XNYS:OMI Owens & Minor Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

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

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9120 Lockwood Boulevard,

Mechanicsville, Virginia

  23116
(Address of principal executive offices)   (Zip Code)

Post Office Box 27626,

Richmond, Virginia

  23261-7626
(Mailing address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (804) 723-7000

 

 

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “larger accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of Owens & Minor, Inc.’s common stock outstanding as of July 20, 2012, was 63,503,881 shares.

 

 

 


Table of Contents

Owens & Minor, Inc. and Subsidiaries

Index

 

          Page  

Part I. Financial Information

  

    Item 1.

   Financial Statements   
   Consolidated Statements of Income—Three and Six Months Ended June, 2012 and 2011      3   
   Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 30, 2012 and 2011      4   
   Consolidated Balance Sheets—June 30, 2012 and December 31, 2011      5   
   Consolidated Statements of Cash Flows—Six Months Ended June 30, 2012 and 2011      6   
   Consolidated Statements of Changes in Equity—Six Months Ended June 30, 2012 and 2011      7   
   Notes to Consolidated Financial Statements      8   

    Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      19   

    Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      24   

    Item 4.

   Controls and Procedures      25   

Part II. Other Information

  

    Item 1.

   Legal Proceedings      25   

    Item 1A.

   Risk Factors      25   

    Item 2.

   Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities      25   

    Item 6.

   Exhibits      26   

 

2


Table of Contents

Part I. Financial Information

 

Item 1. Financial Statements

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Income

(unaudited)

 

     Three Months Ended June 30,      Six Months Ended June 30,  

(in thousands, except per share data)

   2012     2011      2012     2011  

Net revenue

   $ 2,185,444      $ 2,131,448       $ 4,403,326      $ 4,255,263   

Cost of goods sold

     1,974,015        1,915,382         3,977,569        3,828,422   
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross margin

     211,429        216,066         425,757        426,841   

Selling, general, and administrative expenses

     150,288        156,321         305,860        307,294   

Depreciation and amortization

     8,515        8,249         17,093        17,016   

Other operating (income) loss, net

     (551     457         (2,245     495   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating earnings

     53,177        51,039         105,049        102,036   

Interest expense, net

     3,487        3,020         6,909        6,737   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income before income taxes

     49,690        48,019         98,140        95,299   

Income tax provision

     19,577        18,855         38,667        37,395   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income

   $ 30,113      $ 29,164       $ 59,473      $ 57,904   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income per common share:

         

Basic

   $ 0.48      $ 0.46       $ 0.94      $ 0.91   

Diluted

   $ 0.48      $ 0.46       $ 0.94      $ 0.91   

Cash dividends per common share

   $ 0.22      $ 0.20       $ 0.44      $ 0.40   

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)

 

     Three Months Ended June 30,     Six Months Ended June 30,  

(in thousands)

   2012     2011     2012     2011  

Net income

   $ 30,113      $ 29,164      $ 59,473      $ 57,904   

Other comprehensive income, net of tax:

        

Amounts recognized in net periodic benefit cost (net of income tax expense - $92 and $317 in 2012 and $116 and $171 in 2011)

     145        181        496        267   

Amounts recognized in interest expense, net (net of income tax benefit - $8 and $16 for 2012 and $8 and $16 for 2011)

     (11     (13     (24     (25
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

     134        168        472        242   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 30,247      $ 29,332      $ 59,945      $ 58,146   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)

 

(in thousands, except per share data)

   June 30,
2012
    December 31,
2011
 

Assets

    

Current assets

    

Cash and cash equivalents

   $ 224,937      $ 135,938   

Accounts and notes receivable, net of allowances of $15,259 and $15,622

     485,249        506,758   

Merchandise inventories

     748,847        806,366   

Other current assets

     72,346        76,763   
  

 

 

   

 

 

 

Total current assets

     1,531,379        1,525,825   

Property and equipment, net of accumulated depreciation of $110,957 and $102,904

     103,889        108,061   

Goodwill, net

     248,498        248,498   

Intangible assets, net

     21,018        22,142   

Other assets, net

     50,640        42,289   
  

 

 

   

 

 

 

Total assets

   $ 1,955,424      $ 1,946,815   
  

 

 

   

 

 

 

Liabilities and equity

    

Current liabilities

    

Accounts payable

   $ 559,718      $ 575,793   

Accrued payroll and related liabilities

     17,738        20,668   

Deferred income taxes

     37,879        42,296   

Other accrued liabilities

     92,462        93,608   
  

 

 

   

 

 

 

Total current liabilities

     707,797        732,365   

Long-term debt, excluding current portion

     212,032        212,681   

Deferred income taxes

     25,467        21,894   

Other liabilities

     60,165        60,658   
  

 

 

   

 

 

 

Total liabilities

     1,005,461        1,027,598   
  

 

 

   

 

 

 

Commitments and contingencies

    

Equity

    

Owens & Minor, Inc. shareholders’ equity:

    

Preferred stock, par value $100 per share, authorized - 10,000 shares, Series A Participating Cumulative Preferred Stock; none issued

     —          —     

Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 63,504 shares and 63,449 shares

     127,008        126,900   

Paid - in capital

     184,627        179,052   

Retained earnings

     644,220        619,629   

Accumulated other comprehensive loss

     (7,022     (7,494
  

 

 

   

 

 

 

Total Owens & Minor, Inc. shareholders’ equity

     948,833        918,087   

Noncontrolling interest

     1,130        1,130   
  

 

 

   

 

 

 

Total equity

     949,963        919,217   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,955,424      $ 1,946,815   
  

 

 

   

 

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

 

     Six Months Ended
June 30,
 
(in thousands)    2012     2011  

Operating activities:

    

Net income

   $ 59,473      $ 57,904   

Adjustments to reconcile net income to cash provided by operating activities of continuing operations:

    

Depreciation and amortization

     17,093        17,016   

Provision for LIFO reserve

     5,223        11,265   

Share-based compensation expense

     4,126        3,581   

Provision for losses on accounts and notes receivable

     270        758   

Pension contributions

     —          (543

Deferred income tax benefit

     (1,146     (674

Changes in operating assets and liabilities:

    

Accounts and notes receivable

     21,239        (33,606

Merchandise inventories

     52,296        (42,762

Accounts payable

     (16,075     50,033   

Net change in other assets and liabilities

     684        (23,321

Other, net

     (404     114   
  

 

 

   

 

 

 

Cash provided by operating activities of continuing operations

     142,779        39,765   
  

 

 

   

 

 

 

Investing activities:

    

Additions to property and equipment

     (5,460     (8,175

Additions to computer software and intangible assets

     (12,697     (5,573

Proceeds from sale of property and equipment

     115        44   
  

 

 

   

 

 

 

Cash used for investing activities of continuing operations

     (18,042     (13,704
  

 

 

   

 

 

 

Financing activities:

    

Cash dividends paid

     (27,956     (25,496

Repurchases of common stock

     (7,500     (5,086

Financing costs paid

     (1,303     —     

Excess tax benefits related to share-based compensation

     1,160        1,761   

Proceeds from exercise of stock options

     3,761        7,394   

Other, net

     (3,900     (4,514
  

 

 

   

 

 

 

Cash used for financing activities of continuing operations

     (35,738     (25,941
  

 

 

   

 

 

 

Discontinued operations:

    

Operating cash flows

     —          (139
  

 

 

   

 

 

 

Net cash used for discontinued operations

     —          (139
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     88,999        (19

Cash and cash equivalents at beginning of period

     135,938        159,213   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 224,937      $ 159,194   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Income taxes paid, net

   $ 38,113      $ 42,987   

Interest paid

   $ 7,372      $ 7,445   

See accompanying notes to consolidated financial statements.

 

6


Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(unaudited)

 

     Owens & Minor, Inc. Shareholders’ Equity               
(in thousands, except per share data)    Common
Shares
Outstanding
    Common
Stock
($2 par
value)
    Paid-In
Capital
     Retained
Earnings
    Accumulated
Other
Comprehensive
Loss
    Noncontrolling
Interest
     Total
Equity
 

Balance December 31, 2010

     63,433      $ 126,867      $ 165,447       $ 570,320      $ (5,116   $ —         $ 857,518   

Net income

            57,904             57,904   

Other comprehensive income

              242           242   
                

 

 

 

Comprehensive income

                   58,146   
                

 

 

 

Dividends declared ($0.40 per share)

            (25,496          (25,496

Shares repurchased and retired

     (152     (303        (4,783          (5,086

Share-based compensation expense, exercises and other

     488        975        9,722                10,697   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance June, 2011

     63,769      $ 127,539      $ 175,169       $ 597,945      $ (4,874   $ —         $ 895,779   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance December 31, 2011

     63,449      $ 126,900      $ 179,052       $ 619,629      $ (7,494   $ 1,130       $ 919,217   

Net income

            59,473             59,473   

Other comprehensive income

              472           472   
                

 

 

 

Comprehensive income

                   59,945   
                

 

 

 

Dividends declared ($0.44 per share)

            (27,895          (27,895

Shares repurchased and retired

     (256     (513        (6,987          (7,500

Share-based compensation expense, exercises and other

     311        621        5,575                6,196   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance June 30, 2012

     63,504        127,008      $ 184,627       $ 644,220      $ (7,022   $ 1,130       $ 949,963   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

See accompanying notes to consolidated financial statements.

 

7


Table of Contents

Owens & Minor, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

(in thousands, unless otherwise indicated)

 

1. Basis of Presentation and Use of Estimates

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, or our) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). For the consolidated subsidiary in which our ownership is less than 100%, the outside stockholder’s interest is presented as a noncontrolling interest. All significant intercompany accounts and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.

Certain prior period amounts have been reclassified to conform to the current period presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Actual results may differ from these estimates.

 

2. Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The fair value of long-term debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings and average remaining maturities (Level 2). See Note 6 for the fair value of long-term debt.

Property held for sale is reported at estimated fair value less selling costs with fair value determined based on recent sales prices for comparable properties in similar locations (Level 2). Property held for sale of $4.2 million at June 30, 2012, and December 31, 2011, is included in other assets, net, in the consolidated balance sheets. We are actively marketing the property for sale; however, the ultimate timing of sale is dependent on local market conditions.

 

3. Intangible Assets

Intangible assets at June 30, 2012, and December 31, 2011, are as follows:

 

     Customer
Relationships
    Other
Intangibles
    Total  

At June 30, 2012:

      

Gross intangible assets

   $ 31,622      $ 4,720      $ 36,342   

Accumulated amortization

     (10,683     (4,641     (15,324
  

 

 

   

 

 

   

 

 

 

Net intangible assets

   $ 20,939      $ 79      $ 21,018   
  

 

 

   

 

 

   

 

 

 

At December 31, 2011:

      

Gross intangible assets

   $ 31,622      $ 4,720      $ 36,342   

Accumulated amortization

     (9,569     (4,631     (14,200
  

 

 

   

 

 

   

 

 

 

Net intangible assets

   $ 22,053      $ 89      $ 22,142   
  

 

 

   

 

 

   

 

 

 

Amortization expense for intangible assets was $0.5 million and $0.8 million for the three months ended June 30, 2012 and 2011, and $1.1 million and $1.6 million for the six months ended June 30, 2012 and 2011.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $1.0 million for the remainder of 2012 and $2.1 million annually for 2013 through 2017.

 

8


Table of Contents
4. Exit and Realignment Costs

During the fourth quarter of 2011, we recognized total charges of $12.7 million associated with exit activities and our organizational realignment. These charges included loss accruals for operating leases of $8.4 million, employee severance costs of $3.0 million and losses on property and equipment and other expenses of $1.3 million.

The following table summarizes the activity related to exit cost accruals for the six months ended June 30, 2012:

 

Six months ended June 30, 2012

   Lease
Obligations
    Severance
and Other
    Total  

Accrued exit costs, beginning of period

   $ 8,264      $ 1,831      $ 10,095   

Interest accretion

     144        —          144   

Cash payments, net of sublease income

     (734     (1,770     (2,504
  

 

 

   

 

 

   

 

 

 

Accrued exit costs, end of period

   $ 7,674      $ 61      $ 7,735   
  

 

 

   

 

 

   

 

 

 

There were no accruals for exit costs for the six months ended June 30, 2011.

 

5. Retirement Plan

We have a noncontributory, unfunded retirement plan for certain officers and other key employees (the Retirement Plan). In February 2012, our Board of Directors amended the Retirement Plan to freeze benefit levels and modify vesting provisions under the plan effective as of March 31, 2012. As a result, we recognized a curtailment loss of $0.2 million for the six months ended June 30, 2012. The reduction of the projected benefit obligation as a result of the amendment was less than $1 million.

The components of net periodic benefit cost, which are included in selling, general and administrative expenses, for the three and six months ended June 30, 2012 and 2011, are as follows:

 

     Three months ended
June 30,
     Six months ended
June 30,
 
      2012      2011      2012      2011  

Service cost

   $ —         $ 321       $ 130       $ 651   

Interest cost

     404         475         808         902   

Amortization of prior service cost

     —           76         —           146   

Recognized net actuarial loss

     237         221         495         292   

Curtailment loss

     —           —           234         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net periodic benefit cost

   $ 641       $ 1,093       $ 1,667       $ 1,991   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

6. Debt

We have $200 million of senior notes outstanding, which mature on April 15, 2016 and bear interest at 6.35% payable semi-annually (Senior Notes). We may redeem the Senior Notes, in whole or in part, at a redemption price of the greater of 100% of the principal amount of the Senior Notes or the present value of remaining scheduled payments of principal and interest discounted at the applicable Treasury Rate plus 0.25%. As of June 30, 2012 and December 31, 2011, the estimated fair value of the Senior Notes was $218.0 million and $217.0 million, and the related carrying amount was $206.6 million and $207.5 million. The estimated fair value interest rate used to compute the fair value of the Senior Notes at June 30, 2012 was 3.77%.

On June 5, 2012, we entered into a five-year $350 million Credit Agreement with Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A. and a syndicate of financial institutions (the Credit Agreement) expiring June 5, 2017. This agreement replaced an existing $350 million credit agreement set to expire on June 7, 2013. Under the new credit facility, we have the ability to request two one-year extensions and to request an increase in aggregate commitments by up to $150 million. The interest rate on the new credit facility, which is subject to adjustment quarterly, is based on the London Interbank Offered Rate (LIBOR), the Federal Funds Rate or the Prime Rate, plus an adjustment based on the better of our debt ratings or leverage ratio (Credit Spread) as defined by the Credit Agreement. We are charged a commitment fee of between 17.5 and 42.5 basis points on the unused portion of the facility. The terms of the Credit Agreement limit the amount of indebtedness that we may incur and require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition. At June 30, 2012, we had no borrowings and letters of credit of $5.0 million outstanding on the revolving credit facility, leaving $345.0 million available for borrowing.

 

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Table of Contents
7. Income Taxes

The provision for income taxes was $19.6 million and $38.7 million for the three and six months ended June 30, 2012, compared to $18.9 million and $37.4 million for the same periods in 2011. The effective tax rate was 39.4% for both the three and six months ended June 30, 2012, compared to 39.3% and 39.2% for the same periods in 2011.

 

8. Net Income per Common Share

The following summarizes the calculation of net income per common share attributable to common shareholders for the three and six months ended June 30, 2012 and 2011.

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 

(in thousands, except per share data)

    
   2012     2011     2012     2011  

Numerator:

        

Net income

   $ 30,113      $ 29,164      $ 59,473      $ 57,904   

Less: income allocated to unvested restricted shares

     (194     (218     (421     (599
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders—basic

     29,919        28,946        59,052        57,305   
  

 

 

   

 

 

   

 

 

   

 

 

 

Add: undistributed income attributable to unvested restricted shares—basic

     87        114        176        256   

Less: undistributed income attributable to unvested restricted shares—diluted

     (87     (113     (175     (255
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders—diluted

   $ 29,919      $ 28,947      $ 59,053      $ 57,306   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average shares outstanding—basic

     62,815        63,007        62,825        62,808   

Dilutive shares—stock options

     80        191        89        204   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding—diluted

     62,895        63,198        62,914        63,012   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share attributable to common shareholders:

        

Basic

   $ 0.48      $ 0.46      $ 0.94      $ 0.91   

Diluted

   $ 0.48      $ 0.46      $ 0.94      $ 0.91   

 

9. Shareholders’ Equity

In February 2011, our Board of Directors authorized a share repurchase program of up to $50 million of our outstanding common stock to be executed at the discretion of management over a three-year period, expiring in February 2014. The program is intended to offset shares issued in conjunction with our stock incentive plans and may be suspended or discontinued at any time. During the six months ended June 30, 2012, we repurchased in open-market transactions and retired approximately 257 thousand shares of our common stock for an aggregate of $7.5 million, or an average price per share of $29.23. As of June 30, 2012, we have approximately $26.4 million remaining under the repurchase program. We have elected to allocate any excess of share repurchase price over par value to retained earnings.

 

10. Commitments and Contingencies

We have contractual obligations that are required to be paid to customers in the event that certain contractual performance targets are not achieved as of specified dates, generally within 36 months from inception of the contract. These contingent obligations totaled $4.2 million as of June 30, 2012. If none of the performance targets are met as of the specified dates, and customers have met their contractual commitments, payments will be due as follows: Remainder of 2012 – $0.9 million; 2013 – $2.3 million; 2014 – $0.7 million; and 2015 – $0.3 million. None of these contingent obligations were accrued at June 30, 2012, as we do not consider any of them probable. We deferred the recognition of fees that are contingent upon the company’s future performance under the terms of these contracts. As of June 30, 2012, $1.5 million of deferred revenue related to outstanding contractual performance targets is included in other accrued liabilities.

The state of California is continuing its administrative review of certain ongoing local sales tax incentives that may be available to us. Upon completion of this review, we could potentially receive tax incentive payments for all or some of the quarterly periods beginning with the first quarter of 2009. The exact amount, if any, is dependent upon a number of factors, including the timing of negotiation and execution of certain customer agreements, collection of amounts from the parties involved, the variability in sales and our operations in California. As of June 30, 2012, the estimated potential payment we may receive (and related contingent gain) related to prior periods could be more than $7 million.

 

10


Table of Contents

Prior to exiting the direct-to-consumer business in January 2009, we received reimbursements from Medicare, Medicaid, and private healthcare insurers for certain customer billings. We are subject to audits of these reimbursements for up to seven years from the date of the service.

 

11. Condensed Consolidating Financial Information

The following tables present condensed consolidating financial information for: Owens & Minor, Inc., on a combined basis; the guarantors of Owens & Minor, Inc.’s Senior Notes; and the non-guarantor subsidiaries of the Senior Notes. Separate financial statements of the guarantor subsidiaries are not presented because the guarantors are jointly, severally and unconditionally liable under the guarantees and we believe the condensed consolidating financial information is more meaningful in understanding the financial position, results of operations and cash flows of the guarantor subsidiaries.

 

11


Table of Contents

Condensed Consolidating Financial Information

 

For the three months ended June 30, 2012

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Income

          

Net revenue

   $ —        $ 2,185,444      $ 5,378      $ (5,378   $ 2,185,444   

Cost of goods sold

     —          1,974,114        5,053        (5,152     1,974,015   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     —          211,330        325        (226     211,429   

Selling, general and administrative expenses

     183        149,542        563        —          150,288   

Depreciation and amortization

     —          8,494        21        —          8,515   

Other operating income, net

     —          (414     (137     —          (551
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) earnings

     (183     53,708        (122     (226     53,177   

Interest expense (income), net

     4,797        (1,334     24        —          3,487   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (4,980     55,042        (146     (226     49,690   

Income tax (benefit) provision

     (1,963     21,569        (29     —          19,577   

Equity in earnings of subsidiaries

     33,130        —          —          (33,130     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     30,113        33,473        (117     (33,356     30,113   

Other comprehensive income

     134        145        —          (145     134   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 30,247      $ 33,618      $ (117   $ (33,501   $ 30,247   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the three months ended June 30, 2011

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
     Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Income

           

Net revenue

   $ —        $ 2,131,448       $ —        $ —        $ 2,131,448   

Cost of goods sold

     —          1,915,382         —          —          1,915,382   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross margin

     —          216,066         —          —          216,066   

Selling, general and administrative expenses

     415        155,944         (38     —          156,321   

Depreciation and amortization

     —          8,249         —          —          8,249   

Other operating expense, net

     —          457         —          —          457   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating (loss) earnings

     (415     51,416         38        —          51,039   

Interest expense, net

     1,937        1,064         19        —          3,020   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (2,352     50,352         19        —          48,019   

Income tax (benefit) provision

     (923     19,728         50        —          18,855   

Equity in earnings of subsidiaries

     30,593        —           —          (30,593     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

     29,164        30,624         (31     (30,593     29,164   

Other comprehensive income

     168        181         —          (181     168   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 29,332      $ 30,805       $ (31   $ (30,774   $ 29,332   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

12


Table of Contents

Condensed Consolidating Financial Information

 

For the six months ended June 30, 2012

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Income

          

Net revenue

   $ —        $ 4,403,326      $ 6,718      $ (6,718   $ 4,403,326   

Cost of goods sold

     —          3,977,692        6,318        (6,441     3,977,569   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

     —          425,634        400        (277     425,757   

Selling, general and administrative expenses

     655        304,210        995        —          305,860   

Depreciation and amortization

     —          17,058        35        —          17,093   

Other operating income, net

     —          (2,111     (134     —          (2,245
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) earnings

     (655     106,477        (496     (277     105,049   

Interest expense (income), net

     7,567        (705     47        —          6,909   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (8,222     107,182        (543     (277     98,140   

Income tax (benefit) provision

     (3,234     42,014        (113     —          38,667   

Equity in earnings of subsidiaries

     64,461        —          —          (64,461     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     59,473        65,168        (430     (64,738     59,473   

Other comprehensive income

     472        496        —          (496     472   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 59,945      $ 64,672      $ (430   $ (65,234   $ 59,945   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

For the six months ended June 30, 2011

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
     Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Income

           

Net revenue

   $ —        $ 4,255,137       $ 126      $ —        $ 4,255,263   

Cost of goods sold

     —          3,828,406         16        —          3,828,422   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Gross margin

     —          426,731         110        —          426,841   

Selling, general and administrative expenses

     853        306,186         255        —          307,294   

Depreciation and amortization

     —          17,016         —          —          17,016   

Other operating expense (income), net

     148        355         (8     —          495   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Operating (loss) earnings

     (1,001     103,174         (137     —          102,036   

Interest expense, net

     4,762        1,940         35        —          6,737   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (5,763     101,234         (172     —          95,299   

Income tax (benefit) provision

     (2,262     39,681         (24     —          37,395   

Equity in earnings of subsidiaries

     61,405        —           —          (61,405     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

     57,904        61,553         (148     (61,405     57,904   

Other comprehensive income

     242        267         —          (267     242   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 58,146      $ 61,820       $ (148   $ (61,672   $ 58,146   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

13


Table of Contents

Condensed Consolidating Financial Information

 

June 30, 2012

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non- guarantor
Subsidiaries
    Eliminations     Consolidated  

Balance Sheets

          

Assets

          

Current assets

          

Cash and cash equivalents

   $ 214,248      $ 9,362      $ 1,327      $ —        $ 224,937   

Accounts and notes receivable, net

     —          482,803        2,446        —          485,249   

Merchandise inventories

     —          749,123        —          (276     748,847   

Other current assets

     309        71,987        51        (1     72,346   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     214,557        1,313,275        3,824        (277     1,531,379   

Property and equipment, net

     —          103,723        166        —          103,889   

Goodwill, net

     —          247,271        1,227        —          248,498   

Intangible assets, net

     —          21,018        —          —          21,018   

Due from O&M and subsidiaries

     —          220,236        40,405        (260,641     —     

Advances to and investments in consolidated subsidiaries

     1,207,551        —          —          (1,207,551     —     

Other assets, net

     687        49,687        266        —          50,640   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,422,795      $ 1,955,210      $ 45,888      $ (1,468,469   $ 1,955,424   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and equity

          

Current liabilities

          

Accounts payable

   $ —        $ 556,915      $ 2,803      $ —        $ 559,718   

Accrued payroll and related liabilities

     —          17,618        120        —          17,738   

Deferred income taxes

     —          37,879        —          —          37,879   

Other accrued liabilities

     6,705        85,827        (70     —          92,462   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     6,705        698,239        2,853        —          707,797   

Long-term debt, excluding current portion

     206,616        5,416        —          —          212,032   

Due to O&M and subsidiaries

     260,641        —          —          (260,641     —     

Intercompany debt

     —          138,890        —          (138,890     —     

Deferred income taxes

     —          25,467        —          —          25,467   

Other liabilities

     —          60,165        —          —          60,165   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     473,962        928,177        2,853        (399,531     1,005,461   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

          

Common stock

     127,008        —          1,500        (1,500     127,008   

Paid-in capital

     184,627        242,024        64,314        (306,338     184,627   

Retained earnings (deficit)

     644,220        792,219        (23,909     (768,310     644,220   

Accumulated other comprehensive loss

     (7,022     (7,210     —          7,210        (7,022
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Owens & Minor, Inc. shareholders’ equity

     948,833        1,027,033        41,905        (1,068,938     948,833   

Noncontrolling interest

     —          —          1,130        —          1,130   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     948,833        1,027,033        43,035        (1,068,938     949,963   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 1,422,795      $ 1,955,210      $ 45,888      $ (1,468,469   $ 1,955,424   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


Table of Contents

Condensed Consolidating Financial Information

 

December 31, 2011

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non-
guarantor
Subsidiaries
    Eliminations     Consolidated  

Balance Sheets

          

Assets

          

Current assets

          

Cash and cash equivalents

   $ 120,010      $ 14,809      $ 1,119      $ —        $ 135,938   

Accounts and notes receivable, net

     —          506,633        125        —          506,758   

Merchandise inventories

     —          806,281        85        —          806,366   

Other current assets

     139        76,696        35        (107     76,763   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     120,149        1,404,419        1,364        (107     1,525,825   

Property and equipment, net

     —          107,878        183        —          108,061   

Goodwill, net

     —          247,271        1,227        —          248,498   

Intangible assets, net

     —          22,142        —          —          22,142   

Due from O&M and subsidiaries

     —          —          40,888        (40,888     —     

Advances to and investments in consolidated subsidiaries

     1,142,592        —          —          (1,142,592     —     

Other assets, net

     779        41,373        137        —          42,289   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 1,263,520      $ 1,823,083      $ 43,799      $ (1,183,587   $ 1,946,815   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and equity

          

Current liabilities

          

Accounts payable

   $ 113,100      $ 462,604      $ 89      $ —        $ 575,793   

Accrued payroll and related liabilities

     —          20,653        15        —          20,668   

Deferred income taxes

     —          42,296        —          —          42,296   

Other accrued liabilities

     6,505        86,980        230        (107     93,608   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     119,605        612,533        334        (107     732,365   

Long-term debt, excluding current portion

     207,480        5,201        —          —          212,681   

Due to O&M and subsidiaries

     18,348        22,540        —          (40,888     —     

Intercompany debt

     —          138,890        —          (138,890     —     

Deferred income taxes

     —          21,894        —          —          21,894   

Other liabilities

     —          60,658        —          —          60,658   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     345,433        861,716        334        (179,885     1,027,598   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

          

Common stock

     126,900        —          1,500        (1,500     126,900   

Paid-in capital

     179,052        242,024        64,314        (306,338     179,052   

Retained earnings (deficit)

     619,629        727,050        (23,479     (703,571     619,629   

Accumulated other comprehensive loss

     (7,494     (7,707     —          7,707        (7,494
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Owens & Minor, Inc. shareholders’ equity

     918,087        961,367        42,335        (1,003,702     918,087   

Noncontrolling interest

     —          —          1,130        —          1,130   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     918,087        961,367        43,465        (1,003,702     919,217   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 1,263,520      $ 1,823,083      $ 43,799      $ (1,183,587   $ 1,946,815   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15


Table of Contents

Condensed Consolidating Financial Information

 

Six months ended June 30, 2012

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Cash Flows

          

Operating activities:

          

Net income (loss)

   $ 59,473      $ 65,168      $ (430   $ (64,738   $ 59,473   

Adjustments to reconcile net income to cash provided by (used for) operating activities:

          

Equity in earnings of subsidiaries

     (64,461     —          —          64,461        —     

Depreciation and amortization

     —          17,058        35        —          17,093   

Provision for LIFO Reserve

     —          5,223        —          —          5,223   

Share-based compensation expense

     —          4,126        —          —          4,126   

Provision for losses on accounts and notes receivable

     —          270        —          —          270   

Deferred income tax benefit

     —          (1,146     —          —          (1,146

Changes in operating assets and liabilities:

          

Accounts and notes receivable

     —          23,560        (2,218     (103     21,239   

Merchandise inventories

     —          51,935        85        276        52,296   

Accounts payable

     (113,100     94,311        2,714        —          (16,075

Net change in other assets and liabilities

     19        874        (313     104        684   

Other, net

     (862     596        (138     —          (404
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash (used for) provided by operating activities

     (118,931     261,975        (265     —          142,779   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing activities:

          

Additions to property and equipment

     —          (5,452     (8     —          (5,460

Additions to computer software and intangible assets

     —          (12,695     (2     —          (12,697

Proceeds from sale of property and equipment

     —          115        —          —          115   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used for investing activities

     —          (18,032     (10     —          (18,042
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing activities:

          

Change in intercompany advances

     246,583        (247,066     483        —          —     

Cash dividends paid

     (27,956     —          —          —          (27,956

Repurchases of common stock

     (7,500     —          —          —          (7,500

Financing costs paid

     —          (1,303     —          —          (1,303

Excess tax benefits related to share-based compensation

     1,160        —          —          —          1,160   

Proceeds from exercise of stock options

     3,761        —          —          —          3,761   

Other, net

     (2,879     (1,021     —          —          (3,900
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used for) financing activities

     213,169        (249,390     483        —          (35,738
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     94,238        (5,447     208        —          88,999   

Cash and cash equivalents at beginning of period

     120,010        14,809        1,119        —          135,938   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 214,248      $ 9,362      $ 1,327      $ —        $ 224,937   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Condensed Consolidating Financial Information

 

Six months ended June 30, 2011

   Owens &
Minor, Inc.
    Guarantor
Subsidiaries
    Non-guarantor
Subsidiaries
    Eliminations     Consolidated  

Statements of Cash Flows

          

Operating activities:

          

Net income (loss)

   $ 57,904      $ 61,553      $ (148   $ (61,405   $ 57,904   

Adjustments to reconcile net income to cash provided by (used for) operating activities:

          

Equity in earnings of subsidiaries

     (61,405     —          —          61,405        —     

Depreciation and amortization

     —          17,016        —          —          17,016   

Provision for LIFO reserve

     —          11,265        —          —          11,265   

Share-based compensation expense

     —          3,581        —          —          3,581   

Provision for losses on accounts and notes receivable

     —          758        —          —          758   

Pension contributions

     —          (543     —          —          (543

Deferred income tax benefit

     —          (674     —          —          (674

Changes in operating assets and liabilities:

          

Accounts and notes receivable

     313        (33,919     —          —          (33,606

Merchandise inventories

     —          (42,762     —          —          (42,762

Accounts payable

     74,300        (24,268     1        —          50,033   

Net change in other assets and liabilities

     412        (23,284     (449     —          (23,321

Other, net

     122        (8     —          —          114   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used for) operating activities

     71,646        (31,285     (596     —          39,765   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Investing activities:

          

Additions to property and equipment

     —          (8,175     —          —          (8,175

Additions to computer software and intangible assets

     —          (5,573     —          —          (5,573

Proceeds from the sale of property and equipment

     —          44        —          —          44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used for investing activities

     —          (13,704     —          —          (13,704
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financing activities:

          

Change in intercompany advances

     (46,828     46,077        751        —          —     

Cash dividends paid

     (25,496     —          —          —          (25,496

Repurchases of common stock

     (5,086     —          —          —          (5,086

Excess tax benefits related to share-based compensation

     1,761        —          —          —          1,761   

Proceeds from exercise of stock options

     7,394        —          —          —          7,394   

Other, net

     (3,503     (1,011     —          —          (4,514
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash (used for) provided by financing activities

     (71,758     45,066        751        —          (25,941
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Discontinued operations:

          

Operating cash flows

     —          —          (139     —          (139
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used for discontinued operations

     —          —          (139     —          (139
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (112     77        16        —          (19

Cash and cash equivalents at beginning of period

     156,897        2,316        —          —          159,213   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 156,785      $ 2,393      $ 16      $ —        $ 159,194   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
12. Recent Accounting Pronouncements

There has been no change in our significant accounting policies from those contained in our Annual Report on Form 10-K for the year ended December 31, 2011, except as discussed below.

We adopted an Accounting Standard Update (ASU) issued by the Financial Accounting Standards Board (FASB) for fair value measurement. This update amends and clarifies certain measurement principles and disclosure requirements for fair value measurement. The adoption of this guidance did not have an impact on our financial position or results of operations.

We adopted an ASU regarding the presentation of comprehensive income. This update requires entities to report comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. The adoption of this guidance did not have an impact on our financial position or result of operations.

We adopted an ASU for the testing of goodwill. This update allows entities the option to first assess qualitative factors as a basis for determining whether it is necessary to perform the two-step impairment test for goodwill. The adoption of this guidance did not have an impact on our financial position or results of operations.

 

13. Subsequent Events

On July 23, 2012, we entered into a binding offer to purchase from Celesio AG, a leading international trading company and provider of logistics and services in the pharmaceutical and healthcare sector (“Celesio”), the majority of Celesio’s healthcare third-party logistics business known as the Movianto Group (“Movianto”) for cash consideration of approximately €130 million ($158 million). Movianto, a leading third party logistics provider in Europe, currently services customers globally from 23 logistics centers located in 11 European countries with approximately 1,800 teammates. The offer and related share purchase agreement contain customary representations, warranties, covenants and conditions as well as indemnification rights and obligations. Completion of the transaction is subject to customary closing conditions, including satisfaction of certain legal provisions in Europe, and is expected to close in the third quarter of 2012.

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis describes results of operations and material changes in the financial condition of Owens & Minor, Inc. and its subsidiaries since December 31, 2011. Trends of a material nature are discussed to the extent known and considered relevant. This discussion should be read in conjunction with the consolidated financial statements, related notes thereto, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2011.

Results of Operations

Second quarter and first six months of 2012 compared with 2011

Financial highlights. Owens & Minor, Inc. (we, us, or our) is a leading national distributor of name-brand medical and surgical supplies and a healthcare supply-chain management company. Operating earnings increased 4.2% to $53.2 million for the second quarter of 2012, from $51.0 million in the second quarter of 2011. For the first six months of 2012, operating earnings were $105.0 million, an increase of 3.0% from $102.0 million for the first six months of 2011. In the second quarter of 2012, net income increased 3.3% to $30.1 million, from $29.2 million in the second quarter of 2011. In the first six months of 2012, net income was $59.5 million, an increase of 2.7% from $57.9 million for the first six months of 2011. Net income per diluted common share was $0.48 for the second quarter of 2012, an increase from $0.46 in the comparable period of 2011. For the first six months of 2012, net income per diluted common share was $0.94, an increase from $0.91 for the first six months of 2011.

The following table presents highlights from our consolidated statements of income on a percentage of revenue basis:

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2012     2011     2012     2011  

Gross margin

     9.67     10.14     9.67     10.03

Selling, general and administrative expenses

     6.88     7.33     6.95     7.22

Operating earnings

     2.43     2.39     2.39     2.40

Net income

     1.38     1.37     1.35     1.36

Net revenue. Net revenue was $2.19 billion for the second quarter of 2012, representing an increase of 2.5% from $2.13 billion for the second quarter of 2011. Net revenue increased 3.5% to $4.40 billion for the first six months of 2012 from $4.26 billion for the comparable period in 2011.

The following tables present the components of the increase in net revenue for the three- and six-month periods ended June 30, 2012 and 2011, compared with the same periods in the prior year, and presents new customer changes net of lost customer activity (“net new (lost)”). Fee-for-service revenue represents revenue from services provided to customers that are not directly related to sales of product through our traditional distribution services and includes revenue from our OM Healthcare Logistics and OMSolutionsSM businesses.

 

(Dollars in millions)                          

Increase (decrease) for the three months ended June 30,

   2012 versus 2011     2011 versus 2010  
     Net Revenue     Contribution
to  Total
    Net Revenue      Contribution
to Total
 

Revenue from sales of products to:

         

Existing customers

   $ 57.6        2.7   $ 82.1         4.1

Net new (lost) customers

     (4.0     (0.2 )%      22.0         1.1

Fee-for-service revenue

     0.4        0.0     7.5         0.3
  

 

 

   

 

 

   

 

 

    

 

 

 

Total increase in net revenues

   $ 54.0        2.5   $ 111.6         5.5
  

 

 

   

 

 

   

 

 

    

 

 

 

 

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Table of Contents
(Dollars in millions)                           

Increase for the six months ended June 30,

   2012 versus 2011     2011 versus 2010  
      Net Revenue      Contribution
to Total
    Net Revenue      Contribution
to Total
 

Revenue from sales of products to:

          

Existing customers

   $ 113.6         2.7   $ 215.9         5.4

Net new (lost) customers

     29.1         0.7     40.2         1.0

Fee-for-service revenue

     5.4         0.1     9.6         0.3
  

 

 

    

 

 

   

 

 

    

 

 

 

Total increase in net revenues

   $ 148.1         3.5   $ 265.7         6.7
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross margin. Gross margin dollars decreased 2.2% to $211.4 million for the second quarter of 2012 from $216.1 million for the second quarter of 2011. Gross margin dollars decreased 0.3% to $425.8 million for the first six months of 2012 from $426.8 million for the same period of 2011.

The following tables present the components of the increase or decrease in gross margin for the three- and six-month periods ended June 30, 2012 and 2011. Gross margin primarily includes gross margin from customer contracts related to sales of product and contribution to gross margin relating to supplier incentives (“traditional distribution”), fees generated from other services, including OM Healthcare Logistics, OMSolutions and other supply-chain services that are not directly related to sales of product (“fee-for-service”) and the effect of inventory valuation and other operational components, excluding the impact of applying the last-in first-out (LIFO) method (“other”).

 

(Dollars in millions)                         

Increase (decrease) for the three months ended June 30,

   2012 versus 2011     2011 versus 2010  
     Gross
Margin
    Impact on
gross margin
as a percent
of revenue
    Gross
Margin
    Impact on
gross margin
as a percent
of revenue
 

Gross margin components:

        

Traditional distribution

   $ (3.5     (0.40 )%    $ 9.8        (0.03 )% 

Fee-for-service

     0.4        0.00     7.5        0.33

Provision for LIFO

     0.0        0.00     0.2        0.01

Other

     (1.5     (0.07 )%      (0.4     (0.02 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total (decrease) increase in gross margin

   $ (4.6     (0.47 )%    $ 17.1        0.29
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
(Dollars in millions)             

Increase (decrease) for the six months ended June 30,

   2012 versus 2011     2011 versus 2010  
     Gross
Margin
    Impact on
gross margin
as a percent
of revenue
    Gross
Margin
    Impact on
gross margin
as a percent
of revenue
 

Gross margin components:

        

Traditional distribution

   $ (4.1     (0.40 )%    $ 22.1        (0.07 )% 

Fee-for-service

     5.4        0.10     9.6        0.19

Provision for LIFO

     6.0        0.14     (2.8     (0.05 )% 

Other

     (8.4     (0.20 )%      2.0        0.04
  

 

 

   

 

 

   

 

 

   

 

 

 

Total (decrease) increase in gross margin

   $ (1.1     (0.36 )%    $ 30.9        0.11
  

 

 

   

 

 

   

 

 

   

 

 

 

The declines in gross margin as a percentage of revenue in the first quarter and first six months of 2012 compared to the same period of 2011 primarily relate to changes in customer mix, including lower margin on new contracts with large integrated health networks and competitive pressures.

Selling, general and administrative (SG&A) expenses. SG&A expenses include labor, warehousing, handling and delivery costs associated with our distribution and third-party logistics services, as well as labor costs for our supply-chain consulting services. The costs to convert new customers to our information systems are generally incurred prior to the recognition of revenues from the new customers.

SG&A expenses decreased 3.86% to $150.3 million for the second quarter of 2012, compared with $156.3 million in the second quarter of 2011. SG&A expenses decreased by $4.3 million for fee-for-service operations, including lower costs for our third-party logistics business that was converting a large new customer during the second quarter of 2011. SG&A expenses unrelated to fee-for-service operations declined $1.8 million due to decreases resulting from our organizational realignment in the fourth quarter of 2011 and lower consulting and information technology outsourcing expenses, partially offset by greater warehouse and delivery expenses to support growth in business.

SG&A expenses decreased 0.5% to $305.9 million for the first six months of 2012, compared with $307.3 million for the first six months of 2011. SG&A expenses related to fee-for-service operations decreased $0.7 million due to higher expenses in the first half of 2011 to support the conversion of new third-party logistics business. SG&A expenses unrelated to fee-for-service operations also decreased $0.7 million despite an increase in revenue of $142.7 million due to lower compensation and benefit costs driven by organizational realignment, lower consulting and outsourcing fees, and a lower provision for losses on accounts and notes receivable, partially offset by greater warehouse and delivery expenses to support growth in business.

Depreciation and amortization expense. Depreciation and amortization expense increased 3.23% to $8.5 million from $8.2 million for the second quarter and was approximately $17.0 million for the first six months of 2012 and 2011. The second quarter increase is related to leasehold improvements and enhanced warehouse equipment technology, partially offset by lower amortization resulting from the expiration of noncompete agreements.

Other operating income, net. Net other operating income was $0.6 million for the second quarter of 2012 compared to net other operating expense of $0.5 million for the second quarter of 2011, including finance charge income of $1.0 million and $0.5 million, respectively. Net other operating income for the second quarter of 2012 includes $0.6 million of legal and other expenses largely related to the planned acquisition of Movianto (see Recent Developments). Net other operating expense in the second quarter of 2011 was driven by costs of $1.1 million primarily for the development of a model for partnering with new customers.

Net other operating income was $2.2 million for the first six months of 2012 compared to net other operating expense of $0.5 million for the comparable period of 2011, including finance charge income of $2.1 million and $1.4 million, respectively. Net other operating income for the first six months of 2011 includes costs of $1.7 million primarily related to our efforts to develop a model for partnering with new customers.

Operating earnings. Operating earnings for the second quarter of 2012 increased 4.2% to $53.2 million from $51.0 million for the second quarter of 2011, and increased 3.0% in the first six months of 2012 to $105.0 million compared with $102.0 million in 2011. The increases in operating earnings for the second quarter and first six months of 2012 were primarily due to cost reduction efforts as well as lower corporate development expenses incurred in the 2012 periods, partially offset by decreases in gross margin.

 

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Interest expense, net. Interest expense, net of interest earned on cash balances, was $3.5 million for the second quarter of 2012, as compared with $3.0 million for the second quarter of 2011, and $6.9 million for the first six months of 2012 as compared with $6.7 million for the first six months of 2011. The following table presents the components of our effective interest rate and average total debt for the six month periods ended June 30, 2012 and 2011.

 

(Dollars in millions)             

Six months ended June 30,

   2012     2011  

Interest on senior notes

     6.35     6.35

Commitment and other fees

     0.69     0.68

Interest rate swaps

     (1.09 )%      (1.32 )% 

Other, net of interest income

     0.54     0.72
  

 

 

   

 

 

 

Total effective interest rate

     6.49     6.43
  

 

 

   

 

 

 

Average total debt

   $ 214.0      $ 211.2   
  

 

 

   

 

 

 

Income taxes. The provision for income taxes was $19.6 million and $38.7 million for the second quarter and first six months of 2012, compared to $18.9 million and $37.4 million for the comparable periods in 2011. The effective tax rate was 39.4% for the second quarter and first six months of 2012, compared to 39.3% and 39.2% for the comparable periods of 2011.

Net income. Net income increased to $30.1 million for the second quarter of 2012 compared to $29.2 million for the second quarter of 2011. Net income increased to $59.5 million for the first six months of 2012 compared to $57.9 million for the first six months of 2011. The increases are primarily due to increases in operating earnings.

Financial Condition, Liquidity and Capital Resources

Financial condition. Cash and cash equivalents increased to $225 million at June 30, 2012 from $136 million at December 31, 2011. Nearly all of our cash and cash equivalents are held in cash depository accounts with major banks in the United States or invested in high-quality, short-term liquid investments.

Accounts receivable, net of allowances, decreased 4.2% to $485 million at June 30, 2012, from $507 million at December 31, 2011. Accounts receivable days outstanding (DSO) was 19.5 days at June 30, 2012, and 20.7 days at December 31, 2011, based on three months’ sales, and has ranged from 19.9 to 20.7 days over the prior four quarters.

Merchandise inventories decreased 7.1% to $749 million at June 30, 2012, from $806 million at December 31, 2011. Average inventory turnover was 10.8 in the second quarter of 2012, based on three months’ cost of goods sold, and has ranged from 10.0 to 10.5 over the prior four quarters.

Liquidity and capital expenditures. The following table summarizes our consolidated statements of cash flows for the six months ended June 30, 2012 and 2011:

 

(in millions)             

Six months ended June 30,

   2012     2011  

Net cash provided by (used for) continuing operations:

    

Operating activities

   $ 142.7      $ 39.8   

Investing activities

     (18.0     (13.7

Financing activities

     (35.7     (25.9

Net cash used for discontinued operations

     —          (0.2
  

 

 

   

 

 

 

Increase in cash and cash equivalents

   $ 89.0      $ —     
  

 

 

   

 

 

 

Cash provided by operating activities was $142.7 million in the first six months of 2012, compared to $39.8 million for the same period of 2011. Cash from operating activities in the first six months of 2012 was a result of operating earnings, a decrease in merchandise inventories and a decrease in DSO of 1.2 days (favorable impact on cash of approximately $29 million), partially offset by a decrease in accounts payable. Cash from operating activities in the first six months of 2011 was a result of operating earnings and

 

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Table of Contents

an increase in accounts payable, partially offset by increases in accounts and notes receivable and merchandise inventories. We had a buildup of inventory levels during the fourth quarter of 2011 to support the conversion of large new customers. Inventories returned to normalized levels post-conversion in the first quarter of 2012.

Capital expenditures were $18.2 million in the first six months of 2012, compared to $13.7 million in the same period of 2011. Capital expenditures in 2012 primarily related to our operational efficiency initiatives, particularly initiatives relating to information technology enhancements. Capital expenditures in the first six months of 2011 primarily included warehouse equipment and technology for our distribution centers and third-party logistics facilities, as well as investments in certain customer-facing technologies.

Cash used for financing activities in the first six months of 2012 was $35.7 million, compared to $25.9 million in the first six months of 2011. During the first six months of 2012, we paid dividends of $27.9 million, repurchased 256,607 common shares under a share repurchase program for $7.5 million of cash, paid financing costs of $1.3 million related to a new credit facility, and received proceeds of $3.8 million from the exercise of stock options. During the first six months of 2011, we paid dividends of $25.5 million, repurchased 151,581 common shares under a share repurchase program for $5.1 million, and received proceeds of $7.4 million from the exercise of stock options.

Capital resources. Our sources of liquidity include cash and cash equivalents and a revolving credit facility. On June 5, 2012, we entered into a five-year $350 million Credit Agreement with Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A. and a syndicate of financial institutions (the Credit Agreement) expiring June 5, 2017. This agreement replaced an existing $350 million credit agreement set to expire on June 7, 2013. Under the new credit facility, we have the ability to request two one-year extensions and to request an increase in aggregate commitments by up to $150 million. The interest rate on the new credit facility, which is subject to adjustment quarterly, is based on the London Interbank Offered Rate (LIBOR), the Federal Funds Rate or the Prime Rate, plus an adjustment based on the better of our debt ratings or leverage ratio (Credit Spread) as defined by the Credit Agreement. We are charged a commitment fee of between 17.5 and 42.5 basis points on the unused portion of the facility. The terms of the Credit Agreement limit the amount of indebtedness that we may incur and require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition. At June 30, 2012, we had no borrowings and letters of credit of $5.0 million outstanding on the revolving credit facility, leaving $345.0 million available for borrowing.

We may utilize the revolving credit facility for long-term strategic growth, capital expenditures, working capital and general corporate purposes. If we were unable to access the revolving credit facility, it could impact our ability to fund these needs. During the first six months of 2012, we had no borrowings or repayments under the credit facilities. Based on our leverage ratio at June 30, 2012, the interest rate under the new credit facility is LIBOR plus 1.375% . We have $200 million of senior notes outstanding, which mature in 2016 and bear interest at 6.35%, payable semi-annually on April 15 and October 15. The revolving credit facility and senior notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement. We believe we were in compliance with the debt covenants at June 30, 2012.

In the second quarter of 2012, we paid cash dividends on our outstanding common stock at the rate of $0.22 per share, which represents a 10% increase over the rate of $0.20 per share paid in the second quarter of 2011. We anticipate continuing to pay quarterly cash dividends in the future. However, the payment of future dividends remains within the discretion of the Board of Directors and will depend upon our results of operations, financial condition, capital requirements and other factors.

In February 2011, the Board of Directors authorized a share repurchase program of up to $50 million of our outstanding common stock to be executed at the discretion of management over a three-year period, expiring in February 2014. During the second quarter of 2012, we repurchased approximately 131,952 shares at $3.7 million under this program. The remaining amount authorized for repurchases under this program is $26.4 million at June 30, 2012.

We believe available financing sources, including cash generated by operating activities and borrowings under the Revolving Credit Facility, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, payments of quarterly cash dividends, share repurchases and other cash requirements. While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us and/or (iii) our cost of borrowing.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see Note 12 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2012.

Recent Developments

On July 20, 2012, we entered into master lease and technology agreements with Penske Truck Leasing Co., L.P. and Penske Logistics LLC (“Penske”) to consolidate our national delivery fleet under one vendor. The master lease agreement, which is effective immediately, requires approximately $63 million of minimum lease payments over the seven-year terms of the associated lease schedules, subject to certain cost adjustments. The technology services agreement, which is effective August 1, 2012, requires approximately $5 million of payments over a 36 month term and may be terminated at any time with prior notice.

For a description of the planned Movianto acquisition, see Note 13 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2012. We expect to fund the purchase price of the Movianto transaction from cash on hand.

 

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Forward-looking Statements

Certain statements in this discussion constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including, but not limited to:

 

   

general economic and business conditions;

 

   

our ability to implement strategic initiatives;

 

   

the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;

 

   

our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;

 

   

dependence on sales to certain customers;

 

   

the ability of customers to meet financial commitments due to us;

 

   

our ability to retain existing customers and the success of marketing and other programs in attracting new customers;

 

   

changes in government regulations, including healthcare laws and regulations;

 

   

changes in manufacturer preferences between direct sales and wholesale distribution;

 

   

competition;

 

   

changing trends in customer profiles and ordering patterns;

 

   

our ability to meet customer demand for additional value-added services;

 

   

our ability to meet performance targets specified by customer contracts under contractual commitments;

 

   

access to special inventory buying opportunities;

 

   

the ability of business partners and financial institutions to perform their contractual responsibilities;

 

   

our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;

 

   

the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;

 

   

our ability to continue to obtain financing at reasonable rates and to manage financing costs and interest rate risk;

 

   

the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived assets;

 

   

our ability to timely or adequately respond to technological advances in the medical supply industry;

 

   

the risk that information systems are interrupted or damaged by unforeseen events or fail for any extended period of time;

 

   

our ability to successfully identify, manage or integrate acquisitions;

 

   

the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims; and

 

   

the outcome of outstanding tax contingencies and legislative and tax proposals.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We provide credit in the normal course of business to our customers and are exposed to losses resulting from nonpayment or delinquent payment by customers. We perform initial and ongoing credit evaluations of our customers and maintain reserves for estimated credit losses. We measure our performance in collecting customer accounts receivable in terms of days sales outstanding (DSO). Accounts receivable at June 30, 2012, were approximately $485 million, and DSO at June 30, 2012, was 19.5 days, based on three months’ sales. A hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our revolving credit facility, or a combination thereof, of approximately $24 million.

We are exposed to market risk from changes in interest rates related to our revolving credit facility. We had no outstanding borrowings and $5.0 million in letters of credit under the revolving credit facility at June 30, 2012. A hypothetical increase in interest rates of 100 basis points would result in a potential reduction in future pre-tax earnings of approximately $0.1 million per year for every $10 million of outstanding borrowings under the revolving credit facility.

 

24


Table of Contents

Due to the nature of our distribution services, which generally include delivery of product to specified locations, we are exposed to potential volatility in fuel prices. The price of fuel fluctuates due to market conditions generally outside of our control. Increased fuel costs may have a negative impact on our results of operations by increasing the costs we incur to deliver product, either through utilizing our own fleet or third-party carriers.

We estimate that approximately $460,000 of an increase in delivery costs for the first half of 2012 was related to increases in diesel prices. We benchmark our diesel fuel purchase prices against the U.S. Weekly Retail On-Highway Diesel Prices (the “Diesel Benchmark Price”) as quoted on the website of the U.S. Energy Information Administration. The Diesel Benchmark Price averaged $3.96 per gallon for six months ended June 30, 2012, representing an increase of 3.9% from $3.81 per gallon for the same period in 2011. Accordingly, on an annualized basis and based on the quantity of fuel purchased in the first half of 2012, we estimate that every 10 cents per gallon increase (decrease) in the Diesel Benchmark Price decreases (increases) our operating earnings by approximately $600,000, excluding the effect of mitigating strategies. Our strategies for helping to mitigate our exposure to changing fuel prices include the use of fuel surcharges, activity-based pricing and fixed-price contracts with suppliers.

On January 31, 2012, we entered into a fixed-price purchase agreement with one of our diesel fuel suppliers for approximately one-third of our anticipated fuel usage for 2012 at an equivalent Diesel Benchmark Price of $3.90 per gallon.

 

Item 4. Controls and Procedures

We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2012. There has been no change in our internal control over financial reporting during the quarter ended June 30, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

 

Item 1. Legal Proceedings

Certain legal proceedings pending against us are described in our Annual Report on Form 10-K for the year ended December 31, 2011. Through June 30, 2012, there have been no material developments in any legal proceedings reported in such Annual Report.

 

Item 1A. Risk Factors

Certain risk factors that we believe could affect our business and prospects are described in our Annual Report on Form 10-K for the year ended December 31, 2011. Through June 30, 2012, there have been no material changes in the risk factors described in such Annual Report.

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

In February 2011, our Board of Directors authorized a share repurchase program of up to $50 million of our outstanding common stock to be executed at the discretion of management over a three-year period, expiring in February 2014. The program is intended to offset shares issued in conjunction with our stock incentive plan and may be suspended or discontinued at any time. During the second quarter of 2012, we repurchased in open-market transactions and retired 131,952 shares of our common stock for an aggregate of $3.7 million, or an average price per share of $28.42. The following table summarizes share repurchase activity by month during the second quarter of 2012.

 

Period

   Total number of
shares
purchased
     Average price
paid per share
     Total number of shares
purchased as part of a
publicly announced
program
     Maximum dollar value
of shares that may yet
be purchased under the
program
 

April 2012

     5,000       $ 29.37         5,000       $ 29,978,751   

May 2012

     110,000         28.36         110,000         26,858,814   

June 2012

     16,952         28.52         16,952         26,375,628   
  

 

 

       

 

 

    

Total

     131,952            131,952      

 

25


Table of Contents
Item 6. Exhibits

 

(a) Exhibits

 

  10.1    Form of Credit Agreement dated as of June 5, 2012 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc, as Borrowers, Owens & Minor, Inc and certain of its domestic subsidiaries, as Guarantors, Wells Fargo, N.A., as Administrative Agent, JP Morgan Chase, N.A., as Syndication Agent and a syndication of banks as specified on the signature pages thereof (incorporated by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated June 8, 2012).
  31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
  31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
  32.1    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

26


Table of Contents

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: July 27, 2012  

/s/ Craig R. Smith

  Craig R. Smith
  President & Chief Executive Officer
Date: July 27, 2012  

/s/ D. Andrew Edwards

  D. Andrew Edwards
  Vice President, Controller & Interim Chief Financial Officer

 

27


Table of Contents

Exhibits Filed with SEC

 

Exhibit #

    
  10.1    Form of Credit Agreement dated as of June 5, 2012 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc, as Borrowers, Owens & Minor, Inc and certain of its domestic subsidiaries, as Guarantors, Wells Fargo, N.A., as Administrative Agent, JP Morgan Chase, N.A., as Syndication Agent and a syndication of banks as specified on the signature pages thereof (incorporated by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated June 8, 2012).
  31.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

28

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