Exhibit 99.1
FOR IMMEDIATE RELEASE CONTACT:
Trudi Allcott
October 16, 2001 Manager, Communications
804-935-4291
or
Jeff Kaczka
Senior Vice President &
Chief Financial Officer
804-965-5896
Owens & Minor Reports Solid Operating Results
for Third Quarter 2001;
Records Unusual Charges and Extraordinary Item
Richmond, VA....(NYSE-OMI) Owens & Minor today reported solid sales and earnings
growth in the third quarter 2001, before two charges unrelated to the ongoing
core business, and one previously announced extraordinary item.
Sales were $968.2 million for the third quarter ended September 30, 2001, up
$93.9 million or 11 percent from the third quarter of 2000. Income was $9.9
million for the quarter, up $1.5 million or 17 percent, and $0.27 per diluted
common share, up 12.5 percent from the comparable quarter in 2000. These results
exclude the impact of two unusual charges and a previously announced
extraordinary item (discussed below.) Reported income for the quarter before the
extraordinary item was $1.7 million, or $0.05 per diluted common share.
Including the extraordinary item, the company reported a net loss of $5.4
million, or $0.16 per diluted common share. Subsequent comparisons of financial
results in this release exclude the impact of the extraordinary item and the
unusual charges.
"Our solid third quarter and year-to-date operating performance is reflective of
our ability to gain business by employing innovative technology, increasing
account penetration, and providing the best service in the industry," said G.
Gilmer Minor, III, chairman and chief executive officer of Owens & Minor. "We
are working diligently to hold our gross margins and reduce expenses as a
percent to sales in a climate of pricing pressure. Our systems and technology
solutions help our customers focus on reducing total delivered cost, rather than
the cost of each item purchased. In our scenario, both parties win."
Page 2
Unusual Charges and Extraordinary Item
Owens & Minor recorded two unusual charges in the third quarter 2001, in
addition to a previously announced extraordinary item. The first charge of $7.2
million after tax reflects estimated tax liabilities principally related to its
corporate-owned life insurance (COLI) program. The second charge of $1.1 million
after tax reflects an adjustment of the company's investment in an e-commerce
company serving the healthcare industry. The extraordinary item of $7.1 million
after tax, which was previously announced, is related to the company's July 2001
refinancing of its 10 7/8% Senior Subordinated Notes.
"The company views these charges as events that are unrelated to the ongoing
operations of our core business," said Jeff Kaczka, senior vice president and
chief financial officer of Owens & Minor.
The $7.2 million charge for estimated tax liabilities relates principally to
interest deductions for corporate-owned life insurance claimed on the company's
tax returns for the years 1995 through 1998. This potential liability was
previously disclosed in the company's regular filings with the United States
Securities and Exchange Commission.
The Internal Revenue Service (IRS) has disallowed certain prior year deductions
for interest on loans associated with the company's COLI program. Management
believes that the company complied with the tax law as it relates to its COLI
program and has filed an appeal with the IRS. However, several cases involving
other corporations' COLI programs have been decided in favor of the IRS, and
consequently, the climate has become less favorable to taxpayers with respect to
these programs. As a result, management believes that it has become less likely
that the company will achieve a favorable resolution of this matter.
Notwithstanding this action, management does not agree with the IRS position and
will continue to protest this matter either administratively or through
litigation.
Owens & Minor is also taking a charge of approximately $1.1 million after tax to
reflect a decline in the value of its 1999 strategic investment in an e-commerce
company. Because the market value of this e-commerce company's stock has dropped
significantly below the company's original cost, and recovery to the original
cost appears unlikely in the short term, generally accepted accounting
principles require that Owens & Minor account for the decline in the value of
this investment.
"We continue to support and work closely with e-commerce initiatives in the
healthcare industry in an effort to participate in the development of emerging
technologies," said G. Gilmer Minor, III, chairman and chief executive officer
of Owens & Minor. "We are taking this write-down in accordance with regulatory
guidelines."
Page 3
As previously announced, Owens & Minor has recorded a $7.1 million after tax
extraordinary charge relating to the early retirement of $150 million in 10 7/8%
Senior Subordinated Notes. Earlier this year, Owens & Minor successfully
completed a private offering of $200 million of 8 1/2% Senior Subordinated Notes
due 2011. This transaction allowed the company to improve its capital structure
and provides financial flexibility to fund future growth.
Other Third Quarter Results
Gross margin was 10.6 percent of net sales, down from 10.7 percent in the third
quarter of 2000, and comparable to second quarter, 2001. Selling, general and
administrative expense (SG&A) was 7.7 percent of net sales, up from 7.5 percent
for the corresponding quarter in 2000, primarily as a result of costs associated
with bringing on new business, distribution center relocations and higher
employee healthcare costs.
Excluding the impact of the company's accounts receivable securitization
facility, outstanding financing was $275.8 million at quarter end, up from
$261.8 million at the end of the second quarter of 2001. This increase is
primarily attributable to increased investment in inventory to meet growing
sales demand.
"Owens & Minor turned in another solid operating quarter," said Craig R. Smith,
president and chief operating officer. "The pace of our sales growth is a strong
endorsement for the value-added services and innovative technology that Owens &
Minor is providing to new and existing customers."
Year-to-Date Results
For the nine months ended September 30, 2001, sales were $2,846.3 million
compared to $2,606.3 million, for the same period in 2000, an increase of 9
percent. Net income was $26.2 million compared to $22.9 million for the same
period in 2000, up 14.6 percent. Earnings per diluted common share were $0.73
compared to $0.66, an increase of 11 percent. These results exclude
restructuring credits recorded in the second quarters of 2000 and 2001, as well
as the unusual charges and extraordinary item discussed earlier in this release.
For the nine months ended September 30, 2001, reported net income was $11.8
million, or $0.37 per diluted common share; and income before extraordinary item
was $18.8 million, or $0.54 per share.
Year-to-date, gross margin was 10.6 percent, compared to 10.7 percent in 2000.
SG&A expense was 7.7 percent of net sales, unchanged from the first nine months
of 2000.
Page 4
Outlook
Looking ahead, the company said that, for the full year 2001, it expects to
achieve the middle of its guidance range on sales growth of 8 to 10 percent, and
the lowest end of its guidance of 11 to 14 percent on earnings per share growth.
In the near term, the company does not expect to realize previously anticipated
gross margin from its "eMedExpress" (third party logistics) business, as its
arrangement with C.R. Bard is on hold, pending the acquisition of C. R. Bard by
Tyco International. As a result, the company expects that the gross margin
percentage for the fourth quarter of 2001 will be consistent with that reported
in earlier quarters during the year.
"Owens & Minor is committed to developing the eMedExpress opportunity," said
Kaczka, who was recently assigned operational responsibility for this effort.
"We have engaged a consultant with extensive experience in this field to work
with the eMedExpress team in developing a targeted marketing plan."
Recent Events
During the quarter, Owens & Minor was ranked first in the InformationWeek 500,
an annual survey of the nation's most innovative users of technology. This
prestigious annual list ranks U.S.-based businesses with revenues of more than
$1 billion on their ability as technology innovators. The company also achieved
a number one ranking for service, pricing and accuracy in a recent Wall Street
analysts' independent survey of hospital executives. In July, Owens & Minor
completed a successful refinancing of its outstanding Senior Subordinated Notes,
achieving a more favorable rate.
Also, during the quarter, the company hired Paul G. Blair as vice president of
strategic planning and development. Blair, who previously worked for Bindley
Western Industries, Inc., also has an extensive background in corporate finance.
Conference Call Details
Owens & Minor will conduct a conference call on October 17, 2001 at 8:30am
Eastern Time to discuss these issues. The phone number for the Owens & Minor
conference call is 888-391-0107. The call will be available by replay for 24
hours by calling 800-633-8284, key in reservation number: 19797131. The call
will also be Webcast for 21 days through www.owens-minor.com.
Page 5
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, the success
of the strategic initiatives outlined above, 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.
Owens & Minor, Inc., a Fortune 500 company headquartered in Richmond, Va., is
the nation's leading distributor of national name brand medical/surgical
supplies. The company's distribution centers throughout the United States serve
hospitals, integrated healthcare systems and group purchasing organizations. In
addition to its diverse product offering, Owens & Minor helps customers control
healthcare costs and improve inventory management through innovative services in
supply chain management, logistics and technology. For releases on the World
Wide Web, visit www.prnewswire.com, or for more information about Owens & Minor,
as well as news releases and virtual warehouse tours, visit the company's Web
site at www.owens-minor.com.
# # # #
Page Six
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Owens & Minor, Inc.
Consolidated Statements of Operations (unaudited)(1)
(in thousands, except ratios and per share data)
Three Months Ended September 30,
-------------------------------------------------------------------------
2001 % of Sales 2000 % of Sales % Fav(Unfav)
-------------------------------------------------------------------------
Net sales $ 968,230 100.0 % $ 874,318 100.0 % 10.7 %
Cost of goods sold 865,162 89.4 781,197 89.3 (10.7)
--------------------- -------------------
Gross margin 103,068 10.6 93,121 10.7 10.7
---------------------- --------------------
Selling, general and administrative expenses 74,193 7.7 65,752 7.5 (12.8)
Depreciation and amortization 5,650 0.6 5,399 0.6 (4.6)
Interest expense, net 3,549 0.4 3,060 0.4 (16.0)
Discount on accounts receivable securitization 841 0.1 1,744 0.2 51.8
Impairment loss on investment 1,071 0.1 - - n/m
Distribution on mandatorily redeemable
preferred securities 1,773 0.2 1,773 0.2 -
---------------------- --------------------
Total expenses 87,077 9.0 77,728 8.9 (12.0)
---------------------- --------------------
Income before income taxes 15,991 1.7 15,393 1.8 3.9
Income tax provision 14,294 1.5 6,927 0.8 (106.4)
---------------------- --------------------
Income before extraordinary item 1,697 0.2 8,466 1.0 (80.0)
Extraordinary loss on early retirement of debt, net of
tax benefit of $4,712 (7,068) (0.7) - - n/m
---------------------- --------------------
Net income (loss) $ (5,371) (0.6)% $ 8,466 1.0 % (163.4)%
====================== ====================
Per common share - basic:
Income before extraordinary item $ 0.05 $ 0.26
Extraordinary loss on early retirement of debt, net of
tax benefit (0.21) -
----------- -----------
Net income (loss) $ (0.16) $ 0.26
=========== ===========
Per common share - diluted:
Income before extraordinary item $ 0.05 $ 0.24
Extraordinary loss on early retirement of debt, net of
tax benefit (0.21) -
----------- -----------
Net income (loss) $ (0.16) $ 0.24
=========== ===========
Weighted average shares - basic 33,560 32,793
Weighted average shares - diluted 34,196 39,719
(1) Net sales, gross margin, and SG&A expenses have been restated for 2000 in
accordance with Emerging Issues Task Force Issue 00-10, Accounting for
Shipping and Handling Fees and Costs.
Page Seven
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Owens & Minor, Inc.
Consolidated Statements of Operations (unaudited)(1)
(in thousands, except ratios and per share data)
Nine Months Ended September 30,
---------------------------------------------------------------------
2001 % of Sales 2000 % of Sales % Fav(Unfav)
---------------------------------------------------------------------
Net sales $ 2,846,269 100.0 % $ 2,606,290 100.0 % 9.2 %
Cost of goods sold 2,543,597 89.4 2,328,405 89.3 (9.2)
---------------------- ---------------------
Gross margin 302,672 10.6 277,885 10.7 8.9
----------------------- ---------------------
Selling, general and administrative expenses 220,188 7.7 200,102 7.7 (10.0)
Depreciation and amortization 16,878 0.6 15,830 0.6 (6.6)
Interest expense, net 10,357 0.4 9,418 0.4 (10.0)
Discount on accounts receivable securitization 3,746 0.1 5,562 0.2 32.7
Impairment loss on investment 1,071 - - - n/m
Distribution on mandatorily redeemable
preferred securities 5,321 0.2 5,321 0.2 -
Restructuring credit (1,476) (0.1) (750) - 96.8
----------------------- ---------------------
Total expenses 256,085 9.0 235,483 9.0 (8.7)
----------------------- ---------------------
Income before income taxes 46,587 1.6 42,402 1.6 9.9
Income tax provision 27,756 1.0 19,081 0.7 (45.5)
----------------------- ---------------------
Income before extraordinary item 18,831 0.7 23,321 0.9 (19.3)
Extraordinary loss on early retirement of debt, net of tax
benefit of $4,712 (7,068) (0.2) - - n/m
----------------------- ---------------------
Net income $ 11,763 0.4 % $ 23,321 0.9 % (49.6)%
======================= =====================
Per common share - basic:
Income before extraordinary item $ 0.57 $ 0.71
Extraordinary loss on early retirement of debt, net of
tax benefit (0.22) -
------------ -----------
Net income $ 0.35 $ 0.71
============ ===========
Per common share - diluted:
Income before extraordinary item $ 0.54 $ 0.67
Extraordinary loss on early retirement of debt, net of
tax benefit (0.17) -
------------ -----------
Net income $ 0.37 $ 0.67
============ ===========
Weighted average shares - basic 33,280 32,658
Weighted average shares - diluted 40,308 39,424
(1) Net sales, gross margin, and SG&A expenses have been restated for 2000 in
accordance with Emerging Issues Task Force Issue 00-10, Accounting for
Shipping and Handling Fees and Costs.
Page Eight
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Owens & Minor, Inc.
Financial Summary (unaudited)(1)
Quarter Ended
------------------------------------------------------------------------------------------------------------------------------
(in thousands, except ratios and per share data) 9/30/01 6/30/01 3/31/01
------------------------------------------------------------------------------------------------------------------------------
Net sales $ 968,230 $ 953,531 $ 924,508
-----------------------------------------------------------------------------------------------------------------------------
Gross margin as a percent of net sales 10.6% 10.6% 10.7%
-----------------------------------------------------------------------------------------------------------------------------
SG&A expenses as a percent of net sales 7.7% 7.7% 7.9%
-----------------------------------------------------------------------------------------------------------------------------
Operating margin as a percent of net sales 2.4% 2.3% 2.2%
-----------------------------------------------------------------------------------------------------------------------------
Income before unusual items (2) (3) $ 9,936 $ 8,596 $ 7,711
-----------------------------------------------------------------------------------------------------------------------------
Income before unusual items per common share - basic (2) (3) $ 0.30 $ 0.26 $ 0.23
-----------------------------------------------------------------------------------------------------------------------------
Income before unusual items per common share - diluted (2) (3) $ 0.27 $ 0.24 $ 0.22
-----------------------------------------------------------------------------------------------------------------------------
Accounts and notes receivable, net (4) $ 362,869 $ 350,277 $ 345,955
-----------------------------------------------------------------------------------------------------------------------------
Average receivable days sales outstanding (4) 33.9 32.2 33.6
-----------------------------------------------------------------------------------------------------------------------------
Merchandise inventories $ 395,112 $ 376,277 $ 335,785
-----------------------------------------------------------------------------------------------------------------------------
Average inventory turnover 8.9 9.6 10.3
-----------------------------------------------------------------------------------------------------------------------------
Outstanding financing (4) $ 275,797 $ 261,772 $ 247,022
-----------------------------------------------------------------------------------------------------------------------------
Capitalization ratio (4) (5) 43.4% 41.7% 41.3%
-----------------------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ 0.0700 $ 0.0700 $ 0.0625
-----------------------------------------------------------------------------------------------------------------------------
Stock price at quarter-end $ 20.30 $ 19.00 $ 16.53
-----------------------------------------------------------------------------------------------------------------------------
Quarter Ended
------------------------------------------------------------------------------------------------------------
(in thousands, except ratios and per share data) 12/31/00 9/30/00
------------------------------------------------------------------------------------------------------------
Net sales $ 897,293 $ 874,318
------------------------------------------------------------------------------------------------------------
Gross margin as a percent of net sales 10.9% 10.7%
------------------------------------------------------------------------------------------------------------
SG&A expenses as a percent of net sales 7.6% 7.5%
------------------------------------------------------------------------------------------------------------
Operating margin as a percent of net sales 2.7% 2.5%
------------------------------------------------------------------------------------------------------------
Income before unusual items (2) (3) $ 9,767 $ 8,466
------------------------------------------------------------------------------------------------------------
Income before unusual items per common share - basic (2) (3) $ 0.30 $ 0.26
------------------------------------------------------------------------------------------------------------
Income before unusual items per common share - diluted (2) (3) $ 0.27 $ 0.24
------------------------------------------------------------------------------------------------------------
Accounts and notes receivable, net (4) $ 341,905 $ 328,499
------------------------------------------------------------------------------------------------------------
Average receivable days sales outstanding (4) 33.3 33.1
------------------------------------------------------------------------------------------------------------
Merchandise inventories $ 315,570 $ 337,675
------------------------------------------------------------------------------------------------------------
Average inventory turnover 9.7 8.9
------------------------------------------------------------------------------------------------------------
Outstanding financing (4) $ 233,533 $ 228,553
------------------------------------------------------------------------------------------------------------
Capitalization ratio (4) (5) 40.4% 40.5%
------------------------------------------------------------------------------------------------------------
Cash dividends per common share $ 0.0625 $ 0.0625
------------------------------------------------------------------------------------------------------------
Stock price at quarter-end $ 17.75 $ 15.75
------------------------------------------------------------------------------------------------------------
(1) Net sales, gross margin, SG&A expenses and all related ratios have been
restated for the third quarter of 2000 in accordance with Emerging Issues
Task Force Issue 00-10, Accounting for Shipping and Handling Fees and
Costs.
(2) Excludes unusual items, which include the third quarter 2001 impairment
loss on investment of $1.1 million, contingency provision for income tax
assessment of $7.2 million and the extraordinary loss on early retirement
of debt of $7.1 million, net of tax benefit.
(3) Excludes the impact of a reduction in a restructuring accrual originally
established in 1998. This reduction increased second quarter 2001 net
income by $0.8 million.
(4) Excludes the impact of the company's off balance sheet receivables
financing facility.
(5) Includes mandatorily redeemable preferred securities as equity.
Condensed Consolidated Balance Sheets (unaudited)
(in thousands)
9/30/01 12/31/00
---------------- --------------
Assets
Accounts and notes receivable, net* $ 308,869 $ 261,905
Merchandise inventories 395,112 315,570
Property and equipment, net 26,234 24,239
Goodwill, net 200,358 204,849
Other assets 64,054 60,985
---------------- --------------
Total assets $ 994,627 $ 867,548
================ ==============
9/30/01 12/31/00
------- --------
Liabilities and shareholders' equity
Accounts payable $ 331,328 $ 291,507
Debt* 221,797 153,533
Other liabilities 81,230 77,736
Mandatorily redeemable
preferred securities 132,000 132,000
Shareholders' equity 228,272 212,772
---------------- ---------------
Total liabilities and
shareholders' equity $ 994,627 $ 867,548
================ ===============
* Includes the impact of the company's off balance sheet receivables
financing facility. At September 30, 2001 and December 31, 2000, the
company had sold $54.0 million and $80.0 million of receivables under this
facility.