Owens & Minor Reports Second Quarter 2024 Financial Results
Owens Minor, Inc. (NYSE: OMI) today reported financial results for the second quarter ended June 30, 2024.
Key Highlights:
Consolidated revenue of $2.7 billion in the second quarter, representing year-over-year growth of 4% Net loss of $(32) million or $(0.42) per share in the second quarter Adjusted EBITDA of $127 million in the second quarter, representing year-over-year growth of 12% Doubled second quarter year over year Adjusted earnings per share from $0.18 to $0.36“Our second-quarter performance is consistent with our expectations, as we are in the early stages of implementing our long-term strategy discussed at Investor Day in December 2023. Our previous investments in our Products Healthcare Services segment yielded positive results and generated top-line growth in our Medical Distribution division. Our Patient Direct segment performed in line with our expectations, and we expect the segment to benefit from seasonality and recent organic investments during the back half of the year,” said Edward A. Pesicka, President Chief Executive Officer of Owens Minor.
Financial Summary (1)
YTD
YTD
($ in millions, except per share data)
2Q24
2Q23
2024
2023
Revenue
$
2,671
$
2,563
$
5,284
$
5,086
Operating income, GAAP
$
20.3
$
10.8
$
30.0
$
20.6
Adj. Operating Income, Non-GAAP
$
76.3
$
62.0
$
133.6
$
109.7
Net loss, GAAP
$
(31.9
)
$
(28.2
)
$
(53.8
)
$
(52.7
)
Adj. Net Income, Non-GAAP
$
28.2
$
14.2
$
43.0
$
17.8
Adj. EBITDA, Non-GAAP
$
126.8
$
112.8
$
243.1
$
221.5
Net loss per common share, GAAP
$
(0.42
)
$
(0.37
)
$
(0.70
)
$
(0.70
)
Adj. Net Income per share, Non-GAAP
$
0.36
$
0.18
$
0.55
$
0.23
(1) Reconciliations of the differences between the non-GAAP financial measures presented in this release and their most directly comparable GAAP financial measures are included in the tables below.
Results and Business Highlights
Consolidated revenue of $2.7 billion in the second quarter of 2024, an increase of 4% compared to the second quarter of 2023 Patient Direct revenue of $660 million, up 4% compared to the second quarter of 2023 driven by continued strong growth in diabetes and sleep supplies Products Healthcare Services revenue of $2.0 billion, up 4% compared to the second quarter of 2023 driven by strong same store sales and new wins in our Medical Distribution division Second quarter 2024 operating income of $20.3 million and Adjusted Operating income of $76.3 million Operating income grew by 87% and Adjusted Operating income grew by 23% compared to the prior year Net loss of $(32) million and Adjusted Net Income of $28 million in the second quarter of 2024 Adjusted EBITDA of $127 million in the second quarter, representing year-over-year growth of 12% Operating cash flow for the second quarter of 2024 was $116 million Increased by $169 million as compared to the first quarter of 2024 Enabled $71 million debt reduction during the second quarterTax Matter
In the second quarter of 2024, the Company recorded a one-time income tax charge of $17 million (or $0.22 per share) related to a recent decision associated with Notices of Proposed Adjustments received in 2020 and 2021. This was communicated to the Company in late June 2024. Due to the nature of this charge, this item is included in our GAAP to Non-GAAP reconciliations. The matter at hand, as discussed in previously filed SEC documents, is related to past transfer pricing methodology, which is no longer employed. There is an expected related cash payment to be made in the second half of the year in the range of $30-$35 million. The Company believes the matter will be concluded without further impact to its financial results.
2024 Financial Outlook
The Company’s recently reaffirmed financial guidance; summarized below:
Revenue for 2024 to be in a range of $10.5 billion to $10.9 billion Adjusted EBITDA for 2024 to be in a range of $550 million to $590 million Adjusted EPS for 2024 to be in a range of $1.40 to $1.70The Company’s outlook for 2024 contains assumptions, including current expectations regarding the impact of general economic conditions, including inflation, and the continuation of pressure on pricing and demand in our Products Healthcare Services segment. Key assumptions supporting the Company’s 2024 financial guidance include:
Gross margin rate of 21.0% to 21.5% Interest expense of $141 to $146 million Adjusted effective tax rate of 27.5% to 28.5% Diluted weighted average shares of ~78.5 million Capital expenditures of $220 to $240 million Stable commodity prices FX rates as of 12/31/2023Although the Company does provide guidance for adjusted EBITDA and adjusted EPS (which are non-GAAP financial measures), it is not able to forecast the most directly comparable measures calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of the GAAP amounts are not predictable, making it impracticable for the Company to forecast. Such elements include, but are not limited to, restructuring and acquisition charges, which could have a significant and unpredictable impact on our GAAP results. As a result, no GAAP guidance or reconciliation of the Company’s adjusted EBITDA guidance or adjusted EPS guidance is provided. The outlook is based on certain assumptions that are subject to the risk factors discussed in the Company’s filings with the SEC.
Investor Conference Call for Second Quarter 2024 Financial Results
Owens Minor executives will host a conference call for investors and analysts on Friday, August 2, 2024, at 8:30 a.m. EDT. Participants may access the call via the toll-free dial-in number at 1-888-300-2035, or the toll dial-in number at 1-646-517-7437. The conference ID access code is 1058917.
All interested stakeholders are encouraged to access the simultaneous live webcast by visiting the investor relations page of the Owens Minor website available at investors.owens-minor.com/events-and-presentations/. A replay of the webcast can be accessed following the presentation at the link provided above.
Safe Harbor
This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the SEC's Fair Disclosure Regulation. This release contains certain ''forward-looking'' statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the statements in this release regarding our future prospects and performance, including our expectations with respect to our 2024 financial performance, our Operating Model Realignment Program and other cost-saving initiatives, future indebtedness and growth, industry trends, as well as statements related to our expectations regarding the performance of our business, including the results of our Operating Model Realignment Program and our ability to address macro and market conditions. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. Investors should refer to Owens Minor’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024, including the sections captioned “Cautionary Note Regarding Forward-Looking Statements” and “Item 1A. Risk Factors,” and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with or furnished to the SEC, for a discussion of certain known risk factors that could cause the Company’s actual results to differ materially from its current estimates. These filings are available at www.owens-minor.com. Given these risks and uncertainties, Owens Minor can give no assurance that any forward-looking statements will, in fact, transpire and, therefore, cautions investors not to place undue reliance on them. Owens Minor specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
About Owens Minor
Owens Minor, Inc. (NYSE: OMI) is a Fortune 500 global healthcare solutions company providing essential products and services that support care from the hospital to the home. For over 100 years, Owens Minor and its affiliated brands, Apria®, Byram® and HALYARD*, have helped to make each day better for the patients, providers, and communities we serve. Powered by more than 20,000 teammates worldwide, Owens Minor delivers comfort and confidence behind the scenes so healthcare stays at the forefront. Owens Minor exists because every day, everywhere, Life Takes Care™. For more information about Owens Minor and our affiliated brands, visit owens-minor.com or follow us on LinkedIn and Instagram.
*Registered Trademark or Trademark of O Halyard or its affiliates.
Owens Minor, Inc.
Consolidated Statements of Operations (unaudited)
(dollars in thousands, except per share data)
Three Months Ended June 30,
2024
2023
Net revenue
$
2,671,006
$
2,563,226
Cost of goods sold
2,126,853
2,043,794
Gross profit
544,153
519,432
Distribution, selling and administrative expenses
469,313
455,030
Acquisition-related charges and intangible amortization
19,985
22,203
Exit and realignment charges, net
29,293
28,963
Other operating expense, net
5,263
2,397
Operating income
20,299
10,839
Interest expense, net
35,899
40,728
Other expense, net
1,205
1,072
Loss before income taxes
(16,805
)
(30,961
)
Income tax provision (benefit)
15,108
(2,720
)
Net loss
$
(31,913
)
$
(28,241
)
Net loss per common share:
Basic
$
(0.42
)
$
(0.37
)
Diluted
$
(0.42
)
$
(0.37
)
Owens Minor, Inc.
Consolidated Statements of Operations (unaudited)
(i) (dollars in thousands, except per share data)
Six Months Ended June 30,
2024
2023
Net revenue
$
5,283,686
$
5,086,075
Cost of goods sold
4,204,003
4,069,336
Gross profit
1,079,683
1,016,739
Distribution, selling and administrative expenses
946,926
903,752
Acquisition-related charges and intangible amortization
40,298
44,392
Exit and realignment charges, net
56,649
44,637
Other operating expense, net
5,815
3,312
Operating income
29,995
20,646
Interest expense, net
71,554
82,926
Other expense, net
2,358
2,458
Loss before income taxes
(43,917
)
(64,738
)
Income tax benefit (provision)
9,882
(12,079
)
Net loss
$
(53,799
)
$
(52,659
)
Net loss per common share:
Basic
$
(0.70
)
$
(0.70
)
Diluted
$
(0.70
)
$
(0.70
)
Owens Minor, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(dollars in thousands)
June 30,
December 31,
2024
2023
Assets
Current assets
Cash and cash equivalents
$
243,671
$
243,037
Accounts receivable, net
662,444
598,257
Merchandise inventories
1,231,413
1,110,606
Other current assets
189,542
150,890
Total current assets
2,327,070
2,102,790
Property and equipment, net
493,075
543,972
Operating lease assets
368,471
296,533
1,634,723
1,638,846
Intangible assets, net
326,173
361,835
Other assets, net
154,492
149,346
Total assets
$
5,304,004
$
5,093,322
Liabilities and equity
Current liabilities
Accounts payable
$
1,381,871
$
1,171,882
Accrued payroll and related liabilities
108,103
116,398
Current portion of long-term debt
210,913
206,904
Other current liabilities
430,298
396,701
Total current liabilities
2,131,185
1,891,885
Long-term debt, excluding current portion
1,871,800
1,890,598
Operating lease liabilities, excluding current portion
297,728
222,429
Deferred income taxes, net
28,900
41,652
Other liabilities
113,689
122,592
Total liabilities
4,443,302
4,169,156
Total equity
860,702
924,166
Total liabilities and equity
$
5,304,004
$
5,093,322
Owens Minor, Inc.
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
Three Months Ended June 30,
2024
2023
Operating activities:
Net loss
$
(31,913
)
$
(28,241
)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization
63,879
72,062
Share-based compensation expense
6,735
5,212
Provision (benefit) for losses on accounts receivable
143
(379
)
Loss on extinguishment of debt
—
279
Deferred income tax benefit
(5,370
)
(6,167
)
Changes in operating lease right-of-use assets and lease liabilities
2,627
(2,852
)
Gain on sale and dispositions of property and equipment
(12,257
)
(10,294
)
Changes in operating assets and liabilities:
Accounts receivable
6,702
84,963
Merchandise inventories
(87,665
)
119,819
Accounts payable
150,445
29,077
Net change in other assets and liabilities
20,100
46,471
Other, net
2,723
3,162
Cash provided by operating activities
116,149
313,112
Investing activities:
Additions to property and equipment
(44,382
)
(46,600
)
Additions to computer software
(1,418
)
(2,889
)
Proceeds from sale of property and equipment
17,488
18,423
Other, net
(6,858
)
(418
)
Cash used for investing activities
(35,170
)
(31,484
)
Financing activities:
Borrowings under amended Receivables Financing Agreement
462,300
116,100
Repayments under amended Receivables Financing Agreement
(528,000
)
(116,100
)
Repayments of term loans
(7,750
)
(51,801
)
Other, net
(4,790
)
(3,830
)
Cash used for financing activities
(78,240
)
(55,631
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(64
)
(88
)
Net increase in cash, cash equivalents and restricted cash
2,675
225,909
Cash, cash equivalents and restricted cash at beginning of period
270,794
83,194
Cash, cash equivalents and restricted cash at end of period(1)
$
273,469
$
309,103
Supplemental disclosure of cash flow information:
Income taxes paid (received), net
$
2,875
$
(12,911
)
Interest paid
$
52,608
$
46,089
Noncash investing activity:
Unpaid purchases of property and equipment and computer software at end of period
$
76,373
$
65,808
(1) Restricted cash as of June 30, 2024 and March 31, 2024 was $29.8 million and $25.9 million and includes amounts held in an escrow account as required by the Centers for Medicare Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5, as well as restricted cash deposits received under the Master Receivables Purchase Agreement to be remitted to a third-party financial institution.
Owens Minor, Inc.
Consolidated Statements of Cash Flows (unaudited)
(dollars in thousands)
Six Months Ended June 30,
2024
2023
Operating activities:
Net loss
$
(53,799
)
$
(52,659
)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization
137,974
142,988
Share-based compensation expense
13,601
11,675
Provision (benefit) for losses on accounts receivable
324
(900
)
Loss on extinguishment of debt
—
843
Deferred income tax benefit
(9,029
)
(6,758
)
Changes in operating lease right-of-use assets and lease liabilities
3,766
(3,077
)
Gain on sale and dispositions of property and equipment
(27,876
)
(18,563
)
Changes in operating assets and liabilities:
Accounts receivable
(68,442
)
90,203
Merchandise inventories
(123,077
)
165,651
Accounts payable
203,371
52,159
Net change in other assets and liabilities
(19,517
)
82,954
Other, net
5,891
6,994
Cash provided by operating activities
63,187
471,510
Investing activities:
Additions to property and equipment
(90,379
)
(92,750
)
Additions to computer software
(4,829
)
(8,229
)
Proceeds from sale of property and equipment
67,026
35,729
Other, net
(8,858
)
(418
)
Cash used for investing activities
(37,040
)
(65,668
)
Financing activities:
Borrowings under amended Receivables Financing Agreement
667,300
348,200
Repayments under amended Receivables Financing Agreement
(667,300
)
(444,200
)
Repayments of term loans
(12,375
)
(78,301
)
Other, net
(12,545
)
(8,819
)
Cash used for financing activities
(24,920
)
(183,120
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(682
)
196
Net increase in cash, cash equivalents and restricted cash
545
222,918
Cash, cash equivalents and restricted cash at beginning of period
272,924
86,185
Cash, cash equivalents and restricted cash at end of period(1)
$
273,469
$
309,103
Supplemental disclosure of cash flow information:
Income taxes paid (received), net
$
5,240
$
(10,506
)
Interest paid
$
70,819
$
78,625
Noncash investing activity:
Unpaid purchases of property and equipment and computer software at end of period
$
76,373
$
65,808
(1) Restricted cash as of June 30, 2024 and December 31, 2023 was $29.8 million and $29.9 million and includes amounts held in an escrow account as required by the Centers for Medicare Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5, as well as restricted cash deposits received under the Master Receivables Purchase Agreement to be remitted to a third-party financial institution.
Owens Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
Three Months Ended June 30,
2024
2023
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Products Healthcare Services
$
2,010,605
75.28
%
$
1,930,723
75.32
%
Patient Direct
660,401
24.72
%
632,503
24.68
%
Consolidated net revenue
$
2,671,006
100.00
%
$
2,563,226
100.00
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Products Healthcare Services
$
11,468
0.57
%
$
2,940
0.15
%
Patient Direct
64,787
9.81
%
59,065
9.34
%
Acquisition-related charges and intangible amortization
(19,985
)
(22,203
)
Exit and realignment charges, net
(29,293
)
(28,963
)
Litigation and related charges (1)
(6,678
)
—
Consolidated operating income
$
20,299
$
10,839
Depreciation and amortization:
Products Healthcare Services
$
19,084
$
18,772
Patient Direct
44,795
53,290
Consolidated depreciation and amortization
$
63,879
$
72,062
Capital expenditures:
Products Healthcare Services
$
3,117
$
6,602
Patient Direct
42,683
42,887
Consolidated capital expenditures
$
45,800
$
49,489
(1) Litigation and related charges are reported within Other operating expense, net in our Statements of Operations. Refer to footnote 3 in the GAAP/Non-GAAP Reconciliations below.
Owens Minor, Inc.
Summary Segment Information (unaudited)
(dollars in thousands)
Six Months Ended June 30,
2024
2023
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Products Healthcare Services
$
3,985,442
75.43
%
$
3,846,212
75.62
%
Patient Direct
1,298,244
24.57
%
1,239,863
24.38
%
Consolidated net revenue
$
5,283,686
100.00
%
$
5,086,075
100.00
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Products Healthcare Services
$
22,954
0.58
%
$
4,761
0.12
%
Patient Direct
110,666
8.52
%
104,914
8.46
%
Acquisition-related charges and intangible amortization
(40,298
)
(44,392
)
Exit and realignment charges, net
(56,649
)
(44,637
)
Litigation and related charges (1)
(6,678
)
—
Consolidated operating income
$
29,995
$
20,646
Depreciation and amortization:
Products Healthcare Services
$
42,450
$
37,338
Patient Direct
95,524
105,650
Consolidated depreciation and amortization
$
137,974
$
142,988
Capital expenditures:
Products Healthcare Services
$
11,367
$
12,934
Patient Direct
83,841
88,045
Consolidated capital expenditures
$
95,208
$
100,979
(1) Litigation and related charges are reported within Other operating expense, net in our Statements of Operations. Refer to footnote 3 in the GAAP/Non-GAAP Reconciliations below.
Owens Minor, Inc.
Net Loss Per Common Share (unaudited)
(dollars in thousands, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net loss
$
(31,913
)
$
(28,241
)
$
(53,799
)
$
(52,659
)
Weighted average shares outstanding - basic
76,727
75,801
76,526
75,559
Dilutive shares
—
—
—
—
Weighted average shares outstanding - diluted
76,727
75,801
76,526
75,559
Net loss per common share:
Basic
$
(0.42
)
$
(0.37
)
$
(0.70
)
$
(0.70
)
Diluted
$
(0.42
)
$
(0.37
)
$
(0.70
)
$
(0.70
)
Share-based awards of approximately 1.6 million shares for the three and six months ended June 30, 2024 and approximately 1.8 million and 1.7 million shares for the three and six months ended June 30, 2023 were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.
Owens Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited)
(dollars in thousands, except per share data)
The following table provides a reconciliation of reported operating income, net loss and net loss per share to non-GAAP measures used by management.
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Operating income, as reported (GAAP)
$
20,299
$
10,839
$
29,995
$
20,646
Acquisition-related charges and intangible amortization (1)
19,985
22,203
40,298
44,392
Exit and realignment charges, net (2)
29,293
28,963
56,649
44,637
Litigation and related charges (3)
6,678
—
6,678
—
Operating income, adjusted (non-GAAP) (Adjusted Operating income)
$
76,255
$
62,005
$
133,620
$
109,675
Operating income as a percent of net revenue (GAAP)
0.76
%
0.42
%
0.57
%
0.41
%
Adjusted operating income as a percent of net revenue (non-GAAP)
2.85
%
2.42
%
2.53
%
2.16
%
Net loss, as reported (GAAP)
$
(31,913
)
$
(28,241
)
$
(53,799
)
$
(52,659
)
Pre-tax adjustments:
Acquisition-related charges and intangible amortization (1)
19,985
22,203
40,298
44,392
Exit and realignment charges, net (2)
29,293
28,963
56,649
44,637
Litigation and related charges (3)
6,678
—
6,678
—
Other (4)
430
843
861
1,972
Income tax benefit on pre-tax adjustments (5)
(13,553
)
(9,551
)
(24,901
)
(20,530
)
One-time income tax charge (6)
17,233
—
17,233
—
Net income, adjusted (non-GAAP) (Adjusted Net income)
$
28,153
$
14,217
$
43,019
$
17,812
Net loss per common share, as reported (GAAP)
$
(0.42
)
$
(0.37
)
$
(0.70
)
$
(0.70
)
After-tax adjustments:
Acquisition-related charges and intangible amortization (1)
0.19
0.24
0.39
0.45
Exit and realignment charges, net (2)
0.29
0.30
0.55
0.46
Litigation and related charges (3)
0.08
—
0.08
—
Other (4)
—
0.01
0.01
0.02
One-time income tax charge (6)
0.22
—
0.22
—
Net income per common share, adjusted (non-GAAP) (Adjusted EPS)
$
0.36
$
0.18
$
0.55
$
0.23
Owens Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited), continued
(dollars in thousands)
The following tables provide reconciliations of net loss and total debt to non-GAAP measures used by management.
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net loss, as reported (GAAP)
$
(31,913
)
$
(28,241
)
$
(53,799
)
$
(52,659
)
Income tax provision (benefit)
15,108
(2,720
)
9,882
(12,079
)
Interest expense, net
35,899
40,728
71,554
82,926
Acquisition-related charges and intangible amortization (1)
19,985
22,203
40,298
44,392
Exit and realignment charges, net (2)
29,293
28,963
56,649
44,637
Other depreciation and amortization (7)
46,146
50,737
94,160
100,726
Litigation and related charges (3)
6,678
—
6,678
—
Stock compensation (8)
6,312
4,796
12,488
11,146
LIFO (credits) and charges (9)
(1,124
)
(4,534
)
4,314
406
Other (4)
430
843
861
1,972
Adjusted EBITDA (non-GAAP)
$
126,814
$
112,775
$
243,085
$
221,467
June 30,
December 31,
2024
2023
Total debt, as reported (GAAP)
$
2,082,713
$
2,097,502
Cash and cash equivalents
(243,671
)
(243,037
)
Net debt (non-GAAP)
$
1,839,042
$
1,854,465
The following items have been excluded in our non-GAAP financial measures:
(1) Acquisition-related charges and intangible amortization includes $3.7 million of Acquisition-related charges for the three and six months ended June 30, 2024 consisting of costs related to the pending Rotech transaction and $1.3 million and $2.5 million for the three and six months ended June 30, 2023 consisting primarily of costs related to the Acquisition of Apria, Inc., as well as amortization of intangible assets established during Acquisition method of accounting for business combinations. Acquisition-related charges consist primarily of one-time costs related to acquisitions, including transaction costs necessary to consummate the Acquisition, which consist of investment banking advisory fees and legal fees and director and officer tail insurance expense, as well as transition costs, such as severance and retention bonuses, information technology (IT) integration costs and professional fees. These amounts are highly dependent on the size and frequency of acquisitions and are being excluded to allow for a more consistent comparison with forecasted, current and historical results.
(2) During the three and six months ended June 30, 2024 exit and realignment charges, net were $29.3 million and $56.6 million. These charges primarily related to our (1) Operating Model Realignment Program of $22.9 million and $56.4 million, professional fees, severance, and other costs to streamline functions and processes, (2) costs related to IT strategic initiatives such as converting certain divisions to common IT systems of $5.4 million and $6.7 million and (3) other costs associated with strategic initiatives of $1.0 million and $1.1 million for the three and six months ended June 30, 2024. Exit and realignment charges, net also included a $7.4 million gain on the sale of our corporate headquarters for the six months ended June 30, 2024. During the three and six months ended June 30, 2023 exit and realignment charges, net were $29.0 million and $44.6 million. These charges primarily related to our (1) Operating Model Realignment Program of $24.3 million and $39.3 million, including professional fees, severance and other costs to streamline functions and processes, (2) IT restructuring charges such as converting to common IT systems of $3.4 million and $3.5 million and, (3) other costs associated with strategic initiatives of $1.3 million and $1.8 million for the three and six months ended June 30, 2023. These costs are not normal recurring, cash operating expenses necessary for the Company to operate its business on an ongoing basis.
(3) Litigation and related charges includes settlement costs and related charges of legal matters within our Apria division. These costs do not occur in the ordinary course of our business, are non-recurring/infrequent and are inherently unpredictable in timing and amount.
(4) For the three and six months ended June 30, 2024 and 2023, other includes interest costs and net actuarial losses related to our frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S.). Additionally, for the three and six months ended June 30, 2023 other includes loss on extinguishment of debt of $0.3 million and $0.8 million associated with the early retirement of indebtedness of $48.0 million and $73.0 million.
(5) These charges have been tax effected by determining the income tax rate depending on the amount of charges incurred in different tax jurisdictions and the deductibility of those charges for income tax purposes.
(6) One-time income tax charge relates to a recent decision associated with the Notice of Proposed Adjustments received in 2020 and 2021. The matter at hand, as discussed in previously filed SEC documents, is related to past transfer pricing methodology which is no longer employed. We believe the matter will be concluded without further impact to our financial results.
(7) Other depreciation and amortization relates to property and equipment and capitalized computer software, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges.
(8) Stock compensation includes share-based compensation expense related to our share-based compensation plans, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges.
(9) LIFO (credits) and charges includes non-cash adjustments to merchandise inventories valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S. within our Products Healthcare Services segment.
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). In general, the measures exclude items and charges that (i) management does not believe reflect Owens Minor, Inc.’s (the Company) core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered substitutes for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.
OMI-CORP
OMI-IR
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