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 ended June 30, 1996
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)
Registrant's telephone number, including area code (804) 747-9794
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 July 30, 1996 was 31,863,313 shares.
Owens & Minor, Inc. and Subsidiaries
Index
Page
Part I. Financial Information
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6- 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. Other Information 12-14
2
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except per share data)
June 30, December 31,
1996 1995
----------------------------
Assets
Current assets
Cash and cash equivalents $ 546 $ 215
Accounts and notes receivable, net 170,695 265,238
Merchandise inventories 297,074 326,380
Other current assets 18,809 32,069
------------ -------------
Total current assets 487,124 623,902
Property and equipment, net 32,043 39,049
Excess of purchase price over net
assets acquired, net 169,638 171,911
Other assets, net 29,900 22,941
------------ -------------
Total assets $ 718,705 $ 857,803
============ =============
Liabilities and shareholders' equity
Current liabilities
Current maturities of long-term debt $ - $ 4,055
Accounts payable 227,943 241,048
Accrued payroll and related liabilities 4,248 5,534
Other accrued liabilities 38,199 41,602
------------ -------------
Total current liabilities 270,390 292,239
Long-term debt 200,529 323,308
Accrued pension and retirement plans 8,823 6,985
------------ -------------
Total liabilities 479,742 622,532
------------ -------------
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 - 1,150 shares 115,000 115,000
Common stock, par value $2 per share;
authorized - 200,000 shares; issued - 31,857 at
June 30, 1996 and 30,862 at December 31, 1995 63,714 61,724
Paid-in capital 4,807 2,144
Retained earnings 55,442 56,403
------------ -------------
Total shareholders' equity 238,963 235,271
------------ -------------
Total liabilities and shareholders' equity $ 718,705 $ 857,803
============ =============
See accompanying notes to consolidated financial statements.
3
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- --------------
Net sales $ 749,938 $ 743,718 $ 1,521,250 $ 1,490,813
Cost of goods sold 675,427 673,217 1,372,560 1,347,404
------------- ------------- ------------- -------------
Gross margin 74,511 70,501 148,690 143,409
------------- ------------- ------------- -------------
Selling, general and administrative expenses 58,474 54,074 119,514 107,635
Depreciation and amortization 4,071 3,713 8,001 7,229
Interest expense, net 4,974 5,730 10,774 11,121
Discount on accounts receivable securitization 1,851 - 2,595 -
Nonrecurring restructuring expenses - 4,114 - 6,775
------------- ------------- ------------- -------------
Total expenses 69,370 67,631 140,884 132,760
------------- ------------- ------------- -------------
Income before income taxes 5,141 2,870 7,806 10,649
Income tax provision 2,210 1,182 3,356 4,348
------------- ------------- ------------- -------------
Net income 2,931 1,688 4,450 6,301
Dividends on preferred stock 1,294 1,294 2,588 2,588
------------- ------------- ------------- -------------
Net income attributable to common stock $ 1,637 $ 394 $ 1,862 $ 3,713
============= ============= ============= =============
Net income per common share $ 0.05 $ 0.01 $ 0.06 $ 0.12
============= ============= ============= =============
Cash dividends per common share $ 0.045 $ 0.045 $ 0.090 $ 0.090
============= ============= ============= =============
Weighted average common shares
and common share equivalents 32,000 31,077 31,560 31,082
============= ============= ============= =============
See accompanying notes to consolidated financial statements.
4
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended
(In thousands) June 30,
----------------------------------
1996 1995
------------- -------------
Operating Activities
Net income $ 4,450 $ 6,301
Adjustments to reconcile net income to cash
provided by (used for) operating activities
Depreciation and amortization 8,001 7,229
Provision for losses on accounts and
notes receivable 523 222
Provision for LIFO reserve 2,248 1,662
Change in operating assets and liabilities
Accounts and notes receivable 94,020 (10,844)
Merchandise inventories 27,058 (18,841)
Accounts payable (5,091) (92,805)
Net change in other current assets
and current liabilities 9,659 (19,566)
Other, net (2,493) (1,895)
------------- --------------
Cash provided by (used for) operating activities 138,375 (128,537)
------------- --------------
Investing Activities
Additions to property and equipment (3,152) (5,359)
Additions to computer software (3,940) (3,595)
Proceeds from sale of property and equipment 5,312 52
------------- --------------
Cash used for investing activities (1,780) (8,902)
------------- --------------
Financing Activities
Additions to long-term debt 150,000 120,166
Reductions of long-term debt (274,022) (119)
Other short-term financing, net (8,014) 22,235
Cash dividends paid (5,411) (5,362)
Exercise of stock options 1,183 259
------------- --------------
Cash provided by (used for) financing activities (136,264) 137,179
------------- --------------
Net increase (decrease) in cash and cash equivalents 331 (260)
Cash and cash equivalents at beginning of year 215 513
------------- -------------
Cash and cash equivalents at end of period $ 546 $ 253
============= ==============
5
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 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 June 30, 1996 and the
consolidated results of operations for the three and six month periods and
cash flows for the six month periods ended June 30, 1996 and 1995.
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 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 inventories at selected distribution centers. Reported results of
operations for the three and six month periods ended June 30, 1996 and 1995
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. Long-Term Debt and Refinancing
During May 1996 the Company completed the refinancing of its $425 million
revolving credit facility (Senior Credit Facility) by issuing $150 million
of 10.875% Senior Subordinated Notes (Notes), increasing its available
receivables financing facility (Receivables Financing Facility) to $150
million from $75 million and entering into a new $225 million revolving
credit facility (New Senior Credit Facility).
The Notes were issued on May 29, 1996, and mature on June 1, 2006. Interest
on the Notes is payable semi-annually on June 1 and December 1. The Notes
are redeemable at the Company's option subject to certain restrictions. The
Notes are unconditionally guaranteed on a joint and several basis by all
direct and indirect subsidiaries of the Company, other than O&M Funding
Corp. (OMF).
To manage the interest rate exposure of the Notes, the Company entered into
interest rate swap agreements with terms of 10 years during the second
quarter of 1996. Under the interest rate swap agreements, the Company pays
the counterparties a variable rate based on
6
the six-month London Interbank Offered Rate (LIBOR) and the counterparties
pay the Company a fixed interest rate, ranging from 7.29% to 7.32%. The
total notional amount of the interest rate swaps was $100 million at June
30, 1996. The Company is exposed to certain losses in the event of
nonperformance by the counterparties to these agreements. However, the
Company's exposure is not material and nonperformance is not anticipated.
The terms of the Receivables Financing Facility are substantially the same
as the agreement entered into in December 1995 other than an increase in the
available funds to $150 million and the extension of the term of the
agreement from December 1996 to May 1999. At June 30, 1996 the Company had
received $141 million under the Receivables Financing Facility.
The New Senior Credit Facility expires in May 2001 with interest based on
LIBOR or the Prime Rate. The New Senior Credit Facility limits the amount of
indebtedness the Company may incur, requires the Company to maintain certain
financial covenants including covenants related to tangible net worth, cash
flow coverage, current ratio, leverage ratio and fixed charge coverage ratio
and restricts the ability of the Company to materially alter the character
of the business through consolidation, merger or purchase or sale of assets.
5. Condensed Consolidating Financial Information
The following table presents condensed consolidating financial information
for: Owens & Minor, Inc.; on a combined basis, the guarantors of Owens &
Minor, Inc.'s Notes (all of the wholly owned subsidiaries of Owens & Minor,
Inc. except for OMF); and OMF, Owens & Minor, Inc.'s only non-guarantor
subsidiary 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 the Company believes the
condensed consolidating financial statements are more meaningful in
understanding the financial position of the guarantor subsidiaries.
(In thousands)
As of and for the Owens
six months ended & Minor, Guarantor
June 30, 1996 Inc. Subsidiaries OMF Eliminations Consolidated
----------------- -------- ------------ ----------- ------------ ------------
Current assets $201,166 $470,512 $69,866 ($254,420) $487,124
Noncurrent assets 306,152 240,288 - (314,859) 231,581
Total assets 507,318 710,800 69,866 (569,279) 718,705
Current liabilities 3,578 466,457 54,775 (254,420) 270,390
Noncurrent liabilities 190,000 19,352 - - 209,352
Shareholders' equity 313,740 224,991 15,091 (314,859) 238,963
Net sales 14,633 1,521,250 3,912 (18,545) 1,521,250
Expenses 13,471 1,518,279 3,595 (18,545) 1,516,800
Net income 1,162 2,971 317 - 4,450
7
Item 2.
Owens & Minor, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Second quarter and first six months of 1996 compared with 1995
Net Sales. Net sales increased 0.8% to $749.9 million in the second quarter of
1996 from $743.7 million in the second quarter of 1995. Net sales increased 2.0%
to $1.52 billion in the first six months of 1996 from $1.49 billion in the first
six months of 1995. The Company's expected moderate sales growth has been
primarily a result of the price increases instituted in December 1995 and the
first quarter of 1996 and changes in management focus. Sales growth is expected
to be moderate for the remainder of 1996 as the Company focuses on the
profitability of existing business and obtaining new business that meets
established profitability requirements.
Gross margin. Gross margin as a percentage of net sales increased to 9.9% in the
second quarter of 1996 from 9.5% in the second quarter of 1995, and from 8.7% in
the fourth quarter of 1995. Gross margin as a percentage of net sales increased
to 9.8% in the first six months of 1996 from 9.6% in the first six months of
1995. The increase has been a result of several initiatives. As discussed above,
the Company implemented price increases for the services it provides and the
majority of these price increases have been realized. The Company continues to
remain focused on improving gross margin and continues to implement gross margin
enhancement programs in addition to the price increases. These enhancement
programs include: utilizing an activity-based cost system that charges
incremental fees for additional distribution and enhanced inventory management
services, implementing supplier partnerships that will increase margin
opportunities for the Company as well as the supplier and continuing to improve
the Company's utilization of technology which will continue to reduce the cost
of the order fulfillment cycle. There can be no assurance that the Company's
pricing methods and the other gross margin enhancement programs will produce
increases in net sales or gross margin as a percentage of net sales in future
periods.
Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses as a percentage of net sales increased to 7.8% in
the second quarter of 1996 from 7.3% in the second quarter of 1995 and increased
to 7.9% in the first six months of 1996 from 7.2% in the first six months of
1995, but declined from 8.2% in the fourth quarter of 1995. The increase in SG&A
expenses as a percentage of net sales as compared to the second quarter and
first six months of 1995 was primarily a result of increased personnel costs
incurred in connection with new contracts providing for enhanced service levels
and services not previously provided by the Company, a significant increase in
the number of Stock Keeping Units (SKUs) distributed by the Company, system
conversions, opening or expanding 11 distribution centers and reconfiguring
warehouse systems.
During the second quarter of 1996, SG&A expenses decreased $2.6 million from
8.2% of net sales in the fourth quarter of 1995 to 7.9% in the first quarter of
1996 and to 7.8% in the second quarter of 1996. The SG&A expense decline is a
result of many cost saving initiatives, primarily
8
the reduction of over 200 full time equivalent employees in the second quarter
due to reduced overtime and temporary help. Also, the more cost effective
utilization of the Company's mainframe computer system lowered SG&A expenses.
The reduction in these costs has been achieved through the completion of 22
warehouse reconfigurations in 1995, the implementation of improved inventory
management systems in a majority of its facilities and the refocus on functional
best practices within the Company. Additionally, the implementation of the
Company's restructuring plan to further reduce distribution center costs through
the closure of two and the downsizing of five distribution centers (which
resulted in $3.5 million of the Company's nonrecurring restructuring
charges in the fourth quarter of 1995) has contributed to the reduction of SG&A
expenses. The Company will continue to focus on these programs during 1996 and
in future periods. Although the Company expects these initiatives to continue to
reduce SG&A expenses, their impact cannot be assured.
Depreciation and amortization. Depreciation and amortization increased by 9.6%
in the second quarter of 1996 compared to the second quarter of 1995 and
increased by 10.7 % in the first six months of 1996 compared to the first six
months of 1995. This increase was due primarily to the Company's continued
investment in improved Information Technology (IT). The Company anticipates
increases in depreciation and amortization for the remainder of 1996 associated
with additional capital investment in IT.
Interest expense, net and discount on accounts receivable securitization
(Financing Costs). Financing Costs, net of finance charge income of $1.2 million
in the second quarter of 1996 and 1995 increased from $5.7 million in the
second quarter of 1995 to $6.8 million in the second quarter of 1996. Financing
Costs, net of finance charge income of $2.4 million and $1.6 million in the
first six months of 1996 and 1995, respectively, increased from $11.1 million in
the first six months of 1995 to $13.4 million in the first six months of 1996.
The increases were primarily due to higher borrowing levels to fund increased
working capital requirements and higher interest rates. Although Financing
Costs, net of finance charge income increased compared to the same periods in
1995, Financing Costs, net of finance charge income in the second quarter of
1996 declined approximately 13.9% or $1.1 million from the fourth quarter of
1995. This decline is primarily due to the reduction of outstanding financing by
approximately $40.8 million from March 31, 1996.
Management has taken and continues to take action to reduce Financing Costs,
including (i) improving financing rates (as discussed below in the liquidity
section, the Company completed its refinancing plan during the second quarter of
1996 which will provide the Company improved financing rates) and (ii) reducing
working capital requirements through the implementation of the Company's new
inventory forecasting system, product standardization and the strengthening of
its methods of monitoring and enforcing contract payment terms.
Income taxes. The Company had an income tax provision of $3.4 million in the
first six months of 1996 (representing an effective tax rate of 43.0%) compared
with an income tax provision of $4.3 million in the first six months of 1995
(representing an effective tax rate of 40.8%). The increase in the effective tax
rate was due to the Company's lower earnings level increasing the impact
of certain nondeductible expenses such as goodwill amortization.
9
Net income. Net income increased $1.2 million in the second quarter of 1996
compared to the second quarter of 1995. Net income declined $1.9 million in the
first six months of 1996 compared to the first six months of 1995. Excluding
nonrecurring restructuring expenses net of taxes, net income has declined $1.2
million in the second quarter of 1996 compared to the second quarter of 1995 and
has declined $5.9 million in the first six months of 1996 compared to the first
six months of 1995. The decline was due to an increase in SG&A expenses and
Financing Costs. Due to the initiatives previously discussed, the Company has
shown improvement from its fourth quarter 1995 net loss of $9.0 million (which
loss included a $3.4 million nonrecurring restructuring charge, net of taxes),
to net income of $1.5 million in the first quarter of 1996 and to net income of
$2.9 million in the second quarter of 1996. Although the trend has been
favorable and the Company continues to pursue the initiatives previously
discussed in an effort to continue improvement in the earnings of the Company,
the impact of these initiatives on net income cannot be assured.
Financial Condition, Liquidity and Capital Resources
Liquidity. The Company's liquidity position improved significantly during
the first six months of 1996 from the fourth quarter of 1995. The improvement
was the result of increased earnings, reduced working capital requirements and
the availability of additional financing sources.
During May 1996 the Company refinanced its $425.0 million revolving credit
facility (Senior Credit Facility) by issuing $150.0 million of 10.875% Senior
Subordinated Notes (Notes), increasing its available receivables financing
facility to $150.0 million from $75.0 million (Receivables Financing Facility)
and entering into a new $225.0 million revolving credit facility (New Senior
Credit Facility).
The Notes were issued on May 29, 1996, and mature on June 1, 2006. Interest on
the Notes is payable semi-annually on June 1 and December 1. The Notes are
redeemable at the Company's option subject to certain restrictions. The Notes
are unconditionally guaranteed on a joint and several basis by all direct and
indirect subsidiaries of the Company, other than O&M Funding Corp. (OMF).
During the second quarter, the Company entered into interest rate swap
agreements to convert a portion of the fixed interest rates under the Notes to a
variable rate. Under the swap agreements, the Company pays the counterparties a
variable rate based on the six-month London Interbank Offered Rate (LIBOR) and
the counterparties pay the Company a fixed interest rate, ranging from 7.29% to
7.32%. The total notional amount of these interest rate swaps was $100.0 million
at June 30, 1996.
The terms of the Receivables Financing Facility are substantially the same as
the agreement entered into in December 1995 other than an increase in the
available funds to $150.0 million and the extension of the term of the agreement
to May 1999. At June 30, 1996 the Company had received $141.0 million under the
Receivables Financing Facility.
The New Senior Credit Facility expires in May 2001 with interest based on LIBOR
or the Prime Rate. The New Senior Credit Facility limits the amount of
indebtedness the Company may incur,
10
requires the Company to maintain certain financial covenants including covenants
related to tangible net worth, cash flow coverage, current ratio, leverage ratio
and fixed charge coverage ratio and restricts the ability of the Company to
materially alter the character of the business through consolidation, merger or
purchase or sale of assets.
The Company expects that borrowings under the Notes, the New Senior Credit
Facility and proceeds from the Receivables Financing Facility will be sufficient
to fund its working capital needs and long-term strategic growth plans, although
this cannot be assured. Available financing at June 30, 1996 was approximately
$185.0 million.
Working Capital Management. During the first six months of 1996 the Company has
made significant improvement in working capital management. Inventory turnover
has improved from 8.2 times in the fourth quarter of 1995, to 8.7 times in the
first quarter of 1996, to 8.9 times in the second quarter of 1996. This
improvement was due to the continued implementation of the Company's
client/server-based forecasting system scheduled for completion during the third
quarter of 1996 and the limitation of the number of SKUs from multiple
manufacturers distributed by the Company. The Company has also reduced accounts
receivable days sales outstanding from 40.0 in the fourth quarter of 1995 to
39.4 in the second quarter of 1996. This reduction has been achieved through
strengthening the Company's methods of monitoring and enforcing contract payment
terms and basing a portion of its sales force incentives on reducing days sales
outstanding.
Capital Expenditures. Capital expenditures were approximately $7.1 million in
the first six months of 1996, of which approximately $5.8 million were for
computer systems, including the continued conversion of certain applications
from a mainframe computer system to client/server technology. Approximately 75%
of the Company's $25.0 million of capital expenditures planned for 1996 will be
for IT. The Company expects to continue to make this level of investment for the
foreseeable future. These capital expenditures are expected to be funded through
cash flow from operations.
Inflation. Inflation has not had a significant effect on the Company's results
of operations or financial condition.
11
Part II. Other Information
Item 1. Legal Proceedings
In May 1994, Owens & Minor, Inc. acquired all the outstanding capital stock of
Stuart Medical, Inc. (Stuart) through a statutory share exchange. Accordingly,
Stuart, as a wholly owned subsidiary of Owens & Minor, Inc., retains all of its
pre-acquisition liabilities, subject to Stuart's and Owens & Minor, Inc.'s
contractual right of indemnification from the former shareholders of Stuart for
certain pre-acquisition liabilities (including liabilities arising from the
spinal implant litigation discussed below) and the liability insurance coverage
discussed below. Beginning in 1994 and continuing to the present, Stuart has
been named as a defendant along with manufacturers, healthcare providers and
others in approximately 200 lawsuits, filed in various federal and state courts
by multiple plaintiffs, based on alleged injuries attributable to the
implantation of internal spinal fixation devices distributed by a specialty
products division of Stuart from the early 1980s to December 1992 and prior to
Owen & Minor, Inc.'s acquisition of Stuart in 1994. Of the approximately 200
cases naming Stuart, there are approximately 100 plaintiffs implanted with the
type of orthopedic screw distributed by Stuart. Most of the cases seek monetary
damages in varying amounts. The great majority of these cases allege
compensatory and punitive damages in an unspecified amount stated to be in
excess of the jurisdictional minimum for the courts in which such cases are
filed. A smaller group of cases seek specified damages ranging from $50,000 to
$15,000,000. Many of these cases also seek the creation of a fund for medical
research, prejudgment and post-judgment interest and costs of suit.
Substantially all of these cases have been transferred to, and consolidated for
pretrial proceedings in, the Eastern District of Pennsylvania in Philadelphia
under the style MDL Docket No. 1014: In re Orthopedic Bone Screw Products
Liability Litigation. All such cases are in the preliminary stages. In addition,
a motion has been filed to add Stuart and a number of other parties as
additional defendants in approximately 10 additional lawsuits involving multiple
plaintiffs. Owens & Minor, Inc. believes that Stuart may be named as a defendant
in additional similar lawsuits in the future.
Stuart did not manufacture the internal spinal fixation devices. Based upon
management's analysis of indemnification agreements between Stuart and the
manufacturer involved, Owens & Minor, Inc. believes that Stuart is entitled to
indemnification by the manufacturer of the devices with respect to claims
alleging defects in the products. The cases described above are being defended
by the manufacturer's and Stuart's respective insurance carriers. Owens & Minor,
Inc. and Stuart are also contractually entitled to indemnification by the former
shareholders of Stuart for any liabilities and related expenses incurred by
Owens & Minor, Inc. or Stuart in connection with the foregoing litigation.
Because of the preliminary status of the lawsuits, Owens & Minor, Inc. is unable
at this time to determine with certainty whether Stuart may be held liable. In
the event Stuart were to be held liable, Owens & Minor, Inc. believes that
Stuart's available insurance coverage together with the indemnification rights
discussed above are adequate to cover any losses should they occur, and
accordingly has created no reserve therefor. Owens & Minor, Inc. is not aware of
any uncertainty as to the availability and adequacy of such insurance or
indemnification, although there can be no assurance that the manufacturers and
former
12
shareholders will have sufficient financial resources in the future to meet such
obligations. Owens & Minor, Inc. believes that, with or without regard to such
indemnification or insurance, the likelihood is remote that any liability
resulting from such litigation would have a material adverse effect on the
Company's financial condition or results of operations.
The Company is party to various other legal actions that are ordinary and
incidental to its business. While the outcome of legal actions cannot be
predicted with certainty, management believes the outcome of these proceedings
will not have a material adverse effect on the Company's financial condition or
results of operations.
Item 2. Changes in Securities
On May 29, 1996, Owens & Minor, Inc. issued $150 million of 10.875% Senior
Subordinated Notes. Section 4.06 of the Indenture governing the Notes restricts
the Company's ability to make certain payments, including the payment of
dividends on Owens & Minor, Inc.'s Common Stock. See Section 4.06 of the
Indenture dated as of May 29, 1996 attached as Exhibit 4(a) hereto.
In addition, Section 7.12 of the Company's $225 million revolving credit
facility prohibits Owens & Minor, Inc. from paying dividends unless it is in
compliance with certain financial covenants and is otherwise not in default
either prior to or after giving effect to any such dividend. See Section 7.12 of
the Credit Agreement dated as of May 24, 1996 attached as Exhibit 4(b) hereto.
Item 4. Submission of Matters to a Vote of Shareholders
The following matters were submitted to a vote of Owens & Minor, Inc.'s
shareholders at its annual meeting held on April 30, 1996 with the voting
results designated below each such matter:
(1) Election of Vernard W. Henley, G. Gilmer Minor, III and R.E Cabell, Jr.,
as directors of Owens & Minor, Inc. for a three-year term and election of
Josiah Bunting, III as a director of Owens & Minor, Inc. for a one-year
term.
Votes Against Broker
Directors Votes For or Withheld Abstentions Non-Votes
- --------- ---------- ------------- ----------- ---------
Vernard W. Henley 33,880,253 139,918 0 0
G. Gilmer Minor, III 33,920,876 99,295 0 0
R. E. Cabell, Jr. 33,879,128 141,043 0 0
Josiah Bunting, III 33,902,542 117,629 0 0
(2) Ratification of the appointment of KPMG Peat Marwick LLP as Owens &
Minor, Inc.'s independent auditors.
Votes Against Broker
Votes For or Withheld Abstentions Non-Votes
---------- ------------- ----------- ---------
33,908,260 53,132 58,779 0
13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 (a) Indenture dated as of May 29, 1996 among Owens & Minor, Inc., as
Issuer, Owens & Minor Medical, Inc., National Medical Supply
Corporation, Owens & Minor West, Inc., Koley's Medical Supply, Inc.,
Lyons Physician Supply Company, A. Kuhlman & Co., Stuart Medical,
Inc., as Guarantors, and Crestar Bank, as Trustee
4 (b) Credit Agreement dated as of May 24, 1996 by and among Owens & Minor,
Inc., certain of its subsidiaries, various banks and lending
institutions identified on the signature pages hereto, NationsBank,
N.A., as agent, Bank of America National Trust and Savings Association
and Crestar Bank, as co-agents, and NationsBank, N.A., as
administrative agent
10 (a) Amended and Restated Purchase and Sale Agreement dated as of May 28,
1996 among Owens & Minor Medical, Inc., Stuart Medical, Inc., Owens &
Minor, Inc. and O&M Funding Corp.
10 (b) Amended and Restated Receivables Purchase Agreement dated as of May
28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens &
Minor, Inc., Receivables Capital Corporation and Bank of America
National Trust and Savings Association
10 (c) Amended and Restated Parallel Asset Purchase Agreement dated as of May
28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens &
Minor, Inc., the Parallel Purchasers from time to time party hereto
and Bank of America National Trust and Savings Association
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three month period ended June
30, 1996.
14
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 August 9, 1996 /s/ GLENN J. DOZIER
-------------- -----------------------------------
Glenn J. Dozier
Senior Vice President, Finance,
Chief Financial Officer
Date August 9, 1996 /s/ ANN GREER RETOR
--------------- ----------------------------------
Ann Greer Rector
Vice President, Controller
Exhibit Index
Exhibit #
4 (a) Indenture dated as of May 29, 1996 among Owens & Minor, Inc., as Issuer,
Owens & Minor Medical, Inc., National Medical Supply Corporation, Owens &
Minor West, Inc., Koley's Medical Supply, Inc., Lyons Physician Supply
Company, A. Kuhlman & Co., Stuart Medical, Inc., as Guarantors, and
Crestar Bank, as Trustee
4 (b) Credit Agreement dated as of May 24, 1996 by and among Owens & Minor,
Inc., certain of its subsidiaries, various banks and lending institutions
identified on the signature pages hereto, NationsBank, N.A., as agent,
Bank of America National Trust and Savings Association and Crestar Bank,
as co-agents, and NationsBank, N.A., as administrative agent
10 (a) Amended and Restated Purchase and Sale Agreement dated as of May 28, 1996
among Owens & Minor Medical, Inc., Stuart Medical, Inc., Owens & Minor,
Inc. and O&M Funding Corp.
10 (b) Amended and Restated Receivables Purchase Agreement dated as of May 28,
1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor,
Inc., Receivables Capital Corporation and Bank of America National Trust
and Savings Association
10 (c) Amended and Restated Parallel Asset Purchase Agreement dated as of May
28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens &
Minor, Inc., the Parallel Purchasers from time to time party hereto and
Bank of America National Trust and Savings Association
27 Financial Data Schedule