Filing summary
Entity and period: The supplied filing is Owens & Minor, Inc. (NYSE: OMI), not Accendra Health Inc. It is a Form 10-K for the fiscal year ended December 31, 2021, rather than a quarterly filing. Accordingly, the summary below reflects Owens & Minor’s annual results.
Business context
Owens & Minor is a healthcare products manufacturer and distributor, with services spanning acute care and home-based care. Its 2021 reportable segments were Global Solutions, including U.S. distribution and Patient Direct, and Global Products, which manufactures and sources medical-surgical products. The company operated in approximately 70 countries.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Net revenue | $9.785 billion | $8.480 billion |
| Gross margin | $1.513 billion; 15.46% of revenue | $1.281 billion; 15.10% |
| Operating income | $368.5 million; 3.77% of revenue | $204.1 million; 2.41% |
| Income from continuing operations | $221.6 million | $88.1 million |
| Diluted continuing-operations EPS | $2.94 | $1.39 |
| Net cash from operating activities | $124.2 million | $339.2 million |
| Capital expenditures | $49.7 million | $59.2 million |
| Total debt (balance-sheet carrying amount) | $949.6 million | $1.026 billion |
| Cash and cash equivalents | $55.7 million | $83.1 million |
Revenue rose 15.4%. Global Solutions revenue increased 9.0% to $7.860 billion, and Global Products revenue increased 46.7% to $2.656 billion. Segment operating income was $66.6 million for Global Solutions (up from $30.9 million) and $371.9 million for Global Products (up from $259.9 million). The company attributed growth to recovering elective procedures, higher PPE and infection-prevention product sales, glove-cost pass-through, market-share gains, Patient Direct performance, improved mix and operating efficiencies.
Gross margin improved, while DS&A declined as a proportion of revenue to 11.41% from 12.28%. Operating cash flow fell substantially year over year, with higher inventory investment a significant use of cash: merchandise inventories increased 21.3% to $1.496 billion, and inventory days rose to 64.7 from 57.8. DSO improved to 24.6 from 26.0. Cash, cash equivalents and restricted cash at year-end totaled $72.0 million; the balance-sheet cash figure excludes restricted cash.
Interest expense declined to $48.1 million from $83.4 million, but the company recorded a $40.4 million loss on extinguishment of debt, including write-offs and terminated interest-rate swaps. The effective tax rate was 19.9% in both years. The company reported $291 million of availability under its $300 million revolving facility, no revolver borrowings at year-end, and compliance with debt covenants. Its 2024 and 2029 senior notes had principal balances of approximately $246 million and $500 million, respectively.
Changes, outlook and material items
- Compared with 2020, 2021 revenue, gross margin, operating income and continuing-operations earnings increased. The 2020 comparison includes discontinued Movianto operations in cash-flow totals; Movianto had been divested in June 2020 for $133 million, with a $65.5 million loss on divestiture.
- Management said 2021 results benefited from PPE demand, higher glove sales and favorable timing of glove cost pass-through, alongside the recovery of elective procedures. Inflation, commodity costs and transportation costs partly offset those benefits. Management cautioned that elevated pandemic-related demand and productivity gains may not persist.
- On January 7, 2022, the company agreed to acquire Apria, a home healthcare equipment and services provider, for $37.50 per share, with an estimated total transaction value of approximately $1.6 billion including assumed debt and cash. The deal was subject to regulatory and shareholder approvals and was expected to close in the first half of 2022; financing, integration and failure-to-close risks were disclosed.
- Other key risks include COVID-19 effects on demand and supply chains; inflation and inability to pass costs through; dependence on major GPOs and suppliers; competition and pricing pressure; cybersecurity and operational disruption; and substantial debt and restrictive covenants.
- The IRS challenged the company’s transfer-pricing treatment for tax years 2015–2018. Management said it disagreed and believed reserves were adequate, but warned an adverse outcome could materially affect results or cash flows. Ordinary-course legal matters were not expected to have a material effect based on the company’s assessment.
- Management and the external auditor reported effective internal control over financial reporting. KPMG issued unqualified opinions on the financial statements and internal controls. Goodwill was $390.2 million, with no impairment recorded in 2021.
Important facts for investors to verify
- Confirm the issuer and reporting period: the provided text is Owens & Minor’s 2021 Form 10-K, not an Accendra Health filing or a Q4 report.
- Review whether operating cash flow and working-capital trends, particularly inventory growth, improve after year-end.
- Assess the Apria acquisition’s final financing, closing status, leverage impact, integration costs and realized benefits.
- Track PPE and glove demand, commodity and freight costs, and the company’s ability to recover cost increases through pricing.
- Monitor debt maturities, covenant headroom, refinancing needs and the IRS transfer-pricing dispute.