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OMI Owens & Minor

Participants
Truitt Allcott Owens & Minor, Inc.
Paul Cody Phipps Owens & Minor, Inc.
Robert K. Snead Owens & Minor, Inc.
Michael Cherny Bank of America Merrill Lynch
Sean Dodge Jefferies LLC
Erin Wright Credit Suisse
Robert Patrick Jones Goldman Sachs & Co. LLC
Eric W. Coldwell Robert W. Baird & Co., Inc.
Steven Valiquette Barclays Capital, Inc.
David Larsen Leerink Partners LLC
Anne E. Samuel JPMorgan Securities LLC
Call transcript
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Operator

Good morning, ladies and gentlemen and welcome to the Owens & Minor's Third Quarter 2018 Financial Results Conference Call. My name is Bridget and I will be your operator for today. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session towards the end of this conference call.

As a reminder, this conference is being recorded for replay purposes. to call, presentation Ms. like host to now today's for would turn over the your I Trudi Allcott. Ms. proceed Please Allcott.

Truitt Allcott

Thank you, we I'm operator. Owens Good Safe team, morning, everyone and read to third on of the XXXX I'd and like & statement welcome quarter earnings Allcott, call. before Trudi Harbor behalf the begin. Minor's to the

release Robert see morning are to making differ Financial insight update risk into on an and who this provide President on quarter call materially our reference GAAP press our most statements business more and the provide certain financial reconciliations our business in of today, XXXX, which website. third in our progress subject uncertainty of and are make results who the Our discussion a discussion plan; details will focused be cause press on and quarter our factors. and Information from will on discussion Chief the measures. SEC the comments financial to course our on Please overview the included release non-GAAP will third Participating Snead, these Cody those our Officer, may of press our to in results about today our for risk measures and full are of filings President and we and could CEO, In an included and In today, that will posted Chairman, financial comparable we're Vice projected. strategic results These for Phipps, measures Interim supplemental actual release. on statements. information performance. we are these our the the forward-looking our

things Phipps, over like turn off to will start Now, call to morning. Cody? this I'd Cody the who

Paul Cody Phipps

for on we the to I'll comments towards a are Thank results us transforming you our call everyone. update our I'll morning. on with progress company. on an good then move joining the on few this begin Thank you quarterly and morning Trudi and making

by The strong performance and was from solid performance driven and Halyard characterized SBU products third growth quarter by from our Byram.

continued our were However by these offset and distribution gains legacy underperformance business. pressures in

we Capturing European quarter is and but improvements improvements distribution operational still greater our business. a longer logistics business anticipated. domestic the it had to and these top than in attainable During take planned will we had see priority, our

have efforts in of these added to our our and We areas to leadership and new enhance resources progress. accelerate both

quarter environment margin addition In Robert challenging will and distribution in have during few minutes. a results and our remarks pressures remains the acute churn provide continued. space a his into insight customer additional

value-added on position and and previous of alternate transformation products; distribution are four of Byram we & made the the integrating helping following and The our counter for significant As of model have business. three, discussed objectives: manufacturers. and moves performing four, delivering calls, Owens Halyard one, and business our channels; attractive & well an site new to portfolio domestic both success. long-term The Minor Owens strengthen is and our solutions for two, on growing based in business; expanding to domestic brand we successfully delivering headwinds are Minor distribution own strengthening our have on and acquisitions providers Halyard diversify to

and on to we the towards in I'd transformation our provide achieving making Now business out update building like an concrete progress strategy. are our

differentiated stabilizing our is solutions. supply value-added by I'm this this seeing our operating mentioned top and of emphasize Success business, is business in had we than longer chain distribution but is progress, performance. domestic our as impacted we to priority anticipated. signs dynamics actions for and are competitive As I improving taking taking our

our service solutions customers' to operations greater our will enable value are model customer for our that deliver Our us with new new data-rich and integrated customers.

strategy is Byram our in As given expertise site for the direct-to-patient market. is alternate health great capabilities results. the attractive in second-largest already growing Byram third-party advanced billing established team. brings a the home patient Healthcare and us robust Byram channel. strong entering has delivering the an channel, market brand, player momentum an attractive to

in integrated investing experience to are new We such a capabilities service patient's improve payers BXB to e-commerce electronic and our and portal and an our supplier enhance as platform catalog new web to partners.

having early accessing to proposition the Byram's customers GPO in Byram includes contract team also value in are connecting and pricing. pursuing signing which large customers. IDN is We stages good our success The of

As expectations. heads in Byram's August won new has exceeded accelerate new a Since major growth year, This of already customer our as which boarding. I mentioned will recently XXXX. Byram it the last into last growth on further quarter, contract they Byram are acquiring team

track on are of and integrate expand own portfolio to in products. brand our Halyard our We progress

we early integration focus cost services various the transition through unit synergies. achieving and process, As move is on this is resources positive showing to our growth revenue the exiting and is adding business Halyard agreements.

our earnings previously, increases brand revenue go forward had This from transaction low-double we digits meaningful a as own of with our of the mentioned I source platform a leadership for percentage contributor results our Halyard drive Halyard our model. initiatives As quarter. be products. low-single the digits. and to product our to own business place new third strong to growth in was the We in brand now have will

by in earnings the production costs QX XXXX, and call, we input commodity our during mentioned driven experience into costs. higher as higher However, QX will

for value-added also traction. Our move to deliver is gaining both new and providers manufacturers solutions

chain a proposition enhanced and value new our based is with solutions on is resonating of with services, supply value-added customers. range Our

fronts management, standardization while care of such providers, solutions point data selection consumption pain significant points the at product that For these drives inventory and number reducing customer costs. address real-time a on as of

QSight improved point we wins with saw For technology. enhanced of the example newly our customer during quarter, use

help variation reducing and Our they cost. customers and reducing are and pressures under enormous cost want our their waste clinical total in

of manufacturers the manufacturers, the extensive U.S. who knowledge outsourcer in products deliver logistics for care. headway to our These customers and signed point preferred are becoming value way and of healthcare For continue our new we toward manufacturers. healthcare have to of ability Europe seeking make the manufacturer we our the logistic services. all number a Recently to

deployment, turn and Now our specifically me capital to recent changes dividend. let to the our

we it and our dividend we As deleveraging dividend. strategy discussed and our shareholders, capital return deploying on adjusted to allow our to business. is while review transform that move sheet benchmarking, us so previous our calls, aligned with After extensive our level. regularly review has current and will to capital have continue to balance capital board This deployment also our earnings

in the $X.XX to turn expect diluted me of remainder of range $X.XX. XXXX, let the expectations Based the our adjusted the now to of Now on for income per for share remainder we outlook year. net

transformation guidance of We well of XXXX challenging the quarter dynamics, our distribution Against in especially year. will first next business, update our the domestic industry underway. is backdrop in

of value Minor to flow. significant with growth for our We bold We these position of business long-term proposition with and significant in our that has capabilities new allow and to and marketplace. shareholders' believe invest position more take assets company to decisive initiatives continue business to deliver our additional value in sustainable drivers new and our drive and performance Owens and to will us for cash customers & sources value earnings enhance our now diversified The model steps the improvement success. stronger, profitability to a combined

of like financial our a I'd call over turn results. Now to the to Robert review for

Robert K. Snead

$XX of quarter, provide revenue changes third with results, last compared and an everyone. Thank is prior sales eliminating morning recent to and then from remainder before the million Today two transaction of million. an recent $XXX our by will and growth discuss you of from strategy capital contributions Consistent of year. with outlook million our inter-company increase update X.X% on Halyard driven our quarter Healthcare discuss were for primarily I Cody $XX XXXX. billion, Consolidated to Byram our was revenues which the good acquisitions allocation $X.XX

acquisitions. As to-date with Cody are performance both pleased the mentioned, we from

billion, For X.X% the a increase were of nine $XXX.X reported of We revenues income months, first quarter for $XX.X million. the $X.X for prior loss year and year. the to consolidated of consolidated million operating compared an

share million prior $XX.X or the for Year-to-date second year. operating to to intangibles $X.XX $XX.X was income per compared million million kitting million charge goodwill As $XXX for the a was results non-cash third impairment quarter to of $XXX a income reminder, operating Adjusted adjusted of include quarter year-to-date related for prior businesses. million the $XXX compared year. our and the

of was net $X.XX a quarter, $XXX of mentioned year-to-date $XX.X net a or $X.XX reported $X.XX we the per and net GAAP share we GAAP charge adjusted share. income per net loss previously. loss or reported adjusted impairment or per the which basis, per an or includes million $XXX,XXX On a million For $X.XX of $XX.X basis, million share. On share income

year-over-year our over a year $X.XX More our increase the the and the or is it which results, segment it year-to-date third year our to provision transition increased include share. for prior $XX.X significant worth results share, non-cash that this I million $X.X for $X.XX per a LIFO million period provision is noting increased specifically, item. per quarter, or Before in

to $X.XX last segment pressure, primarily billion from operating number the a the third were Now the to develop for existing higher in certain distribution growth $XX.X business. warehouse decline revenues factors margin LIFO income was to customer and in year. including and Global new inefficiencies solutions $XX.X billion by The expenses were million our provision. continued increased million aforementioned in compared Solutions from Results of compared for resulted segment new year. customers, solutions $X.XX locations, our quarter performance. prior affected Quarterly lower-than-expected

point operating note, recovery expectations. want positive the at this it performance On is where in to continues to mentioned, not and our the year. exceed be Cody our we a in Byram As slower-than-expected

Turning Products segment. to the Global

year. Operating $XXX million, For was in quarter, for the Halyard increase million include totaling prior of an million $XXX to $XX.X primarily a contributions compared $XXX of were $XX.X full Revenues quarter from million. contribution. the quarter Halyard million revenues income the

exceed headwinds Excluding to the the commodity price Halyard continues of expectations. impact our

to operating Consolidated remain Xst. capital debt on $XXX working operating debt positively September affected XXth sheet. the million managing our than including in which was Halyard acquisition long-term by balance at on de-lever was more reduction represents cash Turning $X.XX the flow flow May S&IP billion the We timing of since generating to of balance close million and $XX capital our working focused changes. Year-to-date cash sheet.

This per more to change board dividend. fourth representing capital our current the dividend balanced of for The and to a from earnings declared allocation. a our dividend quarterly capital board's $X.XXX to a level $X.XXX adjust quarter reflects Turning objective allocation. reduction our the achieve last of share XXXX,

capital balance priorities strategy our Our to the of deleveraging pursuing capital focus investment disciplined continue business return and a shareholders. to allocation our on a providing sheet, for

we Finally, let me are discuss outlook. the our making to changes

specifically, income targeting As our to Global for of reduction well has to-date we More the we This as for $X.XX of our in guidance incorporates as Cody business share. our are indicated, expectations performed per Solutions adjusted the XXXX results expected. not net $X.XX remainder year. and

we for goods addition, In are for which will results be sold higher portion a the expect Products quarter, segment in the impacted of our in fourth nature. non-recurring costs by Global

As that I'll first with Cody next guidance intend begin XXXX with we to turn the the Q&A over to share our quarter to year. session. operator you of in back the And the Thanks. mentioned, call

Operator

Thank you.

Our first America with Michael of Lynch. from Bank Cherny comes Merrill question

Your line is open.

Michael Cherny

question. for the Good taking morning and thank you

So, were do into in attack, know expected, performance. some hoping of you that walked across that we as How relative of you picture, that you numbers are distribution distribution you you how of can headwind XXXX, the be business thinking big the that terms Cody, you environment, control of think and, competitive better to items, to particularly items your of looking of transition been through pricing thinking I what on told headwinds about, for cycling for? business you the about just business terms your the and get terms going in can you're in within in versus stabilization core core you've that that through had

Paul Cody Phipps

Thanks Michael. Yes.

three by into mean really things is, that go we what that. One churn. define me reducing Let There's customer stabilization.

re-pricing into XX second is, months had that. The that going We're We're to you well throughout out that. pointed as on industry. we we've know XX into a the

the expect environment to those to expect we to more we things of if see drop operating the the driving, see through improvements And two that we're pricing So, stabilize. bottom-line. happen,

of throughout to that's the specifically So can question, we We've focus in that's new control. we now and place. to our we a got we've going on both to We've quarter had improvements teams driving within longer called But on is, And big think your out got our operational And one driving that, leadership we're service in what things materialize. network. this operating control? improvements. take

don't for The focused than certainly environment originally anticipated. going better the our fully of competitive part just And that been control is and and within on has and proposition So, what on value value our negative making that's the good focused now proposition supply delivering churn our is market control. We're a is progress, on we're in we us. taking chain. a it's we had longer what's net

winning Our when that's a where want customers they they we a because to towards contrast business, And other's the chain in value in that. win of and it's models see improvements that approach. new We're product-centric stark as it's business. better business new path their more supply sustained

have You products savings. get more to to buy

So, we're value to And continue business. out do. winning proposition going driving and what our new to we're that's

Michael Cherny

possible it us an give on just right to where update sits now? Is churn

Paul Cody Phipps

business have we losses. our and XX% that a us as new customers, customers – it point net for for us we've Churn qualitatively. And And we're XX% winning churn I'll for also versus has to do at wins negative been any out of one we're year. time net customer in this RFP. said about customer losing is

Michael Cherny

And them around potential is are think competitive more sales? developing providers? about disintermediation is distribution there and traditional you? you direct and other losing logistics competition to how trying and/or market to the into Or the Just landscape coming new

Paul Cody Phipps

anchored us, the space, because we're in acute that against. up competitors traditional it's mostly For we're

Michael Cherny

for Thanks Great. Okay. the color.

Operator

next of from the Jefferies. Dodge Our Sean question comes from line

open. is line Your

Sean Dodge

us the quarter. Thank but production us guidance It the guess split that? what's non-recurring expected insight that's recurring, out the Good a potions would the it can or and of you. of on not driving like fourth what some up the help may be. then some with versus give And Thanks. morning. be? in recurring sounds I you costs starting Maybe tick for little

Robert K. Snead

is Sure. This Robert.

in be the though back expecting, we we below than below And step we If the third in about you in business. take and we we're for quarter items with look if Products where were then the was and a even in doing of how We better then the a took towards actually reason the were thinking this the the the expecting business because what in-line headwinds hitting the part some July going quarter. longer other – that commodity you the P&L bit look were were to in than back quarter for business. out little P&L. and we the we EPS hit consensus, of pointed in fourth the Solutions performance were through at come in we we and came anticipating quarter our had expecting better fourth our year, performed actually were Products That's certainly to

into headwinds the more And so of fourth guidance. reason business then that's your Products our for our the of in indicating about we're you that in And results. lower this take the that then going there'll Products side thinking when our sold that's in of the we're And revised business; of of of production be sequentially goods going a terms a question And was to in the the quarter. that's quarter. discrete account that is quarter also the it been more specifically what's fourth we've year, in all side to items on see in fourth is to part commodity results reflected cost related that the in be there there's the that portion component talking

into translate nature And necessarily XXXX. in to expect and some wouldn't those of non-recurring we are

Sean Dodge

Okay.

incrementally So Is that in than that the the discrete to pressures less more? portion, the is that you something that quarter? or half expect of see fourth

Robert K. Snead

quarter our on year indicated certainly XXXX. to more less. back factoring thinking the of probably folks first with complete be we we'll as in about our that's next we're something that thinking It's as thought that we Yeah. And into coming

Sean Dodge

it. Got

the and revenue the better the on think the pleased contribution Okay, updates a in $XXX quarter, coming over should has we you been revenue far. there seasonality about expected. Halyard million the with Cody performance Is quarters? in And that bit thus you're there how Halyard, momentum It said like of then than much any little on business? from trajectory sounds

Paul Cody Phipps

We've was adding new our is we're pleased effort a Again how of exiting quarter and resources the very TSAs this numbers lot integration going. full results first the in SBU. got to with our going the Halyard and into of products

going well. pointing factored we understanding the into in commodity we're And big all our what that as that's is factor in the Robert's and out business we what that's is, and So production Seasonality bring our results. cost a not costs projections.

Robert K. Snead

its revenue the you business, We revenues we particularly in we heavier revenues have of weight that little of with do have – out a well. through see thinking. And this had a then I'd as U.S. business tends spread expectations through, little we and the the when the the consistent that this terms go and distribution make what mentioned transaction previously, so on year. seen more what distribution fourth portion point the to our to a in of quarter the revenues in business bit north in originally the modeled That's we other relative is were bit itself, performed

an been that's So, encouraging sign.

Sean Dodge

Very Thank Okay. helpful. you.

Paul Cody Phipps

you. Thank

Operator

question Suisse. And Wright line from with next of Erin Credit our comes the

line open. is Your

Erin Wright

Great, you higher what some is, your embedded guess sort than fourth the Can the can that have headwind? quarter on of to impact? And on you're I And commodity dynamics or I much quantify most commodity Thanks. thanks. in visibility to provide contributing color out and you you guess recent I guess, break cost what exposed the pricing specifically how expectations?

Robert K. Snead

Sure.

of the But raw generally is can we products. correlated in component heads example goes first when folks our that are materials where Nitrile raw because non-woven. into think lot refining medium-term, to is with polypropylene oil to gloves for raw ultimately get into oil lot that exposure a and materials of of petroleum our a commodity run and the of And that have manufacture producing another deviate oil. key their and the from we derivatives they a that So, are a true. long the they by-product the near is over of it's process is tightly that around materials the

market individual on depends mentioned pointing broadly that probably what it fourth headwinds a with industries come for say So quarter. the we're we'll are in little about certainly thought north up consistent was spot with some in of in is dynamics in taking July back contemplated But ends what where commodities. that see going I'd back the recently oil talked for stock the XXXX. we to have forecast supply that, demand original we and and in broader where the or of prices as those to was economy we The that about that it.

as for timing a hit quarter. the we helpful little thinking I the P&L mentioned which think I our was than what previously slower were third

Erin Wright

Where Thanks. Byram do terms you And then solutions process integration customer you on outstanding on effort? Thanks. in of that Okay. what's IT And incremental stand in systems. to and the investments there? spoke

Paul Cody Phipps

strategy we're the how They where two thing star bring their TSAs Byram us. help integration, player. the with kind attractive a been scale operations. we a, of, The things, number are Byram, shining real integrate and Byram about alternate is enter exiting where like and it's not Yeah, consistent it's it's site for Again, them, we nice has to business standalone to markets. with our

we're scale to on we've some we delivery growth. additional to done capabilities where side, on enable the sourcing on the that investing And can things bring So, them. of distribution

I that e-commerce capabilities, investing portal in capabilities. So, we're BXB mentioned new

easier is it there is it's the Halyard than effort much been on integration actual they've really expectations. – front. our the And exceeding So,

Robert K. Snead

is working some on we fuel operational are of the add office Cody's And operational, help are revenue still as that I'd The out that for mentioned, for to capture. synergies to ahead, to side integration we're the opportunities comments, just complex-related side are that complete on, have their more there And us growth. there the Byram. back Cody

Erin Wright

Thank you. Great. Okay.

Operator

next is Our from Goldman Robert question Jones Sachs. with

open. line Your is

Robert Patrick Jones

questions. the for Thanks Great.

the you business, XQ. the of, I now guess, implied think competitive highlighting quantify step of your just is issue guys Cody this comments sounds it some the continued the you on major core I and down here, Products from business. distribution then, are But kind Robert acute think expense the in this if into like even, helped pressure landscape we Global touched commodity some there about headwinds of care an and on just

maybe big giving As about be those could think know headwinds just about and I beyond today, not us guidance we we buckets, help just we think on about but as XXXX? how maybe thinking qualitatively you're three XXXX even, those should you move

Paul Cody Phipps

Yeah. Robert I'll can here. start then and jump in

in it seeing. really challenges in expect operational to business. I the our underway than see making. with the and progress am efforts with progress good start Robert pleased we're We've more me there the we're We'd distribution core Let fourth quarter what got

And factoring Robert those up go exercise the reason give our the for XXXX, we challenges did guidance, I'll comment not in we we division. in middle exercise for planning expect XXXX, and that on we're persist was to complete of we before thinking Products prudent giving So, bottom into see now of we're to guidance some the into the cost let our it headwinds as thought that we XXXX. forward.

Robert K. Snead

going I'd the to for XXXX, year. as updated pretty we I commodities side, to comments, Bob, it's in on of will going thinking And and Obviously, forth the folks just Similar the align are we towards what with commodity are with where some what July. consistent an be those control. And just to currency of think think share those to our that put our forecast for for we have along other look we're commodities. share, past plan or we what to in is to lines, our done terms our items with outlook in is outside we've Cody's

we'll provide on So, perspective that.

really And perspective the have where in on to quarter, that quarter and business, control. we is that into was direct our the laser-focused at least, had momentum that's we But get down it that move missed on where we in also on the on see operating is the On opportunity that the that and is, we're area one we third of had frankly. gain quite look – effort some was. our third but I XXXX. Solutions as expenses we you fourth flipside And disappointment an capturing there. a And that item more have that that one efforts more probably, the we from of in doubled what

Robert Patrick Jones

No.

instances and rationale effectively? business? why just done the need I I follow-up. a those think winning where you that going customer competitors you add had that guys the the guys compete there more they're mean main owned and lot year they're negative highlighted not site to what you Cody guys you citing traditional why that customers one traditional guess, have you the feel you're you Any being to as have is that today don't churn, covered I to things you're for on your you products, as marketplace. positive reasons guys have I gotten is, you anything in with for outlined. losing add from like the know alternate kind believe that than the of, you more that this to competitors? on Any feedback still you've far to

Paul Cody Phipps

approach our No. Bob proposition going I goals. I them products million another customers supply and our that cost reduction chain. large savings get is supply based a buy after improvements product-centric more having and that in on dollar more cost But of better the chain, I again, you'll is, are sustainable way. one value pressures. what had enormous it's And mean every think multi-hundred under said, really

that approach. longer-term we is winning And because chain versus So the lose, supply customer we pursuing a when new approach typically customers. it's are

to is that chain and believe won, talk our reason our of opposition. a we is that us certainly going better a that's they're when through having cornerstone supply we've So, value the the toward they the because better customers path future with

Robert Patrick Jones

you. it. Thank Okay. Got

Operator

Our is question Coldwell from Eric with Baird. next

Your line open. is

Eric W. Coldwell

play the and just are then in to brands they and Is away? a owned become wins to that that Hey, loss-leader of on are the their I'm distribution winning thanks. accounts industry? based ability If last these Cardinal more provide label. going line Medline giving Are effectively off private that questions.

Paul Cody Phipps

that What that driven re-pricing we've distribution an margins. is standpoint, subsidizing Eric with from said, industry-wide and is of there's been of product distribution part our re-pricing by

Eric W. Coldwell

Yeah.

Paul Cody Phipps

belief So, care chain. customers why a best better chain supply of we're customers too. interest greater chain. savings. There's reasons And along again the going choice. to investing when those in what's us. and customers' cite forced that the win the the the continuum we like also that – That's And long-term health in are to buy they of of supply winning is the be but investing in our bit we're solutions of our with achieve supply don't is a to that, having connecting industry bring transparency our and They for want to products –

So, a again value our proposition. hallmark of that's

Eric W. Coldwell

of both FedExs, it That's the those XPL you legacy gears Europe talked seeing also and that distributor relationships, UPSs has about a of in manufacture is your line? from, traditional world, it fair. from, Shifting the more XPL trucking logistics companies, number U.S. a you businesses winning new the the which coming more or DHLs, of the maybe Are say, providers are coming a more some from?

Paul Cody Phipps

in Yeah. win the And we're They capabilities. both products that they healthcare-only we Europe progress when those value healthcare there. into U.S. our mixing we those We've from and customers have products. what the again is, hear and expensive been the DC's like logistics customers fact non-healthcare-related with not that pleased their

we care, lab, our the the a about operating their all of cath – the really of to way just to back The room. don't products other is actually the thing get us the hospital, can point we back up they a value truck

And and care it's from get that's to the and win of that so we're we when have coming all way – expertise we because to engagements, those the winning they knowledge value that various point competitors.

Robert K. Snead

which three different all of, that players sort come is then with. I, it's can an had when from able been and think couple secure the examples are sometimes here is we've there's more local big play. we've hit think from, that, really more about even a the mentioned. I that are interesting, recently that it folks Eric has I through you think outsourcing it's And where of wins list piece, the you they've to country-specific of multi-national, business where things of of And the come last that mentioned

hey So side it helped within the a aspects and There's integrated manufacturers that regulatory with. to we've just systems. we don't not at and of control it. some we've of both struggle the have how manufacturer I've expertise very I'm of have and it's I with of won that get where up their themselves. healthcare, we the and than sides. for we the that a I and product this. different out do that we to I'm the are in and sort is, to a a highly away good with them it's said, keep in complying market lot handling And to regulatory headache having warehouse They taken gets table over my these doing of sort having that But of, in XXX(k) do their own visibility that it. it that business doing warehouse got still for inventory we're with a way and win-win compliance bring

Paul Cody Phipps

cascading the add the through industry just might industry. in that are cost to the pressures I

to asking these increasingly They're want growth the as are to in we we So, pressures cost more distribution? why face them. there And see manufacturers we question here too. be support

Eric W. Coldwell

definition, are Good with we gross implies, moving too looks here of and position? on answers fair. and the your might know it on debt like of as fourth from a there it's definition thoughts Last on debt your to one at envelope ran back the are me, you I tough lot all that? bank our low, guidance leverage. what too one That's a But comfortable covenants pieces basis. with quarter what on the year maybe the bank And us how X.X, X with a we exiting point be this are times Are high, you on that. debt

Robert K. Snead

number well and we've compliance That our Yes. all certainly our with in done and is we're high too as math covenant. obviously

Eric W. Coldwell

on that'll case be think the the for midpoint you And Okay. XQ? XQ guidance based exiting

Robert K. Snead

Correct.

Eric W. Coldwell

Thank much. Good. you Okay. very

Operator

next question Steven Barclays. from with Valiquette Our is

open. is line Your

Steven Valiquette

Good Thanks. everyone. morning

Paul Cody Phipps

morning. Good

Steven Valiquette

distribution hospital the have question landscape just I a quick the about in competitive business. domestic

the you, losing, can first competitors just to have rights be the I'm that the refusal curious you match contracts customers business of mechanics any the about where this take of of from want. in language might they of you Some if prices maybe whether trying mentioned, you you

away of So, factors? Thanks. perhaps understand of are these voluntarily still losing I that because pricing actually lower to are price various guess the other then might some question of matching from your Just customers for really trying of or that? the customers you you the offering walking the is, mechanics around some and some those be competitors

Paul Cody Phipps

where like just Yeah. are more that common in investments The those side our may that solutions to may of that of actually manufacturer out to don't mentioned type order us Mechanisms the customer we of need exist. provisions buy on typically contracts. business you the specific make exit

we we of business, just types into we of, penalties for be of on in going customer. trying distribution center have we But sign we've we've it the from a the provisions and when beyond distribution behind the that's to, of case mode certain business, more declining maybe put when where that with entered to level some sense and are to and to doesn't pursuit general, supporting solutions and we're investments more a make sort of side business of – inclined more those often they where that and walk as are opposed for it's may the exist. up business of decide away retain of willing it. don't And us to or investment call the unless network the similar, a types With a logistics arrangements we're we aspects what strategic either will in those our after because

Steven Valiquette

typical – GPO. if a primary that? is to do contract, much, like company large just competitor, try I to trying this retain get have of thank X business color more distributor. you seemed our primary switch – mean try it's and going to saying, a license or get you will as do chance I hey, losing some distributor just those around notification much you to a have to am hunting customers, of from to guess how kind members you it hospital you're a against, of very if hospitals, you to to so just we're every use the those some I Well get again, the

Paul Cody Phipps

work pretty a RFP we're typically But and these IDNs, and we defined then right that. the assessment go to a contracts well-defined follow opportunities so compete doing individual contract they Yes. how and path, pretty I well GPO have retain you're of mean RFP. your hospital with in and business follow we and

Steven Valiquette

right thank color, Okay. you. that's helpful All

Operator

with David Our next of Larsen question Partners. Leerink is the from line

open. Your line is

David Larsen

these flow of XXXX, I that of, reduction in of past of in to restructuring in I to in million about $XXX thoughts were you then what sort recur terms How where on of stand to were going like Just million million Hi. talk there that have, we cost earnings with see about synergies the programs sort goal to of, million think, through? – I XXXX. was should $XXX think any, efforts the we Can $XX those talked $XX was million expected? $XX your million we $XX think and some and

Robert K. Snead

Yeah.

RBT You're one as our programs. those referring of to

referred to we're That's one still focus our hoped things year, as Unfortunately, network. cost strong business. restructuring core again, offsetting we programs. than our So, that. our in and throughout has materialize out. had very discussed slower this last that gone distribution of lot that's margins operational have to on with success reduction of the year We to had declining improvements and been a a we solid the we We've calling

the the those turnover in of five $XXX robust to four on million that's have to in over very goal led market, of years focused our been network harder again has operating that. still to we remain We next Some of higher DCs, by driven have distribution improvements. it's which materialize. the job And delivering so a

David Larsen

Okay. And please? renewals of with where those Thanks. we are then terms in GPO

Robert K. Snead

Sure.

renewal a have of I We latter next and next part year. XXXX. And one towards rest the year beyond are that there's only the then think renewal

David Larsen

Thanks Okay. much. very

Paul Cody Phipps

Thank you.

Operator

Gill time have question. we for one more JPMorgan. from with And That'll Lisa you. be Thank

open. is line Your

Anne E. Samuel

for Anne Samuel on Hi. Lisa. It's

Could seeing the Thanks. internationally there? business. on domestic distribution maybe lot and a covered competitive any You've you you're maybe touch changes on what

Robert K. Snead

Sure.

such we're overseas. mentioned originally slightly of business, overall Australia the present business international ways business I as the a has Japan a products with acquisition north different that countries and earlier, we have as And of were Halyard in come two anticipating. what On number in we do in

fourth And by or the name in large Movianto, here Of course, business we're here our recently manufactured chain, as vary mentioned, customer interesting that supply that the particularly onboarding solutions results in business terms operates then country. had, actual of in a Cody which wins some quarter. the has under Europe

some had well. have losses We as

so And business on forward. driving focused we're that

has in dynamic in maybe We and before have where channel. new the manufacturers today improve XXXX. putting to and business Cody pressures leadership that we we that outsource think they these drive as there instances within opportunity maintain we're that into That and place a similar around still performances will savings help drive mentioned the facing are that to the directed visibility move

Anne E. Samuel

Great. Thanks very much.

Paul Cody Phipps

you. Thank

Operator

showing And further Mr. turn I'll to over not Phipps back now I'm the any for remarks. questions. call Cody closing

Paul Cody Phipps

With Thank us to product forward asset and you. focus has Owens to It's today. the growing Thank transforming on remains own in joining in forward. At it's long-term we on improving executing making enabling on and same diversifying post-acute the to revenue new growing operating you brand The progress our opening Byram fourth & on is changes in performance solid for success. Minor for attractive acquisition Despite enhance call propelled February. our and our opportunities model base challenging We are that our strategy large progress market. an our significant us us year, our underway, look Halyard quarter our and business a offerings. you reposition time, updating our our is company. to

Operator

the Ladies and gentlemen, this does conclude program.

great have disconnect. You may day. now a Everyone