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
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
<PAGE> 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.
tem 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.
art 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.
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