UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period March 31, 1994.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6430
OWENS & MINOR, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0327460
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 Cox Road, Glen Allen, Virginia 23060
(Address of principal executive offices) (Zip Code)
(804) 747-9794
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all report
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
The number of shares of the Company's Common Stock outstanding as of
May 2, 1994 was 20,424,417.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Index
Page
Part I Financial Information
Consolidated Balance Sheets - March 31, 1994 and 3
December 31, 1993
Consolidated Statements of Income - Three Months Ended 4
March 31, 1994 and 1993
Consolidated Statements of Cash Flows - Three Months Ended 5
March 31, 1994 and 1993
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Results of 8-9
Operations and Financial Condition
Part II Other Information 10-11
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Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
<TABLE>
March 31, December 31
1994 1993
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 2,042 $ 2,048
Accounts and notes receivable, net 145,290 144,629
Merchandise inventories 145,924 124,848
Other current assets 11,258 10,638
Total current assets 304,514 282,163
Property and equipment, net 22,825 23,863
Excess of purchase price over net assets acquired, net 16,864 17,316
Other assets 10,580 10,980
Total Assets $ 354,783 $ 334,322
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $ 1,502 $ 1,494
Accounts payable 123,691 120,699
Accrued payroll and related liabilities 5,332 5,768
Accrued income taxes 3,201 -
Other accrued liabilities 11,995 15,111
Total current liabilities 145,721 143,072
Long-term debt 62,312 50,768
Other liabilities 3,980 3,539
Total liabilities 212,013 197,379
Stockholders' equity
Preferred stock, par value $10.00; authorized -
1,000 shares; none issued - -
Series A Participating Cumulative Preferred stock,
par value $10.00; authorized - 300 shares; none issued - -
Common stock, par value $2.00; authorized - 30,000
shares; issued - 20,382 and 20,285 shares 40,763 40,569
Paid-in capital 11,208 9,258
Retained earnings 90,799 87,116
Total stockholders' equity 142,770 136,943
Commitments and contingencies
Total Liabilities and Stockholders' Equity $ 354,783 $ 334,322
</TABLE>
See Notes to Consolidated Financial Statements
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Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
Three Months Ended
March 31,
1994 1993
<S> <C> <C>
Net sales $ 390,794 $ 317,812
Cost of sales 351,668 284,178
Gross margin 39,126 33,634
Selling, general and administrative expenses 28,373 24,886
Depreciation and amortization 2,302 1,717
Interest expense, net 768 639
Total expenses 31,443 27,242
Income before income taxes 7,683 6,392
Provision for income taxes 2,927 2,566
Net income before cumulative effect of accounting change 4,756 3,826
Cumulative effect of change in accounting principle - 706
Net income $ 4,756 $ 4,532
Net income per share:
Net income before cumulative effect of accounting change $ 0.23 $ 0.19
Cumulative effect of change in accounting principle - 0.03
Net income per share $ 0.23 $ 0.22
Cash dividends per share $ 0.053 $ 0.053
Weighted average common shares
and common share equivalents 20,755 20,322
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Three Months Ended
(In thousands) March 31,
1994 1993
<S> <C> <C>
Operating Activities
Net income and noncash charges
Net income $ 4,756 $ 4,532
Noncash charges (credits) to income
Cumulative effect of change in accounting principle - (706)
Depreciation and amortization 2,302 1,717
Provision for losses on accounts and
notes receivable - 277
Provision for LIFO reserve 1,381 1,037
Other, net 243 215
Cash provided by net income and noncash charges 8,682 7,072
Changes in working capital
Accounts and notes receivable (661) 167
Merchandise inventories (22,457) (16,969)
Accounts payable 11,619 10,847
Net change in other current assets
and current liabilities 1,198 3,786
Other, net 850 522
Cash provided by (used for) operating activities (769) 5,425
Investing Activities
Cash acquired from business acquisition - 207
Additions to property and equipment (662) (987)
Other, net (233) (835)
Cash used for investing activities (895) (1,615)
Financing Activities
Cash dividends paid (1,073) (1,034)
Additions to long-term debt 11,412 16,600
Reductions of long-term debt (361) (337)
Reductions of drafts payable (8,627) (20,839)
Exercise of options 307 121
Cash provided by (used for) financing activities 1,658 (5,489)
Net decrease in cash and cash equivalents (6) (1,679)
Cash and cash equivalents at beginning of year 2,048 7,068
Cash and cash equivalents at end of period $ 2,042 $ 5,389
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Accounting Policies
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which are comprised of only
normal recurring accruals and the use of estimates) necessary to present
fairly the consolidated financial position of Owens & Minor, Inc. and
subsidiaries as of March 31, 1994 and the results of operations and cash
flows for the three month periods ended March 31, 1994 and 1993.
2. Interim Results of Operations
The results of operations for interim periods are not necessarily indicative
of the results to be expected for the full year.
3. Interim Gross Margin Reporting
In general, the Company uses estimated gross profit rates to determine the
cost of sales during interim periods. To improve the accuracy of its
estimated gross margins for interim reporting purposes, the Company takes
physical inventories at selected distribution centers and reported earnings
for the quarter reflect the results of such inventories, if materially
different. Management will continue a program of interim physical
inventories at selected distribution centers to the extent it deems
appropriate to ensure the accuracy of interim reporting and to minimize
year-end adjustments.
4. Business Combination
On December 22, 1993, the Company entered into an agreement with Stuart
Medical, Inc. (Stuart), whereby the companies will combine their two
businesses. In the proposed transaction, the Company will form a holding
company that will own all of the currently outstanding capital stock of the
Company and Stuart. Further details of the transaction were included in the
Company's 1993 Annual Report and Proxy Statement/Prospectus dated April 6,
1994. The Company's shareholders will vote on the proposed transaction at
the annual shareholders meeting with expected closing of the transaction to
occur in the second quarter. Had this acquisition been completed on January
1, 1993, the Company would have shown the following results for the three
months ended March 31, 1994 and 1993:
(In thousands, except
per share data)
Three Months Ended Three Months Ended
March 31, 1994 March 31, 1993
Sales $ 634,000 $ 550,000
Net income before
cumulative effect of
accounting change $ 6,180 $ 4,800
Net income per common
share before
cumulative effect of
accounting change $ 0.24 $ 0.17
The pro forma results are not necessarily indicative of what actually would
have occurred if the combination had been in effect for the periods
presented. In addition, they are not intended to be a projection of future
results.
<PAGE>
Item 2.
Owens & Minor, Inc. and Subsidiaries
Management's Discussion and Analysis of
Results of Operations and Financial Condition
First Quarter of 1994 Compared to 1993
Net Sales
Net sales increased 23.0% (21.3% same store sales) to $390.8
million in 1994 from $317.8 million in 1993. The sales increase is
due primarily to market share improvement, account penetration and
product line expansion.
Gross Margin
Gross margin as a percentage of net sales declined to 10.0% in 1994
from 10.6% in 1993. The decline is due to increased volume from
large national customers which have lower than average margins.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of net
sales decreased from 7.8% in 1993 to 7.3% in 1994. This decrease
reflects the benefits derived from the Company's emphasis on
training and technology development, allowing the Company to handle
increased sales volume without corresponding increases in
administrative expenses.
Depreciation and Amortization
Depreciation and amortization has increased from $1.7 million in
1993 to $2.3 million in 1994. The increase is due to continued
investment in new and improved technology and the costs of opening
new distribution centers.
Interest Expense, net
Interest expense, net of interest income, increased from $.6
million in 1993 to $.8 million in 1994. The increase is due to
increased borrowings to finance two acquisitions during the second
quarter of 1993, the opening of four new distribution centers
during the last three quarters of 1993 and increased inventory from
product line expansion.
Provision for Income Taxes
The effective tax rate decreased as a percentage of income before
income taxes from 40.1% in 1993 to 38.1% in 1994. The rate
decrease is due to the favorable resolution of several tax issues
during the first quarter of 1994.
Net Income
Net income increased by 24.3% from $3.8 million, before the
cumulative effect of an accounting change (SFAS 109), in 1993 to
$4.8 million in 1994. Net income per share before the cumulative
effect of an accounting change (SFAS 109) increased by 21.1% from
$.19 per share in 1993 to $.23 per share in 1994. The increases in
net income and net income per share resulted primarily from
increased sales.
Financial Condition
The Company's average receivable days outstanding improved from
34.2 at December 31, 1993 to 32.9 at March 31, 1994. The
improvement is due to continued emphasis on accounts receivable
controls. Average inventory turnover decreased from 11.5 turns at
December 31, 1993 to 10.2 turns at March 31, 1994. The change is
due to an expanded product line, an increase in custom products and
cost effective buying opportunities. The inventory purchases were
financed through the Company's long-term revolving credit facility,
resulting in an increase in the Company's current ratio from 2.0 at
December 31, 1993 to 2.1 at March 31, 1994 and an increase in the
Company's capitalization ratio from 27.1% at December 31, 1993 to
30.4% at March 31, 1994.
<PAGE>
Part II. Other Information
Item Exhibits and Reports on Form 8-K
(b) On January 6, 1994, the Company filed a Form 8-K, items 5 and 7, with
respect to its execution of the Agreement of Exchange dated as of
December 22, 1993, as amended and restated on March 31, 1994, by and
among the Company, O&M Holding, Inc. (formerly OMI Holding, Inc.), Stuart
Medical, Inc. (Stuart), and certain shareholders of Stuart.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
OWENS & MINOR, INC.
Date May 4, 1994 /s/ G. Gilmer Minor, III
G. Gilmer Minor, III
President and
Chief Executive Officer,
Director
Date May 4, 1994 /s/ Glenn J. Dozier
Glenn J. Dozier
Senior Vice President, Finance,
Chief Financial Officer
Date May 4, 1994 /s/ F. Thomas Smiley
F. Thomas Smiley
Vice President, Controller
