earnings Slides November 2, 2022
2 Confidential & Proprietary to Owens & Minor, Inc. 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 2022 financial performance, the Apria transaction, including related synergies and the expected performance of the Apria business, as well as statements related to the Company’s expectations regarding the performance of its business including its 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, 2021, 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. This 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 the Company’ s 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 results set forth below should be carefully evaluated.
3 Confidential & Proprietary to Owens & Minor, Inc. 2022 Company Outlook & Modeling Assumptions Company Outlook & Modeling Assumptions* Full Year 2022 Revenue $9.8 - $10.0 billion Gross Margin ~19.5% Interest Expense $128 - $130 million Capital Expenditures $165 - $175 million Adj. Effective Tax Rate 24% - 26% Diluted Weighted Average Shares Outstanding ~77 million Adjusted EBITDA $527 - $537 million Adjusted EPS $2.50 - $2.60 Commodity Prices / Inflation / Interest Rates Unfavorable in near-term Foreign Currency Rates As of 9/30/2022 * Company outlook and modelling assumptions are assumptions used for 2022 adjusted EPS guidance, and the Company undertakes no obligation to update such assumptions subsequent to the date of this presentation (November 2, 2022). Please see Form 8-K filed by Owens & Minor, Inc. with the SEC on November 2, 2022 for additional financial information.