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): March 4, 2020
 
 
 
Owens & Minor, Inc.
(Exact name of registrant as specified in its charter)
 
 
 

Virginia
 
 
54-1701843
(State or other jurisdiction of
incorporation or organization)
 
 
(I.R.S. Employer
Identification No.)
 
 
 
 
9120 Lockwood Boulevard,
 Mechanicsville
Virginia
23116
(Address of principal executive offices)
 
 
(Zip Code)
 
 
 
 
Post Office Box 27626,
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):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)





o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
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 March 4, 2020, Owens & Minor, Inc. (the “Company”) issued a press release regarding its financial results for the year ended December 31, 2019. 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 March 4, 2020, the Company posted an earnings presentation on the Investor Relations section of its website. The Company is furnishing the earnings presentation attached hereto as Exhibits 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
 
99.2
 







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: March 4, 2020
 
 
 
By:
 
/s/ Nicholas J. Pace
 
 
 
 
 
 
Name:
 
Nicholas J. Pace
 
 
 
 
 
 
Title:
 
Executive Vice President, General Counsel and Corporate Secretary




 

 
FOR IMMEDIATE RELEASE                     
March 4, 2020


Owens & Minor Reports 4th Quarter and Full Year 2019 Financial Results


RICHMOND, VA – March 4, 2020 – Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the fourth quarter and the year ended December 31, 2019, as summarized in the table below.

“I am very pleased that we were able to sustain sequential improvement in adjusted operating income and adjusted earnings per share while also continuing to generate positive cash flow and reduce debt. Looking back at 2019, I am proud that we changed our culture, significantly improved customer service, built a great leadership team, and drove operating efficiencies, enabling us to establish a strong foundation for the future,” said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor.

“In addition to the strong foundation we have built in 2019, we’ve already taken action in 2020 to provide financial flexibility through the pending sale of Movianto and our improved debt profile. This further enables us to reinvest and focus on our core businesses – distribution, products, and services. We believe these investments will continue to drive long-term profitable growth generating consistent annual double-digit earnings growth beyond 2020.”

Financial Summary1
 
 
 
 
FYE
 
FYE
 
($ in millions, except per share data)
4Q19
 
4Q18
 
2019
 
2018
 
 
 
 
 
 
 
 
 
 
Revenue
$2,191
 
$2,434
 
$9,211
 
$9,418
 
 
 
 
 
 
 
 
 
 
Operating Income (loss), GAAP2,3
$14.5
 
($238)
 
$73.2
 
($352)
 
Adj. Operating Income, Non-GAAP2,3
$43.5
 
$33.7
 
$153
 
$177
 
 
 
 
 
 
 
 
 
 
Net Income (Loss), GAAP2,3
($39.0)
 
($262)
 
($62.4)
 
($437)
 
Adj. Net Income, Non-GAAP2,3
$14.7
 
$5.3
 
$34.0
 
$70.4
 
 
 
 
 
 
 
 
 
 
Net Income (Loss) per share, GAAP2,3
($0.65)
 
($4.37)
 
($1.03)
 
($7.28)
 
Adj. Net Income per share, Non-GAAP2,3
$0.24
 
$0.09
 
$0.56
 
$1.15
 
Adj. Net Income per share, Non-GAAP, constant currency2,3,4
$0.26
 
$0.09
 
$0.60
 
$1.15
 
 
 
 
 
 
 
 
 
 
1. Current and prior period financial results reflect the reporting of Movianto as a discontinued operation due to the pending sale.
2. 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.
3. Quarterly and year-to-date comparisons to prior year results are impacted by the 2018 goodwill and intangible asset impairment charges. These charges were classified as non-GAAP items and, accordingly, did not affect results reported on an adjusted basis.
4. Adjusted net income per share, non-GAAP at 2018 foreign currency exchange rates.
 
 







1


 

2019 Results
•
Adjusted operating income and adjusted net income per share improved sequentially in every quarter throughout 2019 as a result of operational effectiveness, seasonality, and revenue mix.
•
Year-over-year adjusted operating income and adjusted net income per share improved for both the fourth quarter and second half of 2019.
•
The revenue changes were driven by lower Medical Distribution sales, partially offset by increased sales from Global Products and certain business lines within Global Solutions.
•
Operating results reflect adjusted operating margin expansion from operating efficiencies and improved sales mix, partially offset by investments to support business growth and Fusion5. 
•
The Company generated $27 million of operating cash flow in the fourth quarter and a total of $166 million for the year including $227 million generated in the last three quarters of the year.
•
Total debt was reduced by $41 million in the fourth quarter and by $117 million for the full year. Combined debt reduction for the second through fourth quarter of 2019 was $171 million.
•
Interest expense increased $27.1 million for the full year compared to prior year.

Recent Highlights
•
On January 16, 2020, the Company announced the pending sale of its European logistics business, Movianto, to EHDH Holding Group, a privately held French company and the transaction, which is subject to certain customary approvals and conditions to close, is expected to close in the first half of 2020.
•
On February 18, 2020, the Company announced it amended its credit agreement providing enhanced financial flexibility.
•
On February 19, 2020, the Company closed an expanded accounts receivable securitization facility in the amount of $325 million allowing it to reduce interest costs.
•
The Company continued to achieve historically strong customer service levels.
•
Andrew G. Long was named Executive Vice President & Chief Financial Officer effective November 11, 2019.
•
Michael C. Riordan, former Co-Chief Executive Officer and Director of Prisma Health, was elected to the Company’s Board of Directors in December of 2019.
•
Gwendolyn M. Bingham, retired U.S. Army Lieutenant General, was elected to the Company’s Board of Directors effective March 5, 2020.

Financial Outlook
The Company’s outlook reflects reinvestment in the core businesses, lost income associated with the pending divestiture of Movianto, the impact of recent financing activity, and customer non-renewals in the first three quarters of 2019, partially offset by further operating efficiencies and continued strong performance in our non-Medical Distribution businesses. The Company believes that the aforementioned investments will position it to generate sustained annual double-digit earnings growth beyond 2020. Adjusted net income for 2020 is expected to be in a range of $0.50 to $0.601 per share.

1.
On a continuing operations basis; based on foreign currency rates in effect December 31, 2019.

Supplemental information related to our 2020 outlook can be found in the Investor Relations section of the Company website.

Although the Company does provide guidance for adjusted net income per share (which is a non-GAAP financial measure), it is not able to forecast the most directly comparable measure calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of the GAAP amount are not predictable, making it impracticable for the Company to forecast. Such elements include, but are not limited to restructuring and acquisition charges. As a result, no GAAP guidance or reconciliation of the Company’s adjusted net income per share guidance is provided. For the same reasons, the Company is unable to assess the probable significance of the unavailable information, which could have a potentially significant impact on its future GAAP financial results. The outlook is based on certain assumptions that are subject to the risk factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

Dividend Information
The Board of Directors approved a first quarter 2020 dividend payment of $0.0025 per share, payable on March 31, 2020, to shareholders of record as of March 16, 2020.



2


 

Investor Conference Call for 4th Quarter and Full Year 2019 Financial Results
Owens & Minor executives will host a conference call at 8:30 a.m. EST to discuss the results. 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. The access code for the conference call, international dial-in and replay is 7046788. A webcast of the event will be available at www.owens-minor.com under the Investor Relations section.

Upcoming Investor Events
•
The 2020 Annual Meeting of Shareholders of Owens & Minor, Inc. will be held at the corporate headquarters of the Company, 9120 Lockwood Boulevard, Mechanicsville, Virginia 23116, on Friday, May 1, 2020, at 9:00 a.m. EDT.

•
The Company will host an Investor Day on May 20, 2020 in New York. Registration details can be found at the following link: https://investors.owens-minor.com/event-registration. The presentation will be webcast live and archived on the Company’s website.

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 expectations with respect to our 2020 financial performance, earnings growth beyond 2020, the closing of the sale of the Company’s Movianto business, as well as other statements related to the Company’s expectations regarding the performance of its business and improvement of operational performance. 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, 2018, filed with the SEC including the sections captioned “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and subsequent annual reports on Form 10-K, 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.

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.

About Owens & Minor
Owens & Minor, Inc. (NYSE: OMI) is a global healthcare solutions company with integrated technologies, products, and services aligned to deliver significant and sustained value for healthcare providers and manufacturers across the continuum of care. With 17,000 dedicated teammates serving healthcare industry customers in 90 countries, Owens & Minor helps to reduce total costs across the supply chain by optimizing episode and point-of-care performance, freeing up capital and clinical resources, and managing contracts to optimize financial performance. A FORTUNE 500 company, Owens & Minor was founded in 1882 in Richmond, Virginia, where it remains headquartered today. The Company has distribution, production, customer service and sales facilities located across the Asia Pacific region, Europe, Latin America, and North America. For more information about Owens & Minor, visit owens-minor.com, follow @Owens_Minor on Twitter, and connect on LinkedIn at www.linkedin.com/company/owens-&-minor.

Contact
Chuck Graves, Director, Finance & Investor Relations, 804-723-7556, [email protected]

SOURCE: Owens & Minor





3


 

Page 4
Owens & Minor, Inc.
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share data)
 
 
Three Months Ended December 31,
 
 
2019
 
2018
Net revenue
 
$
2,190,642

 
$
2,434,043

Cost of goods sold
 
1,905,911

 
2,148,024

Gross margin
 
284,731

 
286,019

Distribution, selling and administrative expenses
 
254,165

 
263,455

Goodwill and intangible asset impairment charges
 
—

 
248,498

Acquisition-related and exit and realignment charges
 
15,275

 
13,381

Other operating expense (income), net
 
753

 
(1,304
)
Operating income (loss)
 
14,538

 
(238,011
)
Interest expense, net
 
22,557

 
22,861

Other (income) expense, net
 
(257
)
 
941

Loss before income taxes
 
(7,762
)
 
(261,813
)
Income tax benefit
 
(2,409
)
 
(28,279
)
Loss from continuing operations
 
(5,353
)
 
(233,534
)
Loss from discontinued operations, net of tax
 
(33,670
)
 
(28,287
)
Net loss
 
$
(39,023
)
 
$
(261,821
)
 
 
 
 
 
Net loss from continuing operations per common share: basic and diluted
 
$
(0.09
)
 
$
(3.89
)
Net loss from discontinued operations per common share: basic and diluted
 
(0.56
)
 
(0.48
)
Net loss per common share: basic and diluted
 
$
(0.65
)
 
$
(4.37
)
 
 
For the Years Ended December 31,
 
 
2019
 
2018
Net revenue
 
$
9,210,939

 
$
9,418,192

Cost of goods sold
 
8,082,448

 
8,347,666

Gross margin
 
1,128,491

 
1,070,526

Distribution, selling and administrative expenses
 
1,023,065

 
952,865

Goodwill and intangible asset impairment charges
 
—

 
413,945

Acquisition-related and exit and realignment charges
 
30,050

 
59,101

Other operating expense (income), net
 
2,225

 
(3,039
)
Operating income (loss)
 
73,151

 
(352,346
)
Interest expense, net
 
98,113

 
70,983

Other expense, net
 
3,757

 
3,765

Loss from continuing operations before income taxes
 
(28,719
)
 
(427,094
)
Income tax benefit
 
(6,135
)
 
(32,429
)
Loss from continuing operations
 
(22,584
)
 
(394,665
)
Loss from discontinued operations, net of tax
 
(39,787
)
 
(42,347
)
Net loss
 
$
(62,371
)
 
$
(437,012
)
 
 
 
 
 
Loss from continuing operations per common share: basic and diluted
 
$
(0.37
)
 
$
(6.58
)
Loss from discontinued operations per common share: basic and diluted
 
(0.66
)
 
(0.70
)
Net loss per common share: basic and diluted
 
$
(1.03
)
 
$
(7.28
)

4


 

Page 5
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands)
 
 
December 31, 2019
 
December 31, 2018
 
 
 
 
 
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
67,030

 
$
66,308

Accounts receivable, net
 
674,706

 
756,687

Merchandise inventories
 
1,146,192

 
1,273,726

Other current assets
 
79,372

 
121,926

Current assets of discontinued operations
 
439,983

 
319,930

Total current assets
 
2,407,283

 
2,538,577

Property and equipment, net
 
315,427

 
323,943

Operating lease assets
 
142,219

 
—

Goodwill
 
393,181

 
414,122

Intangible assets, net
 
285,018

 
314,175

Other assets, net
 
99,956

 
84,510

Other assets of discontinued operations
 
—

 
98,461

Total assets
 
$
3,643,084

 
$
3,773,788

Liabilities and equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
808,035

 
$
1,065,197

Accrued payroll and related liabilities
 
53,584

 
38,358

Other current liabilities
 
231,029

 
178,930

Current liabilities of discontinued operations
 
323,511

 
189,526

Total current liabilities
 
1,416,159

 
1,472,011

Long-term debt, excluding current portion
 
1,508,415

 
1,647,918

Operating lease liabilities, excluding current portion
 
117,080

 
—

Deferred income taxes
 
40,550

 
50,852

Other liabilities
 
98,726

 
77,690

Other liabilities of discontinued operations
 
—

 
6,898

Total liabilities
 
3,180,930

 
3,255,369

Total equity
 
462,154

 
518,419

Total liabilities and equity
 
$
3,643,084

 
$
3,773,788


5


 

Page 6
Owens & Minor, Inc.
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)

 
 
For the Years Ended December 31,
 
 
2019
 
2018
 
 
 
 
 
Operating activities:
 
 
 
 
Net loss
 
$
(62,371
)
 
$
(437,012
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
116,678

 
101,927

Share-based compensation expense
 
15,803

 
16,376

Impairment charges
 
32,112

 
439,613

Deferred income tax benefit
 
(17,402
)
 
(35,018
)
Provision for losses on accounts receivable
 
12,914

 
9,430

Changes in operating lease right-of-use assets and lease liabilities
 
(2,599
)
 
—

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
63,526

 
11,106

Merchandise inventories
 
127,921

 
(65,451
)
Accounts payable
 
(235,631
)
 
92,179

Net change in other assets and liabilities
 
104,801

 
(23,604
)
Other, net
 
10,333

 
6,043

Cash provided by operating activities
 
166,085

 
115,589

Investing activities:
 
 
 
 
Acquisitions, net of cash acquired
 
—

 
(751,834
)
Additions to property and equipment
 
(42,419
)
 
(44,873
)
Additions to computer software
 
(9,809
)
 
(20,812
)
Proceeds from sale of property and equipment
 
331

 
1,690

Cash used for investing activities
 
(51,897
)
 
(815,829
)
Financing activities:
 
 
 
 
Proceeds from issuance of debt
 
—

 
695,750

(Repayments) borrowings from revolving credit facility
 
(32,200
)
 
105,500

Repayment of debt
 
(85,592
)
 
(16,250
)
Financing costs paid
 
(4,313
)
 
(28,512
)
Cash dividends paid
 
(5,226
)
 
(48,200
)
Other, net
 
(2,866
)
 
(7,217
)
Cash (used for) provided by financing activities
 
(130,197
)
 
701,071

Effect of exchange rate changes on cash and cash equivalents
 
(2,671
)
 
(1,986
)
Net decrease in cash, cash equivalents and restricted cash
 
(18,680
)
 
(1,155
)
Cash, cash equivalents and restricted cash at beginning of year
 
103,367

 
104,522

Cash, cash equivalents and restricted cash at end of year
 
$
84,687

 
$
103,367

Supplemental disclosure of cash flow information:
 
 
 
 
Income taxes (received) paid, net of refunds
 
$
(6,198
)
 
$
19,151

Interest paid
 
$
95,413

 
$
68,585


6


 

Page 7
Owens & Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
 
Three Months Ended December 31,
 
2019
 
2018
 
 
 
% of
 
 
 
 % of
 
 
 
consolidated
 
 
 
consolidated
 
Amount
 
net revenue
 
Amount
 
 net revenue
Net revenue:
 
 
 
 
 
 
 
Segment net revenue
 
 
 
 
 
 
 
Global Solutions
$
1,938,420

 
88.48
 %
 
$
2,204,051

 
90.55
 %
Global Products
363,169

 
16.58
 %
 
360,552

 
14.81
 %
Total segment net revenue
2,301,589

 
 
 
2,564,603

 
 
Inter-segment net revenue
 
 
 
 
 
 
 
Global Products
(110,947
)
 
(5.06
)%
 
(130,560
)
 
(5.36
)%
Total inter-segment net revenue
(110,947
)
 
 
 
(130,560
)
 
 
Consolidated net revenue
$
2,190,642

 
100.00
 %
 
$
2,434,043

 
100.00
 %
 
 
 
 
 
 
 
 
 
 
 
% of segment
 
 
 
% of segment
Operating income (loss):
 
 
net revenue
 
 
 
net revenue
Global Solutions
$
19,300

 
1.00
 %
 
$
18,701

 
0.85
 %
Global Products
22,484

 
6.19
 %
 
14,337

 
3.98
 %
Inter-segment eliminations
(730
)
 
 
 
17

 
 
Goodwill and intangible asset impairment charges
—

 
 
 
(248,498
)
 
 
Intangible amortization
(10,614
)
 
 
 
(10,036
)
 
 
Acquisition-related and exit and realignment charges
(15,275
)
 
 
 
(13,381
)
 
 
Other (1)
(627
)
 
 
 
849

 
 
Consolidated operating income (loss)
$
14,538

 
0.66
 %
 
$
(238,011
)
 
(9.78
)%
 
 
 
 
 
 
 
 
Depreciation and amortization: 
 
 
 
 
 
 
 
Global Solutions
$
10,744

 
 
 
$
11,628

 
 
Global Products
13,360

 
 
 
12,085

 
 
Discontinued operations
4,370

 
 
 
4,618

 
 
Consolidated depreciation and amortization
$
28,474

 
 
 
$
28,331

 
 
 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
Global Solutions
$
3,707

 
 
 
$
5,766

 
 
Global Products
8,715

 
 
 
9,007

 
 
Discontinued operations
1,654

 
 
 
3,606

 
 
Consolidated capital expenditures
$
14,076

 
 
 
$
18,379

 
 







7


 

Page 8
Owens & Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
 
For the Years Ended December 31,
 
2019
 
2018
 
 
 
% of
 
 
 
 % of
 
 
 
consolidated
 
 
 
consolidated
 
Amount
 
net revenue
 
Amount
 
 net revenue
Net revenue:
 
 
 
 
 
 
 
Segment net revenue
 
 
 
 
 
 
 
Global Solutions
$
8,243,867

 
89.50
 %
 
$
8,767,549

 
93.09
 %
Global Products
1,433,977

 
15.56
 %
 
1,111,322

 
11.80
 %
Total segment net revenue
9,677,844

 
 
 
9,878,871

 
 
Inter-segment net revenue
 
 
 
 
 
 
 
Global Products
(466,905
)
 
(5.06
)%
 
(460,679
)
 
(4.89
)%
Total inter-segment net revenue
(466,905
)
 
 
 
(460,679
)
 
 
Consolidated net revenue
$
9,210,939

 
100.00
 %
 
$
9,418,192

 
100.00
 %
 
 
 
 
 
 
 
 
 
 
 
% of segment
 
 
 
% of segment
Operating income (loss):
 
 
net revenue
 
 
 
net revenue
Global Solutions
$
83,592

 
1.01
 %
 
$
108,761

 
1.24
 %
Global Products
65,054

 
4.54
 %
 
75,688

 
6.81
 %
Inter-segment eliminations
45

 

 
(3,014
)
 


Goodwill and intangible asset impairment charges
—

 
 
 
(413,945
)
 
 
Intangible amortization
(44,009
)
 
 
 
(35,132
)
 
 
Acquisition-related and exit and realignment charges
(30,050
)
 
 
 
(59,101
)
 
 
Other (1)
(1,481
)
 
 
 
(25,603
)
 
 
Consolidated operating income (loss)
$
73,151

 
0.79
 %
 
$
(352,346
)
 
(3.74
)%
 
 
 

 
 
 

Depreciation and amortization: 
 
 
 
 
 
 
 
Global Solutions
$
42,444

 
 
 
$
45,182

 
 
Global Products
54,302

 
 
 
38,217

 
 
Discontinued operations
19,932

 
 
 
18,528

 
 
Consolidated depreciation and amortization
$
116,678

 
 
 
$
101,927

 
 
 
 
 
 
 
 
 
 
Capital expenditures:
 
 
 
 
 
 
 
Global Solutions
$
10,987

 
 
 
$
38,169

 
 
Global Products
22,289

 
 
 
16,161

 
 
Discontinued operations
18,952

 
 
 
11,355

 
 
Consolidated capital expenditures
$
52,228

 
 
 
$
65,685

 
 
(1) 2019 and 2018 included interest cost and net actuarial losses related to the U.S. Retirement Plan as well as software as a service (SaaS) implementation costs associated with the upgrading of our global IT platforms in connection with the redesign of our global information system strategy. 2018 also includes the incremental charge to cost of goods sold from purchase accounting impacts related to the sale of acquired inventory that was written up to fair value.

8


 

Page 9
Owens & Minor, Inc.
Net Income (Loss) Per Common Share (unaudited)
(dollars in thousands, except per share data)

 
Three Months Ended December 31,
 
For the Years Ended December 31,
 
2019
 
2018
 
2019
 
2018
Numerator:
 
 
 
 
 
 
 
Weighted average shares outstanding - basic and diluted
60,088

 
59,974

 
60,574

 
60,014

 
 
 
 
 
 
 
 
Loss from continuing operations
$
(5,353
)
 
$
(233,534
)
 
$
(22,584
)
 
$
(394,665
)
Basic and diluted per share
$
(0.09
)
 
$
(3.89
)
 
$
(0.37
)
 
$
(6.58
)
 
 
 
 
 
 
 
 
Loss from discontinued operations
$
(33,670
)
 
$
(28,287
)
 
$
(39,787
)
 
$
(42,347
)
Basic and diluted per share
$
(0.56
)
 
$
(0.48
)
 
$
(0.66
)
 
$
(0.70
)
 
 
 
 
 
 
 
 
Net loss
$
(39,023
)
 
$
(261,821
)
 
$
(62,371
)
 
$
(437,012
)
Basic and diluted per share
$
(0.65
)
 
$
(4.37
)
 
$
(1.03
)
 
$
(7.28
)



























9


 

Page 10
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited)
The following table provides a reconciliation of reported operating income (loss) and net income (loss) to non-GAAP measures used by management.
(dollars in thousands, except per share data)
Three Months Ended December 31,
 
For the Years Ended December 31,
 
 
2019
 
2018
 
2019
 
2018
Operating income (loss), as reported (GAAP)
 
$
14,538

 
$
(238,011
)
 
$
73,151

 
$
(352,346
)
Intangible amortization (1)
 
10,614

 
10,036

 
44,009

 
35,132

Goodwill and intangible asset impairment charges (2)
 
—

 
248,498

 
—

 
413,945

Acquisition-related charges (3)
 
4,279

 
4,274

 
15,653

 
45,036

Exit and realignment charges (4)

 
10,996

 
9,107

 
14,397

 
14,065

Fair value adjustments related to purchase accounting (5)
 
—

 
—

 
—

 
27,088

Software as a Service implementation costs (6)

 
1,359

 
92

 
4,408

 
2,287

Other (7)
 
(731
)
 
(941
)
 
(2,923
)
 
(3,765
)
Discontinued operations (8)
 
2,489

 
658

 
4,348

 
(4,669
)
Operating income, adjusted (non-GAAP) (Adjusted Operated Income)
 
$
43,544

 
$
33,713

 
$
153,043

 
$
176,773

 
 
 
 
 
 
 
 
 
Net loss as reported (GAAP)
 
$
(39,023
)
 
$
(261,821
)
 
$
(62,371
)
 
$
(437,012
)
Intangible amortization (1)
 
10,614

 
10,036

 
44,009

 
35,132

Income tax benefit (11)
 
(2,782
)
 
(672
)
 
(10,556
)
 
(7,677
)
Goodwill and intangible asset impairment charges (2)
 
—

 
248,498

 
—

 
413,945

Income tax benefit (11)
 
—

 
(30,669
)
 
—

 
(32,729
)
Acquisition-related charges (3)
 
4,279

 
4,274

 
15,653

 
45,036

Income tax benefit (11)
 
(1,122
)
 
(277
)
 
(3,754
)
 
(9,516
)
Exit and realignment charges (4)

 
10,996

 
9,107

 
14,397

 
14,065

Income tax benefit (11)
 
(2,882
)
 
(682
)
 
(3,453
)
 
(3,563
)
Fair value adjustments related to purchase accounting (5)
 
—

 
—

 
—

 
27,088

Income tax benefit (11)
 
—

 
—

 
—

 
(5,696
)
Software as a Service implementation costs (6)

 
1,359

 
92

 
4,408

 
2,287

Income tax benefit (11)
 
(356
)
 
(6
)
 
(1,057
)
 
(743
)
(Gain) loss on extinguishment and modification of debt (9)
 
(988
)
 
—

 
830

 
—

Income tax expense (11)
 
259

 
—

 
(199
)
 
—

Tax adjustments (10)
 
—

 
—

 
—

 
(1,596
)
Discontinued operations non-GAAP adjustments (8)
 
34,360

 
27,403

 
36,094

 
31,394

Net income, adjusted (non-GAAP) (Adjusted Net Income)
 
$
14,714

 
$
5,283

 
$
34,001

 
$
70,415







10


 

Page 11
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited)
The following table provides a reconciliation of diluted net income (loss) per common share to non-GAAP measures used by management.

(dollars in thousands, except per share data)
Three Months Ended December 31,
 
For the Years Ended December 31,
 
 
2019
 
2018
 
2019
 
2018
Net loss from continuing operations per diluted common share, as reported (GAAP)
 
$
(0.65
)
 
$
(4.37
)
 
$
(1.03
)
 
$
(7.28
)
Intangible amortization (1)
 
0.13

 
0.15

 
0.55

 
0.45

Goodwill and intangible asset impairment charges (2)
 
—

 
3.65

 
—

 
6.38

Acquisition-related charges (3)
 
0.04

 
0.06

 
0.19

 
0.58

Exit and realignment charges (4)

 
0.14

 
0.14

 
0.18

 
0.17

Fair value adjustments related to purchase accounting (5)
 
—

 
—

 
—

 
0.33

Software as a Service implementation costs (6)

 
0.02

 
—

 
0.06

 
0.02

(Gain) loss on extinguishment and modification of debt (9)
 
(0.01
)
 
—

 
0.01

 
—

Tax adjustments (10)
 
—

 
—

 
—

 
(0.02
)
Discontinued operations (8)
 
0.57

 
0.46

 
0.60

 
0.52

Net income per diluted common share, adjusted (non-GAAP) (Adjusted EPS)
 
$
0.24

 
$
0.09

 
$
0.56

 
$
1.15

Impact of currency at 2018 foreign currency exchange rates
 
0.02

 
—

 
0.04

 
—

Net income per diluted common share, on a constant currency basis(12)

$
0.26

 
$
0.09

 
$
0.60

 
$
1.15


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

(1) Intangible amortization in 2019 and 2018 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) Impairment charges in 2018 resulted from our goodwill and intangible asset impairment testing performed as a result of a decline in market capitalization of the company and lower than projected financial results of certain reporting units due to customer losses and operational inefficiencies.
(3) Acquisition-related charges in 2019 and 2018 consisted primarily of transition and transaction costs for the Halyard acquisition.
(4) Exit and realignment charges in 2019 were associated with severance from reduction in force and other costs related to the reorganization of the U.S. commercial and operations and executive teams, along with facility closures in the U.S. and other IT restructuring charges. Amounts in 2018 were associated with severance from reduction in force and other employee costs associated with the establishment of our client engagement centers, the writedown of information system assets which are no longer used and other IT restructuring charges.
(5) Fair value adjustments related to purchase accounting in 2018 includes an incremental charge to cost of goods sold from purchase accounting impacts related to the sale of acquired inventory that was written up to fair value in connection with the Halyard acquisition.
(6) Software as a Service (SaaS) implementation costs in 2019 and 2018 were associated with significant global IT platforms in connection with the redesign of our global information system strategy.
(7) Other in 2019 and 2018 includes interest costs and net actuarial losses related to the U.S. Retirement Plan.
(8) Discontinued operations included in the reconciliation to Adjusted Operating Income includes operating income (loss) adjusted for non-GAAP items from our Movianto business. Discontinued operations non-GAAP adjustments included in the reconciliation to Adjusted Net Income and Adjusted EPS includes non-GAAP adjustments of $32.1 million in impairment charges and $2.3 million in the fourth quarter of 2019 and $4.0 million for the full year 2019 in other costs, primarily related to intangible amortization, from our Movianto business.


11


 


Page 12
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited)

(9) (Gain) loss on extinguishment and modification of debt consists of write-off of deferred financing costs associated with the revolving credit facility as a result of the Fourth Amendment to the Credit Agreement in February 2019 of $2.0 million and gain on extinguishment of debt related to the partial repurchase of our 2021 Notes in the fourth quarter of 2019 of $1.0 million and for the full year 2019 of $1.2 million, which are included in Other expense, net within the accompanying consolidated statements of operations.
(10) Tax adjustments are primarily associated with the benefits under the Tax Cuts and Jobs Act.
(11) These charges have been tax effected in the preceding table 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.
(12) Excludes the impact of translational currency, which assumes 2019 results at 2018 rates.

Use of Non-GAAP Measures

This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP").  In general, the measures exclude items and charges that (i) management does not believe reflect Owens & Minor, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends.  Management uses these non-GAAP financial measures internally to evaluate the Company's performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company's performance to that of its competitors.  However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.


12

4th Quarter & Full Year 2019 Earnings Supplemental Slides March 4, 2020

 
This presentation 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 presentation 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 presentation regarding our expectations with respect to our 2020 financial performance, our modeling assumptions, and earnings growth beyond 2020, as well as other statements related to the Company’s expectations regarding the performance of its business and improvement of operational performance. 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. Safe Harbor Investors should refer to Owens & Minor’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC including the sections captioned “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and subsequent annual reports on Form 10-K, 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. 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. 2 4th Quarter & Full Year 2019 Earnings – March 4, 2020

 
2020 Guidance The Company’s outlook reflects reinvestment in the core businesses, lost income associated with the pending divestiture of Movianto, the impact of recent financing activity, and customer non-renewals in the first three quarters of 2019, partially offset by further operating efficiencies and continued strong performance in our non-Medical Distribution businesses. The Company believes that the aforementioned investments will position it to generate sustained annual double-digit earnings growth beyond 2020. Adjusted net income for 2020 is expected to be in a range of $0.50 to $0.601 per share. 1. On a continuing operations basis; based on foreign currency rates in effect December 31, 2019. 3 4th Quarter & Full Year 2019 Earnings – March 4, 2020

 
2020 Modeling Assumptions from continuing operations Modeling Assumptions1 Full Year 2020 Revenue $8.3 - $8.5 billion Gross Margin 13.0% – 13.3% Interest Expense $93 - $96 million Capital Expenditures $55 - $65 million Adj. Effective Tax Rate ~31% Foreign Currency Based on rates in effect at 12/31/19 Commodity Prices Modestly favorable trend 1. Modeling parameters are assumptions used for initial adjusted EPS guidance for 2020, and the Company undertakes no obligation to update such assumptions/modeling parameters subsequent to the date of this presentation (March 4, 2020). Modeling parameters are presented on a continuing operations and constant currency basis and exclude acquisition-related and exit & realignment charges. 4 4th Quarter & Full Year 2019 Earnings – March 4, 2020

 
Values Explained: Bringing Our Mission to Life I IntegrityE : Act with the highestL standards of ethics. Honor commitments. D Development: Aspire for improvement and growth. Excellence: Perform to the highest standards. Embrace our mission to empower our E customers to advance healthcare into the future. A Accountability: Own our actions and results. Be responsible for what we do. L Listening: Listen to our customers and to one another. Understand needs and deliver solutions. 5 4th Quarter & Full Year 2019 Earnings – March 4, 2020