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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Virginia
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54-1701843
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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9120 Lockwood Boulevard,
Mechanicsville, Virginia
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23116
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(Address of principal executive offices)
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(Zip Code)
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Post Office Box 27626,
Richmond, Virginia
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23261-7626
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(Mailing address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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¨
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging growth company
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o
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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.
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o
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Page
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||
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Item 1.
|
||
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||
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||
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Item 2.
|
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Item 3.
|
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Item 4.
|
||
|
||
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
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Item 5.
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Item 6.
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Three Months Ended
March 31, |
||||||
(in thousands, except per share data)
|
|
2018
|
|
2017
|
||||
Net revenue
|
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$
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2,372,579
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$
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2,328,573
|
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Cost of goods sold
|
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2,047,892
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2,047,393
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Gross margin
|
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324,687
|
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281,180
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Distribution, selling and administrative expenses
|
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284,361
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|
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237,693
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Acquisition-related and exit and realignment charges
|
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14,760
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8,942
|
|
||
Other operating (income) expense, net
|
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1,349
|
|
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(972
|
)
|
||
Operating income
|
|
24,217
|
|
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35,517
|
|
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Interest expense, net
|
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10,253
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6,744
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Income before income taxes
|
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13,964
|
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28,773
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Income tax provision
|
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5,813
|
|
|
9,988
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|
||
Net income
|
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$
|
8,151
|
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$
|
18,785
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|
|
|
|
|
|
||||
Net income per common share: basic and diluted
|
|
$
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0.13
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$
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0.31
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Cash dividends per common share
|
|
$
|
0.26
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|
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$
|
0.2575
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Three Months Ended
March 31, |
||||||
(in thousands)
|
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2018
|
|
2017
|
||||
Net income
|
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$
|
8,151
|
|
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$
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18,785
|
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Other comprehensive income, net of tax:
|
|
|
|
|
||||
Currency translation adjustments (net of income tax of $0 in 2018 and 2017)
|
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8,921
|
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5,492
|
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Change in unrecognized net periodic pension costs (net of income tax of $142 in 2018 and $226 in 2017)
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|
380
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236
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Other (net of income tax of $0 in 2018 and 2017)
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6
|
|
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110
|
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Total other comprehensive income, net of tax
|
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9,307
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|
|
5,838
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Comprehensive income
|
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$
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17,458
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$
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24,623
|
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March 31,
|
|
December 31,
|
||||
(in thousands, except per share data)
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2018
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|
2017
|
||||
Assets
|
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|
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Current assets
|
|
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|
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Cash and cash equivalents
|
$
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87,632
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$
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104,522
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Accounts receivable, net of allowances of $17,925 and $16,280
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778,155
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758,936
|
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Merchandise inventories
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1,021,711
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990,193
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Other current assets
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300,275
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328,254
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Total current assets
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2,187,773
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2,181,905
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Property and equipment, net of accumulated depreciation of $248,482 and $239,581
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207,042
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206,490
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Goodwill, net
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715,445
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713,811
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Intangible assets, net
|
178,880
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184,468
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Other assets, net
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102,414
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89,619
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|
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Total assets
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$
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3,391,554
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$
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3,376,293
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Liabilities and equity
|
|
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|
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Current liabilities
|
|
|
|
||||
Accounts payable
|
$
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958,270
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$
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947,572
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Accrued payroll and related liabilities
|
30,480
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30,416
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|
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Other current liabilities
|
337,230
|
|
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331,745
|
|
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Total current liabilities
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1,325,980
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1,309,733
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|
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Long-term debt, excluding current portion
|
897,071
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900,744
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|
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Deferred income taxes
|
73,180
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74,247
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|
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Other liabilities
|
76,405
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76,090
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|
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Total liabilities
|
2,372,636
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2,360,814
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Commitments and contingencies
|
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Equity
|
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|
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Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 61,812 shares and 61,476 shares
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123,624
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|
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122,952
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|
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Paid-in capital
|
228,273
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226,937
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|
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Retained earnings
|
682,798
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690,674
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Accumulated other comprehensive loss
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(15,777
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)
|
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(25,084
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)
|
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Total equity
|
1,018,918
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1,015,479
|
|
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Total liabilities and equity
|
$
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3,391,554
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$
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3,376,293
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Three Months Ended March 31,
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||||||
(in thousands)
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2018
|
|
2017
|
||||
Operating activities:
|
|
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|
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Net income
|
$
|
8,151
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$
|
18,785
|
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Adjustments to reconcile net income to cash provided by (used for) operating activities:
|
|
|
|
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Depreciation and amortization
|
17,911
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12,558
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|
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Share-based compensation expense
|
3,035
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|
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2,511
|
|
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Provision for losses on accounts receivable
|
1,073
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|
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(603
|
)
|
||
Deferred income tax expense (benefit)
|
(1,482
|
)
|
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(825
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(18,519
|
)
|
|
1,554
|
|
||
Merchandise inventories
|
(30,556
|
)
|
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(32,777
|
)
|
||
Accounts payable
|
9,478
|
|
|
(7,341
|
)
|
||
Net change in other assets and liabilities
|
28,904
|
|
|
(24,965
|
)
|
||
Other, net
|
278
|
|
|
4,743
|
|
||
Cash provided by (used for) operating activities
|
18,273
|
|
|
(26,360
|
)
|
||
Investing activities:
|
|
|
|
||||
Additions to property and equipment
|
(7,074
|
)
|
|
(10,146
|
)
|
||
Additions to computer software and intangible assets
|
(7,086
|
)
|
|
(4,622
|
)
|
||
Proceeds from sale of property and equipment
|
—
|
|
|
315
|
|
||
Cash used for investing activities
|
(14,160
|
)
|
|
(14,453
|
)
|
||
Financing activities:
|
|
|
|
||||
Borrowings (repayments) under revolving credit facility
|
(300
|
)
|
|
—
|
|
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Repayments of debt
|
(3,125
|
)
|
|
—
|
|
||
Cash dividends paid
|
(16,074
|
)
|
|
(15,740
|
)
|
||
Other, net
|
(2,304
|
)
|
|
(2,759
|
)
|
||
Cash used for financing activities
|
(21,803
|
)
|
|
(18,499
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
800
|
|
|
991
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(16,890
|
)
|
|
(58,321
|
)
|
||
Cash and cash equivalents at beginning of period
|
104,522
|
|
|
185,488
|
|
||
Cash and cash equivalents at end of period
|
$
|
87,632
|
|
|
$
|
127,167
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Income taxes paid, net
|
$
|
1,197
|
|
|
$
|
2,825
|
|
Interest paid
|
$
|
9,661
|
|
|
$
|
6,183
|
|
(in thousands, except per share data)
|
Common
Shares
Outstanding
|
|
Common
Stock
($2 par value )
|
|
Paid-In
Capital
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive Income
(Loss)
|
|
Total
Equity
|
|||||||||||
Balance December 31, 2016
|
61,031
|
|
|
$
|
122,062
|
|
|
$
|
219,955
|
|
|
$
|
685,504
|
|
|
$
|
(67,483
|
)
|
|
$
|
960,038
|
|
Net income
|
|
|
|
|
|
|
18,785
|
|
|
|
|
18,785
|
|
|||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
5,838
|
|
|
5,838
|
|
|||||||||
Dividends declared ($0.2575 per share)
|
|
|
|
|
|
|
(15,698
|
)
|
|
|
|
(15,698
|
)
|
|||||||||
Share-based compensation expense, exercises and other
|
171
|
|
|
341
|
|
|
653
|
|
|
|
|
|
|
994
|
|
|||||||
Balance March 31, 2017
|
61,202
|
|
|
$
|
122,403
|
|
|
$
|
220,608
|
|
|
$
|
688,591
|
|
|
$
|
(61,645
|
)
|
|
$
|
969,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance December 31, 2017
|
61,476
|
|
|
$
|
122,952
|
|
|
$
|
226,937
|
|
|
$
|
690,674
|
|
|
$
|
(25,084
|
)
|
|
$
|
1,015,479
|
|
Net income
|
|
|
|
|
|
|
8,151
|
|
|
|
|
8,151
|
|
|||||||||
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
9,307
|
|
|
9,307
|
|
|||||||||
Dividends declared ($0.26 per share)
|
|
|
|
|
|
|
(16,027
|
)
|
|
|
|
(16,027
|
)
|
|||||||||
Share-based compensation expense, exercises and other
|
336
|
|
|
672
|
|
|
1,336
|
|
|
|
|
|
|
2,008
|
|
|||||||
Balance March 31, 2018
|
61,812
|
|
|
$
|
123,624
|
|
|
$
|
228,273
|
|
|
$
|
682,798
|
|
|
$
|
(15,777
|
)
|
|
$
|
1,018,918
|
|
|
Preliminary Fair Value
Originally Estimated as of Acquisition Date (1) |
|
Differences Between Prior and the Current Periods Preliminary Fair Value Estimate
|
|
Preliminary Fair Value Currently Estimated as of Acquisition Date
|
||||||
Assets acquired:
|
|
|
|
|
|
||||||
Current assets
|
$
|
61,986
|
|
|
$
|
—
|
|
|
$
|
61,986
|
|
Goodwill
|
288,691
|
|
|
—
|
|
|
288,691
|
|
|||
Intangible assets
|
115,000
|
|
|
—
|
|
|
115,000
|
|
|||
Other noncurrent assets
|
5,069
|
|
|
—
|
|
|
5,069
|
|
|||
Total assets
|
470,746
|
|
|
—
|
|
|
470,746
|
|
|||
Liabilities assumed:
|
|
|
|
|
|
||||||
Current liabilities
|
72,962
|
|
|
—
|
|
|
72,962
|
|
|||
Noncurrent liabilities
|
31,215
|
|
|
—
|
|
|
31,215
|
|
|||
Total liabilities
|
104,177
|
|
|
—
|
|
|
104,177
|
|
|||
Fair value of net assets acquired, net of cash
|
$
|
366,569
|
|
|
$
|
—
|
|
|
$
|
366,569
|
|
|
Global Solutions
|
|
Global Products
|
|
Consolidated
|
||||||
Carrying amount of goodwill, December 31, 2017
|
$
|
495,860
|
|
|
$
|
217,951
|
|
|
$
|
713,811
|
|
Currency translation adjustments
|
1,070
|
|
|
564
|
|
|
1,634
|
|
|||
Carrying amount of goodwill, March 31, 2018
|
$
|
496,930
|
|
|
$
|
218,515
|
|
|
$
|
715,445
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||||||||||
|
Customer
Relationships
|
|
Other
Intangibles
|
|
Customer
Relationships |
|
Other
Intangibles |
||||||||
|
|
|
|
|
|
|
|
||||||||
Gross intangible assets
|
$
|
200,574
|
|
|
$
|
43,683
|
|
|
$
|
199,265
|
|
|
$
|
43,537
|
|
Accumulated amortization
|
(60,641
|
)
|
|
(4,736
|
)
|
|
(54,757
|
)
|
|
(3,577
|
)
|
||||
Net intangible assets
|
$
|
139,933
|
|
|
$
|
38,947
|
|
|
$
|
144,508
|
|
|
$
|
39,960
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Global Solutions segment
|
$
|
2,708
|
|
|
$
|
7,132
|
|
Global Products segment
|
(29
|
)
|
|
463
|
|
||
Total exit and realignment charges
|
$
|
2,679
|
|
|
$
|
7,595
|
|
|
Lease
Obligations
|
|
Severance and
Other
|
|
Total
|
||||||
Accrued exit and realignment costs, December 31, 2017
|
$
|
—
|
|
|
$
|
11,972
|
|
|
$
|
11,972
|
|
Provision for exit and realignment activities
|
—
|
|
|
2,295
|
|
|
2,295
|
|
|||
Change in estimate
|
—
|
|
|
(23
|
)
|
|
(23
|
)
|
|||
Cash payments
|
—
|
|
|
(6,479
|
)
|
|
(6,479
|
)
|
|||
Accrued exit and realignment costs, March 31, 2018
|
$
|
—
|
|
|
$
|
7,765
|
|
|
$
|
7,765
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
||||||
Accrued exit and realignment costs, December 31, 2016
|
$
|
—
|
|
|
$
|
2,238
|
|
|
$
|
2,238
|
|
Provision for exit and realignment activities
|
—
|
|
|
3,211
|
|
|
3,211
|
|
|||
Change in estimate
|
—
|
|
|
(304
|
)
|
|
(304
|
)
|
|||
Cash payments
|
—
|
|
|
(3,034
|
)
|
|
(3,034
|
)
|
|||
Accrued exit and realignment costs, March 31, 2017
|
$
|
—
|
|
|
$
|
2,111
|
|
|
$
|
2,111
|
|
|
Three Months Ended
March 31, |
||||||
|
2018
|
|
2017
|
||||
Service cost
|
$
|
19
|
|
|
$
|
12
|
|
Interest cost
|
419
|
|
|
474
|
|
||
Recognized net actuarial loss
|
522
|
|
|
462
|
|
||
Net periodic benefit cost
|
$
|
960
|
|
|
$
|
948
|
|
|
Three Months Ended
March 31, |
||||||
(in thousands, except per share data)
|
2018
|
|
2017
|
||||
Numerator:
|
|
|
|
||||
Net income
|
$
|
8,151
|
|
|
$
|
18,785
|
|
Less: income allocated to unvested restricted shares
|
(323
|
)
|
|
(239
|
)
|
||
Net income attributable to common shareholders - basic
|
7,828
|
|
|
18,546
|
|
||
Add: undistributed income attributable to unvested restricted shares - basic
|
—
|
|
|
23
|
|
||
Less: undistributed income attributable to unvested restricted shares - diluted
|
—
|
|
|
(23
|
)
|
||
Net income attributable to common shareholders - diluted
|
$
|
7,828
|
|
|
$
|
18,546
|
|
Denominator:
|
|
|
|
||||
Weighted average shares outstanding - basic and diluted
|
59,969
|
|
|
60,013
|
|
||
Net income per share attributable to common shareholders:
|
|
|
|
||||
Basic and diluted
|
$
|
0.13
|
|
|
$
|
0.31
|
|
|
Retirement Plans
|
|
Currency
Translation
Adjustments
|
|
Other
|
|
Total
|
||||||||
Accumulated other comprehensive income (loss), December 31, 2017
|
$
|
(12,066
|
)
|
|
$
|
(13,185
|
)
|
|
$
|
167
|
|
|
$
|
(25,084
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
8,921
|
|
|
6
|
|
|
8,927
|
|
||||
Income tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income (loss) before reclassifications, net of tax
|
—
|
|
|
8,921
|
|
|
6
|
|
|
8,927
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
522
|
|
|
—
|
|
|
—
|
|
|
522
|
|
||||
Income tax
|
(142
|
)
|
|
—
|
|
|
—
|
|
|
(142
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
380
|
|
|
—
|
|
|
—
|
|
|
380
|
|
||||
Other comprehensive income (loss)
|
380
|
|
|
8,921
|
|
|
6
|
|
|
9,307
|
|
||||
Accumulated other comprehensive income (loss), March 31, 2018
|
$
|
(11,686
|
)
|
|
$
|
(4,264
|
)
|
|
$
|
173
|
|
|
$
|
(15,777
|
)
|
|
Retirement Plans
|
|
Currency
Translation
Adjustments
|
|
Other
|
|
Total
|
||||||||
Accumulated other comprehensive income (loss), December 31, 2016
|
$
|
(11,209
|
)
|
|
$
|
(56,245
|
)
|
|
$
|
(29
|
)
|
|
$
|
(67,483
|
)
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
|
5,492
|
|
|
110
|
|
|
5,602
|
|
||||
Income tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other comprehensive income (loss) before reclassifications, net of tax
|
—
|
|
|
5,492
|
|
|
110
|
|
|
5,602
|
|
||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
462
|
|
|
—
|
|
|
|
|
|
462
|
|
||||
Income tax
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
|
236
|
|
|
—
|
|
|
—
|
|
|
236
|
|
||||
Other comprehensive income (loss)
|
236
|
|
|
5,492
|
|
|
110
|
|
|
5,838
|
|
||||
Accumulated other comprehensive income (loss), March 31, 2017
|
$
|
(10,973
|
)
|
|
$
|
(50,753
|
)
|
|
$
|
81
|
|
|
$
|
(61,645
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net revenue:
|
|
|
|
||||
Segment net revenue
|
|
|
|
||||
Global Solutions
|
$
|
2,341,122
|
|
|
$
|
2,288,955
|
|
Global Products
|
121,287
|
|
|
137,153
|
|
||
Total segment net revenue
|
2,462,409
|
|
|
2,426,108
|
|
||
Inter-segment revenue
|
|
|
|
||||
Global Products
|
(89,830
|
)
|
|
(97,535
|
)
|
||
Total inter-segment revenue
|
(89,830
|
)
|
|
(97,535
|
)
|
||
Consolidated net revenue
|
$
|
2,372,579
|
|
|
$
|
2,328,573
|
|
|
|
|
|
||||
Operating income (loss):
|
|
|
|
||||
Global Solutions
|
$
|
31,625
|
|
|
$
|
37,951
|
|
Global Products
|
9,811
|
|
|
8,128
|
|
||
Inter-segment eliminations
|
(242
|
)
|
|
(698
|
)
|
||
Acquisition-related and exit and realignment charges
|
(14,760
|
)
|
|
(8,942
|
)
|
||
Other
(1)
|
(2,217
|
)
|
|
(922
|
)
|
||
Consolidated operating income
|
$
|
24,217
|
|
|
$
|
35,517
|
|
|
|
|
|
||||
Depreciation and amortization:
|
|
|
|
||||
Global Solutions
|
$
|
15,781
|
|
|
$
|
10,664
|
|
Global Products
|
2,130
|
|
|
1,894
|
|
||
Consolidated depreciation and amortization
|
$
|
17,911
|
|
|
$
|
12,558
|
|
|
|
|
|
||||
Capital expenditures:
|
|
|
|
||||
Global Solutions
|
$
|
13,602
|
|
|
$
|
13,840
|
|
Global Products
|
558
|
|
|
928
|
|
||
Consolidated capital expenditures
|
$
|
14,160
|
|
|
$
|
14,768
|
|
|
March 31, 2018
|
|
December 31, 2017
|
||||
Total assets:
|
|
|
|
||||
Global Solutions
|
$
|
2,900,618
|
|
|
$
|
2,870,999
|
|
Global Products
|
403,304
|
|
|
400,772
|
|
||
Segment assets
|
3,303,922
|
|
|
3,271,771
|
|
||
Cash and cash equivalents
|
87,632
|
|
|
104,522
|
|
||
Consolidated total assets
|
$
|
3,391,554
|
|
|
$
|
3,376,293
|
|
|
Three Months Ended March 31,
|
||||||
|
2018
|
|
2017
|
||||
Net revenue:
|
|
|
|
||||
United States
|
$
|
2,252,634
|
|
|
$
|
2,220,649
|
|
Outside of the United States
|
119,945
|
|
|
107,924
|
|
||
Consolidated net revenue
|
$
|
2,372,579
|
|
|
$
|
2,328,573
|
|
Three Months Ended March 31, 2018
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Statements of Income
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
$
|
—
|
|
|
$
|
2,110,861
|
|
|
$
|
301,266
|
|
|
$
|
(39,548
|
)
|
|
$
|
2,372,579
|
|
Cost of goods sold
|
—
|
|
|
1,914,637
|
|
|
172,726
|
|
|
(39,471
|
)
|
|
2,047,892
|
|
|||||
Gross margin
|
—
|
|
|
196,224
|
|
|
128,540
|
|
|
(77
|
)
|
|
324,687
|
|
|||||
Distribution, selling and administrative expenses
|
(179
|
)
|
|
160,870
|
|
|
123,670
|
|
|
—
|
|
|
284,361
|
|
|||||
Acquisition-related and exit and realignment charges
|
—
|
|
|
13,228
|
|
|
1,532
|
|
|
—
|
|
|
14,760
|
|
|||||
Other operating income, net
|
—
|
|
|
(583
|
)
|
|
1,932
|
|
|
—
|
|
|
1,349
|
|
|||||
Operating income (loss)
|
179
|
|
|
22,709
|
|
|
1,406
|
|
|
(77
|
)
|
|
24,217
|
|
|||||
Interest expense (income), net
|
6,741
|
|
|
2,022
|
|
|
1,490
|
|
|
—
|
|
|
10,253
|
|
|||||
Income (loss) before income taxes
|
(6,562
|
)
|
|
20,687
|
|
|
(84
|
)
|
|
(77
|
)
|
|
13,964
|
|
|||||
Income tax (benefit) provision
|
—
|
|
|
4,456
|
|
|
1,357
|
|
|
—
|
|
|
5,813
|
|
|||||
Equity in earnings of subsidiaries
|
14,713
|
|
|
2,210
|
|
|
—
|
|
|
(16,923
|
)
|
|
—
|
|
|||||
Net income (loss)
|
8,151
|
|
|
18,441
|
|
|
(1,441
|
)
|
|
(17,000
|
)
|
|
8,151
|
|
|||||
Other comprehensive income (loss)
|
9,307
|
|
|
9,363
|
|
|
8,921
|
|
|
(18,284
|
)
|
|
9,307
|
|
|||||
Comprehensive income (loss)
|
$
|
17,458
|
|
|
$
|
27,804
|
|
|
$
|
7,480
|
|
|
$
|
(35,284
|
)
|
|
$
|
17,458
|
|
Three Months Ended March 31, 2017
|
Owens &
Minor, Inc. |
|
Guarantor
Subsidiaries |
|
Non-guarantor
Subsidiaries |
|
Eliminations
|
|
Consolidated
|
||||||||||
Statements of Income
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenue
|
$
|
—
|
|
|
$
|
2,193,285
|
|
|
$
|
186,854
|
|
|
$
|
(51,566
|
)
|
|
$
|
2,328,573
|
|
Cost of goods sold
|
—
|
|
|
1,990,186
|
|
|
108,185
|
|
|
(50,978
|
)
|
|
2,047,393
|
|
|||||
Gross margin
|
—
|
|
|
203,099
|
|
|
78,669
|
|
|
(588
|
)
|
|
281,180
|
|
|||||
Distribution, selling and administrative expenses
|
156
|
|
|
161,235
|
|
|
76,302
|
|
|
—
|
|
|
237,693
|
|
|||||
Acquisition-related and exit and realignment charges
|
—
|
|
|
7,799
|
|
|
1,143
|
|
|
—
|
|
|
8,942
|
|
|||||
Other operating income, net
|
—
|
|
|
(374
|
)
|
|
(598
|
)
|
|
—
|
|
|
(972
|
)
|
|||||
Operating income (loss)
|
(156
|
)
|
|
34,439
|
|
|
1,822
|
|
|
(588
|
)
|
|
35,517
|
|
|||||
Interest expense (income), net
|
6,848
|
|
|
(790
|
)
|
|
686
|
|
|
—
|
|
|
6,744
|
|
|||||
Income (loss) before income taxes
|
(7,004
|
)
|
|
35,229
|
|
|
1,136
|
|
|
(588
|
)
|
|
28,773
|
|
|||||
Income tax (benefit) provision
|
—
|
|
|
8,013
|
|
|
1,975
|
|
|
—
|
|
|
9,988
|
|
|||||
Equity in earnings of subsidiaries
|
25,789
|
|
|
(1,105
|
)
|
|
—
|
|
|
(24,684
|
)
|
|
—
|
|
|||||
Net income (loss)
|
18,785
|
|
|
26,111
|
|
|
(839
|
)
|
|
(25,272
|
)
|
|
18,785
|
|
|||||
Other comprehensive income (loss)
|
5,838
|
|
|
5,644
|
|
|
5,492
|
|
|
(11,136
|
)
|
|
5,838
|
|
|||||
Comprehensive income (loss)
|
$
|
24,623
|
|
|
$
|
31,755
|
|
|
$
|
4,653
|
|
|
$
|
(36,408
|
)
|
|
$
|
24,623
|
|
March 31, 2018
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-
guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|||||||||||
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current assets
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and cash equivalents
|
$
|
13,271
|
|
|
$
|
1,018
|
|
|
$
|
73,343
|
|
|
$
|
—
|
|
|
$
|
87,632
|
|
|
Accounts receivable, net
|
—
|
|
|
613,000
|
|
|
172,044
|
|
|
(6,889
|
)
|
|
778,155
|
|
||||||
Merchandise inventories
|
—
|
|
|
933,024
|
|
|
90,342
|
|
|
(1,655
|
)
|
|
1,021,711
|
|
||||||
Other current assets
|
25
|
|
|
111,987
|
|
|
188,263
|
|
|
—
|
|
|
300,275
|
|
||||||
Total current assets
|
13,296
|
|
|
1,659,029
|
|
|
523,992
|
|
|
(8,544
|
)
|
|
2,187,773
|
|
||||||
Property and equipment, net
|
—
|
|
|
108,770
|
|
|
98,272
|
|
|
—
|
|
|
207,042
|
|
||||||
Goodwill, net
|
—
|
|
|
180,006
|
|
|
535,439
|
|
|
—
|
|
|
715,445
|
|
||||||
Intangible assets, net
|
—
|
|
|
9,064
|
|
|
169,816
|
|
|
—
|
|
|
178,880
|
|
||||||
Due from O&M and subsidiaries
|
—
|
|
|
413,109
|
|
|
—
|
|
|
(413,109
|
)
|
|
—
|
|
||||||
Advances to and investment in consolidated subsidiaries
|
2,129,567
|
|
|
566,615
|
|
|
—
|
|
|
(2,696,182
|
)
|
|
—
|
|
||||||
Other assets, net
|
—
|
|
|
67,071
|
|
|
35,343
|
|
|
—
|
|
|
102,414
|
|
||||||
Total assets
|
$
|
2,142,863
|
|
|
$
|
3,003,664
|
|
|
$
|
1,362,862
|
|
|
$
|
(3,117,835
|
)
|
|
$
|
3,391,554
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|||||||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accounts payable
|
$
|
—
|
|
|
$
|
841,364
|
|
|
$
|
123,814
|
|
|
$
|
(6,908
|
)
|
|
$
|
958,270
|
|
|
Accrued payroll and related liabilities
|
—
|
|
|
14,888
|
|
|
15,592
|
|
|
—
|
|
|
30,480
|
|
||||||
Other accrued liabilities
|
5,867
|
|
|
166,738
|
|
|
164,625
|
|
|
—
|
|
|
337,230
|
|
||||||
Total current liabilities
|
5,867
|
|
|
1,022,990
|
|
|
304,031
|
|
|
(6,908
|
)
|
|
1,325,980
|
|
||||||
Long-term debt, excluding current portion
|
545,603
|
|
|
337,024
|
|
|
14,444
|
|
|
—
|
|
|
897,071
|
|
||||||
Due to O&M and subsidiaries
|
572,475
|
|
|
—
|
|
|
460,381
|
|
|
(1,032,856
|
)
|
|
—
|
|
||||||
Intercompany debt
|
—
|
|
|
138,890
|
|
|
—
|
|
|
(138,890
|
)
|
|
—
|
|
||||||
Deferred income taxes
|
—
|
|
|
24,058
|
|
|
49,122
|
|
|
—
|
|
|
73,180
|
|
||||||
Other liabilities
|
—
|
|
|
66,152
|
|
|
10,253
|
|
|
—
|
|
|
76,405
|
|
||||||
Total liabilities
|
1,123,945
|
|
|
1,589,114
|
|
|
838,231
|
|
|
(1,178,654
|
)
|
|
2,372,636
|
|
||||||
Equity
|
|
|
|
|
|
|
|
|
|
|||||||||||
Common stock
|
123,624
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
123,624
|
|
||||||
Paid-in capital
|
228,273
|
|
|
174,614
|
|
|
583,866
|
|
|
(758,480
|
)
|
|
228,273
|
|
||||||
Retained earnings (deficit)
|
682,798
|
|
|
1,254,606
|
|
|
(54,857
|
)
|
|
(1,199,749
|
)
|
|
682,798
|
|
||||||
Accumulated other comprehensive income (loss)
|
(15,777
|
)
|
|
(14,670
|
)
|
|
(4,378
|
)
|
|
19,048
|
|
|
(15,777
|
)
|
||||||
Total equity
|
1,018,918
|
|
|
1,414,550
|
|
|
524,631
|
|
|
(1,939,181
|
)
|
|
1,018,918
|
|
||||||
Total liabilities and equity
|
$
|
2,142,863
|
|
|
$
|
3,003,664
|
|
|
$
|
1,362,862
|
|
|
$
|
(3,117,835
|
)
|
|
$
|
3,391,554
|
|
December 31, 2017
|
Owens &
Minor, Inc. |
|
Guarantor
Subsidiaries |
|
Non-guarantor
Subsidiaries |
|
Eliminations
|
|
Consolidated
|
||||||||||
Balance Sheets
|
|
|
|
|
|
|
|
|
|
||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||||
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
$
|
13,700
|
|
|
$
|
865
|
|
|
$
|
89,957
|
|
|
$
|
—
|
|
|
$
|
104,522
|
|
Accounts receivable, net
|
—
|
|
|
559,269
|
|
|
206,410
|
|
|
(6,743
|
)
|
|
758,936
|
|
|||||
Merchandise inventories
|
—
|
|
|
902,190
|
|
|
89,580
|
|
|
(1,577
|
)
|
|
990,193
|
|
|||||
Other current assets
|
100
|
|
|
123,067
|
|
|
205,087
|
|
|
—
|
|
|
328,254
|
|
|||||
Total current assets
|
13,800
|
|
|
1,585,391
|
|
|
591,034
|
|
|
(8,320
|
)
|
|
2,181,905
|
|
|||||
Property and equipment, net
|
—
|
|
|
107,010
|
|
|
99,480
|
|
|
—
|
|
|
206,490
|
|
|||||
Goodwill, net
|
—
|
|
|
180,006
|
|
|
533,805
|
|
|
—
|
|
|
713,811
|
|
|||||
Intangible assets, net
|
—
|
|
|
9,582
|
|
|
174,886
|
|
|
—
|
|
|
184,468
|
|
|||||
Due from O&M and subsidiaries
|
—
|
|
|
439,654
|
|
|
—
|
|
|
(439,654
|
)
|
|
—
|
|
|||||
Advances to and investments in consolidated subsidiaries
|
2,114,853
|
|
|
558,429
|
|
|
—
|
|
|
(2,673,282
|
)
|
|
—
|
|
|||||
Other assets, net
|
—
|
|
|
57,724
|
|
|
31,895
|
|
|
—
|
|
|
89,619
|
|
|||||
Total assets
|
$
|
2,128,653
|
|
|
$
|
2,937,796
|
|
|
$
|
1,431,100
|
|
|
$
|
(3,121,256
|
)
|
|
$
|
3,376,293
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
||||||||||
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable
|
$
|
—
|
|
|
$
|
824,307
|
|
|
$
|
130,028
|
|
|
$
|
(6,763
|
)
|
|
$
|
947,572
|
|
Accrued payroll and related liabilities
|
—
|
|
|
15,504
|
|
|
14,912
|
|
|
—
|
|
|
30,416
|
|
|||||
Other current liabilities
|
5,822
|
|
|
140,048
|
|
|
185,875
|
|
|
—
|
|
|
331,745
|
|
|||||
Total current liabilities
|
5,822
|
|
|
979,859
|
|
|
330,815
|
|
|
(6,763
|
)
|
|
1,309,733
|
|
|||||
Long-term debt, excluding current portion
|
545,352
|
|
|
340,672
|
|
|
14,720
|
|
|
—
|
|
|
900,744
|
|
|||||
Due to O&M and subsidiaries
|
562,000
|
|
|
—
|
|
|
506,703
|
|
|
(1,068,703
|
)
|
|
—
|
|
|||||
Intercompany debt
|
—
|
|
|
138,890
|
|
|
—
|
|
|
(138,890
|
)
|
|
—
|
|
|||||
Deferred income taxes
|
—
|
|
|
25,493
|
|
|
48,754
|
|
|
—
|
|
|
74,247
|
|
|||||
Other liabilities
|
—
|
|
|
66,136
|
|
|
9,954
|
|
|
—
|
|
|
76,090
|
|
|||||
Total liabilities
|
1,113,174
|
|
|
1,551,050
|
|
|
910,946
|
|
|
(1,214,356
|
)
|
|
2,360,814
|
|
|||||
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
122,952
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122,952
|
|
|||||
Paid-in capital
|
226,937
|
|
|
174,614
|
|
|
583,869
|
|
|
(758,483
|
)
|
|
226,937
|
|
|||||
Retained earnings (deficit)
|
690,674
|
|
|
1,236,165
|
|
|
(50,416
|
)
|
|
(1,185,749
|
)
|
|
690,674
|
|
|||||
Accumulated other comprehensive income (loss)
|
(25,084
|
)
|
|
(24,033
|
)
|
|
(13,299
|
)
|
|
37,332
|
|
|
(25,084
|
)
|
|||||
Total equity
|
1,015,479
|
|
|
$
|
1,386,746
|
|
|
520,154
|
|
|
(1,906,900
|
)
|
|
1,015,479
|
|
||||
Total liabilities and equity
|
$
|
2,128,653
|
|
|
$
|
2,937,796
|
|
|
$
|
1,431,100
|
|
|
$
|
(3,121,256
|
)
|
|
$
|
3,376,293
|
|
Three Months Ended March 31, 2018
|
Owens &
Minor, Inc.
|
|
Guarantor
Subsidiaries
|
|
Non-guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|||||||||||
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss)
|
$
|
8,151
|
|
|
$
|
18,441
|
|
|
$
|
(1,441
|
)
|
|
$
|
(17,000
|
)
|
|
$
|
8,151
|
|
|
Adjustments to reconcile net income to cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity in earnings of subsidiaries
|
(14,713
|
)
|
|
(2,210
|
)
|
|
—
|
|
|
16,923
|
|
|
—
|
|
||||||
Depreciation and amortization
|
—
|
|
|
6,653
|
|
|
11,258
|
|
|
—
|
|
|
17,911
|
|
||||||
Share-based compensation expense
|
—
|
|
|
3,035
|
|
|
—
|
|
|
—
|
|
|
3,035
|
|
||||||
Provision for losses on accounts receivable
|
—
|
|
|
(724
|
)
|
|
1,797
|
|
|
—
|
|
|
1,073
|
|
||||||
Deferred income tax expense (benefit)
|
—
|
|
|
(1,453
|
)
|
|
(29
|
)
|
|
—
|
|
|
(1,482
|
)
|
||||||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accounts receivable
|
—
|
|
|
(53,007
|
)
|
|
34,341
|
|
|
147
|
|
|
(18,519
|
)
|
||||||
Merchandise inventories
|
—
|
|
|
(30,834
|
)
|
|
202
|
|
|
76
|
|
|
(30,556
|
)
|
||||||
Accounts payable
|
—
|
|
|
17,057
|
|
|
(7,439
|
)
|
|
(140
|
)
|
|
9,478
|
|
||||||
Net change in other assets and liabilities
|
121
|
|
|
31,976
|
|
|
(3,187
|
)
|
|
(6
|
)
|
|
28,904
|
|
||||||
Other, net
|
250
|
|
|
132
|
|
|
(104
|
)
|
|
—
|
|
|
278
|
|
||||||
Cash provided by (used for) operating activities
|
(6,191
|
)
|
|
(10,934
|
)
|
|
35,398
|
|
|
—
|
|
|
18,273
|
|
||||||
Investing activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additions to property and equipment
|
—
|
|
|
(5,847
|
)
|
|
(1,227
|
)
|
|
—
|
|
|
(7,074
|
)
|
||||||
Additions to computer software and intangible assets
|
—
|
|
|
(6,078
|
)
|
|
(1,008
|
)
|
|
—
|
|
|
(7,086
|
)
|
||||||
Cash provided by (used for) investing activities
|
—
|
|
|
(11,925
|
)
|
|
(2,235
|
)
|
|
—
|
|
|
(14,160
|
)
|
||||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Borrowing (repayments) under revolving credit facility
|
—
|
|
|
(300
|
)
|
|
—
|
|
|
—
|
|
|
(300
|
)
|
||||||
Repayment of debt
|
—
|
|
|
(3,125
|
)
|
|
—
|
|
|
—
|
|
|
(3,125
|
)
|
||||||
Change in intercompany advances
|
22,949
|
|
|
26,858
|
|
|
(49,807
|
)
|
|
—
|
|
|
—
|
|
||||||
Cash dividends paid
|
(16,074
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16,074
|
)
|
||||||
Other, net
|
(1,113
|
)
|
|
(421
|
)
|
|
(770
|
)
|
|
—
|
|
|
(2,304
|
)
|
||||||
Cash provided by (used for) financing activities
|
5,762
|
|
|
23,012
|
|
|
(50,577
|
)
|
|
—
|
|
|
(21,803
|
)
|
||||||
Effect of exchange rate changes on cash and cash
equivalents
|
—
|
|
|
—
|
|
|
800
|
|
|
—
|
|
|
800
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
(429
|
)
|
|
153
|
|
|
(16,614
|
)
|
|
—
|
|
|
(16,890
|
)
|
||||||
Cash and cash equivalents at beginning of period
|
13,700
|
|
|
865
|
|
|
89,957
|
|
|
—
|
|
|
104,522
|
|
||||||
Cash and cash equivalents at end of period
|
$
|
13,271
|
|
|
$
|
1,018
|
|
|
$
|
73,343
|
|
|
$
|
—
|
|
|
$
|
87,632
|
|
Three Months Ended March 31, 2017
|
Owens &
Minor, Inc. |
|
Guarantor
Subsidiaries |
|
Non-guarantor
Subsidiaries |
|
Eliminations
|
|
Consolidated
|
|||||||||||
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss)
|
$
|
18,785
|
|
|
$
|
26,111
|
|
|
$
|
(839
|
)
|
|
$
|
(25,272
|
)
|
|
$
|
18,785
|
|
|
Adjustments to reconcile net income to cash provided by (used for) operating activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Equity in earnings of subsidiaries
|
(25,789
|
)
|
|
1,105
|
|
|
—
|
|
|
24,684
|
|
|
—
|
|
||||||
Depreciation and amortization
|
—
|
|
|
6,876
|
|
|
5,682
|
|
|
—
|
|
|
12,558
|
|
||||||
Share-based compensation expense
|
—
|
|
|
2,511
|
|
|
—
|
|
|
—
|
|
|
2,511
|
|
||||||
Provision for losses on accounts receivable
|
—
|
|
|
(707
|
)
|
|
104
|
|
|
—
|
|
|
(603
|
)
|
||||||
Deferred income tax expense (benefit)
|
—
|
|
|
(825
|
)
|
|
—
|
|
|
—
|
|
|
(825
|
)
|
||||||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accounts receivable
|
—
|
|
|
2,459
|
|
|
(131
|
)
|
|
(774
|
)
|
|
1,554
|
|
||||||
Merchandise inventories
|
—
|
|
|
(3,311
|
)
|
|
(30,154
|
)
|
|
688
|
|
|
(32,777
|
)
|
||||||
Accounts payable
|
37
|
|
|
(15,051
|
)
|
|
6,999
|
|
|
674
|
|
|
(7,341
|
)
|
||||||
Net change in other assets and liabilities
|
164
|
|
|
(3,434
|
)
|
|
(21,695
|
)
|
|
—
|
|
|
(24,965
|
)
|
||||||
Other, net
|
214
|
|
|
4,549
|
|
|
(20
|
)
|
|
—
|
|
|
4,743
|
|
||||||
Cash provided by (used for) operating activities
|
(6,589
|
)
|
|
20,283
|
|
|
(40,054
|
)
|
|
—
|
|
|
(26,360
|
)
|
||||||
Investing activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Additions to property and equipment
|
—
|
|
|
(8,141
|
)
|
|
(2,005
|
)
|
|
—
|
|
|
(10,146
|
)
|
||||||
Additions to computer software and intangible assets
|
—
|
|
|
(677
|
)
|
|
(3,945
|
)
|
|
—
|
|
|
(4,622
|
)
|
||||||
Proceeds from the sale of property and equipment
|
—
|
|
|
45
|
|
|
270
|
|
|
—
|
|
|
315
|
|
||||||
Cash provided by (used for) investing activities
|
—
|
|
|
(8,773
|
)
|
|
(5,680
|
)
|
|
—
|
|
|
(14,453
|
)
|
||||||
Financing activities:
|
|
|
|
|
|
|
|
|
|
|||||||||||
Change in intercompany advances
|
49,025
|
|
|
(56,375
|
)
|
|
7,350
|
|
|
—
|
|
|
—
|
|
||||||
Cash dividends paid
|
(15,740
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,740
|
)
|
||||||
Other, net
|
(1,541
|
)
|
|
(516
|
)
|
|
(702
|
)
|
|
—
|
|
|
(2,759
|
)
|
||||||
Cash provided by (used for) financing activities
|
31,744
|
|
|
(56,891
|
)
|
|
6,648
|
|
|
—
|
|
|
(18,499
|
)
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
991
|
|
|
—
|
|
|
991
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
25,155
|
|
|
(45,381
|
)
|
|
(38,095
|
)
|
|
—
|
|
|
(58,321
|
)
|
||||||
Cash and cash equivalents at beginning of period
|
38,015
|
|
|
61,266
|
|
|
86,207
|
|
|
—
|
|
|
185,488
|
|
||||||
Cash and cash equivalents at end of period
|
$
|
63,170
|
|
|
$
|
15,885
|
|
|
$
|
48,112
|
|
|
$
|
—
|
|
|
$
|
127,167
|
|
•
|
lender commitments and funding for a
$195.75 million
term A-2 loan with a
four
-year maturity and a
$254.25 million
term B loan with a
seven
-year maturity;
|
•
|
lender commitments and funding for an additional
$245.75 million
of term B loans with a
seven
-year maturity;
|
•
|
interest rate pricing grid based on the better of debt to EBITDA ratio or credit ratings for all loans other than the term B loans;
|
•
|
a new interest rate margin for term B loans of
3.50%
per annum with respect to Base Rate Loans (as defined in the Credit Agreement), and
4.50%
per annum with respect to Eurocurrency Rate Loans (as defined in the Credit Agreement);
|
•
|
amended financial covenant-related definitions and amendments to certain customary affirmative and negative covenants;
|
•
|
the addition of collateral for the benefit of the Secured Parties (as defined), first priority liens and security interests (“Liens”) in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries (limited, in the case of controlled foreign corporations, to a pledge of
65%
of the voting capital stock of each first-tier foreign subsidiary of each Credit Party) and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions;
|
•
|
addition of a “springing maturity date” with respect to (i) the term B loans, if as of the date that is
91
days prior to the maturity date of the Company’s
3.875%
senior notes due 2021 (the “
2021 Notes
”) or
4.375%
senior notes due 2024 (the “
2024 Notes
”), all outstanding amounts owing under the 2021 Notes or the 2024 Notes, respectively, have not been paid in full and (ii) the revolving loans and the term A loans, if as of the date that is
91
days prior to the 2021 Notes maturity date, all outstanding amounts owing under the 2021 Notes have not been paid in full; and
|
•
|
extension of the “soft call” provision from
six
months to
twelve
months.
|
|
Three Months Ended March 31,
|
||||||
(Dollars in thousands except per share data)
|
2018
|
|
2017
|
||||
Operating income, as reported (GAAP)
|
$
|
24,217
|
|
|
$
|
35,517
|
|
Acquisition-related intangible amortization
(1)
|
6,407
|
|
|
2,319
|
|
||
Acquisition-related and exit and realignment charges
(2)
|
14,760
|
|
|
8,942
|
|
||
Other
(3)
|
2,217
|
|
|
922
|
|
||
Operating income, adjusted (non-GAAP) (Adjusted Operated Income)
|
$
|
47,601
|
|
|
$
|
47,700
|
|
Operating Income as a percent of revenue (GAAP)
|
1.02
|
%
|
|
1.53
|
%
|
||
Adjusted Operating Income as a percent of revenue (non-GAAP)
|
2.01
|
%
|
|
2.05
|
%
|
||
|
|
|
|
||||
Net income, as reported (GAAP)
|
$
|
8,151
|
|
|
$
|
18,785
|
|
Acquisition-related intangible amortization
(1)
|
6,407
|
|
|
2,319
|
|
||
Income tax expense (benefit)
(4)
|
(1,557
|
)
|
|
(696
|
)
|
||
Acquisition-related and exit and realignment charges
(2)
|
14,760
|
|
|
8,942
|
|
||
Income tax expense (benefit)
(4)
|
(3,576
|
)
|
|
(3,505
|
)
|
||
Other
(3)
|
2,217
|
|
|
922
|
|
||
Income tax expense (benefit)
(4)
|
(228
|
)
|
|
(354
|
)
|
||
Net income, adjusted (non-GAAP) (Adjusted Net Income)
|
$
|
26,174
|
|
|
$
|
26,413
|
|
|
|
|
|
||||
Net income per diluted common share, as reported (GAAP)
|
$
|
0.13
|
|
|
$
|
0.31
|
|
Acquisition-related intangible amortization
(1)
|
0.08
|
|
|
0.03
|
|
||
Acquisition-related and exit and realignment charges
(2)
|
0.19
|
|
|
0.09
|
|
||
Other
(3)
|
0.03
|
|
|
0.01
|
|
||
Net income per diluted common share, adjusted (non-GAAP)(Adjusted EPS)
|
$
|
0.43
|
|
|
$
|
0.44
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Global Solutions
|
$
|
2,341,122
|
|
|
$
|
2,288,955
|
|
|
$
|
52,167
|
|
|
2.3
|
%
|
Global Products
|
121,287
|
|
|
137,153
|
|
|
(15,866
|
)
|
|
(11.6
|
)%
|
|||
Inter-segment
|
(89,830
|
)
|
|
(97,535
|
)
|
|
7,705
|
|
|
7.9
|
%
|
|||
Net revenue
|
$
|
2,372,579
|
|
|
$
|
2,328,573
|
|
|
$
|
44,006
|
|
|
1.9
|
%
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Cost of goods sold
|
$
|
2,047,892
|
|
|
$
|
2,047,393
|
|
|
$
|
499
|
|
|
—
|
%
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Gross margin
|
$
|
324,687
|
|
|
$
|
281,180
|
|
|
$
|
43,507
|
|
|
15.5
|
%
|
As a % of net revenue
|
13.68
|
%
|
|
12.08
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Distribution, selling & administrative expenses
|
$
|
284,361
|
|
|
$
|
237,693
|
|
|
$
|
46,668
|
|
|
19.6
|
%
|
As a % of net revenue
|
11.99
|
%
|
|
10.21
|
%
|
|
|
|
|
|||||
Other operating (income) expense, net
|
$
|
1,349
|
|
|
$
|
(972
|
)
|
|
$
|
2,321
|
|
|
238.8
|
%
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Interest expense, net
|
$
|
10,253
|
|
|
$
|
6,744
|
|
|
$
|
3,509
|
|
|
52.0
|
%
|
Effective interest rate
|
4.52
|
%
|
|
4.59
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
|
Change
|
|||||||||||
(Dollars in thousands)
|
2018
|
|
2017
|
|
$
|
|
%
|
|||||||
Income tax provision
|
$
|
5,813
|
|
|
$
|
9,988
|
|
|
$
|
(4,175
|
)
|
|
(41.8
|
)%
|
Effective tax rate
|
41.6
|
%
|
|
34.7
|
%
|
|
|
|
|
|
March 31, 2018
|
|
December 31, 2017
|
|
Change
|
|||||||||
(Dollars in thousands)
|
|
|
$
|
|
%
|
|||||||||
Cash and cash equivalents
|
$
|
87,632
|
|
|
$
|
104,522
|
|
|
$
|
(16,890
|
)
|
|
(16.2
|
)%
|
Accounts receivable, net of allowances
|
$
|
778,155
|
|
|
$
|
758,936
|
|
|
$
|
19,219
|
|
|
2.5
|
%
|
Consolidated DSO
(1)
|
28.9
|
|
|
28.7
|
|
|
|
|
|
|||||
Merchandise inventories
|
$
|
1,021,711
|
|
|
$
|
990,193
|
|
|
$
|
31,518
|
|
|
3.2
|
%
|
Consolidated inventory turnover
(2)
|
8.3
|
|
|
8.5
|
|
|
|
|
|
|||||
Accounts payable
|
$
|
958,270
|
|
|
$
|
947,572
|
|
|
$
|
10,698
|
|
|
1.1
|
%
|
(Dollars in thousands)
|
2018
|
|
2017
|
||||
Net cash provided by (used for):
|
|
|
|
||||
Operating activities
|
$
|
18,273
|
|
|
$
|
(26,360
|
)
|
Investing activities
|
(14,160
|
)
|
|
(14,453
|
)
|
||
Financing activities
|
(21,803
|
)
|
|
(18,499
|
)
|
||
Effect of exchange rate changes
|
800
|
|
|
991
|
|
||
Increase (decrease) in cash and cash equivalents
|
$
|
(16,890
|
)
|
|
$
|
(58,321
|
)
|
•
|
competitive pressures in the marketplace, including intense pricing pressure;
|
•
|
our ability to retain existing and attract new customers in a market characterized by significant customer consolidation and intense cost-containment initiatives;
|
•
|
our dependence on sales to certain customers or the loss or material reduction in purchases by key customers;
|
•
|
our dependence on distribution of product of certain suppliers;
|
•
|
our ability to successfully identify, manage or integrate acquisitions, including our ability to successfully integrate the S&IP business into our operations and to realize the anticipated benefits and synergies from the S&IP acquisition;
|
•
|
our ability to successfully manage our international operations, including risks associated with changes in international trade regulations, foreign currency volatility, changes in regulatory conditions, deteriorating economic conditions, adverse tax consequences, and other risks of operating in international markets;
|
•
|
uncertainties related to and our ability to adapt to changes in government regulations, including healthcare laws and regulations (including the Affordable Care Act);
|
•
|
risks arising from possible violations of legal, regulatory or licensing requirements of the markets in which we operate;
|
•
|
uncertainties related to general economic, regulatory and business conditions;
|
•
|
our ability to successfully implement our strategic initiatives;
|
•
|
the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;
|
•
|
our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;
|
•
|
the ability of customers and suppliers to meet financial commitments due to us;
|
•
|
changes in manufacturer preferences between direct sales and wholesale distribution;
|
•
|
changing trends in customer profiles and ordering patterns and our ability to meet customer demand for additional value-added services;
|
•
|
our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;
|
•
|
our ability to meet performance targets specified by customer contracts under contractual commitments;
|
•
|
availability of and our ability to access special inventory buying opportunities;
|
•
|
the ability of business partners and financial institutions to perform their contractual responsibilities;
|
•
|
the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;
|
•
|
our ability to continue to obtain financing at reasonable rates and to manage financing costs and interest rate risk;
|
•
|
the risk that information systems are interrupted or damaged or fail for any extended period of time, that new information systems are not successfully implemented or integrated, or that there is a data security breach in our information systems;
|
•
|
the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived assets;
|
•
|
our ability to timely or adequately respond to technological advances in the medical supply industry;
|
•
|
the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims;
|
•
|
adverse changes in U.S. and foreign tax laws and the outcome of outstanding tax contingencies and legislative and tax proposals;
|
•
|
our ability to successfully implement the expense reduction and productivity and efficiency increasing initiatives of our Rapid Business Transformation (RBT);
|
•
|
our ability to continue to comply with the terms and conditions of Byram Healthcare’s Corporate Integrity Agreement;
|
•
|
the potentially adverse impact of the United Kingdom’s planned withdrawal from the European Union; and
|
•
|
other factors detailed from time to time in the reports we file with the SEC.
|
•
|
Expenses and difficulties in the transition and integration of operations and systems;
|
•
|
Retention of current customers and the ability to obtain new customers;
|
•
|
The assimilation and retention of personnel, including management personnel, in the acquired businesses;
|
•
|
Accounting, tax, regulatory and compliance issues that could arise;
|
•
|
Difficulties in implementing uniform controls, procedures and policies in our acquired companies, or in remediating control deficiencies in acquired companies not formerly subject to the Sarbanes-Oxley Act of 2002;
|
•
|
Unanticipated expenses incurred or charges to earnings based on unknown circumstances or liabilities;
|
•
|
Failure to realize the synergies and other benefits we expect from the acquisition at the pace we anticipate;
|
•
|
General economic conditions in the markets in which the acquired businesses operate; and
|
•
|
Difficulties encountered in conducting business in markets where we have limited experience and expertise.
|
•
|
Lack of familiarity with and expertise in conducting business in foreign markets;
|
•
|
Foreign currency fluctuations and exchange risk;
|
•
|
Unexpected changes in foreign regulations or conditions relating to labor, economic or political environment, and social norms or requirements;
|
•
|
Adverse tax consequences and difficulties in repatriating cash generated or held abroad;
|
•
|
Local economic environments, such as in the European markets served by Movianto, ArcRoyal and Halyard Health’s S&IP business, including recession, inflation, indebtedness, currency volatility and competition; and
|
•
|
Changes in trade protection laws and other laws affecting trade and investment, including import/export regulations in both the United States and foreign countries.
|
•
|
The inability to successfully combine operations in a manner that would result in the anticipated benefits of the S&IP Acquisition in the time frame currently anticipated or at all;
|
•
|
Complexities associated with managing the expanded operations;
|
•
|
Integrating personnel;
|
•
|
Creation of uniform standards, internal controls, procedures, policies and information systems;
|
•
|
Unforeseen increased expenses, delays or regulatory issues associated with integrating the operations; and
|
•
|
Performance shortfalls as a result of the diversion of management attention caused by completing the integration of the operations.
|
•
|
lender commitments for an additional $245.75 million of term B loans with a seven-year maturity funded on May 9, 2018 (the proceeds of which were used to pay down outstanding revolving borrowings incurred in connection with the Company’s acquisition of Halyard Health, Inc.’s Surgical and Infection Prevention business (the “
Acquisition
”));
|
•
|
a new interest rate margin for term B loans of 3.50% per annum with respect to Base Rate Loans (as defined in the Credit Agreement), and 4.50% per annum with respect to Eurocurrency Rate Loans (as defined in the Credit Agreement);
|
•
|
addition of a “springing maturity date” with respect to (i) the term B loans, if as of the date that is 91 days prior to the maturity date of the Company’s 3.875% senior notes due 2021 (the “
2021 Notes
”) or 4.375% senior notes due 2024 (the “
2024 Notes
”), all outstanding amounts owing under the 2021 Notes or the 2024 Notes, respectively, have not been paid in full and (ii) the revolving loans and the term A loans, if as of the date that is 91 days prior to the 2021 Notes maturity date, all outstanding amounts owing under the 2021 Notes have not been paid in full; and
|
•
|
extension of the “soft call” provision from six months to twelve months.
|
(a)
|
Exhibits
|
2.1
|
|
|
|
|
|
3.1
|
|
|
|
|
|
3.2
|
|
|
|
|
|
4.1
|
|
|
|
|
|
10.1
|
|
|
|
|
|
10.2
|
|
|
|
|
|
10.3
|
|
|
|
|
|
10.4
|
|
|
|
|
|
10.5
|
|
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
10.8
|
|
|
|
|
|
10.9
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
* Certain exhibits and schedules been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC.
|
|
|
** Management contract or compensatory plan or arrangement
|
|
|
|
Owens & Minor, Inc.
|
|
|
|
(Registrant)
|
|
|
|
|
Date:
|
May 10, 2018
|
|
/s/ Paul C. Phipps
|
|
|
|
Paul C. Phipps
|
|
|
|
President & Chief Executive Officer
|
|
|
|
|
Date:
|
May 10, 2018
|
|
/s/ Richard A. Meier
|
|
|
|
Richard A. Meier
|
|
|
|
Executive Vice President, Chief Financial Officer & President, International
|
ADMINISTRATIVE AGENT
:
|
WELLS FARGO BANK, N.A.,
in its capacity as Administrative Agent |
COLLATERAL AGENT
:
|
BANK OF AMERICA, N.A.,
in its capacity as Term B Facility Agent and as Collateral Agent |
BANKS
:
|
WELLS FARGO BANK, N.A.,
in its capacity as a Bank, Issuing Bank and the Swingline Bank |
Bank
|
Second Amendment Effective Date Term B Commitment
|
Third Amendment Effective Date Term B Commitment
|
Term B Commitment Percentage
|
Bank of America, N.A.
|
$254,250,000.00
|
$245,750,000.00
|
100.000000000%
|
Wells Fargo Bank, N.A.
|
$0.00
|
$0.00
|
0.000000000%
|
JPMorgan Chase Bank, N.A.
|
$0.00
|
$0.00
|
0.000000000%
|
SunTrust Bank
|
$0.00
|
$0.00
|
0.000000000%
|
PNC Bank, National Association
|
$0.00
|
$0.00
|
0.000000000%
|
U.S. Bank National Association
|
$0.00
|
$0.00
|
0.000000000%
|
MUFG Bank, Ltd.
|
$0.00
|
$0.00
|
0.000000000%
|
Branch Banking& Trust Company
|
$0.00
|
$0.00
|
0.000000000%
|
Citibank, N.A.
|
$0.00
|
$0.00
|
0.000000000%
|
HSBC Bank USA, National Association
|
$0.00
|
$0.00
|
0.000000000%
|
Total:
|
$254,250,000.00
|
$245,750,000.00
|
100.000000000%
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 of Owens & Minor, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date:
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May 10, 2018
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/s/ Paul C. Phipps
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|
Paul C. Phipps
|
|
President & Chief Executive Officer
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1.
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I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, of Owens & Minor, Inc.;
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c.
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date:
|
May 10, 2018
|
/s/ Richard A. Meier
|
|
Richard A. Meier
|
|
Executive Vice President, Chief Financial Officer & President, International
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(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Paul C. Phipps
|
Paul C. Phipps
|
President & Chief Executive Officer
|
Owens & Minor, Inc.
|
May 10, 2018
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Richard A. Meier
|
Richard A. Meier
|
Executive Vice President, Chief Financial Officer & President, International
|
Owens & Minor, Inc.
|
May 10, 2018
|
|