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8-K - FORM 8-K - OWENS & MINOR INC/VA/d674624d8k.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE

February 10, 2014

Owens & Minor Reports 4th Quarter & Full-Year 2013

Financial Results

RICHMOND, VA….Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the fourth quarter and full-year ended December 31, 2013, including the following highlights:

 

    Consolidated annual revenue growth and adjusted EPS met targeted guidance for 2013

 

    Adjusted consolidated net income was $1.90 per diluted share for 2013 and $0.52 for the quarter

 

    4Q 2013 adjusted consolidated operating earnings (non-GAAP) improved by more than $11 million

 

    The Domestic segment achieved revenue growth for the second consecutive quarter

 

    The International segment reported positive fourth quarter operating earnings

For the quarter ended December 31, 2013, the company reported consolidated quarterly revenues of $2.32 billion, an increase of 1.1% when compared to the fourth quarter of 2012. For the fourth quarter of 2013, net income increased 12% to $27.9 million, or $0.44 per diluted share, when compared to the same period last year. For the fourth quarter, adjusted net income (non-GAAP), which excludes after-tax charges of $5.0 million for acquisition-related and exit and realignment activities, was $33.0 million, or $0.52 per diluted share, an increase of 26% when compared to the fourth quarter of 2012.

Consolidated operating earnings for the fourth quarter of 2013, were $50.9 million, improved by $5.9 million, or 13.1%, when compared to operating earnings for the same period last year. Adjusted consolidated operating earnings (non-GAAP) for the fourth quarter of 2013 were $58.0 million, or 2.50% of revenues, increased $11.2 million, in comparison to last year’s fourth quarter results. Since the fourth quarter of 2012, quarterly adjusted operating earnings (non-GAAP) have improved sequentially in each of the four consecutive quarters.

“During 2013, our teams in the U.S., Europe and Asia collaborated to achieve a successful outcome for the year,” said Craig R. Smith, chairman & chief executive officer of Owens & Minor. “Our teammates are creating a faster, more flexible Owens & Minor that is well-equipped to pursue emerging opportunities. Looking ahead, we intend to capitalize on the investments we have made in the company to capture new market opportunities, operate more efficiently and provide our healthcare customers with the best logistics’ solutions in healthcare.”

In completing a year-end review of customer contracts in the International segment, the company has revised the presentation of a portion of its International segment revenues from a gross to a net basis, after determining that this presentation is more representative of the customer arrangement. This change resulted in reductions of gross revenues of approximately $30 million to $35 million per quarter for the fourth quarter of 2012 and each of the first three quarters of 2013. As a result of this revised classification, International segment revenues were $105 million for the fourth quarter of 2013 compared to $96.3 million for the same period last year, and were $384 million for 2013 compared to $137 million for 2012. This change did not affect gross margin, operating earnings or net income, and had an immaterial impact on consolidated revenues reported for 2012 and the first three quarters of 2013. The International segment consists of Movianto, a leading European healthcare logistics provider, which was acquired by Owens & Minor on August 31, 2012.

 

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2013 Annual Results

For the year ended December 31, 2013, consolidated revenues were $9.07 billion, an increase of $203 million, or 2.3%, when compared to 2012 revenues. The International segment contributed $384 million in revenues for 2013 and $137 million for 2012, which represented four months of revenue contributions. Net income for 2013 improved 1.7% to $111 million, or $1.76 per diluted share, in comparison to net income of $109 million, or $1.72 per diluted share, in the same period last year. For the year, adjusted net income (non-GAAP), which excludes after-tax charges of $8.9 million for acquisition-related and exit and realignment activities, was $120 million, or $1.90 per diluted share, an increase of 2.2% in comparison to last year’s results.

Consolidated operating earnings for 2013 improved slightly to $198 million, or 2.18% of revenues, compared to operating earnings of $197 million, or 2.22% of revenues, for the same period of 2012. Adjusted operating earnings (non-GAAP) for 2013 were $211 million, or 2.32 % of revenues, increased 1.7% when compared to adjusted operating earnings of $207 million, or 2.33% of revenues, for the same period last year.

Asset Management

The balance of cash and cash equivalents was $102 million at December 31, 2013. For the year, the company reported cash provided by operating activities of $141 million compared to $219 million in the same period last year. Asset management metrics for the quarter were positive with consolidated days sales outstanding (DSO) of 22.1, as of December 31, 2013, compared to DSO of 20.8 days for the same period last year. Consolidated inventory turns were 10.4 for 2013 versus inventory turns of 10.1 for 2012.

Segment Results

Domestic segment revenues for the fourth quarter of 2013 were $2.21 billion, improved modestly from revenue of $2.20 billion. For 2013, Domestic segment revenue experienced a slight decline to $8.69 billion, when compared to the prior year. Domestic revenue growth was impeded by ongoing market trends, including lower rates of healthcare utilization and reduced government spending, as well as the company’s continued rationalization of smaller, less profitable healthcare provider customers and suppliers. Despite these market challenges, the Domestic segment achieved year-over-year and sequential revenue growth for both the third and fourth quarters of 2013.

For the fourth quarter of 2013, Domestic segment operating earnings were $56.6 million, an increase of $5.0 million when compared to same period of 2012. Quarterly operating earnings, when compared to the prior year, benefitted from certain strategic initiatives, including growth in fee-for-service business. In addition, $2.0 million in legal expenses and loss contingencies associated with California-specific litigation and compensation and benefits requirements in 2012 did not recur in 2013. During the quarter, certain exit and realignment activities designed to optimize the company’s Domestic operations were accelerated; these activities were associated with closing certain U.S.-based distribution and logistics centers, and offsite warehouses. For the full year, Domestic segment operating earnings were $212 million for 2013 and 2012, representing 2.44% and 2.43% of segment revenues respectively for each year. In addition to factors affecting fourth quarter results, annual operating earnings benefitted from certain California municipal sales tax incentives and supplier price changes in the first half of the year, offset by increases in healthcare costs, workers’ compensation and other administrative expenses.

For the International segment, quarterly revenues increased 8.6% to $105 million and were $384 million for the first full year as part of Owens & Minor. For the fourth quarter of 2013, the International segment had operating earnings of $1.4 million, representing a $6.2 million increase over fourth quarter of 2012.

 

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For the full-year 2013, the International segment narrowed its operating losses by $4.0 million to $1.4 million. The comparative improvement for 2013 resulted from increased utilization of network capacity, continued growth, and diminishing reliance on transition services from the former parent company. During the second half of 2013, the International segment also benefitted from seasonally stronger customer activity.

2014 Outlook

The company reiterated the following financial guidance for 2014, which was originally issued at its December 2013 Investor Day:

For 2014, the company is targeting revenue growth of up to 2% and adjusted net income per diluted share of $1.95 to $2.05 for the year, which excludes exit and realignment and transaction-related costs.

Upcoming Investor Relations Events

Owens & Minor will participate in the following investor conferences in the first quarter of 2014; webcasts of executive presentations will be available on www.owens-minor.com

 

    Leerink Swann Global Healthcare Conference 2014; February 12; New York

 

    Citi 2014 Global Healthcare Conference; February 26; New York

 

    Barclays Capital 2014 Global Healthcare Conference; March 13; Miami

Investors Conference Call & Supplemental Material

Conference Call: Owens & Minor’s management team will conduct a conference call for investors on Tuesday, February 11, 2014, at 8:30 a.m. Eastern. The access code for the conference call, international dial-in and replay is #40287606. Participants may access the call at 866-393-1604. The international dial-in number is 224-357-2191. Replay: A replay of the call will be available for one week by dialing 855-859-2056. Webcast: A listen-only webcast of the call, along with supplemental information, will be available on www.owens-minor.com under “Investor Relations.”

Owens & Minor uses its Web site, www.owens-minor.com, as a channel of distribution for material company information, including news releases, investor presentations and financial information. This information is routinely posted and accessible under the Investor Relations section.

Included with the press release financial tables are reconciliations of the differences between the non-GAAP financial measures presented in this news release, which exclude acquisition-related and exit and realignment charges, and their most directly comparable GAAP financial measures.

Safe Harbor Statement

Except for historical information, the matters discussed in this press release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are discussed in reports filed by the company with the Securities & Exchange Commission. All of this information is available at www.owens-minor.com. The company assumes no obligation, and expressly disclaims any such obligation, to update or alter information, whether as a result of new information, future events, or otherwise.

Owens & Minor, Inc., (NYSE: OMI) a FORTUNE 500 company headquartered in Richmond, Virginia, is a leading national provider of distribution and logistics services to the healthcare industry and a leading European provider of logistics services to pharmaceutical, life-science, and medical-device manufacturers. With a diverse product and service offering and facilities throughout the United States and Europe, the company serves hospitals, integrated healthcare systems, alternate site locations, group purchasing organizations, healthcare manufacturers, and the federal government. Owens & Minor also

 

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provides technology and consulting programs that improve inventory management and streamline logistics across the entire medical supply chain. For news releases, or for more information about Owens & Minor, visit the company website at www.owens-minor.com.

CONTACTS:

Truitt Allcott, Director, Investor & Media Relations, 804-723-7555, truitt.allcott@owens-minor.com

Chuck Graves, Director, Finance & Investor Relations, 804-723-7556, chuck.graves@owens-minor.com

SOURCE: Owens & Minor

 

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Owens & Minor, Inc.

Consolidated Statements of Income (unaudited)

(in thousands, except per share data)

 

     Three Months Ended December 31,  
     2013     2012  

Net revenue

   $ 2,318,524      $ 2,294,208   

Cost of goods sold

     2,027,261        2,023,434   
  

 

 

   

 

 

 

Gross margin

     291,263        270,774   

Selling, general and administrative expenses

     222,043        211,415   

Acquisition-related and exit and realignment charges

     7,049        1,717   

Depreciation and amortization

     13,239        12,420   

Other operating expense (income), net

     (2,002     181   
  

 

 

   

 

 

 

Operating earnings

     50,934        45,041   

Interest expense, net

     3,263        3,422   
  

 

 

   

 

 

 

Income before income taxes

     47,671        41,619   

Income tax provision

     19,729        16,685   
  

 

 

   

 

 

 

Net income

   $ 27,942      $ 24,934   
  

 

 

   

 

 

 

Net income per common share:

    

Basic

   $ 0.44      $ 0.40   

Diluted

   $ 0.44      $ 0.39   
     Twelve Months Ended December 31,  
     2013     2012  

Net revenue

   $ 9,071,532      $ 8,868,324   

Cost of goods sold

     7,954,457        7,943,670   
  

 

 

   

 

 

 

Gross margin

     1,117,075        924,654   

Selling, general and administrative expenses

     863,656        682,595   

Acquisition-related and exit and realignment charges

     12,444        10,164   

Depreciation and amortization

     50,586        39,604   

Other operating expense (income), net

     (7,694     (4,462
  

 

 

   

 

 

 

Operating earnings

     198,083        196,753   

Interest expense, net

     13,098        13,397   
  

 

 

   

 

 

 

Income before income taxes

     184,985        183,356   

Income tax provision

     74,103        74,353   
  

 

 

   

 

 

 

Net income

   $ 110,882      $ 109,003   
  

 

 

   

 

 

 

Net income per common share:

    

Basic

   $ 1.76      $ 1.72   

Diluted

   $ 1.76      $ 1.72   

 

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Owens & Minor, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(in thousands)

 

     December 31,
2013
     December 31,
2012
 

Assets

     

Current assets

     

Cash and cash equivalents

   $ 101,905       $ 97,888   

Accounts and notes receivable, net

     572,854         537,335   

Merchandise inventories

     771,663         763,756   

Other current assets

     279,510         231,264   
  

 

 

    

 

 

 

Total current assets

     1,725,932         1,630,243   

Property and equipment, net

     191,961         191,841   

Goodwill, net

     275,439         274,884   

Intangible assets, net

     40,406         42,313   

Other assets, net

     90,304         75,117   
  

 

 

    

 

 

 

Total assets

   $ 2,324,042       $ 2,214,398   
  

 

 

    

 

 

 

Liabilities and equity

     

Current liabilities

     

Accounts payable

   $ 643,872       $ 603,137   

Accrued payroll and related liabilities

     23,296         25,468   

Deferred income taxes

     41,613         42,107   

Other current liabilities

     280,398         254,924   
  

 

 

    

 

 

 

Total current liabilities

     989,179         925,636   

Long-term debt, excluding current portion

     213,815         215,383   

Deferred income taxes

     43,727         36,269   

Other liabilities

     52,278         63,454   
  

 

 

    

 

 

 

Total liabilities

     1,298,999         1,240,742   

Total equity

     1,025,043         973,656   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 2,324,042       $ 2,214,398   
  

 

 

    

 

 

 

 

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Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

     Twelve Months Ended  
     2013     2012  

Operating activities:

    

Net income

   $ 110,882      $ 109,003   

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     50,586        39,604   

Share-based compensation expense

     6,381        5,697   

Deferred income tax expense

     3,713        1,060   

Provision for losses on accounts and notes receivable

     787        1,004   

Changes in operating assets and liabilities:

    

Accounts and notes receivable

     (38,645     27,161   

Merchandise inventories

     (7,064     58,734   

Accounts payable

     47,374        (18,694

Net change in other assets and liabilities

     (32,337     (4,490

Other, net

     (1,123     (573
  

 

 

   

 

 

 

Cash provided by operating activities

     140,554        218,506   
  

 

 

   

 

 

 

Investing activities:

    

Acquisition, net of cash acquired

     —          (155,210

Additions to computer software and intangible assets

     (32,010     (29,131

Additions to property and equipment

     (28,119     (9,832

Proceeds from the sale of property and equipment

     3,051        3,298   
  

 

 

   

 

 

 

Cash used for investing activities

     (57,078     (190,875
  

 

 

   

 

 

 

Financing activities:

    

Cash dividends paid

     (60,731     (55,681

Repurchases of common stock

     (18,876     (15,000

Financing costs paid

     —          (1,303

Proceeds from exercise of stock options

     5,352        4,986   

Excess tax benefits related to share-based compensation

     898        1,293   

Other, net

     (8,623     (2,710
  

 

 

   

 

 

 

Cash used for financing activities

     (81,980     (68,415
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     2,521        2,734   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     4,017        (38,050

Cash and cash equivalents at beginning of period

     97,888        135,938   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 101,905      $ 97,888   
  

 

 

   

 

 

 

 

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Owens & Minor, Inc.

Financial Statistics and GAAP/Non-GAAP Reconciliations (unaudited)

 

     Quarter Ended  

(in thousands, except ratios and per share data)

   12/31/2013     9/30/2013     6/30/2013     3/31/2013     12/31/2012  

Consolidated operating results:

          

Domestic

   $ 2,213,949      $ 2,175,663      $ 2,143,691      $ 2,154,715      $ 2,197,932   

International (1)

     104,575        94,884        92,386        91,669        96,276   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenue

   $ 2,318,524      $ 2,270,547      $ 2,236,077      $ 2,246,384      $ 2,294,208   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

   $ 291,263      $ 273,329      $ 273,431      $ 279,052      $ 270,774   

Gross margin as a percent of revenue

     12.56     12.04     12.23     12.42     11.80
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SG&A expenses

   $ 222,043      $ 211,344      $ 212,548      $ 217,721      $ 211,415   

SG&A expenses as a percent of revenue

     9.58     9.31     9.51     9.69     9.22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings, as reported (GAAP)

   $ 50,934      $ 49,215      $ 50,050      $ 47,884      $ 45,041   

Acquisition-related and exit and realignment charges

     7,049        2,747        638        2,010        1,717   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings, adjusted (Non-GAAP)

   $ 57,983      $ 51,962      $ 50,688      $ 49,894      $ 46,758   

Operating earnings as a percent of revenue, adjusted (Non-GAAP)

     2.50     2.29     2.27     2.22     2.04
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income, as reported (GAAP)

   $ 27,942      $ 27,970      $ 28,872      $ 26,098      $ 24,934   

Acquisition-related and exit and realignment charges, after-tax

     5,024        1,899        412        1,521        1,237   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income, adjusted (Non-GAAP)

   $ 32,966      $ 29,869      $ 29,284      $ 27,619      $ 26,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share, as reported (GAAP)

   $ 0.44      $ 0.44      $ 0.46      $ 0.41      $ 0.39   

Acquisition-related and exit and realignment charges

     0.08        0.03        —          0.03        0.02   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share, adjusted (Non-GAAP)

   $ 0.52      $ 0.47      $ 0.46      $ 0.44      $ 0.41   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing:

          

Cash and cash equivalents

   $ 101,905      $ 153,789      $ 207,826      $ 218,563      $ 97,888   

Total interest-bearing debt

   $ 216,243      $ 216,850      $ 216,994      $ 216,414      $ 217,591   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock information:

          

Cash dividends per common share

   $ 0.24      $ 0.24      $ 0.24      $ 0.24      $ 0.22   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock price at quarter-end

   $ 36.56      $ 34.59      $ 33.83      $ 32.56      $ 28.51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Revised to reflect net presentation of revenues for certain customer contracts. Previously reported revenues were $128,937, $122,996, $120,994 and $126,992 for the prior four quarters from 9/30/2013 to 12/31/2012, respectively.

Use of Non-GAAP Measures

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

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

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

 

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Owens & Minor, Inc.

Summary Segment Information (unaudited)

(in thousands)

 

     Three Months Ended December 31,     Twelve Months Ended December 31,  
     2013     2012     2013     2012  
     Amount     % of
consolidated
net revenue
    Amount     % of
consolidated
net revenue
    Amount     % of
consolidated
net revenue
    Amount     % of
consolidated
net revenue
 

Net revenue:

                

Domestic

   $ 2,213,949        95.49   $ 2,197,932        95.80   $ 8,688,018        95.77   $ 8,731,484        98.46

International

     104,575        4.51     96,276        4.20     383,514        4.23     136,839        1.54
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net revenue

   $ 2,318,524        100.00   $ 2,294,208        100.00   $ 9,071,532        100.00   $ 8,868,323        100.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           % of segment
net revenue
          % of segment
net revenue
          % of segment
net revenue
          % of segment
net revenue
 

Operating earnings (loss):

                

Domestic

   $ 56,568        2.56   $ 51,546        2.35   $ 211,932        2.44   $ 212,335        2.43

International

     1,415        1.35     (4,788     (4.97 )%      (1,405     (0.37 )%      (5,418     (3.96 )% 

Acquisition-related and exit and realignment charges

     (7,049     N/A        (1,717     N/A        (12,444     N/A        (10,164     N/A   
  

 

 

     

 

 

     

 

 

     

 

 

   

Consolidated operating earnings

   $ 50,934        2.20   $ 45,041        1.96   $ 198,083        2.18   $ 196,753        2.22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

                

Domestic

   $ 9,033        $ 9,121        $ 35,808        $ 35,016     

International

     4,206          3,299          14,778          4,588     
  

 

 

     

 

 

     

 

 

     

 

 

   

Consolidated depreciation and amortization

   $ 13,239        $ 12,420        $ 50,586        $ 39,604     
  

 

 

     

 

 

     

 

 

     

 

 

   

Capital expenditures: (1)

                

Domestic

   $ 8,295        $ 7,364        $ 42,802        $ 34,450     

International

     6,328          3,775          17,327          4,513     
  

 

 

     

 

 

     

 

 

     

 

 

   

Consolidated capital expenditures

   $ 14,623        $ 11,139        $ 60,129        $ 38,963     
  

 

 

     

 

 

     

 

 

     

 

 

   
     December 31,
2013
          December 31,
2012
                               

Total assets:

                

Domestic

   $ 1,747,572        $ 1,730,396             

International

     474,565          386,114             
  

 

 

     

 

 

           

Segment assets

     2,222,137          2,116,510             

Cash and cash equivalents

     101,905          97,888             
  

 

 

     

 

 

           

Consolidated total assets

   $ 2,324,042        $ 2,214,398             
  

 

 

     

 

 

           

 

(1) Represents additions to property and equipment and additions to computer software and separately acquired intangible assets.

 

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Owens & Minor, Inc.

Net Income Per Common Share (unaudited)

(in thousands, except per share data)

 

     Three Months Ended
December 31,
    Twelve Months Ended
December 31,
 
     2013     2012     2013     2012  

Numerator:

        

Net income

   $ 27,942      $ 24,934      $ 110,882      $ 109,003   

Less: income allocated to unvested restricted shares

     (193     (173     (738     (749
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders - basic

     27,749        24,761        110,144        108,254   

Add: undistributed income attributable to unvested restricted shares -basic

     67        61        257        292   

Less: undistributed income attributable to unvested restricted shares -diluted

     (67     (61     (257     (292
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders - diluted

   $ 27,749      $ 24,761      $ 110,144      $ 108,254   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average shares outstanding — basic

     62,446        62,671        62,625        62,765   

Dilutive shares - stock options

     21        67        36        79   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding — diluted

     62,467        62,738        62,661        62,844   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to common shareholders:

        

Basic

   $ 0.44      $ 0.40      $ 1.76      $ 1.72   

Diluted

   $ 0.44      $ 0.39      $ 1.76      $ 1.72   

 

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