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, 2001 ------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number 1-9810 ------------- Owens & Minor, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Virginia 54-1701843 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 4800 Cox Road, Glen Allen, Virginia 23060 - -------------------------------------------------------------------------------- (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) 747-9794 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _ ------- ----- The number of shares of Owens & Minor, Inc.'s common stock outstanding as of July 31, 2001, was 33,787,253 shares. 1
Owens & Minor, Inc. and Subsidiaries Index <TABLE> <CAPTION> Page <S> <C> Part I. Financial Information Item 1. Financial Statements Consolidated Statements of Income - Three Months and Six Months Ended June 30, 2001 and 2000 3 Consolidated Balance Sheets - June 30, 2001 and December 31, 2000 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16 Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 Part II. Other Information Item 1. Legal Proceedings 20 Item 2. Changes in Securities and Use of Proceeds 20 Item 4. Submission of Matters to a Vote of Shareholders 20 Item 6. Exhibits and Reports on Form 8-K 21 </TABLE> 2
Part I. Financial Information Item 1. Financial Statements Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Income (in thousands, except per share data) (unaudited) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ---------------------------- 2001 2000 2001 2000 ----------- ----------- ----------------------------- <S> <C> Net sales $ 953,531 $ 875,230 $ 1,878,039 $ 1,731,972 Cost of goods sold 852,810 782,427 1,678,435 1,547,208 ----------- ----------- ----------- ----------- Gross margin 100,721 92,803 199,604 184,764 ----------- ----------- ----------- ----------- Selling, general and administrative expenses 73,294 66,924 145,995 134,350 Depreciation and amortization 5,621 5,270 11,228 10,431 Interest expense, net 3,385 3,053 6,808 6,358 Discount on accounts receivable securitization 1,296 1,959 2,905 3,818 Distributions on mandatorily redeemable preferred securities 1,774 1,774 3,548 3,548 Restructuring credit (1,476) (750) (1,476) (750) ----------- ----------- ----------- ----------- Total expenses 83,894 78,230 169,008 157,755 ----------- ----------- ----------- ----------- Income before income taxes 16,827 14,573 30,596 27,009 Income tax provision 7,404 6,558 13,462 12,154 ----------- ----------- ----------- ----------- Net income $ 9,423 $ 8,015 $ 17,134 $ 14,855 =========== =========== =========== =========== Net income per common share-basic $ 0.28 $ 0.25 $ 0.52 $ 0.46 =========== =========== =========== =========== Net income per common share-diluted $ 0.26 $ 0.23 $ 0.48 $ 0.43 =========== =========== =========== =========== Cash dividends per common share $ 0.07 $ 0.0625 $ 0.1325 $ 0.1225 =========== =========== =========== =========== </TABLE> See accompanying notes to consolidated financial statements. 3
Owens & Minor, Inc. and Subsidiaries Consolidated Balance Sheets <TABLE> <CAPTION> (in thousands, except per share data) June 30, December 31, 2001 2000 --------- --------- (unaudited) <S> <C> Assets Current assets Cash and cash equivalents $ 1,423 $ 626 Accounts and notes receivable, net of allowance of $6,389 and $6,419 245,277 261,905 Merchandise inventories 376,277 315,570 Other current assets 16,850 16,190 --------- --------- Total current assets 639,827 594,291 Property and equipment, net of accumulated depreciation of $62,129 and $58,876 26,789 24,239 Goodwill, net of accumulated amortization of $36,971 and $33,977 201,855 204,849 Other assets, net 42,706 44,169 --------- --------- Total assets $ 911,177 $ 867,548 ========= ========= Liabilities and shareholders' equity Current liabilities Accounts payable $ 319,244 $ 291,507 Accrued payroll and related liabilities 8,216 9,940 Other accrued liabilities 52,011 59,207 --------- --------- Total current liabilities 379,471 360,654 Long-term debt 156,100 152,872 Other liabilities 9,989 9,250 --------- --------- Total liabilities 545,560 522,776 --------- --------- Company-obligated mandatorily redeemable preferred securities of subsidiary trust, holding solely convertible debentures of Owens & Minor, Inc. 132,000 132,000 --------- --------- 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 - 33,758 shares and 33,180 shares 67,516 66,360 Paid-in capital 25,030 18,039 Retained earnings 141,694 129,001 Accumulated other comprehensive loss (623) (628) --------- --------- Total shareholders' equity 233,617 212,772 --------- --------- Total liabilities and shareholders' equity $ 911,177 $ 867,548 ========= ========= </TABLE> See accompanying notes to consolidated financial statements. 4
Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Cash Flows <TABLE> <CAPTION> (in thousands) Six Months Ended (unaudited) June 30, ----------------------- 2001 2000 -------- -------- <S> <C> Operating activities Net income $ 17,134 $ 14,855 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 11,228 10,431 Restructuring credit (1,476) (750) Provision for LIFO reserve 2,025 1,750 Provision for losses on accounts and notes receivable 374 404 Sales of accounts receivable, net 25,000 2,064 Changes in operating assets and liabilities: Accounts and notes receivable (8,746) 12,001 Merchandise inventories (62,732) (21,757) Accounts payable 30,537 27,046 Net change in other current assets and current liabilities (8,115) (665) Other, net 2,953 2,865 -------- -------- Cash provided by operating activities 8,182 48,244 -------- -------- Investing activities Additions to property and equipment (7,210) (3,726) Additions to computer software (1,995) (5,825) Other, net (872) (83) -------- -------- Cash used for investing activities (10,077) (9,634) -------- -------- Financing activities Addition to debt 3,900 -- Reduction of debt (661) (21,925) Other financing, net (2,800) (13,746) Cash dividends paid (4,441) (4,022) Proceeds from exercise of stock options 6,694 1,044 -------- -------- Cash provided by (used for) financing activities 2,692 (38,649) -------- -------- Net increase (decrease) in cash and cash equivalents 797 (39) Cash and cash equivalents at beginning of period 626 669 -------- -------- Cash and cash equivalents at end of period $ 1,423 $ 630 ======== ======== </TABLE> See accompanying notes to consolidated financial statements. 5
Owens & Minor, Inc. and Subsidiaries Notes to Consolidated Financial Statements (unaudited) 1. Accounting Policies In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which are comprised only of normal recurring accruals and the use of estimates) necessary to present fairly the consolidated financial position of Owens & Minor, Inc. and its wholly-owned subsidiaries (O&M or the company) as of June 30, 2001 and the consolidated results of operations for the three and six month periods and cash flows for the six month periods ended June 30, 2001 and 2000. 2. Interim Results of Operations The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. 3. Interim Gross Margin Reporting The company uses estimated gross margin rates to determine the cost of goods sold during interim periods. To improve the accuracy of its estimated gross margins for interim reporting purposes, the company takes physical inventory counts at selected distribution centers. Reported results of operations for the three and six month periods ended June 30, 2001 and 2000 reflect the results of such counts, to the extent that they are materially different from estimated amounts. Management will continue a program of interim physical inventories at selected distribution centers to the extent it deems appropriate to ensure the accuracy of interim reporting and to minimize year- end adjustments. 4. Reclassification of Shipping Fees In the fourth quarter of 2000, the company adopted the provisions of Emerging Issues Task Force (EITF) Issue 00-10, Accounting for Shipping and Handling Fees and Costs. As a result, the company reclassified certain amounts billed to customers for shipping from selling, general and administrative (SG&A) expenses to net sales for all prior periods. As a result, net sales, gross margin, and SG&A expenses for the three months and six months ended June 30, 2000 have been increased by $2.1 million and $4.3 million. 6
5. Acquisition In 1999, the company acquired certain net assets of Medix, Inc. (Medix), a distributor of medical and surgical supplies. The acquisition has been accounted for by the purchase method. In connection with the acquisition, management adopted a plan for integration of the businesses which includes closure of some Medix facilities and consolidation of certain administrative functions. An accrual was established to provide for certain costs of this plan. The following table sets forth the activity in the accrual since December 31, 2000: <TABLE> <CAPTION> (in thousands) Balance at Balance at December 31, 2000 Charges June 30, 2001 --------------------------------------------------------------------------------------- <S> <C> Losses under lease commitments $1,285 $ 25 $1,260 Employee separations 83 28 55 Other 281 -- 281 --------------------------------------------------------------------------------------- Total $1,649 $ 53 $1,596 ======================================================================================= </TABLE> As of June 30, 2001, approximately 40 employees had been terminated, including two in the second quarter of 2001. The integration of the Medix business is expected to be completed by late 2001. 6. Restructuring Reserve As a result of the cancellation of a significant customer contract in 1998, the company recorded a nonrecurring restructuring charge to downsize operations. In the second quarter of 2001, the company re-evaluated its estimate of the remaining costs to be incurred in connection with the restructuring plan and reduced the reserve by approximately $1.5 million. The following table sets forth the activity in the restructuring reserve since December 31, 2000: <TABLE> <CAPTION> (in thousands) Balance at Balance at December 31, 2000 Charges Adjustments June 30, 2001 ------------------------------------------------------------------------------------------------------ <S> <C> Losses under lease commitments $ 2,718 $ 204 $(1,504) $ 1,010 Asset write-offs 821 -- 28 849 ------------------------------------------------------------------------------------------------------ Total $ 3,539 $ 204 $(1,476) $ 1,859 ====================================================================================================== </TABLE> 7. Off Balance Sheet Receivables Financing Facility In the second quarter of 2001, the company adopted the provisions of Statement of Financial Accounting Standards No. (SFAS) 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, a replacement of SFAS 125 of the same title. SFAS 140 revises the standards for securitizations and other transfers of financial assets and expands the disclosure requirements for such transactions, while carrying over many of the provisions of SFAS 125 without change. The provisions of SFAS 140 are effective for transfers of financial assets and extinguishments of liabilities occurring after March 31, 2001, and are to be applied prospectively. The adoption of this Standard did not require a change in the company's accounting treatment of sales of accounts receivable under its off balance sheet receivables financing facility (Receivables Financing Facility), or have any material effect on the company's consolidated financial position, results of operations, or cash flows. The company adopted the disclosure requirements of SFAS 140 in 2000. 7
Under the terms of its Receivables Financing Facility, O&M Funding is entitled to transfer, without recourse, certain of the company's trade receivables and receive up to $225.0 million from a group of unrelated third party purchasers. At June 30, 2001 and December 31, 2000, net accounts receivable of $105.0 million and $80.0 million had been sold under the agreement and, as a result, have been excluded from the consolidated balance sheets. 8. Derivative Financial Instruments On January 1, 2001, the company adopted the provisions of Statement of Financial Accounting Standards No. (SFAS) 133, Accounting for Derivative Instruments and Hedging Activities, as amended. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities measured at fair value. The accounting treatment for changes in the fair value of a derivative depends upon the intended use of the derivative and the resulting designation. The company enters into interest rate swaps as part of its interest rate risk management strategy. The purpose of these swaps is to maintain the company's desired mix of fixed to floating rate financing, and to minimize interest expense related to fixed rate financing. The company had interest rate swap agreements of $100.0 million notional amounts that effectively converted a portion of the company's fixed rate financing instruments to variable rates, which were cancelled by their respective counterparties on May 28, 2001. These swaps were designated as fair value hedges of a portion of the company's 10.875% Senior Subordinated 10-year Notes due in 2006, and were assumed to have no ineffectiveness under the provisions of SFAS 133. The adoption of this Standard did not have a material impact on the company's results of operations or financial position. 9. Comprehensive Income The company's comprehensive income for the three months and six months ended June 30, 2001 and 2000 is shown in the table below. Other comprehensive income is comprised of changes in unrealized gain or loss on investment, net of income tax. <TABLE> <CAPTION> (in thousands) Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------------- 2001 2000 2001 2000 ----------------------- ----------------------- <S> <C> Net income $9,423 $ 8,015 $17,134 $14,855 Other comprehensive income - change in unrealized gain (loss) on investment, net of tax (43) (1,106) 5 160 - -------------------------------------------------------------------------------------------------------------------- Comprehensive income $9,380 $ 6,909 $17,139 $15,015 ==================================================================================================================== </TABLE> 8
10. Net Income per Common Share The following sets forth the computation of basic and diluted net income per common share: <TABLE> <CAPTION> (in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------------------------------------- 2001 2000 2001 2000 ----------------------- ----------------------- <S> <C> Numerator: Numerator for basic net income per common share - net income $ 9,423 $ 8,015 $17,134 $14,855 Distributions on convertible mandatorily redeemable preferred securities, net of income taxes 993 976 1,986 1,951 - ------------------------------------------------------------------------------------------------------------------------- Numerator for diluted net income per common share - net income attributable to common stock after assumed conversions $10,416 $ 8,991 $19,120 $16,806 - ------------------------------------------------------------------------------------------------------------------------- Denominator: Denominator for basic net income per common share - weighted average shares 33,284 32,595 33,137 32,590 Effect of dilutive securities: Conversion of mandatorily redeemable preferred securities 6,400 6,400 6,400 6,400 Stock options and restricted stock 683 334 613 284 - ------------------------------------------------------------------------------------------------------------------------- Denominator for diluted net income per common share - adjusted weighted average shares and assumed conversions 40,367 39,329 40,150 39,274 - ------------------------------------------------------------------------------------------------------------------------- Net income per common share - basic $ 0.28 $ 0.25 $ 0.52 $ 0.46 Net income per common share - diluted $ 0.26 $ 0.23 $ 0.48 $ 0.43 ========================================================================================================================= </TABLE> 11. Contingency In August 2000, the company received notice from the Internal Revenue Service that it has disallowed certain prior year deductions for interest on loans associated with the company's corporate-owned life insurance (COLI) program. Management believes that the company has complied with the tax law as it relates to its COLI program, and has filed an appeal with the Internal Revenue Service. The impact of the disallowance of these deductions, if appeals were unsuccessful, would be approximately $8.8 million after tax, including interest. The ultimate resolution of this matter may take several years and a determination adverse to the company could have a material impact on the company's results of operations. 12. Subsequent Event In July 2001, the company issued $200.0 million of 8 1/2% Senior Subordinated 10-year notes (2011 Notes) which mature on July 15, 2011. Interest on the 2011 Notes is payable semi-annually on January 15 and July 15, beginning January 15, 2002. The 2011 Notes are redeemable on or after July 15, 2006, at the company's option, subject to certain restrictions. The 2011 Notes are unconditionally guaranteed on a joint and several basis by certain subsidiaries of the company, including all significant subsidiaries other than O&M Funding Corporation and Owens & Minor Trust I. The proceeds from the 2011 Notes were used to retire the 10.875% Senior Subordinated 10-year Notes due in 2006 (2006 Notes) and reduce the amount of accounts receivable sold under the Receivables Financing Facility. The early retirement of the 2006 Notes will result in an extraordinary loss of approximately $7 million, net of tax benefit, which will be recorded in the company's financial statements for the quarter ended September 30, 2001. 9
13. 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 2006 Notes; and the non-guarantor subsidiaries of the 2006 Notes. Separate financial statements of the guarantor subsidiaries are not presented because the guarantors are jointly, severally and unconditionally liable under the guarantees and the company believes the condensed consolidating financial information is more meaningful in understanding the financial position, results of operations and cash flows of the guarantor subsidiaries. Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> For the three months ended Owens & Guarantor Non-guarantor June 30, 2001 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------ <S> <C> Statements of Operations Net sales $ -- $ 953,531 $ -- $ -- $ 953,531 Cost of goods sold -- 852,810 -- -- 852,810 - ------------------------------------------------------------------------------------------------------------------------------ Gross margin -- 100,721 -- -- 100,721 - ------------------------------------------------------------------------------------------------------------------------------ Selling, general and administrative expenses -- 73,210 84 -- 73,294 Depreciation and amortization -- 5,621 -- -- 5,621 Interest expense, net 4,571 (1,186) -- -- 3,385 Intercompany interest expense, net (2,399) 7,106 (4,707) -- -- Intercompany dividend income (126,386) -- -- 126,386 -- Discount on accounts receivable securitization -- 3 1,293 -- 1,296 Distributions on mandatorily redeemable preferred -- -- 1,774 -- 1,774 securities Restructuring credit -- (1,476) -- -- (1,476) - ------------------------------------------------------------------------------------------------------------------------------ Total expenses (124,214) 83,278 (1,556) 126,386 83,894 - ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 124,214 17,443 1,556 (126,386) 16,827 Income tax provision (benefit) (956) 7,676 684 -- 7,404 - ------------------------------------------------------------------------------------------------------------------------------ Net income $ 125,170 $ 9,767 $ 872 $ (126,386) $ 9,423 ============================================================================================================================== </TABLE> <TABLE> <CAPTION> For the three months ended Owens & Guarantor Non-guarantor June 30, 2000 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------ <S> <C> Statements of Operations Net sales $ -- $ 875,230 $ -- $ -- $ 875,230 Cost of goods sold -- 782,427 -- -- 782,427 - ------------------------------------------------------------------------------------------------------------------------------ Gross margin -- 92,803 -- -- 92,803 - ------------------------------------------------------------------------------------------------------------------------------ Selling, general and administrative expenses -- 66,649 275 -- 66,924 Depreciation and amortization -- 5,270 -- -- 5,270 Interest expense, net 4,362 (1,309) -- -- 3,053 Intercompany interest expense, net (1,863) 7,379 (5,516) -- -- Discount on accounts receivable securitization -- 2 1,957 -- 1,959 Distributions on mandatorily redeemable preferred -- -- 1,774 -- 1,774 securities Restructuring credit -- (750) -- -- (750) - ------------------------------------------------------------------------------------------------------------------------------ Total expenses 2,499 77,241 (1,510) -- 78,230 - ------------------------------------------------------------------------------------------------------------------------------ Income (loss) before income taxes (2,499) 15,562 1,510 -- 14,573 Income tax provision (benefit) (1,100) 6,845 813 -- 6,558 - ------------------------------------------------------------------------------------------------------------------------------ Net income (loss) $ (1,399) $ 8,717 $ 697 $ -- $ 8,015 - ------------------------------------------------------------------------------------------------------------------------------ </TABLE> 10
Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> For the six months ended Owens & Guarantor Non-guarantor June 30, 2001 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> Statements of Operations Net sales $ -- $ 1,878,039 $ -- $ -- $ 1,878,039 Cost of goods sold -- 1,678,435 -- -- 1,678,435 - ---------------------------------------------------------------------------------------------------------------------------------- Gross margin -- 199,604 -- -- 199,604 - ---------------------------------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses -- 145,654 341 -- 145,995 Depreciation and amortization -- 11,228 -- -- 11,228 Interest expense, net 8,954 (2,146) -- -- 6,808 Intercompany interest expense, net (4,225) 14,538 (10,313) -- -- Intercompany dividend income (126,386) -- -- 126,386 -- Discount on accounts receivable securitization -- 6 2,899 -- 2,905 Distributions on mandatorily redeemable preferred -- -- 3,548 -- 3,548 securities Restructuring credit -- (1,476) -- -- (1,476) - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses (121,657) 167,804 (3,525) 126,386 169,008 - ---------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 121,657 31,800 3,525 (126,386) 30,596 Income tax provision (benefit) (2,081) 13,978 1,565 -- 13,462 - ---------------------------------------------------------------------------------------------------------------------------------- Net income $ 123,738 $ 17,822 $ 1,960 $ (126,386) $ 17,134 ================================================================================================================================== </TABLE> <TABLE> <CAPTION> For the six months ended Owens & Guarantor Non-guarantor June 30, 2000 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> Statements of Operations Net sales $ -- $ 1,731,972 $ -- $ -- $ 1,731,972 Cost of goods sold -- 1,547,208 -- -- 1,547,208 - ---------------------------------------------------------------------------------------------------------------------------------- Gross margin -- 184,764 -- -- 184,764 - ---------------------------------------------------------------------------------------------------------------------------------- Selling, general and administrative expenses -- 133,790 560 -- 134,350 Depreciation and amortization -- 10,431 -- -- 10,431 Interest expense, net 8,938 (2,580) -- -- 6,358 Intercompany interest expense, net (4,027) 14,578 (10,551) -- -- Discount on accounts receivable securitization -- 9 3,809 -- 3,818 Distributions on mandatorily redeemable preferred -- -- 3,548 -- 3,548 securities Restructuring credit -- (750) -- -- (750) - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 4,911 155,478 (2,634) -- 157,755 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) before income taxes (4,911) 29,286 2,634 -- 27,009 Income tax provision (benefit) (2,161) 12,840 1,475 -- 12,154 - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ (2,750) $ 16,446 $ 1,159 $ -- $ 14,855 ================================================================================================================================== </TABLE> 11
Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> - ---------------------------------------------------------------------------------------------------------------------------------- Owens & Guarantor Non-guarantor June 30, 2001 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> Balance Sheets Assets Current assets Cash and cash equivalents $ 507 $ 915 $ 1 $ -- $ 1,423 Accounts and notes receivable, net -- 7,723 237,554 -- 245,277 Merchandise inventories -- 376,277 -- -- 376,277 Intercompany advances, net 134,695 73,099 (207,794) -- -- Other current assets -- 16,850 -- -- 16,850 - --------------------------------------------------------------------------------------------------------------------------------- Total current assets 135,202 474,864 29,761 -- 639,827 Property and equipment, net -- 26,787 2 -- 26,789 Goodwill, net -- 201,855 -- -- 201,855 Intercompany investments 340,023 15,001 136,083 (491,107) -- Other assets, net 8,250 33,456 1,000 -- 42,706 - --------------------------------------------------------------------------------------------------------------------------------- Total assets $ 483,475 $ 751,963 $ 166,846 $(491,107) $ 911,177 ================================================================================================================================= Liabilities and shareholders' equity Current liabilities Accounts payable $ -- $ 319,244 $ -- $ -- $ 319,244 Accrued payroll and related liabilities -- 8,216 -- -- 8,216 Other accrued liabilities 1,415 51,247 (651) -- 52,011 - --------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 1,415 378,707 (651) -- 379,471 Long-term debt 156,100 -- -- -- 156,100 Intercompany long-term debt 136,083 143,890 -- (279,973) -- Other liabilities (930) 10,922 (3) -- 9,989 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities 292,668 533,519 (654) (279,973) 545,560 - --------------------------------------------------------------------------------------------------------------------------------- Company-obligated mandatorily redeemable preferred securities of subsidiary trust, holding solely convertible debentures of Owens & Minor, Inc. -- -- 132,000 -- 132,000 - --------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity Common stock 67,516 40,879 5,583 (46,462) 67,516 Paid-in capital 25,030 149,671 15,001 (164,672) 25,030 Retained earnings 98,884 27,894 14,916 -- 141,694 Accumulated other comprehensive loss (623) -- -- -- (623) - --------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 190,807 218,444 35,500 (211,134) 233,617 - --------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 483,475 $ 751,963 $ 166,846 $(491,107) $ 911,177 ================================================================================================================================= </TABLE> 12
Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> Owens & Guarantor Non-guarantor December 31, 2000 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> Balance Sheets Assets Current assets Cash and cash equivalents $ 507 $ 118 $ 1 $ -- $ 626 Accounts and notes receivable, net -- 24,224 237,681 -- 261,905 Merchandise inventories -- 315,570 -- -- 315,570 Intercompany advances, net 129,447 79,645 (209,092) -- -- Other current assets 17 16,173 -- -- 16,190 - ---------------------------------------------------------------------------------------------------------------------------------- Total current assets 129,971 435,730 28,590 -- 594,291 Property and equipment, net -- 24,236 3 -- 24,239 Goodwill, net -- 204,849 -- -- 204,849 Intercompany investments 213,637 15,001 136,083 (364,721) -- Other assets, net 8,735 35,157 277 -- 44,169 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $ 352,343 $ 714,973 $ 164,953 $(364,721) $ 867,548 ================================================================================================================================== Liabilities and shareholders' equity Current liabilities Accounts payable $ -- $ 291,507 $ -- $ -- $ 291,507 Accrued payroll and related liabilities -- 9,940 -- -- 9,940 Other accrued liabilities 1,632 58,159 (584) -- 59,207 - ---------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 1,632 359,606 (584) -- 360,654 Long-term debt 152,200 672 -- -- 152,872 Intercompany long-term debt 136,083 -- -- (136,083) -- Other liabilities (930) 10,183 (3) -- 9,250 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities 288,985 370,461 (587) (136,083) 522,776 - ---------------------------------------------------------------------------------------------------------------------------------- Company-obligated mandatorily redeemable preferred securities of subsidiary trust, holding solely convertible debentures of Owens & Minor, Inc. -- -- 132,000 -- 132,000 - ---------------------------------------------------------------------------------------------------------------------------------- Shareholders' equity Common stock 66,360 40,879 5,583 (46,462) 66,360 Paid-in capital 18,039 167,175 15,001 (182,176) 18,039 Retained earnings (accumulated deficit) (20,413) 136,458 12,956 -- 129,001 Accumulated other comprehensive loss (628) -- -- -- (628) Total shareholders' equity 63,358 344,512 33,540 (228,638) 212,772 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 352,343 $ 714,973 $ 164,953 $(364,721) $ 867,548 ================================================================================================================================== </TABLE> 13
Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> For the six months ended Owens & Guarantor Non-guarantor June 30, 2001 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ------------------------------------------------------------------------------------------------------------------------------------ <S> <C> Statements of Cash Flows Operating activities Net income $ 123,738 $ 17,822 $ 1,960 $(126,386) $ 17,134 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization -- 11,228 -- -- 11,228 Nonrecurring restructuring credit -- (1,476) -- -- (1,476) Provision for LIFO reserve -- 2,025 -- -- 2,025 Provision for losses on accounts and notes receivable -- 591 (217) -- 374 Sales of accounts receivable, net -- -- 25,000 -- 25,000 Changes in operating assets and liabilities: Accounts and notes receivable -- 15,910 (24,656) -- (8,746) Merchandise inventories -- (62,732) -- -- (62,732) Accounts payable -- 30,537 -- -- 30,537 Net change in other current assets and current liabilities (200) (8,093) 178 -- (8,115) Other, net 1,943 984 26 -- 2,953 - ------------------------------------------------------------------------------------------------------------------------------------ Cash provided by operating activities 125,481 6,796 2,291 (126,386) 8,182 - ------------------------------------------------------------------------------------------------------------------------------------ Investing activities Additions to property and equipment -- (7,210) -- -- (7,210) Additions to computer software -- (1,995) -- -- (1,995) Investments in intercompany debt (143,890) -- -- 143,890 -- Decrease in intercompany investment 17,504 -- -- (17,504) -- Other, net -- 128 (1,000) -- (872) - ------------------------------------------------------------------------------------------------------------------------------------ Cash used for investing activities (126,386) (9,077) (1,000) 126,386 (10,077) - ------------------------------------------------------------------------------------------------------------------------------------ Financing activities Addition to debt 3,900 -- -- -- 3,900 Reduction of debt -- (661) -- -- (661) Proceeds from issuance of intercompany debt -- 143,890 -- (143,890) -- Change in intercompany advances (5,248) 6,539 (1,291) -- -- Decrease in intercompany investment -- (17,504) -- 17,504 -- Other financing, net -- (2,800) -- -- (2,800) Cash dividends paid (4,441) -- -- -- (4,441) Intercompany dividends paid -- (126,386) -- 126,386 -- Proceeds from exercise of stock options 6,694 -- -- -- 6,694 - ------------------------------------------------------------------------------------------------------------------------------------ Cash provided by (used for) financing activities 905 3,078 (1,291) -- 2,692 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in cash and cash equivalents -- 797 -- -- 797 Cash and cash equivalents at beginning of period 507 118 1 -- 626 - ------------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $ 507 $ 915 $ 1 $ -- $ 1,423 =================================================================================================================================== </TABLE> 14
Condensed Consolidating Financial Information (in thousands) <TABLE> <CAPTION> For the six months ended Owens & Guarantor Non-guarantor June 30, 2000 Minor, Inc. Subsidiaries Subsidiaries Eliminations Consolidated - ---------------------------------------------------------------------------------------------------------------------------------- <S> <C> Statements of Cash Flows Operating activities Net income (loss) $ (2,750) $ 16,446 $ 1,159 $ -- $ 14,855 Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities: Depreciation and amortization -- 10,431 -- -- 10,431 Nonrecurring restructuring credit -- (750) -- -- (750) Provision for LIFO reserve -- 1,750 -- -- 1,750 Provision for losses on accounts and notes receivable -- 590 (186) -- 404 Sales of accounts receivable, net -- -- 2,064 -- 2,064 Changes in operating assets and liabilities: Accounts and notes receivable -- 4,912 7,089 -- 12,001 Merchandise inventories -- (21,708) (49) -- (21,757) Accounts payable -- 27,046 -- -- 27,046 Net change in other current assets and current liabilities (101) (776) 212 -- (665) Other, net 1,028 1,119 718 -- 2,865 - --------------------------------------------------------------------------------------------------------------------------------- Cash provided by (used for) operating activities (1,823) 39,060 11,007 -- 48,244 - --------------------------------------------------------------------------------------------------------------------------------- Investing activities Additions to property and equipment -- (3,722) (4) -- (3,726) Additions to computer software -- (5,825) -- -- (5,825) Other, net (155) 72 -- -- (83) - --------------------------------------------------------------------------------------------------------------------------------- Cash used for investing activities (155) (9,475) (4) -- (9,634) - --------------------------------------------------------------------------------------------------------------------------------- Financing activities Reduction of debt (21,300) (625) -- -- (21,925) Change in intercompany advances 27,502 (16,496) (11,006) -- -- Other financing, net (1,246) (12,500) -- -- (13,746) Cash dividends paid (4,022) -- -- -- (4,022) Proceeds from exercise of stock options 1,044 -- -- -- 1,044 - --------------------------------------------------------------------------------------------------------------------------------- Cash provided by (used for) financing activities 1,978 (29,621) (11,006) -- (38,649) Net decrease in cash and cash equivalents -- (36) (3) -- (39) - --------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 507 158 4 -- 669 ================================================================================================================================= Cash and cash equivalents at end of period $ 507 $ 122 $ 1 $ -- $ 630 ================================================================================================================================= </TABLE> 15
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following management discussion and analysis describes material changes in the financial condition of Owens & Minor, Inc. and its wholly-owned subsidiaries (the company) since December 31, 2000. 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 the company's 2000 Annual Report on Form 10-K for the year ended December 31, 2000. Financial Condition, Liquidity and Capital Resources Liquidity. Combined outstanding debt and off balance sheet accounts receivable securitization increased by $28.2 million from December 31, 2000 to $261.8 million at June 30, 2001. This increase was primarily a result of an increased investment in inventory to support growing sales volume and the initial requirements of new customers. Excluding sales of accounts receivable and their subsequent collections under the receivables financing facility, $16.8 million of cash was used for operating activities in the first six months of 2001, compared with $46.2 million provided by operating activities in the first six months of 2000. This decrease in operating cash flow largely resulted from the increased purchases of inventory mentioned above. On July 2, 2001, the company issued $200 million of 8 1/2% Senior Subordinated Notes maturing in July 2011. The proceeds from these notes were used to retire the company's $150 million of 10 7/8% Senior Subordinated Notes and reduce the amount of accounts receivable sold under the receivables financing facility. In conjunction with the new notes, the company entered into interest rate swap agreements under which the company pays counterparties a variable rate based on LIBOR and the counterparties pay the company a fixed interest rate of 8 1/2% on a notional amount of $100 million, effectively converting one-half of the notes to variable-rate debt. In addition, effective July 12, 2001, the company extended the expiration of its receivables financing facility to July 11, 2002. The company expects that its available financing will be sufficient to fund its working capital needs and long-term strategic growth, although this cannot be assured. At June 30, 2001, the company had $218.9 million of unused credit under its revolving credit facility and the ability to sell an additional $120.0 million of accounts receivable under its receivables financing facility. Working Capital Management. The company's working capital increased by $26.7 million from December 31, 2000 to $260.4 million at June 30, 2001, as a result of increased inventory levels. Annualized inventory turnover for the second quarter of 2001 decreased slightly to 9.6 from 9.7 in the fourth quarter of 2000. Accounts receivable, excluding the effect of the company's receivables financing facility, increased by $8.4 million to $350.3 million at June 30, 2001. However, sales growth outpaced this increase, resulting in decreased average days sales outstanding of 32.2 days for the second quarter of 2001, compared to 33.3 days for the fourth quarter of 2000. Capital Expenditures. Capital expenditures were approximately $9.2 million in the first six months of 2001, including $3.3 million for the purchase of land to be used for the company's future headquarters. The company spent $3.6 million to purchase computer hardware and software. The company expects to continue supporting strategic initiatives and improving operational efficiency through investments in technology including system upgrades. These capital expenditures are expected to be funded through cash flow from operations. 16
Results of Operations Second quarter and first six months of 2001 compared with 2000 Net sales. Net sales increased 9% to $953.5 million in the second quarter of 2001 from $875.2 million in the second quarter of 2000. Net sales increased 8% to $1.9 billion in the first six months of 2001 from $1.7 billion in the first six months of 2000. These increases resulted from further penetration of existing accounts as well as new business. Gross margin. Gross margin as a percentage of net sales remained consistent at 10.6% in the second quarter of 2001 compared to the second quarter of 2000. Gross margin as a percentage of net sales decreased slightly to 10.6% in the first six months of 2001 compared with 10.7% for the first six months of 2000. The decrease resulted from decreased customer contract margins which were partially offset by favorable vendor initiatives. As the company continues to face margin pressure, it is focusing on opportunities for margin improvement, including an emphasis on providing value-added services. Selling, general and administrative expenses. Selling, general and administrative (SG&A) expenses as a percentage of net sales increased slightly to 7.7% of net sales for the second quarter of 2001, compared to 7.6% for the second quarter of 2000. This increase resulted, in part, from higher personnel costs incurred to support sales growth and to prepare for additional business which will be converted in the third quarter. The company also consolidated four of its distribution centers into two locations in the second quarter of 2001. For the first six months of 2001, SG&A expense remained consistent with the first six months of 2000 at 7.8% of net sales. Depreciation and amortization. Depreciation and amortization expense for the second quarter and first six months of 2001 increased by approximately 7% and 8% from the same periods in 2000, primarily as a result of continued investments in computer software. Interest expense, net, and discount on accounts receivable securitization (financing costs). Financing costs totaled $4.7 million for the second quarter of 2001 and $9.7 million for the first six months of 2001, compared with $5.0 million and $10.2 million for the same periods of 2000. This decrease resulted from lower average outstanding financing in 2001. The company expects to continue to manage its financing costs by continuing its working capital reduction initiatives and management of interest rate risks, although the future results of these initiatives cannot be assured. Restructuring credits. As a result of the cancellation of a significant customer contract in 1998, the company recorded a nonrecurring restructuring charge of $6.6 million, after taxes, to downsize operations. The company periodically re-evaluates its restructuring reserve, and since the actions under this plan had resulted in lower projected total costs than originally anticipated, the company recorded reductions in the reserve in the second quarters of both 2001 and 2000, which increased net income by approximately $0.8 million in 2001 and $0.4 million in 2000. Income taxes. The income tax provision was $13.5 million for the first six months of 2001 compared with $12.2 million for the first six months of 2000. The effective tax rate was 44.0%, compared to 45.0% for the same period in 2000. This reduction in rate resulted primarily from decreases in certain nondeductible items. 17
Net income. Net income increased to $9.4 million for the second quarter of 2001 from $8.0 million for the second quarter of 2000 and increased to $17.1 million for the first six months of 2001 from $14.9 million for the same period of 2000. Excluding the adjustments to the restructuring reserve, net income increased to $8.6 million for the second quarter of 2001 from $7.6 million for the second quarter of 2000 and increased to $16.3 million for the first six months of 2001 from $14.4 million for the same period of 2000. The increase is primarily due to the increase in sales and success in controlling financing costs. Recent Accounting Pronouncements In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS 141, Business Combinations. The provisions of SFAS 141 require that all business combinations initiated after June 30, 2001, be accounted for by the purchase method and also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. The adoption of this standard will affect the company's accounting for potential future acquisitions. Also in July, the FASB issued SFAS 142, Goodwill and Other Intangible Assets. The provisions of SFAS 142 state that goodwill should not be amortized but should be tested for impairment upon adoption of the standard, and at least annually, at the reporting unit level. The company will be required to adopt the provisions of this standard beginning on January 1, 2002. As a result, the company will no longer record goodwill amortization expense. The company will also be required to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. Any such transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the company's consolidated statement of income. As of the date of adoption, the company expects to have unamortized goodwill in the amount of $198.9 million, which will be subject to the transition provisions of SFAS 142. Amortization expense related to goodwill was $1.5 million and $1.5 million for the three month periods ended June 30, 2001 and 2000, and $3.0 million and $3.0 million for the six month periods ended June 30, 2001 and 2000. Based on current values, management does not believe that the company is likely to incur a transitional impairment loss. Risks The company is subject to risks associated with changes in the medical industry, including continued efforts to control costs, which place pressure on operating margin, and changes in the way medical and surgical services are delivered to patients. The loss of one of the company's larger customers could have a significant effect on its business. However, management believes that the company's competitive position in the marketplace and its ability to control costs would enable it to continue profitable operations and attract new customers in the event of such a loss. Forward-looking Statements Certain statements in this discussion constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, including, but not limited to, general economic and business conditions, dependence on sales to certain customers, dependence on suppliers, competition, changing trends in customer profiles, the ability to timely or adequately respond to technological advances in the medical supply industry, the ability to successfully identify, manage or integrate possible future acquisitions, outcome of outstanding litigation and changes in government regulations. Although the company believes its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and 18
operations, there can be no assurance that actual results, performance or achievements of the company will not differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk The company believes there has been no material change in its exposure to market risk from that discussed in Item 7A in the company's Annual Report on Form 10-K for the year ended December 31, 2000. 19
Part II. Other Information Item 1. Legal Proceedings Certain legal proceedings pending against the company are described in the company's Annual Report on Form 10-K for the year ended December 31, 2000. Through June 30, 2001, there have been no material developments in any legal proceedings reported in such Annual Report. Item 2. Changes in Securities and Use of Proceeds On July 2, 2001, Owens & Minor, Inc. issued $200 million of 8 1/2% Senior Subordinated Notes. The Senior Subordinated Indenture and First Supplemental Indenture governing the Notes (attached as Exhibits 4.1 and 4.2 hereto) contain certain financial covenants and limitations on the payment of dividends. Item 4. Submission of Matters to a Vote of Shareholders The following matters were submitted to a vote of O&M's shareholders at its annual meeting held on April 26, 2001, with the voting results designated below each such matter: (1) Election of A. Marshall Acuff, Jr., Henry A. Berling, James B. Farinholt, Jr. and Anne Marie Whittemore as directors of O&M for a three-year term. <TABLE> <CAPTION> Votes Against Broker Directors Votes For Or Withheld Abstentions Non-Votes - ---------------------------------- -------------- ------------------ --------------- ---------------- <S> <C> A. Marshall Acuff, Jr. 29,116,257 611,627 0 0 Henry A. Berling 29,060,190 667,694 0 0 James B. Farinholt, Jr. 29,070,872 657,012 0 0 Anne Marie Whittemore 29,070,791 657,093 0 0 </TABLE> (2) Ratification of an amendment to the 1998 Stock Option and Incentive Plan increasing the number of shares available for issuance and extending the term of the Plan. Votes Against Votes For Or Withheld Abstentions -------------- ------------- ------------ 21,225,827 5,633,409 136,095 (3) Ratification of the appointment of KPMG LLP as O&M's independent auditors. Votes Against Votes For Or Withheld Abstentions -------------- ------------- ------------ 29,607,253 69,864 50,766 20
Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 3 Amended and Restated Bylaws of Owens & Minor, Inc. 4.1 Senior Subordinated Indenture dated as of July 2, 2001 among Owens & Minor, Inc., as Issuer, Owens & Minor Medical, Inc., National Medical Supply Corporation, Owens & Minor West, Inc., Koley's Medical Supply, Inc. and Stuart Medical, Inc., as Guarantors (the "Guarantors"), and SunTrust Bank, as Trustee 4.2 First Supplemental Indenture dated as of July 2, 2001 among Owens & Minor, Inc., the Guarantors and SunTrust Bank. 4.3 Exchange and Registration Rights Agreement dated as of July 2, 2001 among Owens & Minor, Inc., the Guarantors, Lehman Brothers Inc., Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Union Securities, Inc., Goldman Sachs & Co. and J.P. Morgan Securities Inc. 4.4 First amendment dated as of June 12, 2001 to Credit Agreement dated as of April 24, 2000 among Owens & Minor, Inc., the Guarantors, First Union National Bank, SunTrust Bank, Bank One, N.A., The Bank of Nova Scotia, and Bank of America, N.A. 10 Amendment No. 1 dated as of July 12, 2001 to Receivables Purchase Agreement among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., Falcon Asset Securitization Corporation, Receivables Capital Corporation, Liberty Street Funding Corporation, Bank One, N.A., Bank of America, N.A., and The Bank of Nova Scotia (b) Reports on Form 8-K The company filed a Current Report on Form 8-K dated June 5, 2001, under Items 5 and 7, with respect to the commencement by the company of a tender offer to purchase for cash any and all of its outstanding $150 million aggregate principal amount of 10 7/8% Senior Subordinated Notes due 2006. The company filed a Current Report on Form 8-K dated June 15, 2001, under Items 5 and 7, with respect to the extension by the company of the Early Tender Date for any and all of its outstanding $150 million aggregate principal amount of 10 7/8% Senior Subordinated Notes due 2006 to June 22, 2001, as well as the commencement by the company of a proposed private offering of $200 million aggregate principal amount of Senior Subordinated Notes due 2011. The company filed a Current Report on Form 8-K dated July 2, 2001, under Items 5 and 7, with respect to the completion of the company's private offering of its $200 million aggregate principal amount of 8 1/2% Senior Subordinated notes due 2011, as well as the expiration of the company's tender offer for any and all of its outstanding $150 million aggregate principal amount of 10 7/8% Senior Subordinated Notes due 2006. 21
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Owens & Minor, Inc. ----------------------------- (Registrant) Date August 13, 2001 ----------------- ----------------------------- Jeffrey Kaczka Senior Vice President Chief Financial Officer Date August 13, 2001 ---------------- ----------------------------- Olwen B. Cape Vice President & Controller Chief Accounting Officer
Exhibits Filed with SEC ----------------------- Exhibit # --------- 3 Amended and Restated Bylaws of Owens & Minor, Inc. 4.1 Senior Subordinated Indenture dated as of July 2, 2001 among Owens & Minor, Inc., as Issuer, Owens & Minor Medical, Inc., National Medical Supply Corporation, Owens & Minor West, Inc., Koley's Medical Supply, Inc. and Stuart Medical, Inc., as Guarantors (the "Guarantors"), and SunTrust Bank, as Trustee 4.2 First Supplemental Indenture dated as of July 2, 2001 among Owens & Minor, Inc., the Guarantors and SunTrust Bank. 4.3 Exchange and Registration Rights Agreement dated as of July 2, 2001 among Owens & Minor, Inc., the Guarantors, Lehman Brothers Inc., Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, First Union Securities, Inc., Goldman Sachs & Co. and J.P. Morgan Securities Inc. 4.4 First amendment dated as of June 12, 2001 to Credit Agreement dated as of April 24, 2000 among Owens & Minor, Inc., the Guarantors, First Union National Bank, SunTrust Bank, Bank One, N.A., The Bank of Nova Scotia, and Bank of America, N.A. 10 Amendment No. 1 dated as of July 12, 2001 to Receivables Purchase Agreement among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., Falcon Asset Securitization Corporation, Receivables Capital Corporation, Liberty Street Funding Corporation, Bank One, N.A., Bank of America, N.A., and The Bank of Nova Scotia