Exhibit 99.1
FOR IMMEDIATE RELEASE
October 27, 2008
Owens & Minor Reports Record Quarterly Revenue and Net Income
for 3rd Quarter 2008
O&M completes acquisition of The Burrows Company, effective October 1, 2008
RICHMOND, VA…. Owens & Minor (NYSE-OMI) today reported financial results for the third quarter ended September 30, 2008. Revenue for the third quarter was a record $1.81 billion, improved 7.3% from revenue of $1.69 billion in the third quarter of 2007. Net income for the third quarter was a record $25.3 million, increased 19.4% when compared to net income of $21.2 million in last year’s third quarter. Net income per diluted share for the quarter was $0.61, increased 17.3% when compared to $0.52 per diluted share in the same period last year.
“We grew revenue at a fast pace and demonstrated strong improvement in earnings for the third quarter,” said Craig R. Smith, president & chief executive officer of Owens & Minor. “At the same time, we completed an important acquisition that will give us added strength in the Midwest. As we look to the rest of the year, we are focused on integrating these new customers into the Owens & Minor family and transitioning them to our systems. Our continuing financial and operational strength provides us a strong platform for growth and flexibility for the future.”
Year-to-Date Results
For the nine months ended September 30, 2008, revenue was $5.36 billion, improved 6.1% from $5.05 billion in the same period last year. Net income for the first nine months of 2008 was $73.1 million, increased 45.5% from net income of $50.3 million in the same period last year. Year-to-date, net income per diluted share was $1.76, improved 43.1% when compared to $1.23 per diluted share in the first nine months of 2007. For comparative purposes, net income for the first nine months of 2007 reflects the impact of the transition and integration of an acquired business to Owens & Minor.
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Asset Management
For the third quarter of 2008, operating cash flow was $45 million, increased when compared sequentially to the second quarter 2008, but decreased when compared to $116 million in operating cash flow for the third quarter of 2007. As for the first nine months of 2008, operating cash flow was $124 million, a decrease when compared to $202 million for the same period last year. For comparative purposes, 2007 operating cash flow reflects the short-term impact on inventory and accounts receivable from the transition and integration of the acquired McKesson business. Long-term debt as of the end of the third quarter 2008 was $209 million, decreased from long-term debt of $231 million in the third quarter last year. Days sales outstanding (DSO) as of September 30, 2008, were 23.8 days, comparing favorably to DSO of 27.7 in the same period last year, while inventory turns of 10.3 for the third quarter of 2008 were improved from turns of 9.8 in the prior year third quarter.
Burrows Acquisition Update
On October 1, 2008, Owens & Minor acquired certain assets and liabilities of The Burrows Company, a privately held distributor of medical and surgical supplies to the acute-care market. The Burrows Company reported sales of $603 million for the year ended December 31, 2007. The purchase price was $23.7 million of cash, plus $56.1 million of assumed debt, which was paid off on the acquisition date. In conjunction with this acquisition, Owens & Minor also entered into an agreement to purchase certain real estate used in the operation of this business. This transaction is expected to be completed by year-end 2008, and the purchase price is expected to be in the range of $20 million.
2008 Outlook
“With our excellent performance so far this year and our success in strengthening relationships with our customers, we are continuing to target 2008 annual organic revenue growth in the 5% to 7% range,” said Smith. “We also continue to target net income per diluted share for the year in a range of $2.30 to $2.40, which includes the expected dilution in the fourth quarter from the Burrows acquisition.”
Information for Investors:
Management Conference Call & Supplemental Material
Conference Call: Owens & Minor management will conduct a conference call for professional analysts and investors on Tuesday, October 28, 2008, at 9:00 a.m. Eastern Daylight Time. Participants may access thelive call at 877-748-0043 with conference code #68468838. Theinternational dial-in number is 706-758-5871 with conference code #68468838.Replay:A replay of the call will be available for seven days by dialing 800-642-1687, using conference code #68468838.Webcast: The event will also be webcast onwww.owens-minor.com under “Investor Relations.”
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2008 Investor Day
Owens & Minor will hold its annual Investor Day for analysts and professional investors in New York at the Westin New York at Times Square on Wednesday, December 10, 2008. The event will feature presentations from the executive management team. Contact Owens & Minor Investor Relations at 804-723-7555 ortruitt.allcott@owens-minor.com orchuck.graves@owens-minor.com for registration details.
Safe Harbor Statement
Except for historical information, 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 risk factors are discussed in reports filed by the company with the Securities & Exchange Commission. All of this information is available at www.owens-minor.com. The company assumes no obligation, and expressly disclaims any such obligation, to update or alter information, whether as a result of new information, future events, or otherwise.
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. Owens & Minor is also a member of the Russell 2000® Index, which measures the performance of the small-cap segment of the U.S. equity universe, as well as the S&P SmallCap 600, which includes companies with a market capitalization of $300 million to $2 billion that meet certain financial standards. 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, the federal government and consumers. Owens & Minor provides technology and consulting programs that improve inventory management and streamline logistics across the entire medical supply chain—from origin of product to patient bedside. For news releases, or for more information about Owens & Minor, visit the company Web site atwww.owens-minor.com.
CONTACTS: Trudi Allcott, Director, Investor & Media Relations, 804-723-7555; Chuck Graves, Director, Finance & Investor Relations, 804-723-7556.
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Owens & Minor, Inc.
Condensed Consolidated Statements of Income (unaudited)
(in thousands, except per share data)
| Three Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
Revenue | $ | 1,810,468 | $ | 1,686,744 | ||||
Cost of revenue | 1,616,752 | 1,508,487 | ||||||
Gross margin | 193,716 | 178,257 | ||||||
Selling, general and administrative expenses | 140,983 | 131,365 | ||||||
Depreciation and amortization | 7,774 | 7,654 | ||||||
Other operating income and expense, net | (1,243 | ) | (1,704 | ) | ||||
Operating earnings | 46,202 | 40,942 | ||||||
Interest expense, net | 6,268 | 5,418 | ||||||
Income before income taxes | 39,934 | 35,524 | ||||||
Income tax provision | 14,650 | 14,348 | ||||||
Net income | $ | 25,284 | $ | 21,176 | ||||
Net income per common share—basic | $ | 0.62 | $ | 0.53 | ||||
Net income per common share—diluted | $ | 0.61 | $ | 0.52 | ||||
Weighted average shares—basic | 40,860 | 40,318 | ||||||
Weighted average shares—diluted | 41,544 | 40,954 | ||||||
| Nine Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
Revenue | $ | 5,358,100 | $ | 5,051,987 | ||||
Cost of revenue | 4,787,104 | 4,522,206 | ||||||
Gross margin | 570,996 | 529,781 | ||||||
Selling, general and administrative expenses | 419,637 | 407,603 | ||||||
Depreciation and amortization | 23,370 | 23,920 | ||||||
Other operating income and expense, net | (3,210 | ) | (4,174 | ) | ||||
Operating earnings | 131,199 | 102,432 | ||||||
Interest expense, net | 12,607 | 19,202 | ||||||
Income before income taxes | 118,592 | 83,230 | ||||||
Income tax provision | 45,468 | 32,973 | ||||||
Net income | $ | 73,124 | $ | 50,257 | ||||
Net income per common share—basic | $ | 1.79 | $ | 1.25 | ||||
Net income per common share—diluted | $ | 1.76 | $ | 1.23 | ||||
Weighted average shares—basic | 40,744 | 40,180 | ||||||
Weighted average shares—diluted | 41,436 | 40,870 | ||||||
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Owens & Minor, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
| September 30, 2008 | December 31, 2007 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 25,741 | $ | 10,395 | ||||
Accounts and notes receivable, net | 468,304 | 462,392 | ||||||
Merchandise inventories | 609,327 | 581,569 | ||||||
Other current assets | 49,746 | 43,767 | ||||||
Total current assets | 1,153,118 | 1,098,123 | ||||||
Property and equipment, net | 78,064 | 76,122 | ||||||
Goodwill, net | 271,699 | 271,699 | ||||||
Intangible assets, net | 25,473 | 32,517 | ||||||
Other assets, net | 43,677 | 44,885 | ||||||
Total assets | $ | 1,572,031 | $ | 1,523,346 | ||||
Liabilities and shareholders’ equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 521,428 | $ | 477,368 | ||||
Accrued payroll and related liabilities | 32,766 | 18,763 | ||||||
Other accrued liabilities | 81,884 | 80,599 | ||||||
Total current liabilities | 636,078 | 576,730 | ||||||
Long-term debt, excluding current portion | 208,832 | 283,845 | ||||||
Other liabilities | 47,708 | 48,412 | ||||||
Total liabilities | 892,618 | 908,987 | ||||||
Shareholders’ equity | ||||||||
Common stock | 82,808 | 81,748 | ||||||
Paid-in capital | 177,192 | 161,978 | ||||||
Retained earnings | 426,305 | 377,913 | ||||||
Accumulated other comprehensive loss | (6,892 | ) | (7,280 | ) | ||||
Total shareholders’ equity | 679,413 | 614,359 | ||||||
Total liabilities and shareholders’ equity | $ | 1,572,031 | $ | 1,523,346 | ||||
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Owens & Minor, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| Nine Months Ended September 30, | ||||||||
| 2008 | 2007 | |||||||
Operating activities | ||||||||
Net income | $ | 73,124 | $ | 50,257 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 23,370 | 23,920 | ||||||
Provision for losses on accounts and notes receivable | 16,407 | 14,497 | ||||||
Provision for LIFO reserve | 10,468 | 7,500 | ||||||
Amortization of direct-response advertising costs | 5,333 | 5,198 | ||||||
Deferred direct-response advertising costs | (7,927 | ) | (6,402 | ) | ||||
Share-based compensation expense | 6,369 | 5,167 | ||||||
Loss on interest rate swaps | 3,141 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and notes receivable | (22,319 | ) | 15,935 | |||||
Merchandise inventories | (38,225 | ) | 61,315 | |||||
Accounts payable | 43,426 | 9,630 | ||||||
Net change in other current assets and current liabilities | 9,106 | 16,705 | ||||||
Other, net | 1,290 | (1,679 | ) | |||||
Cash provided by operating activities | 123,563 | 202,043 | ||||||
Investing activities | ||||||||
Additions to property and equipment | (12,766 | ) | (13,535 | ) | ||||
Additions to computer software | (7,439 | ) | (6,875 | ) | ||||
Acquisition of intangible assets | — | 18 | ||||||
Net cash received related to acquisitions of businesses | — | 14,133 | ||||||
Other, net | 8 | 395 | ||||||
Cash used for investing activities | (20,197 | ) | (5,864 | ) | ||||
Financing activities | ||||||||
Cash dividends paid | (24,733 | ) | (20,690 | ) | ||||
Net payments on revolving credit facility | (76,908 | ) | (200,800 | ) | ||||
Proceeds from exercise of stock options | 8,140 | 7,379 | ||||||
Excess tax benefits related to stock-based compensation | 2,963 | 2,892 | ||||||
Increase in drafts payable | 634 | 17,662 | ||||||
Proceeds from termination of interest rate swaps | 3,795 | — | ||||||
Other, net | (1,911 | ) | (1,750 | ) | ||||
Cash used for financing activities | (88,020 | ) | (195,307 | ) | ||||
Net increase in cash and cash equivalents | 15,346 | 872 | ||||||
Cash and cash equivalents at beginning of period | 10,395 | 7,990 | ||||||
Cash and cash equivalents at end of period | $ | 25,741 | $ | 8,862 | ||||
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Owens & Minor, Inc.
Financial Statistics (unaudited)
(in thousands, except ratios and per share data) | Quarter Ended | |||||||||||||||||||
| 9/30/2008 | 6/30/2008 | 3/31/2008 | 12/31/2007 | 9/30/2007 | ||||||||||||||||
Operating results: | ||||||||||||||||||||
Revenue | $ | 1,810,468 | $ | 1,794,915 | $ | 1,752,717 | $ | 1,748,479 | $ | 1,686,744 | ||||||||||
Gross margin | $ | 193,716 | $ | 190,187 | $ | 187,092 | $ | 185,203 | $ | 178,257 | ||||||||||
Gross margin as a percent of revenue | 10.70 | % | 10.60 | % | 10.67 | % | 10.59 | % | 10.57 | % | ||||||||||
SG&A expense | $ | 140,983 | $ | 141,546 | $ | 137,108 | $ | 137,668 | $ | 131,365 | ||||||||||
SG&A expense as a percent of revenue | 7.79 | % | 7.89 | % | 7.82 | % | 7.87 | % | 7.79 | % | ||||||||||
Operating earnings | $ | 46,202 | $ | 41,798 | $ | 43,199 | $ | 40,781 | $ | 40,942 | ||||||||||
Operating earnings as a percent of revenue | 2.55 | % | 2.33 | % | 2.46 | % | 2.33 | % | 2.43 | % | ||||||||||
Net income | $ | 25,284 | $ | 23,632 | $ | 24,208 | $ | 22,453 | $ | 21,176 | ||||||||||
Net income per common share—basic | $ | 0.62 | $ | 0.58 | $ | 0.60 | $ | 0.56 | $ | 0.53 | ||||||||||
Net income per common share—diluted | $ | 0.61 | $ | 0.57 | $ | 0.59 | $ | 0.55 | $ | 0.52 | ||||||||||
Accounts receivable: | ||||||||||||||||||||
Accounts and notes receivable, net | $ | 468,304 | $ | 474,248 | $ | 457,345 | $ | 462,392 | $ | 508,746 | ||||||||||
Days sales outstanding(1) | 23.8 | 24.0 | 23.7 | 24.3 | 27.7 | |||||||||||||||
Inventory: | ||||||||||||||||||||
Merchandise inventories | $ | 609,327 | $ | 632,877 | $ | 607,881 | $ | 581,569 | $ | 581,363 | ||||||||||
Average inventory turnover(1) | 10.3 | 10.4 | 10.6 | 10.6 | 9.8 | |||||||||||||||
Financing: | ||||||||||||||||||||
Long-term debt, excluding current portion | $ | 208,832 | $ | 221,081 | $ | 211,962 | $ | 283,845 | $ | 231,142 | ||||||||||
Stock information: | ||||||||||||||||||||
Cash dividends per common share | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.17 | $ | 0.17 | ||||||||||
Stock price at quarter-end | $ | 48.50 | $ | 45.69 | $ | 39.34 | $ | 42.43 | $ | 38.09 | ||||||||||
(1) | Days sales outstanding and average inventory turnover are based on three-months’ sales. |
Certain adjustments have been made to prior period amounts to conform to current year presentation.
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