UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to Commission file number 1-9810 OWENS & MINOR, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Virginia 54-1701843 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4800 Cox Road, Glen Allen, Virginia 23060 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 747-9794 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ The number of shares of Owens & Minor, Inc.'s common stock outstanding as of July 30, 1996 was 31,863,313 shares.
Owens & Minor, Inc. and Subsidiaries Index Page Part I. Financial Information Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations - Three Months and Six Months Ended June 30, 1996 and 1995 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6- 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Part II. Other Information 12-14 2
Part I. Financial Information Item 1. Financial Statements Owens & Minor, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except per share data) June 30, December 31, 1996 1995 ---------------------------- Assets Current assets Cash and cash equivalents $ 546 $ 215 Accounts and notes receivable, net 170,695 265,238 Merchandise inventories 297,074 326,380 Other current assets 18,809 32,069 ------------ ------------- Total current assets 487,124 623,902 Property and equipment, net 32,043 39,049 Excess of purchase price over net assets acquired, net 169,638 171,911 Other assets, net 29,900 22,941 ------------ ------------- Total assets $ 718,705 $ 857,803 ============ ============= Liabilities and shareholders' equity Current liabilities Current maturities of long-term debt $ - $ 4,055 Accounts payable 227,943 241,048 Accrued payroll and related liabilities 4,248 5,534 Other accrued liabilities 38,199 41,602 ------------ ------------- Total current liabilities 270,390 292,239 Long-term debt 200,529 323,308 Accrued pension and retirement plans 8,823 6,985 ------------ ------------- Total liabilities 479,742 622,532 ------------ ------------- Shareholders' equity Preferred stock, par value $100 per share; authorized - 10,000 shares Series A; Participating Cumulative Preferred Stock; none issued - - Series B; Cumulative Preferred Stock; 4.5%, convertible; issued - 1,150 shares 115,000 115,000 Common stock, par value $2 per share; authorized - 200,000 shares; issued - 31,857 at June 30, 1996 and 30,862 at December 31, 1995 63,714 61,724 Paid-in capital 4,807 2,144 Retained earnings 55,442 56,403 ------------ ------------- Total shareholders' equity 238,963 235,271 ------------ ------------- Total liabilities and shareholders' equity $ 718,705 $ 857,803 ============ ============= See accompanying notes to consolidated financial statements. 3
Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------ 1996 1995 1996 1995 -------------- --------------- -------------- -------------- <S> <C> Net sales $ 749,938 $ 743,718 $ 1,521,250 $ 1,490,813 Cost of goods sold 675,427 673,217 1,372,560 1,347,404 ------------- ------------- ------------- ------------- Gross margin 74,511 70,501 148,690 143,409 ------------- ------------- ------------- ------------- Selling, general and administrative expenses 58,474 54,074 119,514 107,635 Depreciation and amortization 4,071 3,713 8,001 7,229 Interest expense, net 4,974 5,730 10,774 11,121 Discount on accounts receivable securitization 1,851 - 2,595 - Nonrecurring restructuring expenses - 4,114 - 6,775 ------------- ------------- ------------- ------------- Total expenses 69,370 67,631 140,884 132,760 ------------- ------------- ------------- ------------- Income before income taxes 5,141 2,870 7,806 10,649 Income tax provision 2,210 1,182 3,356 4,348 ------------- ------------- ------------- ------------- Net income 2,931 1,688 4,450 6,301 Dividends on preferred stock 1,294 1,294 2,588 2,588 ------------- ------------- ------------- ------------- Net income attributable to common stock $ 1,637 $ 394 $ 1,862 $ 3,713 ============= ============= ============= ============= Net income per common share $ 0.05 $ 0.01 $ 0.06 $ 0.12 ============= ============= ============= ============= Cash dividends per common share $ 0.045 $ 0.045 $ 0.090 $ 0.090 ============= ============= ============= ============= Weighted average common shares and common share equivalents 32,000 31,077 31,560 31,082 ============= ============= ============= ============= </TABLE> See accompanying notes to consolidated financial statements. 4
Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Cash Flows <TABLE> <CAPTION> Six Months Ended (In thousands) June 30, ---------------------------------- 1996 1995 ------------- ------------- <S> <C> Operating Activities Net income $ 4,450 $ 6,301 Adjustments to reconcile net income to cash provided by (used for) operating activities Depreciation and amortization 8,001 7,229 Provision for losses on accounts and notes receivable 523 222 Provision for LIFO reserve 2,248 1,662 Change in operating assets and liabilities Accounts and notes receivable 94,020 (10,844) Merchandise inventories 27,058 (18,841) Accounts payable (5,091) (92,805) Net change in other current assets and current liabilities 9,659 (19,566) Other, net (2,493) (1,895) ------------- -------------- Cash provided by (used for) operating activities 138,375 (128,537) ------------- -------------- Investing Activities Additions to property and equipment (3,152) (5,359) Additions to computer software (3,940) (3,595) Proceeds from sale of property and equipment 5,312 52 ------------- -------------- Cash used for investing activities (1,780) (8,902) ------------- -------------- Financing Activities Additions to long-term debt 150,000 120,166 Reductions of long-term debt (274,022) (119) Other short-term financing, net (8,014) 22,235 Cash dividends paid (5,411) (5,362) Exercise of stock options 1,183 259 ------------- -------------- Cash provided by (used for) financing activities (136,264) 137,179 ------------- -------------- Net increase (decrease) in cash and cash equivalents 331 (260) Cash and cash equivalents at beginning of year 215 513 ------------- ------------- Cash and cash equivalents at end of period $ 546 $ 253 ============= ============== </TABLE> 5
Owens & Minor, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Accounting Policies In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which are comprised only of normal recurring accruals and the use of estimates) necessary to present fairly the consolidated financial position of Owens & Minor, Inc. and its wholly owned subsidiaries (the Company) as of June 30, 1996 and the consolidated results of operations for the three and six month periods and cash flows for the six month periods ended June 30, 1996 and 1995. 2. Interim Results of Operations The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. 3. Interim Gross Margin Reporting In general, the Company uses estimated gross margin rates to determine the cost of goods sold during interim periods. To improve the accuracy of its estimated gross margins for interim reporting purposes, the Company takes physical inventories at selected distribution centers. Reported results of operations for the three and six month periods ended June 30, 1996 and 1995 reflect the results of such inventories, if materially different. Management will continue a program of interim physical inventories at selected distribution centers to the extent it deems appropriate to ensure the accuracy of interim reporting and to minimize year-end adjustments. 4. Long-Term Debt and Refinancing During May 1996 the Company completed the refinancing of its $425 million revolving credit facility (Senior Credit Facility) by issuing $150 million of 10.875% Senior Subordinated Notes (Notes), increasing its available receivables financing facility (Receivables Financing Facility) to $150 million from $75 million and entering into a new $225 million revolving credit facility (New Senior Credit Facility). The Notes were issued on May 29, 1996, and mature on June 1, 2006. Interest on the Notes is payable semi-annually on June 1 and December 1. The Notes are redeemable at the Company's option subject to certain restrictions. The Notes are unconditionally guaranteed on a joint and several basis by all direct and indirect subsidiaries of the Company, other than O&M Funding Corp. (OMF). To manage the interest rate exposure of the Notes, the Company entered into interest rate swap agreements with terms of 10 years during the second quarter of 1996. Under the interest rate swap agreements, the Company pays the counterparties a variable rate based on 6
the six-month London Interbank Offered Rate (LIBOR) and the counterparties pay the Company a fixed interest rate, ranging from 7.29% to 7.32%. The total notional amount of the interest rate swaps was $100 million at June 30, 1996. The Company is exposed to certain losses in the event of nonperformance by the counterparties to these agreements. However, the Company's exposure is not material and nonperformance is not anticipated. The terms of the Receivables Financing Facility are substantially the same as the agreement entered into in December 1995 other than an increase in the available funds to $150 million and the extension of the term of the agreement from December 1996 to May 1999. At June 30, 1996 the Company had received $141 million under the Receivables Financing Facility. The New Senior Credit Facility expires in May 2001 with interest based on LIBOR or the Prime Rate. The New Senior Credit Facility limits the amount of indebtedness the Company may incur, requires the Company to maintain certain financial covenants including covenants related to tangible net worth, cash flow coverage, current ratio, leverage ratio and fixed charge coverage ratio and restricts the ability of the Company to materially alter the character of the business through consolidation, merger or purchase or sale of assets. 5. Condensed Consolidating Financial Information The following table presents condensed consolidating financial information for: Owens & Minor, Inc.; on a combined basis, the guarantors of Owens & Minor, Inc.'s Notes (all of the wholly owned subsidiaries of Owens & Minor, Inc. except for OMF); and OMF, Owens & Minor, Inc.'s only non-guarantor subsidiary of the Notes. Separate financial statements of the guarantor subsidiaries are not presented because the guarantors are jointly, severally and unconditionally liable under the guarantees and the Company believes the condensed consolidating financial statements are more meaningful in understanding the financial position of the guarantor subsidiaries. (In thousands) <TABLE> <CAPTION> As of and for the Owens six months ended & Minor, Guarantor June 30, 1996 Inc. Subsidiaries OMF Eliminations Consolidated ----------------- -------- ------------ ----------- ------------ ------------ <S> <C> Current assets $201,166 $470,512 $69,866 ($254,420) $487,124 Noncurrent assets 306,152 240,288 - (314,859) 231,581 Total assets 507,318 710,800 69,866 (569,279) 718,705 Current liabilities 3,578 466,457 54,775 (254,420) 270,390 Noncurrent liabilities 190,000 19,352 - - 209,352 Shareholders' equity 313,740 224,991 15,091 (314,859) 238,963 Net sales 14,633 1,521,250 3,912 (18,545) 1,521,250 Expenses 13,471 1,518,279 3,595 (18,545) 1,516,800 Net income 1,162 2,971 317 - 4,450 </TABLE> 7
Item 2. Owens & Minor, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Second quarter and first six months of 1996 compared with 1995 Net Sales. Net sales increased 0.8% to $749.9 million in the second quarter of 1996 from $743.7 million in the second quarter of 1995. Net sales increased 2.0% to $1.52 billion in the first six months of 1996 from $1.49 billion in the first six months of 1995. The Company's expected moderate sales growth has been primarily a result of the price increases instituted in December 1995 and the first quarter of 1996 and changes in management focus. Sales growth is expected to be moderate for the remainder of 1996 as the Company focuses on the profitability of existing business and obtaining new business that meets established profitability requirements. Gross margin. Gross margin as a percentage of net sales increased to 9.9% in the second quarter of 1996 from 9.5% in the second quarter of 1995, and from 8.7% in the fourth quarter of 1995. Gross margin as a percentage of net sales increased to 9.8% in the first six months of 1996 from 9.6% in the first six months of 1995. The increase has been a result of several initiatives. As discussed above, the Company implemented price increases for the services it provides and the majority of these price increases have been realized. The Company continues to remain focused on improving gross margin and continues to implement gross margin enhancement programs in addition to the price increases. These enhancement programs include: utilizing an activity-based cost system that charges incremental fees for additional distribution and enhanced inventory management services, implementing supplier partnerships that will increase margin opportunities for the Company as well as the supplier and continuing to improve the Company's utilization of technology which will continue to reduce the cost of the order fulfillment cycle. There can be no assurance that the Company's pricing methods and the other gross margin enhancement programs will produce increases in net sales or gross margin as a percentage of net sales in future periods. Selling, general and administrative expenses. Selling, general and administrative (SG&A) expenses as a percentage of net sales increased to 7.8% in the second quarter of 1996 from 7.3% in the second quarter of 1995 and increased to 7.9% in the first six months of 1996 from 7.2% in the first six months of 1995, but declined from 8.2% in the fourth quarter of 1995. The increase in SG&A expenses as a percentage of net sales as compared to the second quarter and first six months of 1995 was primarily a result of increased personnel costs incurred in connection with new contracts providing for enhanced service levels and services not previously provided by the Company, a significant increase in the number of Stock Keeping Units (SKUs) distributed by the Company, system conversions, opening or expanding 11 distribution centers and reconfiguring warehouse systems. During the second quarter of 1996, SG&A expenses decreased $2.6 million from 8.2% of net sales in the fourth quarter of 1995 to 7.9% in the first quarter of 1996 and to 7.8% in the second quarter of 1996. The SG&A expense decline is a result of many cost saving initiatives, primarily 8
the reduction of over 200 full time equivalent employees in the second quarter due to reduced overtime and temporary help. Also, the more cost effective utilization of the Company's mainframe computer system lowered SG&A expenses. The reduction in these costs has been achieved through the completion of 22 warehouse reconfigurations in 1995, the implementation of improved inventory management systems in a majority of its facilities and the refocus on functional best practices within the Company. Additionally, the implementation of the Company's restructuring plan to further reduce distribution center costs through the closure of two and the downsizing of five distribution centers (which resulted in $3.5 million of the Company's nonrecurring restructuring charges in the fourth quarter of 1995) has contributed to the reduction of SG&A expenses. The Company will continue to focus on these programs during 1996 and in future periods. Although the Company expects these initiatives to continue to reduce SG&A expenses, their impact cannot be assured. Depreciation and amortization. Depreciation and amortization increased by 9.6% in the second quarter of 1996 compared to the second quarter of 1995 and increased by 10.7 % in the first six months of 1996 compared to the first six months of 1995. This increase was due primarily to the Company's continued investment in improved Information Technology (IT). The Company anticipates increases in depreciation and amortization for the remainder of 1996 associated with additional capital investment in IT. Interest expense, net and discount on accounts receivable securitization (Financing Costs). Financing Costs, net of finance charge income of $1.2 million in the second quarter of 1996 and 1995 increased from $5.7 million in the second quarter of 1995 to $6.8 million in the second quarter of 1996. Financing Costs, net of finance charge income of $2.4 million and $1.6 million in the first six months of 1996 and 1995, respectively, increased from $11.1 million in the first six months of 1995 to $13.4 million in the first six months of 1996. The increases were primarily due to higher borrowing levels to fund increased working capital requirements and higher interest rates. Although Financing Costs, net of finance charge income increased compared to the same periods in 1995, Financing Costs, net of finance charge income in the second quarter of 1996 declined approximately 13.9% or $1.1 million from the fourth quarter of 1995. This decline is primarily due to the reduction of outstanding financing by approximately $40.8 million from March 31, 1996. Management has taken and continues to take action to reduce Financing Costs, including (i) improving financing rates (as discussed below in the liquidity section, the Company completed its refinancing plan during the second quarter of 1996 which will provide the Company improved financing rates) and (ii) reducing working capital requirements through the implementation of the Company's new inventory forecasting system, product standardization and the strengthening of its methods of monitoring and enforcing contract payment terms. Income taxes. The Company had an income tax provision of $3.4 million in the first six months of 1996 (representing an effective tax rate of 43.0%) compared with an income tax provision of $4.3 million in the first six months of 1995 (representing an effective tax rate of 40.8%). The increase in the effective tax rate was due to the Company's lower earnings level increasing the impact of certain nondeductible expenses such as goodwill amortization. 9
Net income. Net income increased $1.2 million in the second quarter of 1996 compared to the second quarter of 1995. Net income declined $1.9 million in the first six months of 1996 compared to the first six months of 1995. Excluding nonrecurring restructuring expenses net of taxes, net income has declined $1.2 million in the second quarter of 1996 compared to the second quarter of 1995 and has declined $5.9 million in the first six months of 1996 compared to the first six months of 1995. The decline was due to an increase in SG&A expenses and Financing Costs. Due to the initiatives previously discussed, the Company has shown improvement from its fourth quarter 1995 net loss of $9.0 million (which loss included a $3.4 million nonrecurring restructuring charge, net of taxes), to net income of $1.5 million in the first quarter of 1996 and to net income of $2.9 million in the second quarter of 1996. Although the trend has been favorable and the Company continues to pursue the initiatives previously discussed in an effort to continue improvement in the earnings of the Company, the impact of these initiatives on net income cannot be assured. Financial Condition, Liquidity and Capital Resources Liquidity. The Company's liquidity position improved significantly during the first six months of 1996 from the fourth quarter of 1995. The improvement was the result of increased earnings, reduced working capital requirements and the availability of additional financing sources. During May 1996 the Company refinanced its $425.0 million revolving credit facility (Senior Credit Facility) by issuing $150.0 million of 10.875% Senior Subordinated Notes (Notes), increasing its available receivables financing facility to $150.0 million from $75.0 million (Receivables Financing Facility) and entering into a new $225.0 million revolving credit facility (New Senior Credit Facility). The Notes were issued on May 29, 1996, and mature on June 1, 2006. Interest on the Notes is payable semi-annually on June 1 and December 1. The Notes are redeemable at the Company's option subject to certain restrictions. The Notes are unconditionally guaranteed on a joint and several basis by all direct and indirect subsidiaries of the Company, other than O&M Funding Corp. (OMF). During the second quarter, the Company entered into interest rate swap agreements to convert a portion of the fixed interest rates under the Notes to a variable rate. Under the swap agreements, the Company pays the counterparties a variable rate based on the six-month London Interbank Offered Rate (LIBOR) and the counterparties pay the Company a fixed interest rate, ranging from 7.29% to 7.32%. The total notional amount of these interest rate swaps was $100.0 million at June 30, 1996. The terms of the Receivables Financing Facility are substantially the same as the agreement entered into in December 1995 other than an increase in the available funds to $150.0 million and the extension of the term of the agreement to May 1999. At June 30, 1996 the Company had received $141.0 million under the Receivables Financing Facility. The New Senior Credit Facility expires in May 2001 with interest based on LIBOR or the Prime Rate. The New Senior Credit Facility limits the amount of indebtedness the Company may incur, 10
requires the Company to maintain certain financial covenants including covenants related to tangible net worth, cash flow coverage, current ratio, leverage ratio and fixed charge coverage ratio and restricts the ability of the Company to materially alter the character of the business through consolidation, merger or purchase or sale of assets. The Company expects that borrowings under the Notes, the New Senior Credit Facility and proceeds from the Receivables Financing Facility will be sufficient to fund its working capital needs and long-term strategic growth plans, although this cannot be assured. Available financing at June 30, 1996 was approximately $185.0 million. Working Capital Management. During the first six months of 1996 the Company has made significant improvement in working capital management. Inventory turnover has improved from 8.2 times in the fourth quarter of 1995, to 8.7 times in the first quarter of 1996, to 8.9 times in the second quarter of 1996. This improvement was due to the continued implementation of the Company's client/server-based forecasting system scheduled for completion during the third quarter of 1996 and the limitation of the number of SKUs from multiple manufacturers distributed by the Company. The Company has also reduced accounts receivable days sales outstanding from 40.0 in the fourth quarter of 1995 to 39.4 in the second quarter of 1996. This reduction has been achieved through strengthening the Company's methods of monitoring and enforcing contract payment terms and basing a portion of its sales force incentives on reducing days sales outstanding. Capital Expenditures. Capital expenditures were approximately $7.1 million in the first six months of 1996, of which approximately $5.8 million were for computer systems, including the continued conversion of certain applications from a mainframe computer system to client/server technology. Approximately 75% of the Company's $25.0 million of capital expenditures planned for 1996 will be for IT. The Company expects to continue to make this level of investment for the foreseeable future. These capital expenditures are expected to be funded through cash flow from operations. Inflation. Inflation has not had a significant effect on the Company's results of operations or financial condition. 11
Part II. Other Information Item 1. Legal Proceedings In May 1994, Owens & Minor, Inc. acquired all the outstanding capital stock of Stuart Medical, Inc. (Stuart) through a statutory share exchange. Accordingly, Stuart, as a wholly owned subsidiary of Owens & Minor, Inc., retains all of its pre-acquisition liabilities, subject to Stuart's and Owens & Minor, Inc.'s contractual right of indemnification from the former shareholders of Stuart for certain pre-acquisition liabilities (including liabilities arising from the spinal implant litigation discussed below) and the liability insurance coverage discussed below. Beginning in 1994 and continuing to the present, Stuart has been named as a defendant along with manufacturers, healthcare providers and others in approximately 200 lawsuits, filed in various federal and state courts by multiple plaintiffs, based on alleged injuries attributable to the implantation of internal spinal fixation devices distributed by a specialty products division of Stuart from the early 1980s to December 1992 and prior to Owen & Minor, Inc.'s acquisition of Stuart in 1994. Of the approximately 200 cases naming Stuart, there are approximately 100 plaintiffs implanted with the type of orthopedic screw distributed by Stuart. Most of the cases seek monetary damages in varying amounts. The great majority of these cases allege compensatory and punitive damages in an unspecified amount stated to be in excess of the jurisdictional minimum for the courts in which such cases are filed. A smaller group of cases seek specified damages ranging from $50,000 to $15,000,000. Many of these cases also seek the creation of a fund for medical research, prejudgment and post-judgment interest and costs of suit. Substantially all of these cases have been transferred to, and consolidated for pretrial proceedings in, the Eastern District of Pennsylvania in Philadelphia under the style MDL Docket No. 1014: In re Orthopedic Bone Screw Products Liability Litigation. All such cases are in the preliminary stages. In addition, a motion has been filed to add Stuart and a number of other parties as additional defendants in approximately 10 additional lawsuits involving multiple plaintiffs. Owens & Minor, Inc. believes that Stuart may be named as a defendant in additional similar lawsuits in the future. Stuart did not manufacture the internal spinal fixation devices. Based upon management's analysis of indemnification agreements between Stuart and the manufacturer involved, Owens & Minor, Inc. believes that Stuart is entitled to indemnification by the manufacturer of the devices with respect to claims alleging defects in the products. The cases described above are being defended by the manufacturer's and Stuart's respective insurance carriers. Owens & Minor, Inc. and Stuart are also contractually entitled to indemnification by the former shareholders of Stuart for any liabilities and related expenses incurred by Owens & Minor, Inc. or Stuart in connection with the foregoing litigation. Because of the preliminary status of the lawsuits, Owens & Minor, Inc. is unable at this time to determine with certainty whether Stuart may be held liable. In the event Stuart were to be held liable, Owens & Minor, Inc. believes that Stuart's available insurance coverage together with the indemnification rights discussed above are adequate to cover any losses should they occur, and accordingly has created no reserve therefor. Owens & Minor, Inc. is not aware of any uncertainty as to the availability and adequacy of such insurance or indemnification, although there can be no assurance that the manufacturers and former 12
shareholders will have sufficient financial resources in the future to meet such obligations. Owens & Minor, Inc. believes that, with or without regard to such indemnification or insurance, the likelihood is remote that any liability resulting from such litigation would have a material adverse effect on the Company's financial condition or results of operations. The Company is party to various other legal actions that are ordinary and incidental to its business. While the outcome of legal actions cannot be predicted with certainty, management believes the outcome of these proceedings will not have a material adverse effect on the Company's financial condition or results of operations. Item 2. Changes in Securities On May 29, 1996, Owens & Minor, Inc. issued $150 million of 10.875% Senior Subordinated Notes. Section 4.06 of the Indenture governing the Notes restricts the Company's ability to make certain payments, including the payment of dividends on Owens & Minor, Inc.'s Common Stock. See Section 4.06 of the Indenture dated as of May 29, 1996 attached as Exhibit 4(a) hereto. In addition, Section 7.12 of the Company's $225 million revolving credit facility prohibits Owens & Minor, Inc. from paying dividends unless it is in compliance with certain financial covenants and is otherwise not in default either prior to or after giving effect to any such dividend. See Section 7.12 of the Credit Agreement dated as of May 24, 1996 attached as Exhibit 4(b) hereto. Item 4. Submission of Matters to a Vote of Shareholders The following matters were submitted to a vote of Owens & Minor, Inc.'s shareholders at its annual meeting held on April 30, 1996 with the voting results designated below each such matter: (1) Election of Vernard W. Henley, G. Gilmer Minor, III and R.E Cabell, Jr., as directors of Owens & Minor, Inc. for a three-year term and election of Josiah Bunting, III as a director of Owens & Minor, Inc. for a one-year term. Votes Against Broker Directors Votes For or Withheld Abstentions Non-Votes - --------- ---------- ------------- ----------- --------- Vernard W. Henley 33,880,253 139,918 0 0 G. Gilmer Minor, III 33,920,876 99,295 0 0 R. E. Cabell, Jr. 33,879,128 141,043 0 0 Josiah Bunting, III 33,902,542 117,629 0 0 (2) Ratification of the appointment of KPMG Peat Marwick LLP as Owens & Minor, Inc.'s independent auditors. Votes Against Broker Votes For or Withheld Abstentions Non-Votes ---------- ------------- ----------- --------- 33,908,260 53,132 58,779 0 13
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4 (a) Indenture dated as of May 29, 1996 among Owens & Minor, Inc., as Issuer, Owens & Minor Medical, Inc., National Medical Supply Corporation, Owens & Minor West, Inc., Koley's Medical Supply, Inc., Lyons Physician Supply Company, A. Kuhlman & Co., Stuart Medical, Inc., as Guarantors, and Crestar Bank, as Trustee 4 (b) Credit Agreement dated as of May 24, 1996 by and among Owens & Minor, Inc., certain of its subsidiaries, various banks and lending institutions identified on the signature pages hereto, NationsBank, N.A., as agent, Bank of America National Trust and Savings Association and Crestar Bank, as co-agents, and NationsBank, N.A., as administrative agent 10 (a) Amended and Restated Purchase and Sale Agreement dated as of May 28, 1996 among Owens & Minor Medical, Inc., Stuart Medical, Inc., Owens & Minor, Inc. and O&M Funding Corp. 10 (b) Amended and Restated Receivables Purchase Agreement dated as of May 28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., Receivables Capital Corporation and Bank of America National Trust and Savings Association 10 (c) Amended and Restated Parallel Asset Purchase Agreement dated as of May 28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., the Parallel Purchasers from time to time party hereto and Bank of America National Trust and Savings Association 27 Financial Data Schedule (b) Reports on Form 8-K There were no reports on Form 8-K for the three month period ended June 30, 1996. 14
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Owens & Minor, Inc. (Registrant) Date August 9, 1996 /s/ GLENN J. DOZIER -------------- ----------------------------------- Glenn J. Dozier Senior Vice President, Finance, Chief Financial Officer Date August 9, 1996 /s/ ANN GREER RETOR --------------- ---------------------------------- Ann Greer Rector Vice President, Controller
Exhibit Index Exhibit # 4 (a) Indenture dated as of May 29, 1996 among Owens & Minor, Inc., as Issuer, Owens & Minor Medical, Inc., National Medical Supply Corporation, Owens & Minor West, Inc., Koley's Medical Supply, Inc., Lyons Physician Supply Company, A. Kuhlman & Co., Stuart Medical, Inc., as Guarantors, and Crestar Bank, as Trustee 4 (b) Credit Agreement dated as of May 24, 1996 by and among Owens & Minor, Inc., certain of its subsidiaries, various banks and lending institutions identified on the signature pages hereto, NationsBank, N.A., as agent, Bank of America National Trust and Savings Association and Crestar Bank, as co-agents, and NationsBank, N.A., as administrative agent 10 (a) Amended and Restated Purchase and Sale Agreement dated as of May 28, 1996 among Owens & Minor Medical, Inc., Stuart Medical, Inc., Owens & Minor, Inc. and O&M Funding Corp. 10 (b) Amended and Restated Receivables Purchase Agreement dated as of May 28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., Receivables Capital Corporation and Bank of America National Trust and Savings Association 10 (c) Amended and Restated Parallel Asset Purchase Agreement dated as of May 28, 1996 among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., the Parallel Purchasers from time to time party hereto and Bank of America National Trust and Savings Association 27 Financial Data Schedule