UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
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 1-9810
OWENS & MINOR, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Virginia 54-1701843
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 Cox Road, Glen Allen, Virginia 23060
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Post Office Box 27626, Richmond, Virginia 23261-7626
- --------------------------------------------------------------------------------
(Mailing address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 747-9794
----------------
Indicate by check mark whether the Registrant (1) has filed all 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 Owens & Minor, Inc.'s common stock outstanding as
of November 6, 1998 was 32,567,642 shares.
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Index
Page
Part I. Financial Information
Consolidated Statements of Income - Three Months and Nine
Months Ended September 30, 1998 and 1997 3
Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 4
Consolidated Statements of Cash Flows - Nine Months
Ended September 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II. Other Information 20
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands, except per share data)
(Unaudited) Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 768,416 $ 785,778 $ 2,365,344 $ 2,312,123
Cost of goods sold 687,412 706,897 2,119,720 2,080,099
---------- ---------- ---------- ----------
Gross margin 81,004 78,881 245,624 232,024
---------- ---------- ---------- ----------
Selling, general and administrative
expenses 58,542 57,582 180,563 172,616
Depreciation and amortization 4,583 4,507 13,556 13,044
Interest expense, net 3,799 3,928 10,602 11,634
Discount on accounts receivable
securitization 884 1,649 3,870 5,002
Distributions on mandatorily
redeemable preferred securities 1,785 -- 2,720 --
Nonrecurring restructuring expenses -- -- 11,200 --
---------- ---------- ---------- ----------
Total expenses 69,593 67,666 222,511 202,296
---------- ---------- ---------- ----------
Income before income taxes 11,411 11,215 23,113 29,728
Income tax provision 4,793 4,737 9,591 12,486
---------- ---------- ---------- ----------
Net income 6,618 6,478 13,522 17,242
Dividends on preferred stock -- 1,293 1,898 3,881
---------- ---------- ---------- ----------
Net income attributable to common stock $ 6,618 $ 5,185 $ 11,624 $ 13,361
========== ========== ========== ==========
Net income per common share - basic $ 0.20 $ 0.16 $ 0.36 $ 0.42
Net income per common share - diluted $ 0.20 $ 0.16 $ 0.36 $ 0.42
Weighted average shares - basic 32,532 32,090 32,472 32,003
Weighted average shares - diluted 38,951 32,120 32,561 32,054
Cash dividends per common share $ 0.050 $ 0.045 $ 0.150 $ 0.135
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data) September 30, December 31,
1998 1997
---------------------------------
Assets (Unaudited)
Current assets
Cash and cash equivalents $ 3,648 $ 583
Accounts and notes receivable, net
of allowance of $6,363 and $6,312 198,997 187,878
Merchandise inventories 324,517 285,529
Other current assets 22,530 25,274
----------- ----------
Total current assets 549,692 499,264
Property and equipment, net of accumulated
depreciation of $46,061 and $41,500 25,339 26,628
Goodwill, net of accumulated
amortization of $21,707 and $18,298 159,412 162,821
Other assets, net 28,632 23,850
=========== ==========
Total assets $ 763,075 $ 712,563
=========== ==========
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ 247,213 $ 224,072
Accrued payroll and related liabilities 9,566 7,840
Other accrued liabilities 63,613 33,563
----------- ----------
Total current liabilities 320,392 265,475
Long-term debt 150,000 182,550
Accrued pension and retirement plans 5,881 5,237
----------- ----------
Total liabilities 476,273 453,262
Company-obligated mandatorily redeemable
preferred securities of subsidiary
trust, holding solely convertible
debentures of Owens & Minor, Inc. 132,000 -
----------- ----------
Shareholders' equity
Preferred stock, par value $100
per share; authorized - 10,000
shares
Series A; Participating Cumulative
Preferred Stock; none issued - -
Series B; Cumulative Preferred Stock;
4.5%, convertible; issued
and outstanding - none and 1,150
shares - 115,000
Common stock, par value $2 per share;
authorized - 200,000 shares; issued and
outstanding - 32,532 shares and 32,213
shares 65,064 64,426
Paid-in capital 11,121 8,005
Retained earnings 78,617 71,870
----------- ----------
Total shareholders' equity 154,802 259,301
=========== ==========
Total liabilities and shareholders'
equity $ 763,075 $ 712,563
=========== ==========
See accompanying notes to consolidated financial statements.
4
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands) Nine Months Ended
(Unaudited) September 30,
------------------------
1998 1997
---------- -----------
Operating activities
Net income $ 13,522 $ 17,242
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation and amortization 13,556 13,044
Refund of federal income taxes 15,910 -
Restructuring provision 11,200 -
Provision for losses on accounts and notes
receivable 387 183
Provision for LIFO reserve 2,497 2,150
Changes in operating assets and liabilities:
Accounts and notes receivable (11,506) (32,657)
Merchandise inventories (41,485) (3,093)
Accounts payable 59,428 38,778
Net change in other current assets
and current liabilities 8,844 7,546
Other, net 516 (819)
---------- -----------
Cash provided by operating activities 72,869 42,374
---------- -----------
Investing activities
Additions to property and equipment (5,180) (6,290)
Additions to computer software (3,650) (3,115)
Proceeds from sale of property and equipment 65 1,838
---------- ----------
Cash used for investing activities (8,765) (7,567)
---------- ----------
Financing activities
Net proceeds from issuance of mandatorily redeemable
preferred securities 127,319 -
Repurchase of preferred stock (115,000) -
Reduction of long-term debt (32,550) (13,358)
Other financing (36,287) (15,088)
Cash dividends paid (7,638) (8,205)
Proceeds from exercise of stock options 3,117 1,772
---------- ----------
Cash used for financing activities (61,039) (34,879)
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,065 (72)
Cash and cash equivalents at beginning of year 583 743
========== ==========
Cash and cash equivalents at end of period $ 3,648 $ 671
========== ==========
See accompanying notes to consolidated financial statements.
5
<PAGE>
Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which are comprised only of
normal recurring accruals and the use of estimates) necessary to present
fairly the consolidated financial position of Owens & Minor, Inc. and its
wholly-owned subsidiaries (the "Company") as of September 30, 1998 and the
consolidated results of operations for the three and nine month periods and
cash flows for the nine month periods ended September 30, 1998 and 1997.
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
The Company uses estimated gross margin rates to determine the cost of goods
sold during interim periods. To improve the accuracy of its estimated gross
margins for interim reporting purposes, the Company takes physical inventory
counts at selected distribution centers. Reported results of operations for
the three and nine month periods ended September 30, 1998 and 1997 reflect
the results of such counts, to the extent that they are materially different
from estimated amounts. 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. Nonrecurring Restructuring Expenses
In the second quarter of 1998, the Company recorded a nonrecurring charge of
$11.2 million, or $6.6 million after tax, related to the impact of the
cancellation of its medical/surgical distribution contract with Columbia/HCA
Healthcare Corporation ("Columbia/HCA/ HCA"). The restructuring plan includes
reductions in warehouse space and in the number of employees in those
divisions which have the highest volume of business with Columbia/HCA
facilities. The following table sets forth the activity in the restructuring
reserve through September 30, 1998:
(In millions)
Balance at
Restructuring September
Provision Charges 30, 1998
--------- ------- --------
Losses under lease commitments $ 4.2 $0.1 $ 4.1
Asset write-offs 4.0 - 4.0
Employee separations 2.5 0.2 2.3
Other 0.5 - 0.5
--------- ------- --------
Total $11.2 $ 0.3 $10.9
========= ======= ========
Approximately nineteen employees were terminated during the third quarter in
connection with the restructuring plan.
6
<PAGE>
5. Net Income per Common Share
The following sets forth the computation of basic and diluted net income per
common share:
(In thousands, except per share Three Months Ended Nine Months Ended
data) September 30, September 30,
--------------------- -------------------
1998 1997 1998 1997
---------- ---------- --------- ---------
Numerator:
Net income $ 6,618 $ 6,478 $ 13,522 $ 17,242
Preferred stock dividends $ - $ 1,293 $ 1,898 $ 3,881
----------------------------------------------------------------------------
Numerator for basic net income
per common share - net income
available to common
shareholders 6,618 5,185 11,624 13,361
Distributions on mandatorily
redeemable preferred
securities, net of tax 1,035 - - -
----------------------------------------------------------------------------
Numerator for diluted net income
per common share-net income
available to common share-
holders after assumed
conversions $7,653 $ 5,185 $11,624 $13,361
----------------------------------------------------------------------------
Denominator:
Denominator for basic net
income per common share -
weighted average shares 32,532 32,090 32,472 32,003
Effect of dilutive securities:
Mandatorily redeemable
preferred securities 6,400 - - -
Stock options and
restricted stock 19 30 89 51
----------------------------------------------------------------------------
Denominator for diluted net
income per common
share - adjusted weighted
average
shares 38,951 32,120 32,561 32,054
----------------------------------------------------------------------------
Net income per common share -
basic $ 0.20 $ 0.16 $ 0.36 $ 0.42
Net income per common share -
diluted $ 0.20 $ 0.16 $ 0.36 $ 0.42
----------------------------------------------------------------------------
6. Mandatorily Redeemable Preferred Securities
In May 1998, Owens & Minor Trust I (the "Trust"), a statutory business trust
sponsored and wholly-owned by Owens & Minor, Inc. ("O&M"), issued 2,640,000
shares of $2.6875 Term Convertible Securities, Series A (the "Securities")
for aggregate proceeds of $132.0 million. Each Security has a liquidation
value of $50. The net proceeds were invested by the Trust in 5.375% Junior
Subordinated Convertible Debentures of O&M (the "Debentures"). The Debentures
are the sole assets of the Trust. O&M applied substantially all of the net
proceeds of the Debentures to repurchase 1,150,000 shares of its Series B
Cumulative Preferred Stock at its par value.
The Securities accrue and pay quarterly cash distributions at an annual rate
of 5.375% of the liquidation value. Each Security is convertible into 2.4242
shares of the common stock of O&M at the holder's option prior to May 1,
2013. The Securities are mandatorily redeemable upon the maturity of the
Debentures on April 30, 2013, and may be redeemed in whole or in part after
May 1, 2001. The obligations of the Trust, as provided under the terms of the
Securities, are fully and unconditionally guaranteed by O&M.
7
<PAGE>
7. Condensed Consolidating Financial Information
The following tables present condensed consolidating financial information
for: O&M; on a combined basis, the guarantors of O&M's 10 7/8% Senior
Subordinated 10-year Notes (the "Notes") (all of the wholly-owned
subsidiaries of O&M except for O&M Funding Corp. ("OMF") and the Trust); and
OMF and the Trust, O&M's non-guarantors of the Notes. Separate financial
statements of the guarantor subsidiaries are not presented because the
guarantors are jointly, severally and unconditionally liable under the
guarantees and O&M believes the condensed consolidating financial statements
are more meaningful in understanding the financial position and results of
operations and cash flows of the guarantor subsidiaries.
8
<PAGE>
Condensed Consolidating Financial Statements ( 1 )
<TABLE>
<CAPTION>
(In thousands)
For the nine months ended Owens & Guarantor Non-guarantor
September 30, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------------------
Statements of Operations
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 2,365,344 $ - $ - $ 2,365,344
Cost of goods sold - 2,119,720 - - 2,119,720
- -------------------------------------------------------------------------------------------------------------------------------
Gross margin - 245,624 - - 245,624
- -------------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 5 180,374 184 - 180,563
Depreciation and amortization - 13,556 - - 13,556
Interest expense, net 12,998 (2,396) - - 10,602
Intercompany interest expense, net (8,758) 19,999 (10,153) (1,088) -
Discount on accounts receivable securitization - 62 3,808 - 3,870
Distributions on mandatorily redeemable preferred
securities - - 2,720 - 2,720
Nonrecurring restructuring expenses - 11,200 - - 11,200
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 4,245 222,795 (3,441) (1,088) 222,511
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (4,245) 22,829 3,441 1,088 23,113
Income tax provision (benefit) (1,719) 9,456 1,397 457 9,591
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) (2,526) 13,373 2,044 631 13,522
Dividends on preferred stock 1,898 - - - 1,898
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ (4,424) $ 13,373 $ 2,044 $ 631 $ 11,624
- -------------------------------------------------------------------------------------------------------------------------------
September 30, 1997
- -------------------------------------------------------------------------------------------------------------------------------
Statements of Operations
Net sales $ - $ 2,312,123 $ - $ - $ 2,312,123
Cost of goods sold - 2,080,099 - - 2,080,099
- -------------------------------------------------------------------------------------------------------------------------------
Gross margin - 232,024 - - 232,024
- -------------------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses - 172,484 132 - 172,616
Depreciation and amortization - 13,044 - - 13,044
Interest expense, net 13,575 (1,941) - - 11,634
Intercompany interest expense, net (11,646) 20,565 (7,835) (1,084) -
Discount on accounts receivable securitization - 7 4,995 - 5,002
- -------------------------------------------------------------------------------------------------------------------------------
Total expenses 1,929 204,159 (2,708) (1,084) 202,296
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (1,929) 27,865 2,708 1,084 29,728
Income tax provision (benefit) (791) 11,698 1,124 455 12,486
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) (1,138) 16,167 1,584 629 17,242
Dividends on preferred stock 3,881 - - - 3,881
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) attributable to common stock $ (5,019) $ 16,167 $ 1,584 $ 629 $ 13,361
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
( 1 ) Certain amounts in the 1997 condensed consolidating financial statements
have been reclassified to conform to the 1998 presentation.
9
<PAGE>
Condensed Consolidating Financial Statements
<TABLE>
<CAPTION>
(In thousands) Owens & Guarantor Non-guarantor
September 30, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Balance Sheets
Assets
Current assets
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 505 $ 3,142 $ 1 $ - $ 3,648
Accounts and notes receivable, net - 83,171 115,826 - 198,997
Merchandise inventories - 324,517 - - 324,517
Intercompany advances, net 153,953 93,515 1,183 (248,651) -
Other current assets - 22,530 - - 22,530
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 154,458 526,875 117,010 (248,651) 549,692
Property and equipment, net - 25,339 - - 25,339
Goodwill, net - 159,412 - - 159,412
Intercompany investments 303,941 15,001 136,083 (455,025) -
Other assets, net 10,120 18,512 - - 28,632
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 468,519 $ 745,139 $ 253,093 $ (703,676) $ 763,075
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ - $ 247,213 $ - $ - $ 247,213
Accrued payroll and related liabilities - 9,566 - - 9,566
Intercompany advances, net - 153,953 95,329 (249,282) -
Other accrued liabilities 5,135 57,106 1,372 - 63,613
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,135 467,838 96,701 (249,282) 320,392
Long-term debt 150,000 - - - 150,000
Intercompany long-term debt 136,083 - - (136,083) -
Accrued pension and retirement plans - 5,881 - - 5,881
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 291,218 473,719 96,701 (385,365) 476,273
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust, holding
solely convertible debentures of Owens & Minor, Inc. - - 132,000 - 132,000
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred stock - - - - -
Common stock 65,064 - 4,083 (4,083) 65,064
Paid-in capital 11,121 299,858 15,001 (314,859) 11,121
Retained earnings (cumulative deficit) 101,116 (28,438) 5,308 631 78,617
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 177,301 271,420 24,392 (318,311) 154,802
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 468,519 $ 745,139 $ 253,093 $ (703,676) $ 763,075
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Condensed Consolidating Financial Statements
<TABLE>
<CAPTION>
(In thousands) Owens & Guarantor Non-guarantor
December 31, 1997 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
Balance Sheets
Assets
Current assets
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 505 $ 77 $ 1 $ - $ 583
Accounts and notes receivable, net - 100,336 87,542 - 187,878
Merchandise inventories - 285,529 - - 285,529
Intercompany advances, net 176,335 68,016 - (244,351) -
Other current assets - 25,274 - - 25,274
- --------------------------------------------------------------------------------------------------------------------------------
Total current assets 176,840 479,232 87,543 (244,351) 499,264
Property and equipment, net - 26,628 - - 26,628
Goodwill, net - 162,821 - - 162,821
Intercompany investments 299,858 15,001 - (314,859) -
Other assets, net 6,180 17,670 - - 23,850
- --------------------------------------------------------------------------------------------------------------------------------
Total assets $ 482,878 $ 701,352 $ 87,543 $ (559,210) $ 712,563
- --------------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities
Accounts payable $ - $ 224,072 $ - $ - $ 224,072
Accrued payroll and related liabilities - 7,840 - - 7,840
Intercompany advances, net - 176,335 68,759 (245,094) -
Other accrued liabilities 2,480 30,563 520 - 33,563
- --------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 2,480 438,810 69,279 (245,094) 265,475
Long-term debt 182,550 - - - 182,550
Accrued pension and retirement plans - 5,237 - - 5,237
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 185,030 444,047 69,279 (245,094) 453,262
- --------------------------------------------------------------------------------------------------------------------------------
Shareholders' equity
Preferred stock 115,000 - - - 115,000
Common stock 64,426 - - - 64,426
Paid-in capital 8,005 299,858 15,001 (314,859) 8,005
Retained earnings (cumulative deficit) 110,417 (42,553) 3,263 743 71,870
- --------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 297,848 257,305 18,264 (314,116) 259,301
- --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 482,878 $ 701,352 $ 87,543 $ (559,210) $ 712,563
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Condensed Consolidating Financial Statements
<TABLE>
<CAPTION>
(In thousands)
For the nine months ended Owens & Guarantor Non-guarantor
September 30, 1998 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
Statements of Cash Flows
Operating Activities
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (2,526) $ 13,373 $ 2,044 $ 631 $ 13,522
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities
Depreciation and amortization - 13,556 - - 13,556
Refund of federal income taxes - 15,910 - - 15,910
Restructuring provision - 11,200 - - 11,200
Provision for losses on accounts and notes receivable - 212 175 - 387
Provision for LIFO reserve - 2,497 - - 2,497
Changes in operating assets and liabilities
Accounts and notes receivable - 16,953 (28,459) - (11,506)
Merchandise inventories - (41,485) - - (41,485)
Accounts payable - 59,428 - - 59,428
Net change in other current assets
and current liabilities 4,030 3,965 849 - 8,884
Other, net 866 393 (112) (631) 516
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities 2,370 96,002 (25,503) - 72,869
- -----------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Additions to property and equipment - (5,180) - - (5,180)
Additions to computer software - (3,650) - - (3,650)
Proceeds from sale of property and equipment - 65 - - 65
- -----------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities - (8,765) - - (8,765)
- -----------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net proceeds from issuance of manditorily redeemable
preferred securities (4,681) - 132,000 - 127,319
Repurchase of preferred stock 115,000) - - - (115,000)
Reduction of long-term debt (32,550) - - - (32,550)
Change in intercompany advances 154,382 (47,885) (106,497) - -
Other financing - (36,287) - - (36,287)
Cash dividends paid (7,638) - - - (7,638)
Proceeds from exercise of stock options 3,117 - - - 3,117
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities (2,370) (84,172) 25,503 - (61,039)
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents - 3,065 - - 3,065
Cash and cash equivalents at beginning of year 505 77 1 - 583
- -----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 505 $ 3,142 $ 1 $ - $ 3,648
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
Condensed Consolidating Financial Statements
<TABLE>
<CAPTION>
(In thousands)
For the nine months ended Owens & Guarantor Non-guarantor
September 30, 1997 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------------
Statements of Cash Flows
Operating Activities
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (1,138) $ 16,167 $ 1,584 $ 629 $ 17,242
Adjustments to reconcile net income (loss) to cash
provided by (used for) operating activities
Depreciation and amortization - 13,044 - - 13,044
Provision for losses on accounts and notes receivable - 58 125 - 183
Provision for LIFO reserve - 2,150 - - 2,150
Changes in operating assets and liabilities
Accounts and notes receivable - (6,122) (26,535) - (32,657)
Merchandise inventories - (3,093) - - (3,093)
Accounts payable - 38,778 - - 38,778
Net change in other current assets
and current liabilities 3,731 3,900 (85) - 7,546
Other, net 679 (349) (520) (629) (819)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) operating activities 3,272 64,533 (25,431) - 42,374
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Additions to property and equipment - (6,290) - - (6,290)
Additions to computer software - (3,115) - - (3,115)
Proceeds from sale of property and equipment - 1,838 - - 1,838
- ----------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities - (7,567) - - (7,567)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities
Reduction of long-term debt (2,309) (11,049) - - (13,358)
Change in intercompany advances 5,470 (30,901) 25,431 - -
Other financing - (15,088) - - (15,088)
Cash dividends paid (8,205) - - - (8,205)
Proceeds from exercise of stock options 1,772 - - - 1,772
- ----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used for) financing activities (3,272) (57,038) 25,431 - (34,879)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents - (72) - - (72)
Cash and cash equivalents at beginning of year 505 237 1 - 743
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 505 $ 165 $ 1 $ - $ 671
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Item 2. Owens & Minor, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following management discussion and analysis describes material changes in
the Company's financial condition since December 31, 1997. Trends of a material
nature are discussed to the extent known and considered relevant. This
discussion should be read in conjunction with the consolidated financial
statements, related notes thereto and management's discussion and analysis of
financial condition and results of operations included in the Company's 1997
Annual Report to Shareholders and Annual Report on Form 10-K for the year ended
December 31, 1997.
General
On May 26, 1998, Columbia/HCA informed the Company of its intention to cancel
its medical/surgical supply contract. The Company and Columbia/HCA have agreed
upon a plan for transition of the Columbia/HCA business. This plan has resulted
in a substantial reduction in purchases by Columbia/HCA from the Company,
beginning in the third quarter of 1998. The remaining Columbia/HCA business is
expected to transfer from the Company by December 31, 1998. For the first nine
months of 1998 and 1997, approximately 11% and 12%, respectively, of the
Company's net sales were to Columbia/HCA facilities and for the third quarter of
1998 and 1997, approximately 9% and 12%, respectively, of the Company's net
sales were to Columbia/HCA facilities. In the second quarter of 1998, the
Company implemented a restructuring plan to downsize warehouse operations in
those divisions with the highest volumes of sales to Columbia/HCA facilities. To
offset the loss of sales due to the contract cancellation, the Company has
continued its commitment to profitable sales growth and has entered into new
agreements in the third quarter of 1998 that will provide opportunities for such
future growth, although such growth cannot be assured.
Results of Operations
Third quarter and first nine months of 1998 compared with 1997
Net sales. Net sales decreased 2.2% to $768.4 million in the third quarter of
1998 from $785.8 million in the third quarter of 1997. This decrease is
primarily due to the impact of the cancellation of the Company's distribution
contract with Columbia/HCA. Net sales increased 2.3% to $2.37 billion in the
first nine months of 1998 from $2.31 billion in the first nine months of 1997.
The increase in sales was a result of both increased penetration of existing
accounts and new customer contracts.
Gross margin. Gross margin as a percentage of net sales increased to 10.5% in
the third quarter of 1998 from 10.0% in the third quarter of 1997. Gross margin
as a percentage of net sales increased 10.4% in the first nine months of 1998
from 10.0% in the first nine months of 1997. This improvement reflects the
Company's continued emphasis on supply chain initiatives with key suppliers as
well as inventory purchasing opportunities. The Company will continue to focus
on improving margin levels through continued emphasis on supply chain
initiatives.
14
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Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses as a percentage of net sales increased to 7.6%
for the third quarter of 1998, compared to 7.3% for the third quarter of 1997.
The increase was the result of both lower sales for the quarter than in 1997 as
a result of the termination of the Columbia/HCA contract; and increased spending
for information systems, as the Company continued to use information technology
to control costs, through more extensive use of electronic data interchange
(EDI) in transactions with both customers and suppliers.
For the first nine months of 1998, SG&A expenses as a percentage of net sales
increased to 7.6% from 7.5% in the first nine months of 1997, in part as a
result of increased information technology spending, including $2.4 million of
expenses for Year 2000, compared to $1.1 million for the same period in 1997.
Depreciation and amortization. Depreciation and amortization increased by 1.7%
in the third quarter of 1998 compared to the third quarter of 1997 and increased
by 3.9% in the first nine months of 1998 compared to the first nine months of
1997. This increase was due primarily to the Company's continued investment in
information technology, including capital spending in the first nine months of
1998 for systems upgrades of $1.9 million associated with Year 2000 issues. The
Company anticipates similar increases in depreciation and amortization for the
remainder of 1998 associated with additional capital investment in information
technology.
Interest expense, net, and discount on accounts receivable securitization
(financing costs). Financing costs decreased to $4.7 million in the third
quarter of 1998 from $5.6 million in the third quarter of 1997, net of finance
charge income of $0.6 million and $0.5 million, respectively. Financing costs
decreased to $14.5 million in the first nine months of 1998 from $16.6 million
in the first nine months of 1997, net of finance charge income of $2.2 million
and $2.3 million, respectively. This reduction has been a result of improved
cash flow from operations, which has enabled the Company to reduce borrowings
for the 1998 third quarter and year to date, compared to the same periods in
1997, as well as lower effective interest rates for the first nine months of
1998 compared to the first nine months of 1997. The Company reduced outstanding
debt, excluding the impact of the accounts receivable securitization, by
approximately $67.6 million in the first nine months of 1998. Included in cash
flow from operations is a $15.9 million refund of federal income tax resulting
from a tax method change. Beginning with the tax year ending December 31, 1997,
the Company received permission from the Internal Revenue Service to change its
method of accounting for last-in first-out inventory. The cumulative effect of
this adjustment generated a net operating loss in the tax year ended December
31, 1997. This refund resulted in an increase in current deferred taxes payable,
and has no effect on the income tax provision for the current periods. The
Company expects to continue to manage its financing costs by continuing its
working capital reduction initiatives and management of interest rates, although
the future results of these initiatives cannot be assured.
15
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Distributions on mandatorily redeemable preferred securities and dividends on
preferred stock. In May 1998, the Trust issued $132 million of the Securities.
O&M applied substantially all of the net proceeds to repurchase and retire
1,150,000 shares of its Series B Cumulative Preferred Stock at its par value.
The Securities accrue and pay cash distributions quarterly at an annual rate of
5.375% of the liquidation value of $50. As of September 30, 1998, the Company
had accrued $1.2 million of distributions related to these Securities.
Nonrecurring restructuring expenses. As a result of the Columbia/HCA contract
termination, the Company recorded a nonrecurring restructuring charge of $11.2
million, or $6.6 million after taxes, in the second quarter of 1998, to reflect
the Company's plan to downsize warehouse operations in those divisions with the
highest volumes of sales to Columbia/HCA facilities. The restructuring plan
includes reductions in warehouse space and in the number of employees in those
divisions which had the highest volume of business with Columbia/HCA facilities.
In the third quarter of 1998, $0.3 million was charged against this liability.
Income taxes. The Company had an income tax provision of $9.6 million in the
first nine months of 1998 compared with $12.5 million in the first nine months
of 1997 and an effective tax rate of 41.5%, compared to 42.0% for the same
period in 1997.
Net income. Net income for the third quarter of 1998 increased slightly from the
same period in 1997 as improvements discussed in gross margin and financing
costs were offset by the distributions on mandatorily redeemable preferred
securities. However, net income attributable to common stock increased 27.6%,
reflecting the positive effect of the issuance of the Securities and the
retirement of the Series B Cumulative Preferred Stock discussed above. Net
income decreased $3.7 million in the first nine months of 1998 compared to the
first nine months of 1997. The decrease was due to the impact of the
restructuring charge discussed above. Excluding the effect of the restructuring
charge, net income increased 16.7% and net income per basic and diluted common
share increased to $0.56 and $0.55, respectively, for the first nine months of
1998 compared to $0.42 per basic and diluted common share for the first nine
months of 1997. This increase was primarily due to the improvements previously
discussed in gross margin and reduced financing costs. Although the trend,
excluding the effect of the restructuring charge, has been favorable and the
Company continues to pursue initiatives to improve profitability, the future
impact on net income cannot be assured.
Financial Condition, Liquidity and Capital Resources
Liquidity. The Company's liquidity improved during the first nine months of
1998. Outstanding financing (excluding the impact of the off balance sheet
accounts receivable securitization) was reduced by $67.6 million to $225.0
million at September 30, 1998 from $292.6 million at December 31, 1997. The
reduction was due to improvements in cash flow from operations as discussed
above. The capitalization ratio at September 30, 1998, including the Securities
as equity and excluding the effect of the accounts receivable securitization,
was 44.0% compared to 53.0% at December 31, 1997. This improvement was primarily
the result of the reduction in outstanding financing.
16
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In May 1998, O&M repurchased all of its outstanding Series B Cumulative
Preferred Stock, financing the repurchase with substantially all the proceeds of
the $132.0 million of Securities issued by the Trust. Management believes that
these transactions will result in lower overall costs of capital.
The Company expects that its available financing will be sufficient to fund its
working capital needs and long-term strategic growth, although this cannot be
assured. At September 30, 1998, the Company had approximately $225.0 million of
unused credit under its revolving credit facility and $47.7 million under its
receivables financing facility.
Working Capital Management. During the third quarter of 1998, the Company's
working capital increased compared to the third quarter of 1997. The Company's
accounts receivable days sales outstanding (excluding the impact of the off
balance sheet accounts receivable securitization) increased to 32.4 at September
30, 1998 from 31.6 at September 30, 1997. This increase was primarily caused by
the transition of most of the Columbia/HCA business toward the end of the
quarter. Inventory turnover decreased to 8.3 times in the third quarter of 1998
from 9.6 times in the third quarter of 1997 as a result of inventory purchasing
opportunities.
Capital Expenditures. Capital expenditures were approximately $8.8 million in
the first nine months of 1998, of which approximately $7.2 million was for
computer hardware and software, including $1.9 million for system upgrades for
the Year 2000 initiative. The Company expects to continue to invest in
technology, including system upgrades, as the most cost-effective method of
reducing operating expenses. These capital expenditures are expected to be
funded through cash flow from operations.
Recent Accounting Pronouncements. In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities.
This Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This Statement is effective for all
quarters of fiscal years beginning after June 15, 1999. Management believes the
effect on the Company of the adoption of this standard will be limited to
financial statement presentation and disclosure and will not have a material
effect on financial condition or results of operations.
In March 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 requires that certain costs
related to the development or purchase of internal-use software be capitalized
and amortized over the estimated useful life of the software. The SOP also
requires that costs related to the preliminary stage and the
post-implementation/operations stage of an internal-use computer software
development project be expensed as incurred. This Statement is effective for
fiscal years beginning after December 15, 1998. The Company has adopted this
standard effective January 1, 1998. Adoption of this standard did not have a
material impact on the Company's financial condition or results of operations.
17
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In February 1998, the FASB issued SFAS No. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits. SFAS No. 132 amends the disclosure
requirements of SFAS No. 87, Employers' Accounting for Pensions, SFAS No. 88,
Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pensions Plans and for Termination Benefits, and SFAS No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions. This Statement
standardizes the disclosure requirements of SFAS No. 87 and SFAS No. 106 and
recommends a parallel format for presenting information about pensions and other
postretirement benefits. This Statement is effective for fiscal years beginning
after December 15, 1997. Management believes the effect on the Company of
adoption of this standard will be limited to changes in financial statement
presentation and disclosure.
Forward-looking Statements
Certain statements in this discussion constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, including, but not
limited to, general economic and business conditions, competition, changing
trends in customer profiles, outcomes of outstanding litigation, and changes in
government regulations. Although the Company believes that its expectations with
respect to the forward-looking statements are based upon reasonable assumptions
within the bounds of its knowledge of its business and operations, there can be
no assurance that actual results, performance or achievements of the Company
will not differ materially from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Readiness for Year 2000
The Year 2000 (Y2K) issue is the result of computer programs being written using
two-digit, rather than four-digit, year dates. The Company's computer hardware,
software, and devices with imbedded technology that are time-sensitive may
recognize a date code using "00" as the year 1900 rather than the year 2000.
This situation could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in other normal business
activities.
The Company has divided its Y2K efforts into three main areas:
o computer hardware and software;
o other systems and equipment, such as telephone equipment, scanning equipment
and alarm systems; and
o suppliers and customers.
Computer Hardware and Software. In 1997, the Company completed its assessment of
its computer hardware and software, and developed a strategy of remediation.
This strategy includes retirement of outdated software, and replacement or
repair of the remaining software and hardware. The Company began repair and
replacement efforts in 1997, and expects that they will be substantially
complete by mid-1999, prior to any currently anticipated impact on its computer
hardware and software. Testing of repairs is expected to be substantially
complete by mid-1999, but will continue through the end of that year. The
Company estimates that, as of September 30, 1998, it had completed approximately
90% of the repair, 20% of replacement, and 30% of the testing that it believes
will be necessary to fully address potential Y2K issues relating to its computer
hardware and software.
18
<PAGE>
Other Systems and Equipment. The Company has completed an inventory and
assessment of non-computer related systems and equipment at its operating
divisions, and is expects to complete a similar inventory and assessment at its
corporate offices by the end of 1998. The Company believes that the impact on
operations of potential noncompliance for these systems and equipment is
minimal. During the third quarter of 1998, the Company started a program of
replacement and repair of non-compliant systems and equipment, and expects this
effort to be complete by late 1999.
Suppliers and Customers. The Company has contacted its significant suppliers to
determine the extent to which the Company is vulnerable to the suppliers'
failure to remediate their Y2K compliance issues. Of the suppliers representing
approximately 90% of the Company's sales, 87% have responded, and, of those
responding, 93% have indicated that they have either remedied their Y2K
compliance issues, or plan to do so before the end of 1999.
During third quarter 1998, the Company has also contacted its largest customers
to determine their level of Y2K readiness. Many customers have not yet responded
to these inquiries, or have not responded with sufficient detail for the Company
to determine whether they will be Y2K compliant on a timely basis. The Company
is continuing its efforts to ascertain the readiness of its customers but, since
this readiness cannot be assured, the Company is in the process of developing
contingency plans to address the most likely risks of non-compliance.
The Company estimates that the cost of its Y2K remediation efforts will total
approximately $8.0 million of operating expenses and $6.0 million of capital
expenditures. These expenditures will be funded from operating cash flows.
Through September 30, 1998, the Company had incurred approximately $4.5 million
of expenses and $2.5 million of capital spending related to its Y2K efforts, of
which $0.9 million and $1.0 million were incurred in third quarter of 1998. For
the remainder of 1998 and for 1999, the Company expects to incur approximately
$3.5 million of expenses and $3.5 million of capital spending. Other non-Y2K
information technology efforts have not been significantly delayed by Y2K
initiatives.
The Company has begun, but not yet completed, an analysis of the operational
problems and costs that would be reasonably likely to result from the failure by
the Company and certain third parties to complete efforts necessary to achieve
Y2K compliance on a timely basis. The most reasonably likely worst case scenario
has not yet been identified, nor have contingency plans been developed for this
scenario. The Company currently plans to complete its analysis and contingency
planning by late 1999.
19
<PAGE>
The Company presently believes that the Y2K issue will not pose significant
operational problems for the Company. However, if all Y2K issues are not
properly identified or if assessment, remediation, and testing are not completed
on a timely basis, there can be no assurance that the Y2K issue will not
materially adversely impact the Company's results of operations or adversely
affect the Company's relationships with customers, suppliers, or others.
Additionally, there can be no assurance that Y2K non-compliance by other
entities will not have a material adverse impact on the Company's systems or
results of operations.
The costs of the Company's Y2K efforts and the dates on which the Company
believes it will complete these efforts are based upon management's current
estimates. These estimates used numerous assumptions regarding future events,
including the continued availability of certain resources, third-party
remediation plans, and other factors. There can be no assurance that these
estimates will prove to be accurate and actual results could differ materially
from those currently anticipated.
Part II. Other Information
Item 1. Legal Proceedings
Certain legal proceedings pending against the Company are described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
Through September 30, 1998, there have been no material developments in any
legal proceedings reported in such Annual Report.
Item 5. Other Information
The Company has amended its Bylaws to make Article 14.1 of the Virginia Stock
Corporation Act (the Control Share Acquisitions Statute) inapplicable to shares
of any class of capital stock of the Company and to add certain advance notice
requirements applicable to proposals by shareholders for nominees for election
as directors of the Company and for other matters sought to be brought before an
annual meeting of shareholders.
The text of the amended Bylaws of the Company is filed as Exhibit 3(b) to this
Report, which is incorporated by reference. The amendments are described below.
Article I, Section 1.9 of the Company's By-laws provides that for a shareholder
to bring a matter properly before an annual meeting of shareholders, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a shareholder's notice must be given, either by
personal delivery or by United States registered or certified mail, postage
prepaid, to the Secretary of the Company not later than 90 days before the
anniversary of the date of the first mailing of the Company's proxy statement
for the immediately preceding annual meeting -- such date is December 31, 1998
with respect to the 1999 annual meeting. In no event shall the public
announcement of an adjournment or postponement of an annual meeting or the fact
that an annual meeting is held after the anniversary of the preceding annual
meeting commence a new time period for the giving of a shareholder's notice as
described above.
A shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting, including the complete text
of any resolutions to be presented at the meeting with respect to such business,
and the reasons for conducting such business at the meeting, (ii) the name and
address of record of the shareholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is made, (iii) the class and number
of shares of the Company that are owned by the shareholder and such beneficial
owner, (iv) a representation that the shareholder is a holder of record of
shares of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to propose such business, and (v) any material
interest of the shareholder and such beneficial owner in such business. In the
event that a shareholder attempts to bring business before a meeting without
complying with the foregoing procedure, such business shall not be transacted at
such meeting.
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<PAGE>
In the case of nominations for the election of directors, Article I, Section 1.8
of the Company's By-laws provides that any shareholder entitled to vote in the
election of directors may nominate one or more persons for election as directors
only at an annual meeting and if written notice of such shareholder's intent to
make such nomination or nominations has been given, either by personal delivery
or by United States registered or certified mail, postage prepaid, to the
Secretary of the Company not later than 90 days before the anniversary of the
date of the first mailing of the Company's proxy statement for the immediately
preceding year's annual meeting -- such date is December 31, 1998 with respect
to the 1999 annual meeting. In no event shall the public announcement of an
adjournment or postponement of an annual meeting or the fact that an annual
meeting is held after the anniversary of the preceding annual meeting commence a
new time period for the giving of a shareholder's notice as described above.
Each notice shall set forth (i) the name and address of record of the
shareholder who intends to make the nomination, the beneficial owner, if any, on
whose behalf the nomination is made and of the person or persons to be
nominated, (ii) the class and number of shares of the Company that are owned by
the shareholder and such beneficial owner, (iii) a representation that the
shareholder is a holder of record of shares of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice, (iv) a description of
all arrangements, understandings or relationships between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder, and (v) such other information regarding each nominee proposed by
such shareholder as would be required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required to be disclosed, pursuant to the proxy rules of the Securities and
Exchange Commission, had the nominee been nominated, or intended to be
nominated, by the Board of Directors, and shall include a consent signed by each
such nominee to serve as a director of the Company if so elected. In the event
that a shareholder attempts to nominate any person without complying with the
foregoing procedure, such person shall not be nominated and shall not stand for
election at such meeting.
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For purposes of including a shareholder proposal in the Company's proxy
statement for the 1999 annual meeting of shareholders, the shareholder must also
comply with the requirements set forth under the section "Other Information
Shareholder Proposals" of the Company's 1998 Proxy Statement, dated March 13,
1998, which section is incorporated by reference herein.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3(b). Amended and Restated Bylaws of the Company, as
amended
27. Financial Data Schedule - September 30, 1998 and 1997
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
22
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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.
(Registrant)
Date November 12, 1998 /s/ Ann Greer Rector
------------------------ ------------------------------
Ann Greer Rector
Senior Vice President &
Chief Financial Officer
Date November 12, 1998 /s/ Olwen B. Cape
------------------------ ------------------------------
Olwen B. Cape
Vice President & Controller
Chief Accounting Officer
23
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Exhibits Filed with SEC
Exhibit #
---------
3(b). Amended and Restated Bylaws of the Company, as amended
27. Financial Data Schedule - September 30, 1998 and 1997
AMENDED AND RESTATED
BYLAWS
OF
OWENS & MINOR, INC.
ARTICLE I
Meetings of Shareholders
1.1 Places of Meetings. All meetings of the shareholders shall be
held at such place, either within or without the Commonwealth of Virginia, as
from time to time may be fixed by the Board of Directors.
1.2 Annual Meetings. The annual meeting of the shareholders, for the
election of Directors and transaction of such other business as may come before
the meeting, shall be held in each year on the fourth Tuesday in April, at 11:00
a.m., or on such other business day that is not earlier than the first day of
March and not later than the last day of April, or at such other time, as shall
be fixed by the Board of Directors.
1.3 Special Meetings. A special meeting of the shareholders for any
purpose or purposes may be called at any time by the Chairman of the Board, the
President, or by a majority of the Board of Directors. At a special meeting no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting.
1.4 Notice of Meetings. Written or printed notice stating the place,
day and hour of every meeting of the shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
mailed not less than ten nor more than sixty days before the date of the meeting
to each shareholder of record entitled to vote at such meeting, at his address
which appears in the share transfer books of the Corporation. Such further
notice shall be given as may be required by law, but meetings may be held
without notice if all the shareholders entitled to vote at the meeting are
present in person or by proxy or if notice is waived in writing by those not
present, either before or after the meeting.
1.5 Quorum. Any number of shareholders together holding at least a
majority of the outstanding shares of capital stock entitled to vote with
respect to the business to be transacted, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If less than a quorum shall be in attendance at the
time for which a meeting shall have been called, the meeting may be adjourned
from time to time by a majority of the shareholders present or represented by
proxy without notice other than by announcement at the meeting.
<PAGE>
1.6 Voting. At any meeting of the shareholders each shareholder of a
class entitled to vote on any matter coming before the meeting shall, as to such
matter, have one vote, in person or by proxy, for each share of capital stock of
such class standing in his name on the books of the Corporation on the date, not
more than seventy days prior to such meeting, fixed by the Board of Directors as
the record date for the purpose of determining shareholders entitled to vote.
Every proxy shall be in writing, dated and signed by the shareholder entitled to
vote or his duly authorized attorney-in-fact.
1.7 Inspectors. An appropriate number of inspectors for any meeting
of shareholders may be appointed by the Chairman of such meeting. Inspectors so
appointed will open and close the polls, will receive and take charge of proxies
and ballots, and will decide all questions as to the qualifications of voters,
validity of proxies and ballots, and the number of votes properly cast.
1.8 Nomination by Shareholders. Subject to any rights of holders of
shares of the Preferred Stock of the Corporation, nominations for the election
of directors shall be made by the Board of Directors or by any shareholder
entitled to vote in elections of directors. However, any shareholder entitled to
vote in the election of directors may nominate one or more persons for election
as directors only at an annual meeting and if written notice of such
shareholders' intent to make such nomination or nominations has been given,
either by personal delivery or by United States registered or certified mail,
postage prepaid, to the Secretary of the Corporation not later than 90 days
before the anniversary of the date of the first mailing of the Corporation's
proxy statement for the immediately preceding year's annual meeting. In no event
shall the public announcement of an adjournment or postponement of an annual
meeting or the fact that an annual meeting is held after the anniversary of the
preceding annual meeting commence a new time period for the giving of a
shareholder's notice as described above. Each notice shall set forth (i) the
name and address of record of the shareholder who intends to make the
nomination, the beneficial owner, if any, on whose behalf the nomination is made
and of the person or persons to be nominated, (ii) the class and number of
shares of the Corporation that are owned by the shareholder and such beneficial
owners, (iii) a representation that the shareholder is a holder of record of
shares of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice, (iv) a description of all arrangements, understandings or
relationships between the shareholder and each nominee and any other person or
person (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder, and such other information
regarding each nominee proposed by such shareholder as would be required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required to be disclosed, pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors, and shall include a consent
signed by each such nominee to serve as a director of the Corporation it so
elected. In the event that a shareholder attempts to nominate any person without
complying with the procedures set forth in this Section 1.8, such person shall
not be nominated and shall not stand for election at such meeting. The Chairman
2
<PAGE>
of the Board of Directors shall have the power and duty to determine whether a
nomination proposed to be brought before the meeting was made in accordance with
the procedures set forth in this Section 1.8 and, if any proposed nomination is
not in compliance with this Section 1.8, to declare that such defective proposal
shall be disregarded.
1.9 Business Proposed by a Shareholder. To be properly brought
before a meeting of shareholders, business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors or (iii) otherwise properly brought before
an annual meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States registered or certified
mail, postage prepaid, to the Secretary of the Corporation not later than 90
days before the anniversary of the date of the first mailing of the
Corporation's proxy statement for the immediately preceding year's annual
meeting. In no event shall the public announcement of an adjournment or
postponement of an annual meeting or the fact that an annual meeting is held
after the anniversary of the preceding annual meeting commence a new time period
for the giving of a shareholder's notice as described above. A shareholder's
notice to the Secretary shall set forth as to each matter the shareholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, including the complete text of any
resolutions to be presented at the meeting with respect to such business, and
the reasons for conducting such business at the meeting, (ii) the name and
address of record of the shareholder proposing such business and the beneficial
owner, if any, on whose behalf the proposal is made, (iii) the class and number
of shares of the Corporation that are owned by the shareholder and such
beneficial owner and (iv) any material interest of the shareholder and such
beneficial owner, in such business. In the event that a shareholder attempts to
bring business before a meeting without complying with the procedures set forth
in this Section 1.9, such business shall not be transacted at such meeting. The
Chairman of the Board of Directors shall have the power and duty to determine
whether any proposal to bring business before the meeting was made in accordance
with the procedures set forth in this Section 1.9 and, if any business is not
proposed in compliance with this Section 1.9, to declare that such defective
proposal shall be disregarded and that such proposed business shall not be
transacted at such meeting.
ARTICLE II
Directors
2.1 General Powers. The property, affairs and business of the
Corporation shall be managed under the direction of the Board of Directors, and,
except as otherwise expressly provided by law, the Articles of Incorporation or
these Bylaws, all of the powers of the Corporation shall be vested in such
Board.
3
<PAGE>
2.2 Number of Directors. The number of Directors constituting the
Board of Directors shall be ten (10). The Directors shall be divided into three
(3) classes, each class to be as nearly equal in number as possible.
2.3 Election and Removal of Directors; Quorum.
(a) At each annual meeting of shareholders, (i) the number
of Directors equal to the number in the class whose term expires at the time of
such meeting shall be elected to hold office until the third succeeding annual
meeting and until their successors are elected, and (ii) any other vacancies
then existing shall be filled.
(b) Any Director may be removed from office at a meeting
called expressly for that purpose by the vote of shareholders holding not less
than a majority of the shares entitled to vote at an election of Directors.
(c) Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of the majority of the remaining Directors though
less than a quorum of the Board, and the term of office of any Director so
elected shall expire at the next shareholders' meeting at which directors are
elected.
(d) A majority of the number of Directors fixed by these
Bylaws shall constitute a quorum for the transaction of business. The act of a
majority of Directors present at a meeting at which a quorum is present shall be
the act of the Board of Directors. Less than a quorum may adjourn any meeting.
2.4 Meetings of Directors. An annual meeting of the Board of
Directors shall be held as soon as practicable after the adjournment of the
annual meeting of shareholders at such place as the Board may designate. Other
meetings of the Board of Directors shall be held at places within or without the
Commonwealth of Virginia and at times fixed by resolution of the Board, or upon
call of the Chairman of the Board, the President or a majority of the Directors.
The Secretary or officer performing the Secretary's duties shall give not less
than twenty-four hours' notice by letter, telegraph or telephone (or in person)
of all meetings of the Board of Directors, provided that notice need not be
given of the annual meeting or of regular meetings held at times and places
fixed by resolution of the Board. Meetings may be held at any time without
notice if all of the Directors are present, or if those not present waive notice
in writing either before or after the meeting. The notice of meetings of the
Board need not state the purpose of the meeting.
4
<PAGE>
2.5 Compensation. By resolution of the Board, Directors may be
allowed a fee and expenses for attendance at all meetings, but nothing herein
shall preclude Directors from serving the Corporation in other capacities and
receiving compensation for such other services.
2.6 Eligibility for Service as a Director. No person shall be
elected or reelected as a Director if at the time of such proposed election or
re-election such person shall have attained the age of 75 years. No person shall
serve as a Director after the annual meeting following his or her seventy-fifth
(75th) birthday; provided that the provisions of this sentence shall not apply
to any person elected as a director for a term beginning prior to January 1,
1993, during such term.
2.7 Director Emeritus. The Board of Directors may from time to time
elect one or more Directors Emeritus. A Director Emeritus may be named "Chairman
Emeritus" or "Vice Chairman Emeritus" if such person holds the office of
Chairman or Vice Chairman of the Corporation or any of its subsidiaries at the
time of retirement as a Director thereof. Each Director Emeritus shall be
elected for a term expiring on the date of the next annual meeting of the Board.
Directors Emeritus may attend meetings of the Board of Directors but shall not
be entitled to vote at such meetings and shall not be considered "directors" for
purposes of these Bylaws or for any other purpose, except that they shall be
entitled to receive notice of all regular and special meetings of the Board of
Directors. Each Director Emeritus shall be paid the same fees as members of the
Board of Directors for attendance at Board meetings.
ARTICLE III
Committees.
3.1 Executive Committee. The Board of Directors, by resolution
adopted by a majority of the number of Directors fixed by these Bylaws, may
elect an Executive Committee which shall consist of not less than three
Directors, including the President. When the Board of Directors is not in
session, the Executive Committee shall have all power vested in the Board of
Directors by law, by the Articles of Incorporation, or by these Bylaws, provided
that the Executive Committee shall not have power to (i) approve or recommend to
shareholders action that the Virginia Stock Corporation Act requires to be
approved by shareholders; (ii) fill vacancies on the Board or on any of its
committees; (iii) amend the Articles of Incorporation pursuant to ss.13.1-706 of
the Virginia Code; (iv) adopt, amend, or repeal the Bylaws; (v) approve a plan
of merger not requiring shareholder approval; (vi) authorize or approve a
distribution, except according to a general formula or method prescribed by the
Board of Directors; or (vii) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences, and limitations of a class or series of shares, other than within
limits specifically prescribed by the Board of Directors. The Executive
Committee shall report at the next regular or special meeting of the Board of
Directors all action that the Executive Committee may have taken on behalf of
the Board since the last regular or special meeting of the Board of Directors.
5
<PAGE>
3.2 Other Committees. The Board of Directors, by resolution adopted
by a majority of the number of Directors fixed by these Bylaws, may establish
such other standing or special committees of the Board as it may deem advisable,
consisting of not less than two Directors; and the members, terms and authority
of such committees shall be as set forth in the resolutions establishing the
same.
3.3 Meetings. Regular and special meetings of any Committee
established pursuant to this Article may be called and held subject to the same
requirements with respect to time, place and notice as are specified in these
Bylaws for regular and special meetings of the Board of Directors.
3.4 Quorum and Manner of Acting. A majority of the number of members
of any Committee shall constitute a quorum for the transaction of business at
such meeting. The action of a majority of those members present at a Committee
meeting at which a quorum is present shall constitute the act of the Committee.
3.5 Term of Office. Members of any Committee shall be elected as
above provided and shall hold office until their successors are elected by the
Board of Directors or until such Committee is dissolved by the Board of
Directors.
3.6 Resignation and Removal. Any member of a Committee may resign at
any time by giving written notice of his intention to do so to the President or
the Secretary of the Corporation, or may be removed, with or without cause, at
any time by such vote of the Board of Directors as would suffice for his
election.
3.7 Vacancies. Any vacancy occurring in a Committee resulting from
any cause whatever may be filled by a majority of the number of Directors fixed
by these Bylaws.
6
<PAGE>
ARTICLE IV
Officers
4.1 Election of Officers: Terms. The officers of the Corporation
shall consist of a President, a Secretary and a Treasurer. Other officers,
including a Chairman of the Board, one or more Vice Presidents (whose seniority
and titles, including Executive Vice Presidents and Senior Vice Presidents, may
be specified by the Board of Directors), and assistant and subordinate officers,
may from time to time be elected by the Board of Directors. All officers shall
hold office until the next annual meeting of the Board of Directors and until
their successors are elected. The President shall be chosen from among the
Directors. Any two officers may be combined in the same person as the Board of
Directors may determine.
4.2 Removal of Officers: Vacancies. Any officer of the Corporation
may be removed summarily with or without cause, at any time, by the Board of
Directors. Vacancies may be filled by the Board of Directors.
4.3 Duties. The officers of the Corporation shall have such duties
as generally pertain to their offices, respectively, as well as such powers and
duties as are prescribed by law or are hereinafter provided or as from time to
time shall be conferred by the Board of Directors. The Board of Directors may
require any officer to give such bond for the faithful performance of his duties
as the Board may see fit.
4.4 Duties of the President. The President shall be the chief
executive officer of the Corporation and shall be primarily responsible for the
implementation of policies of the Board of Directors. He shall have authority
over the general management and direction of the business and operations of the
Corporation and its divisions, if any, subject only to the ultimate authority of
the Board of Directors. He shall be a Director and, except as otherwise provided
in these Bylaws or in the resolutions establishing such committees, he shall be
ex officer a member of all Committees of the Board. In the absence of the
Chairman and the Vice-Chairman of the Board, or if there are no such officers,
the President shall preside at all corporate meetings. He may sign and execute
in the name of the Corporation share certificates, deeds, mortgages, bonds,
contracts or other instruments except in cases where the signing and the
execution thereof shall be expressly delegated by these Bylaws to some other
officer or agent of the Corporation or shall be required by law otherwise to be
signed or executed. In addition, he shall perform all duties incident to the
office of the President and such other duties as from time to time may be
assigned to him by the Board of Directors.
4.5 Duties of the Vice Presidents. Each Vice President (which term
includes any Senior Executive Vice President, Executive Vice President and
Senior Vice President), if any, shall have such powers and duties as may from
time to time be assigned to him by the President or the Board of Directors. Any
Vice President may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts or other instruments authorized by the Board of
7
<PAGE>
Directors, except where the signing and execution of such documents shall be
expressly delegated by the Board of Directors or the President to some other
officer or agent of the Corporation or shall be required by law or otherwise to
be signed or executed.
4.6 Duties of the Treasurer. The Treasurer shall have charge of and
be responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit all monies and securities of the Corporation in
such banks and depositories as shall be designated by the Board of Directors. He
shall be responsible (i) for maintaining adequate financial accounts and records
in accordance with generally accepted accounting practices; (ii) for the
preparation of appropriate operating budgets and financial statements; (iii) for
the preparation and filing of all tax returns required by law; and (iv) for the
performance of all duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Board of Directors or
the President. The Treasurer may sign and execute in the name of the Corporation
share certificates, deeds, mortgages, bonds, contracts or other instruments,
except in cases where the signing and the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law or otherwise to be signed
or executed.
4.7 Duties of the Secretary. The Secretary shall act as secretary of
all meetings of the Board of Directors and shareholders of the Corporation. When
requested, he shall also act as secretary of the meetings of the committees of
the Board. He shall keep and preserve the minutes of all such meetings in
permanent books. He shall see that all notices required to be given by the
Corporation are duly given and served; shall have custody of the seal of the
Corporation and shall affix the seal or cause it to be affixed by facsimile or
otherwise to all share certificates of the Corporation and to all documents the
execution of which on behalf of the Corporation under its corporate seal is
required in accordance with law or the provisions of these Bylaws; shall have
custody of all deeds, leases, contracts and other important corporate documents;
shall have charge of the books, records and papers of the Corporation relating
to its organization and management as a Corporation; shall see that all reports,
statements and other documents required by law (except tax returns) are properly
filed; and shall in general perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
4.8 Compensation. The Board of Directors shall have authority to fix
the compensation of all officers of the Corporation.
8
<PAGE>
ARTICLE V
Capital Stock
5.1 Certificates. The shares of capital stock of the Corporation
shall be evidenced by certificates in forms prescribed by the Board of Directors
and executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
shares of the Corporation may be appointed by the Board of Directors and may be
required to countersign certificates representing shares of such class or
classes. If any officer whose signature or facsimile thereof shall have been
used on a share certificate shall for any reason cease to be an officer of the
Corporation and such certificate shall not then have been delivered by the
Corporation, the Board of Directors may nevertheless adopt such certificate and
it may then be issued and delivered as though such person had not ceased to be
an officer of the Corporation.
5.2 Lost, Destroyed and Mutilated Certificates. Holders of the
shares of the Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such shareholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
5.3 Transfer of Shares. The shares of the Corporation shall be
transferable or assignable only on the books of the Corporation by the holder in
person or by attorney on surrender of the certificate for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a written
power of attorney to have the same transferred on the books of the Corporation.
The Corporation will recognize, however, the exclusive right of the person
registered on its books as the owner of shares to receive dividends or other
distributions and to vote as such owner. To the extent that any provision of the
Amended and Restated Rights Agreement between the Corporation and Bank of New
York, as Rights Agent, dated as of February 9, 1998, is deemed to constitute a
restriction on the transfer of any securities of the Corporation, including,
without limitation, the Rights, as defined therein, such restriction is hereby
authorized by these Bylaws.
5.4 Fixing Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive payment of a
dividend or other distribution, the date on which notices of the meeting are
9
<PAGE>
mailed or the date on which the resolution of the Board of Directors declaring
such dividend or other distribution is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
5.5 Control Share Acquisition Statute. Article 14.1 of the Virginia
Stock Corporation Act shall not apply to acquisitions of shares of capital stock
of the Corporation.
ARTICLE VI
Miscellaneous Provisions
6.1 Seal. The seal of the Corporation shall consist of a circular
design with the words "Owens & Minor, Inc." around the top margin thereof,
"Richmond, Virginia" around the lower margin thereof and the word "Seal" in the
center thereof.
6.2 Fiscal Year. The fiscal year of the Corporation shall end on
such date and shall consist of such accounting periods as may be fixed by the
Board of Directors.
6.3 Checks, Notes and Drafts. Checks, notes, drafts and other orders
for the payment of money shall be signed by such persons as the Board of
Directors from time to time may authorize. When the Board of Directors so
authorizes, however, the signature of any such person may be a facsimile.
6.4 Amendment of Bylaws. Unless proscribed by the Articles of
Incorporation, these Bylaws may be amended or altered at any meeting of the
Board of Directors by affirmative vote of a majority of the number of Directors
fixed by these Bylaws. The shareholders entitled to vote in respect of the
election of Directors, however, shall have the power to rescind, amend, alter or
repeal any Bylaws and to enact Bylaws which, if expressly so provided, may not
be amended, altered or repealed by the Board of Directors.
6.5 Voting of Shares Held. Unless otherwise provided by resolution
of the Board of Directors or of the Executive Committee, if any, the President
may cast the vote which the Corporation may be entitled to cast as a shareholder
or otherwise in any other corporation, any of whose securities may be held by
the Corporation, at meetings of the holders of the shares or other securities of
such other corporation, or to consent in writing to any action by any such other
10
<PAGE>
corporation, or in lieu thereof, from time to time appoint an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast such votes or give such consents. The President shall
instruct any person or persons so appointed as to the manner of casting such
votes or giving such consent and may execute or cause to be executed
on behalf of the Corporation, and under its corporate seal or otherwise, such
written proxies, consents, waivers or other instruments as may be necessary or
proper.
ARTICLE VII
Emergency Bylaws
7.1 The Emergency Bylaws provided in this Article VII shall be
operative during any emergency, notwithstanding any different provision in the
preceding Articles of these Bylaws or in the Articles of Incorporation of the
Corporation or in the Virginia Stock Corporation Act (other than those
provisions relating to emergency bylaws). An emergency exists if a quorum of the
Corporation's Board of Directors cannot readily be assembled because of some
catastrophic event. To the extent not inconsistent with these Emergency Bylaws,
the Bylaws provided in the preceding Articles shall remain in effect during such
emergency and upon the termination of such emergency the Emergency Bylaws shall
cease to be operative unless and until another such emergency shall occur.
7.2 During any such emergency:
(a) Any meeting of the Board of Directors may be called by
any officer of the Corporation or by any Director. The notice thereof shall
specify the time and place of the meeting. To the extent feasible, notice shall
be given in accord with Section 2.4 above, but notice may be given only to such
of the Directors as it may be feasible to reach at the time, by such means as
may be feasible at the time, including publication or radio, and at a time less
than twenty-four hours before the meeting if deemed necessary by the person
giving notice. Notice shall be similarly given, to the extent feasible, to the
other persons referred to in (b) below.
(b) At any meeting of the Board of Directors, a quorum
shall consist of a majority of the number of Directors fixed at the time by
these Bylaws. If the Directors present at any particular meeting shall be fewer
than the number required for such quorum, other persons present as referred to
below, to the number necessary to make up such quorum, shall be deemed Directors
for such particular meeting as determined by the following provisions and in the
following order of priority:
(i) Vice-Presidents not already serving as
Directors, in the order of their seniority of first election to such offices, or
if two or more shall have been first elected to such offices on the same day, in
the order of their seniority in age;
11
<PAGE>
(ii) All other officers of the Corporation in the
order of their seniority of first election to such offices, or if two or more
shall have been first elected to such offices on the same day, in the order of
their seniority in age; and
(iii) Any other persons that are designated on a
list that shall have been approved by the Board of Directors before the
emergency, such persons to be taken in such order of priority and subject to
such conditions as may be provided in the resolution approving the list.
(c) The Board of Directors, during as well as before any
such emergency, may provide, and from time to time modify, lines of succession
in the event that during such an emergency any or all officers or agents of the
Corporation shall for any reason be rendered incapable of discharging their
duties.
(d) The Board of Directors, during as well as before any
such emergency, may, effective in the emergency, change the principal office, or
designate several alternative offices, or authorize the officers so to do.
7.3 No officer, Director or employee shall be liable for action
taken in good faith in accordance with these Emergency Bylaws.
7.4 These Emergency Bylaws shall be subject to repeal or change by
further action of the Board of Directors or by action of the shareholders,
except that no such repeal or change shall modify the provisions of the next
preceding paragraph with regard to action or inaction prior to the time of such
repeal or change. Any such amendment of these Emergency Bylaws may make any
further or different provision that may be practical and necessary for the
circumstances of the emergency.
Amended 10/26/98
12
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