Exhibit 99.1
FOR IMMEDIATE RELEASE
October 20, 2004
Owens & Minor Reports 6.7% Revenue Increase, and
18.4% Net Income Growth for Third Quarter 2004
The company also reports continued strength in asset management and cash flow
Richmond, VA….(NYSE-OMI) Owens & Minor reported revenue of $1.13 billion for the third quarter ended September 30, 2004, an increase of 6.7 percent, or $70.9 million, compared to revenue of $1.06 billion in the third quarter last year. Earnings per diluted common share (EPS) for the third quarter were $0.38, up 11.8 percent compared to $0.34 for the prior year quarter. Net income for the third quarter increased 18.4 percent to $15.2 million, comparing favorably with net income of $12.8 million in last year’s third quarter.
“The third quarter results reflect a continuation of our positive performance so far this year,” said G. Gilmer Minor, III, chairman and chief executive officer of Owens & Minor. “We are managing the many variables that impact our earnings in a balanced way to produce excellent results. These variables include revenue growth, gross margin pressure, the investment in OMSolutionsSM, expense reduction and asset management. We believe we are part of the solution for driving more efficiency and productivity in the healthcare supply chain. Our eyes are clearly on the ball when it comes to achieving our goals.
“On a personal note, I am proud of all our teammates who were affected by this year’s hurricanes, especially our teammates in Florida and Louisiana, for their rapid and heartfelt response to our customers’ needs during the storms,” said Minor. “The character of a company is tested during a crisis, and the Owens & Minor team rose to the occasion time and again.”
Other Third Quarter Results
For the third quarter 2004, operating earnings held steady at 2.4 percent of revenue when compared with operating earnings in the same period of last year, as improvements in selling, general and administrative expenses (SG&A) offset margin pressures. Gross margin was 10.1 percent of revenue, compared to gross margin of 10.3 percent from the prior year quarter. The company attributed the change in gross margin to reduced alternate sourcing of products, ongoing competitive pressures in the marketplace, and slower than expected contributions from OMSolutionsSM. SG&A was 7.4 percent of revenue, improved from 7.6 percent in the prior year quarter, aided in part by lower healthcare costs when compared to the third quarter of last year.
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“This year, we have demonstrated that we are delivering on our commitments,” said Craig R. Smith, president and chief operating officer of Owens & Minor. “Since we are running our core business very efficiently, we have been able to invest in our strategic initiatives, while, at the same time, growing our revenue and earnings at a steady pace. Our focus, as we look ahead, is on improving margins, growing our OMSolutionsSM business, supplemented by acquisitions and penetration, and working with customers to ensure their success.”
Asset management continued to show strength in the third quarter of 2004, with days sales outstanding (DSO) at 25.8 days, comparing favorably to DSO of 27.5 days from last year’s third quarter. Inventory turns for the quarter were 9.6, down slightly from 9.7 in last year’s third quarter. Cash flow from operations for the third quarter was a strong $57.4 million.
Year-to-date results
Year-to-date, revenue was $3.4 billion, up 7.1 percent from $3.1 billion in the prior year. Net income for the nine months ended September 30, 2004 was $45.1 million compared to $39.3 million, a 14.8 percent increase. Diluted earnings per share for the first nine months of 2004 were $1.14, up 7.5 percent from $1.06 in the same period of 2003.
For the first nine months of 2004, operating earnings were 2.5 percent of revenue, consistent with the corresponding period of 2003, even as the company continued to invest in new strategic initiatives. Gross margin for the first nine months of 2004 was 10.2 percent, compared with 10.4 percent for the same period last year. SG&A improved to 7.5 percent, compared to 7.6 percent for the comparable period of 2003. Cash flow from operations year-to-date was a very strong $128.5 million, driven by excellent asset management.
Outlook for 2004
Financial guidance for 2004 remains unchanged. The company anticipates that it will report revenue growth in the 5 to 7 percent range, and diluted EPS in a range of $1.54 to $1.56 for the year.
Recent Highlights
Owens & Minor Acquires Healthcare Consulting Firm
In October 2004, Owens & Minor acquired the assets of HealthCare Logistics Services (HLS), a small, California-based, healthcare consulting firm. HLS is widely recognized for its leadership in providing supply chain consulting and management services to healthcare providers, suppliers, group purchasing organizations and other consulting and services firms. The HLS team of professionals has joined Owens & Minor’s OMSolutionsSM consulting and outsourcing services group, adding new strength across the nation.
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“The addition of the HLS team, with its innovative services, is a plus for OMSolutionsSM and our customers,” said Smith. “The HLS team brings expertise that is a strong complement to our OMSolutionsSM offerings in the healthcare marketplace. In particular, HLS will add depth to our team on the West Coast, where we see untapped opportunity for our OMSolutionsSM business.”
Former President of the Federal Reserve of Richmond Joins O&M Board
Effective August 2, 2004, the Owens & Minor board of directors appointed J. Alfred Broaddus, Jr., the former president of the Federal Reserve Bank of Richmond, to serve on the Owens & Minor board of directors. Broaddus, 65, will serve as a member of the Compensation & Benefits and Governance & Nominating Committees. Broaddus is expected to be nominated for election by the shareholders at the company’s 2005 Annual Shareholders’ Meeting.
Broaddus served as president of the Federal Reserve Bank of Richmond from 1993 until July 31, 2004. During his tenure, he also served as a rotating member of the Federal Open Market Committee of the Federal Reserve System.
Investor Day
Owens & Minor will host its annualInvestor Day for institutional investors and financial analysts at theNew York Stock Exchange in New York City. The event begins at 8:30am (Eastern Time) onThursday, October 28, 2004,and will conclude at 1:30pm (Eastern Time).Registration for the event is required. The company will webcast the day’s activities viawww.owens-minor.com. Contact Trudi Allcott, Manager, Investor Communications, at 804-935-4291 ortruitt.allcott@owens-minor.com to register for the event.
Conference Call Details
Owens & Minor will conduct a conference call on Thursday, October 21, 2004 at 8:30am (Eastern Time) to discuss third quarter 2004 results. The telephone number for the Owens & Minor conference call is 800-299-0148. The call will also be available by replay for 5 days by calling 888-286-8010, with access code: #29735579. The call will also be available as a webcast for 21 days throughwww.owens-minor.com.
Safe Harbor Statement
Except for the historical information contained herein, the matters discussed in this press release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include the rate at which new business can be converted to the company, intense competitive pressures within the industry, success of the company’s strategic initiatives, changes in customer order patterns, pricing pressures, changes in government funding to hospitals and other healthcare providers, loss of major customers, and other factors discussed from time to time in the reports filed by the company with the Securities and Exchange Commission. The company assumes no obligation to update information contained in this release.
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Owens & Minor, Inc., (NYSE: OMI) aFORTUNE 500 company headquartered in Richmond, Virginia, is the leading distributor of national name-brand medical and surgical supplies and a healthcare supply chain management company. With a diverse product and service offering and distribution centers throughout the United States, the company serves hospitals, integrated healthcare systems, alternate care locations, group purchasing organizations and the federal government. Owens & Minor provides technology and consulting programs that enable healthcare providers to maximize efficiency and cost-effectiveness in materials purchasing, improve inventory management and streamline logistics across the entire medical supply chain—from origin of product to patient bedside. The company also has established itself as a leader in the development and use of technology. For news releases, or for more information about Owens & Minor, visit the company Web site atwww.owens-minor.com.
# # # #
Contact: Jeff Kaczka, SVP & Chief Financial Officer, 804-965-5896; Dick Bozard, VP & Treasurer, 804-965-2921; or Trudi Allcott, Manager, Investor Communications 804-935-4291
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Page Five
Owens & Minor, Inc.
Consolidated Statements of Income (unaudited)
(in thousands, except ratios and per share data)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30,
| |
| | | 2004
| | | % of revenue
| | | 2003(1)
| | | % of revenue
| | | % Fav(Unfav)
| |
Revenue | | $ | 1,134,387 | | | 100.0 | % | | $ | 1,063,509 | | | 100.0 | % | | 6.7 | % |
Cost of revenue | | | 1,019,537 | | | 89.9 | | | | 954,289 | | | 89.7 | | | (6.8 | ) |
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Gross margin | | | 114,850 | | | 10.1 | | | | 109,220 | | | 10.3 | | | 5.2 | |
Selling, general and administrative expenses | | | 84,480 | | | 7.4 | | | | 80,868 | | | 7.6 | | | (4.5 | ) |
Depreciation and amortization | | | 3,676 | | | 0.3 | | | | 3,868 | | | 0.4 | | | 5.0 | |
Other operating (income) and expense, net | | | (903 | ) | | (0.1 | ) | | | (969 | ) | | (0.1 | ) | | (6.8 | ) |
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| | | |
Operating earnings | | | 27,597 | | | 2.4 | | | | 25,453 | | | 2.4 | | | 8.4 | |
Interest expense, net | | | 3,086 | | | 0.3 | | | | 4,142 | | | 0.4 | | | 25.5 | |
Discount on accounts receivable securitization | | | — | | | — | | | | 199 | | | 0.0 | | | 100.0 | |
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| | | |
Income before income taxes | | | 24,511 | | | 2.2 | | | | 21,112 | | | 2.0 | | | 16.1 | |
Income tax provision | | | 9,314 | | | 0.8 | | | | 8,277 | | | 0.8 | | | (12.5 | ) |
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| | | |
Net income | | $ | 15,197 | | | 1.3 | % | | $ | 12,835 | | | 1.2 | % | | 18.4 | % |
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|
| | | |
Net income per basic common share | | $ | 0.39 | | | | | | $ | 0.37 | | | | | | | |
Net income per diluted common share | | $ | 0.38 | | | | | | $ | 0.34 | | | | | | | |
| | | | | |
Weighted average shares - basic | | | 39,083 | | | | | | | 35,128 | | | | | | | |
Weighted average shares - diluted | | | 39,682 | | | | | | | 39,351 | | | | | | | |
| |
| | | Nine Months Ended September 30,
| |
| | | 2004
| | | % of revenue
| | | 2003(1)
| | | % of revenue
| | | % Fav(Unfav)
| |
Revenue | | $ | 3,359,836 | | | 100.0 | % | | $ | 3,135,980 | | | 100.0 | % | | 7.1 | % |
Cost of revenue | | | 3,016,095 | | | 89.8 | | | | 2,811,067 | | | 89.6 | | | (7.3 | ) |
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Gross margin | | | 343,741 | | | 10.2 | | | | 324,913 | | | 10.4 | | | 5.8 | |
Selling, general and administrative expenses | | | 253,030 | | | 7.5 | | | | 237,113 | | | 7.6 | | | (6.7 | ) |
Depreciation and amortization | | | 11,197 | | | 0.3 | | | | 11,801 | | | 0.4 | | | 5.1 | |
Other operating (income) and expense, net | | | (3,175 | ) | | (0.1 | ) | | | (3,449 | ) | | (0.1 | ) | | (7.9 | ) |
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| | | |
Operating earnings | | | 82,689 | | | 2.5 | | | | 79,448 | | | 2.5 | | | 4.1 | |
Interest expense, net | | | 9,375 | | | 0.3 | | | | 11,153 | | | 0.4 | | | 15.9 | |
Discount on accounts receivable securitization | | | 261 | | | 0.0 | | | | 581 | | | 0.0 | | | 55.1 | |
Distributions on mandatorily redeemable preferred securities | | | — | | | — | | | | 2,898 | | | 0.1 | | | 100.0 | |
Other expense | | | — | | | — | | | | 154 | | | 0.0 | | | 100.0 | |
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Income before income taxes | | | 73,053 | | | 2.2 | | | | 64,662 | | | 2.1 | | | 13.0 | |
Income tax provision | | | 27,906 | | | 0.8 | | | | 25,348 | | | 0.8 | | | (10.1 | ) |
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Net income | | $ | 45,147 | | | 1.3 | % | | $ | 39,314 | | | 1.3 | % | | 14.8 | % |
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Net income per basic common share | | $ | 1.16 | | | | | | $ | 1.16 | | | | | | | |
Net income per diluted common share | | $ | 1.14 | | | | | | $ | 1.06 | | | | | | | |
| | | | | |
Weighted average shares - basic | | | 38,986 | | | | | | | 34,021 | | | | | | | |
Weighted average shares - diluted | | | 39,608 | | | | | | | 39,321 | | | | | | | |
| (1) | Certain components of selling, general and administrative expenses and interest expense, net for the 2003 statement of income have been reclassified to cost of revenue and other operating income and expense, net in order to conform to the current presentation. |
Page Six
Owens & Minor, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands)
| | | | | | | | |
| | | September 30,
2004
| | | December 31,
2003
| |
Assets | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 102,342 | | | $ | 16,335 | |
Accounts and notes receivable, net | | | 327,433 | | | | 353,431 | |
Merchandise inventories | | | 428,551 | | | | 384,266 | |
Other current assets | | | 28,617 | | | | 27,343 | |
| | |
|
|
| |
|
|
|
Total current assets | | | 886,943 | | | | 781,375 | |
| | |
Property and equipment, net | | | 22,196 | | | | 21,088 | |
Goodwill | | | 198,960 | | | | 198,063 | |
Other assets, net | | | 42,643 | | | | 45,222 | |
| | |
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Total assets | | $ | 1,150,742 | | | $ | 1,045,748 | |
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Current liabilities | | | | | | | | |
Accounts payable | | $ | 377,044 | | | $ | 314,723 | |
Accrued payroll and related liabilities | | | 13,460 | | | | 13,279 | |
Other accrued liabilities | | | 71,070 | | | | 67,630 | |
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Total current liabilities | | | 461,574 | | | | 395,632 | |
| | |
Long-term debt | | | 208,307 | | | | 209,499 | |
Other liabilities | | | 31,704 | | | | 30,262 | |
| | |
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Total liabilities | | | 701,585 | | | | 635,393 | |
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Shareholders’ equity | | | | | | | | |
Common stock | | | 78,832 | | | | 77,958 | |
Paid-in capital | | | 124,600 | | | | 118,843 | |
Retained earnings | | | 252,639 | | | | 220,468 | |
Accumulated other comprehensive loss | | | (6,914 | ) | | | (6,914 | ) |
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Total shareholders’ equity | | | 449,157 | | | | 410,355 | |
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Total liabilities and shareholders’ equity | | $ | 1,150,742 | | | $ | 1,045,748 | |
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Page Seven
Owens & Minor, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| | | | | | | | |
| | | Nine Months Ended September 30,
| |
| | | 2004
| | | 2003
| |
Operating activities | | | | | | | | |
Net income | | $ | 45,147 | | | $ | 39,314 | |
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 11,197 | | | | 11,801 | |
Provision for LIFO reserve | | | 3,150 | | | | 3,280 | |
Provision for losses on accounts and notes receivable | | | 1,176 | | | | 1,938 | |
Changes in operating assets and liabilities: | | | | | | | | |
Accounts and notes receivable | | | 24,844 | | | | 29,815 | |
Merchandise inventories | | | (47,435 | ) | | | (38,801 | ) |
Accounts payable | | | 82,294 | | | | 84,681 | |
Net change in other current assets and current liabilities | | | 2,294 | | | | (8,111 | ) |
Other, net | | | 5,812 | | | | 4,457 | |
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|
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|
Cash provided by operating activities | | | 128,479 | | | | 128,374 | |
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Investing activities | | | | | | | | |
Additions to property and equipment | | | (8,105 | ) | | | (4,273 | ) |
Additions to computer software | | | (3,713 | ) | | | (8,008 | ) |
Net cash paid for acquisition of business | | | (2,512 | ) | | | — | |
Proceeds from sale of land | | | 1,820 | | | | — | |
Other, net | | | 215 | | | | 274 | |
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Cash used for investing activities | | | (12,295 | ) | | | (12,007 | ) |
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Financing activities | | | | | | | | |
Repurchase of mandatorily redeemable preferred securities | | | — | | | | (20,439 | ) |
Repurchase of common stock | | | — | | | | (10,884 | ) |
Net payments on revolving credit facility | | | — | | | | (27,900 | ) |
Cash dividends paid | | | (12,976 | ) | | | (9,220 | ) |
Proceeds from exercise of stock options | | | 4,004 | | | | 4,303 | |
Decrease in drafts payable | | | (20,000 | ) | | | (26,150 | ) |
Other, net | | | (1,205 | ) | | | — | |
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Cash used for financing activities | | | (30,177 | ) | | | (90,290 | ) |
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Net increase in cash and cash equivalents | | | 86,007 | | | | 26,077 | |
Cash and cash equivalents at beginning of period | | | 16,335 | | | | 3,361 | |
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Cash and cash equivalents at end of period | | $ | 102,342 | | | $ | 29,438 | |
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Page Eight
Owens & Minor, Inc.
Financial Statistics (unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | Quarter Ended
| |
(in thousands, except ratios and per share data)
| | 9/30/2004
| | | 6/30/2004
| | | 3/31/2004
| | | 12/31/2003
| | | 9/30/2003
| |
Operating results: | | | | | | | | | | | | | | | | | | | | |
Revenue | | $ | 1,134,387 | | | $ | 1,119,375 | | | $ | 1,106,074 | | | $ | 1,108,087 | | | $ | 1,063,509 | |
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Gross margin(1) | | $ | 114,850 | | | $ | 114,831 | | | $ | 114,060 | | | $ | 111,489 | | | $ | 109,220 | |
Gross margin as a percent of revenue(1) | | | 10.1 | % | | | 10.3 | % | | | 10.3 | % | | | 10.1 | % | | | 10.3 | % |
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SG&A expense(1) | | $ | 84,480 | | | $ | 84,533 | | | $ | 84,017 | | | $ | 82,682 | | | $ | 80,868 | |
SG&A expense as a percent of revenue(1) | | | 7.4 | % | | | 7.6 | % | | | 7.6 | % | | | 7.5 | % | | | 7.6 | % |
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Operating earnings(1) | | $ | 27,597 | | | $ | 27,654 | | | $ | 27,438 | | | $ | 26,263 | | | $ | 25,453 | |
Operating earnings as a percent of revenue(1) | | | 2.4 | % | | | 2.5 | % | | | 2.5 | % | | | 2.4 | % | | | 2.4 | % |
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Net income | | $ | 15,197 | | | $ | 15,325 | | | $ | 14,625 | | | $ | 14,327 | | | $ | 12,835 | |
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Net income per basic common share | | $ | 0.39 | | | $ | 0.39 | | | $ | 0.38 | | | $ | 0.37 | | | $ | 0.37 | |
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Net income per diluted common share | | $ | 0.38 | | | $ | 0.39 | | | $ | 0.37 | | | $ | 0.36 | | | $ | 0.34 | |
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Accounts receivable: | | | | | | | | | | | | | | | | | | | | |
Accounts and notes receivable, net | | $ | 327,433 | | | $ | 329,049 | | | $ | 335,028 | | | $ | 353,431 | | | $ | 323,103 | |
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Days sales outstanding | | | 25.8 | | | | 25.5 | | | | 26.1 | | | | 27.8 | | | | 27.5 | |
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Inventory: | | | | | | | | | | | | | | | | | | | | |
Merchandise inventories | | $ | 428,551 | | | $ | 413,611 | | | $ | 395,053 | | | $ | 384,266 | | | $ | 387,356 | |
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Average inventory turnover | | | 9.6 | | | | 10.0 | | | | 10.2 | | | | 10.2 | | | | 9.7 | |
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Financing: | | | | | | | | | | | | | | | | | | | | |
Debt | | $ | 208,307 | | | $ | 207,032 | | | $ | 211,051 | | | $ | 209,499 | | | $ | 211,311 | |
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Stock information: | | | | | | | | | | | | | | | | | | | | |
Cash dividends per common share | | $ | 0.11 | | | $ | 0.11 | | | $ | 0.11 | | | $ | 0.09 | | | $ | 0.09 | |
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Stock price at quarter-end | | $ | 25.40 | | | $ | 25.90 | | | $ | 25.30 | | | $ | 21.91 | | | $ | 24.10 | |
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| (1) | Certain components of selling, general and administrative expenses and interest expense, net for the 2003 statement of income have been reclassified to cost of revenue and other operating income and expense, net in order to conform to the current presentation. |
