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 September 30, 1997 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) 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 (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 November 5, 1997 was 32,207,271 shares.
Owens & Minor, Inc. and Subsidiaries Index Page Part I. Financial Information Consolidated Balance Sheets - September 30, 1997 and December 31, 1996 3 Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 1997 and 1996 4 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996 5 Notes to Consolidated Financial Statements 6-8 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Part II. Other Information 11-13
Part I. Financial Information Item 1. Financial Statements Owens & Minor, Inc. and Subsidiaries Consolidated Balance Sheets <TABLE> <CAPTION> (In thousands, except share data) September 30, December 31, (Unaudited) 1997 1996 ------------- ------------ <S> <C> Assets Current assets Cash and cash equivalents $ 671 $ 743 Accounts and notes receivable, net of allowance of $6,404 and $6,495 180,083 147,243 Merchandise inventories 282,782 281,839 Other current assets 24,235 25,675 --------- -------- Total current assets 487,771 455,500 Property and equipment, net of accumulated depreciation of $40,186 and $35,242 27,689 29,231 Excess of purchase price over net assets acquired, net of accumulated amortization of $17,161 and $13,752 163,957 167,366 Other assets, net 25,522 27,404 ---------- --------- Total assets $ 704,939 $ 679,501 ========== ========== Liabilities and shareholders' equity Current liabilities Accounts payable $ 247,727 $ 224,037 Accrued payroll and related liabilities 7,339 5,001 Other accrued liabilities 36,790 33,472 ---------- ----------- Total current liabilities 291,856 262,510 Long-term debt 154,200 167,549 Accrued pension and retirement plans 5,285 7,042 ---------- ----------- Total liabilities 451,341 437,101 ---------- ------------ 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 and outstanding - 1,150 shares 115,000 115,000 Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 32,122 shares and 31,907 shares 64,244 63,814 Paid-in capital 6,818 5,086 Retained earnings 67,536 58,500 ---------- ---------- Total shareholders' equity 253,598 242,400 ---------- ----------- Total liabilities and shareholders' equity $ 704,939 $ 679,501 ========== =========== </TABLE> See accompanying notes to consolidated financial statements.
Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Income <TABLE> <CAPTION> (In thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- <S> <C> Net sales $ 785,778 $ 744,146 $ 2,312,123 $ 2,265,396 Cost of goods sold 706,897 669,660 2,080,099 2,042,220 ------------- ------------- ------------- -------------- Gross margin 78,881 74,486 232,024 223,176 ------------- ------------ -------------- -------------- Selling, general and administrative expenses 57,582 57,709 172,616 177,223 Depreciation and amortization 4,507 4,016 13,044 12,017 Interest expense, net 3,928 4,283 11,634 15,057 Discount on accounts receivable securitization 1,649 1,889 5,002 4,484 ------------- ------------ ------------- ------------- Total expenses 67,666 67,897 202,296 208,781 ------------- ------------ -------------- ------------- Income before income taxes 11,215 6,589 29,728 14,395 Income tax provision 4,737 2,839 12,486 6,195 ------------- ------------ --------------- ------------- Net income 6,478 3,750 17,242 8,200 Dividends on preferred stock 1,293 1,293 3,881 3,881 ------------- ------------ --------------- ------------- Net income attributable to common stock $ 5,185 $ 2,457 $ 13,361 $ 4,319 ============= ================ =============== ============== Net income per common share $ 0.16 $ 0.08 $ 0.42 $ 0. 14 ============= ================ =============== =============== Cash dividends per common share $ 0.045 $ 0.045 $ 0.135 $ 0.135 ============= ================ =============== ================ Weighted average common shares and common share equivalents 32,250 31,980 32,130 31,700 ============= ================= =============== ================ </TABLE> See accompanying notes to consolidated financial statements.
Owens & Minor, Inc. and Subsidiaries Consolidated Statements of Cash Flows <TABLE> <CAPTION> (In thousands) (Unaudited) Nine Months Ended September 30, ---------------------------------- 1997 1996 ---------- ---------- <S> <C> Operating Activities Net income $ 17,242 $ 8,200 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 13,044 12,017 Provision for LIFO reserve 2,150 1,551 Changes in operating assets and liabilities Accounts and notes receivable (32,657) 112,999 Merchandise inventories (3,093) 29,985 Accounts payable 38,778 (12,953) Net change in other current assets and current liabilities 7,729 15,854 Other, net (819) (1,417) ---------- -------- Cash provided by operating activities 42,374 166,236 ---------- --------- Investing Activities Additions to property and equipment (6,290) (4,553) Additions to computer software (3,115) (5,397) Proceeds from sale of property and equipment 1,838 5,372 ----------- --------- Cash used for investing activities (7,567) (4,578) ----------- ---------- Financing Activities Additions to long-term debt - 150,000 Reductions of long-term debt (13,358) (282,122) Other short-term financing, net (15,088) (22,471) Cash dividends paid (8,205) (8,136) Exercise of stock options 1,772 1,511 ----------- ---------- Cash used for financing activities (34,879) (161,218) ----------- ---------- Net increase (decrease) in cash and cash equivalents (72) 440 Cash and cash equivalents at beginning of year 743 215 ---------- ---------- Cash and cash equivalents at end of period $ 671 $ 655 ========== ========== </TABLE> See accompanying notes to consolidated financial statements.
Owens & Minor, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Accounting Policies Basis of Presentation 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 September 30, 1997 and the consolidated results of operations for the three and nine month periods and cash flows for the nine month periods ended September 30, 1997 and 1996. Derivative Financial Instruments The Company enters into off-balance sheet interest rate swap agreements as part of its interest rate risk management strategy. These swaps are not held for trading purposes and are classified as synthetic alterations. In order for the swaps to be accounted for as synthetic alterations they must satisfy the following criteria: (1) the asset or liability to be converted creates exposure to interest rate risk, and (2) the off-balance sheet agreement is designated and effective as a synthetic alteration of the balance sheet item. Accrual accounting is applied for these agreements and the net payments or receipts are accrued as other accrued liabilities and are recorded as adjustments to interest expense. If the outstanding financing were to drop below the notional amount of the related swap, the excess portion of the related swap would be marked to market and the resulting gain or loss included in income. If a swap were to be terminated, the gain or loss would be deferred and amortized over the remaining life of the agreement. 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 nine month periods ended September 30, 1997 and 1996 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. Long Term Debt and Off Balance Sheet Financing In September, 1997 the Company renegotiated the terms of its Senior Credit Facility (Facility). The Facility expires in May, 2001 with interest based on, at the Companys discretion, the London Interbank Offered Rate (LIBOR) or the Prime Rate. The Company is charged a commitment fee of between 0.15% and 0.25%, depending upon the Companys capitalization ratio, on the unused portion of the Facility. The terms of the Facility limit the amount of indebtedness that the Company may incur, require the Company to maintain certain levels of tangible net worth, current ratio, leverage ratio and fixed charge coverage, and restrict the ability of the Company to materially alter the character of the business through consolidation, merger or purchase or sale of assets. In October, 1997 the Companys accounts receivable financing facility (Receivables Financing Facility) was modified to reduce the term of the agreement from May, 1999 to October, 1998. The remaining terms of the Receivables Financing Facility are substantially the same as those in the agreement entered into in December, 1995 and modified in May, 1996. 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 Senior Subordinated 10-year Notes (Notes) (all of the wholly owned subsidiaries of Owens & Minor, Inc. except for O&M Funding Corp. (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. <TABLE> <CAPTION> (In thousands) As of and for the Owens nine months ended & Minor, Guarantor September 30, 1997 Inc. Subsidiaries OMF Eliminations Consolidated <S> <C> Current assets $ 155,220 $ 468,959 $ 85,784 $ (222,192) $ 487,771 Noncurrent assets 306,129 225,898 - (314,859) 217,168 ----------- ----------- ----------- -------------- --------------- Total assets $ 461,349 $ 694,857 $ 85,784 $ (537,051) $ 704,939 =========== =========== =========== ============== =============== Current liabilities $ 7,440 $ 439,092 $ 68,143 $ (222,819) $ 291,856 Noncurrent liabilities 154,200 5,285 - - 159,485 Shareholders equity 299,709 250,480 17,641 (314,232) 253,598 ----------- ----------- ----------- -------------- ---------------- Total liabilities and shareholders equity $ 461,349 $ 694,857 $ 85,784 $ (537,051) $ 704,939 =========== =========== =========== =============== ================ Net sales $ 11,646 $ 2,312,123 $ 10,591 $ (22,237) $ 2,312,123 Expenses 12,784 2,295,956 9,007 (22,866) 2,294,881 ----------- ----------- ----------- --------------- ---------------- Net income (loss) $ (1,138) $ 16,167 $ 1,584 $ 629 $ 17,242 =========== =========== =========== =============== ================ </TABLE>
<TABLE> <CAPTION> As of and for the Owens nine months ended & Minor, Guarantor September 30, 1996 Inc. Subsidiaries OMF Eliminations Consolidated - ------------------ ---- ------------ --- ------------ ------------ <S> <C> Current assets $ 191,572 $ 446,930 $ 53,892 $ (227,236) $ 465,158 Noncurrent assets 306,791 237,486 - (314,859) 229,418 ----------- ------------ ------------ --------------- ---------------- Total assets $ 498,363 $ 684,416 $ 53,892 $ (542,095) $ 694,576 =========== ============ ============ ============== ================= Current liabilities $ 6,261 $ 436,425 $ 38,451 $ (227,860) $ 253,277 Noncurrent liabilities 181,900 19,187 - - 201,087 Shareholders equity 310,202 228,804 15,441 (314,235) 240,212 ----------- ------------ ------------ --------------- ---------------- Total liabilities and shareholders equity $ 498,363 $ 684,416 $ 53,892 $ (542,095) $ 694,576 =========== ============ ============ ============== ================= Net sales $ 18,014 $ 2,265,396 $ 7,911 $ (25,925) $ 2,265,396 Expenses 17,937 2,258,732 7,076 (26,549) 2,257,196 ----------- ------------ ------------ --------------- ---------------- Net income $ 77 $ 6,664 $ 835 $ 624 $ 8,200 =========== ============ ============ ============== ================= </TABLE> Item 2. Owens & Minor, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations The following management discussion and analysis describes material changes in the Companys financial condition since December 31, 1996. 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 managements discussion and analysis of financial condition and results of operations included in the Companys 1996 Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 1996. 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, competition, changing trends in customer profiles, outcome of outstanding litigation, and changes in government regulations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and 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. Results of Operations Third quarter and first nine months of 1997 compared with 1996 Net sales. Net sales increased 5.6% to $785.8 million in the third quarter of 1997 from $744.1 million in the third quarter of 1996. Net sales increased 2.1% to $2,312.1 million in the first nine months of 1997 from $2,265.4 million in the first nine months of 1996. The increase in sales was a result of several new sales agreements signed during the first half of 1997, and penetration of existing accounts. The Company continues its emphasis on initiatives to increase profitable sales while continuing its efforts to reduce unprofitable sales and therefore increase the overall profitability of the Company. The Company will continue this commitment to profitable sales growth and has entered into several new agreements in 1997 that will provide an opportunity for such future growth, although such growth cannot be assured.
In August, 1997 the Company entered into a new three-year contract with VHA Inc. (VHA) to provide distribution services to VHAs member hospitals and primary care facilities. Net sales to member hospitals under contract with VHA Inc. totaled approximately $926 million and $910 million for the nine month periods ended September 30, 1997 and 1996, approximately 40% of the Companys total net sales. Under this contract, the Company will distribute medical and surgical supplies and pursue growth opportunities with VHAs member hospitals and primary care facilities. Gross margin. Gross margin as a percentage of net sales of 10.0% in the third quarter of 1997 is unchanged from the third quarter of 1996. Gross margin as a percentage of net sales increased to 10.0% in the first nine months of 1997 from 9.9% in the first nine months of 1996. The improvement has been a result of the Companys efforts to reduce unprofitable sales by negotiating price increases where appropriate or reducing sales to unprofitable customers. Also, the improvement has been the result of product and supplier standardization. The Company will continue to focus on maintaining margin levels through its continued emphasis on profitable sales and standardization of suppliers and products. Selling, general and administrative expenses. Selling, general and administrative (SG&A) expenses as a percentage of net sales decreased to 7.3% in the third quarter of 1997 from 7.8% in the third quarter of 1996 and decreased to 7.5% in the first nine months of 1997 from 7.8% in the first nine months of 1996. This decline was a result of many cost-saving initiatives, including the reduction of over 100 full-time equivalent employees since September 30, 1996; the reduction in the cost of employee retirement plans; the more cost effective utilization of computer resources; the implementation of improved inventory management systems; the continuing automation of administrative functions through the utilization of electronic data interchange; and the refocus on best practices within the Company. The results of these initiatives will be partially offset by costs associated with computer system changes required to accommodate the year 2000. Depreciation and amortization. Depreciation and amortization increased by 12.2% in the third quarter of 1997 compared to the third quarter of 1996 and increased by 8.5% in the first nine months of 1997 compared to the first nine months of 1996. This increase was due primarily to the Company's continued investment in information technology. The Company anticipates similar increases in depreciation and amortization for the remainder of 1997 associated with additional capital investment in this area. Interest expense, net and discount on accounts receivable securitization (financing costs). Financing costs, net of finance charge income of $0.5 million and $1.1 million in the third quarter of 1997 and 1996, respectively, decreased to $5.6 million in the third quarter of 1997 from $6.2 million in the third quarter of 1996. Financing costs, net of finance charge income of $2.3 million and $3.5 million in the first nine months of 1997 and 1996, respectively, decreased to $16.6 million in the first nine months of 1996 from $19.5 million in the first nine months of 1996. The decline in financing costs has been a result of the Companys ability to reduce working capital requirements by substantially completing the implementation of its client/server-based inventory forecasting system and strengthening its accounts receivable collection procedures. As a result of the reduction in working capital requirements, the Company has reduced outstanding borrowing by approximately $75.8 million since September 30, 1996. Additionally, during 1996, the Company completed a refinancing plan that, in addition to the Companys improved financial performance, reduced the effective rate of its outstanding financing. The Company will continue to take action to reduce financing costs by continuing its working capital reduction initiatives, although the future results of these initiatives cannot be assured.
Income taxes. The Company had an income tax provision of $12.5 million in the first nine months of 1997 (representing an effective tax rate of 42.0%) compared with $6.2 million in the first nine months of 1996 (representing an effective tax rate of 43.0%). The decline in the effective tax rate is due primarily to increased income before taxes reducing the impact of nondeductible goodwill amortization. Net income. Net income increased $2.7 million in the third quarter of 1997 compared to the third quarter of 1996. Net income increased $9.0 million in the first nine months of 1997 compared to the first nine months of 1996. The increase was primarily due to the initiatives previously discussed related to gross margin, SG&A expenses and financing costs. Although the trend has been favorable and the Company continues to pursue these and other initiatives, the future impact on net income cannot be assured. Financial Condition, Liquidity and Capital Resources Liquidity. The Company's liquidity position improved significantly during the first nine months of 1997 compared to the first nine months of 1996. Outstanding financing was reduced $75.8 million to $249.8 million at September 30, 1997 from $325.6 million at September 30, 1996 and $43.7 million from $293.5 million on December 31, 1996. The capitalization ratio (excluding the impact of the off balance sheet accounts receivable securitization) decreased to 49.6% at September 30, 1997 from 57.5% at September 30, 1996 and from 54.8% at December 31, 1996. The improvement was the result of reduced working capital requirements and increased earnings. The Company expects that its available financing will be sufficient to fund its working capital needs and long-term strategic growth plans, although this cannot be assured. At September 30, 1997, the Company had approximately $220.8 million of unused credit under its revolving credit facility and $30.6 million under its accounts receivable financing facility. Working Capital Management. During the first nine months of 1997, the Companys working capital management improved significantly compared to the first nine months of 1996. Inventory turnover improved to 9.6 in the third quarter of 1997 from 9.0 in the third quarter of 1996 and from 9.4 in the fourth quarter of 1996. This improvement was due to the implementation of the Com-pany's client/server-based inventory forecasting system and the initiative to reduce the number of items from multiple manufacturers distributed by the Company. The Company has also reduced accounts receivable days sales outstanding (excluding the impact of the off balance sheet accounts receivable securitization) to 31.6 days in the third quarter of 1997 from 33.9 days in the fourth 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. The Company will focus on maintaining these working capital management measurements, although the results of its efforts cannot be assured.
Capital Expenditures. Capital expenditures were approximately $9.4 million in the first nine months of 1997, of which approximately $5.9 million was for computer systems. The Company expects to continue to invest in technology for the foreseeable future as the most cost effective method of reducing operating expenses. These capital expenditures are expected to be funded through cash flow from operations. Recent Accounting Pronouncements In February, 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share. SFAS 128 prescribes the computation, presentation and disclosure requirements for earnings per share. This standard is effective for reporting periods ending after December 15, 1997. Management believes the adoption of this new standard will not have a material impact on the results of operations of the Company. Part II. Other Information Item 1. Legal Proceedings As of October 31, 1997, Stuart Medical, Inc. (Stuart), which was acquired by the Company in May, 1994, had been named as a defendant along with product manufacturers, distributors, healthcare providers, trade associations and others in approximately 136 lawsuits, filed in various federal and state courts (the Cases). The Cases represent the claims of approximately 143 plaintiffs claiming personal injuries and approximately 73 spouses asserting claims for loss of consortium. The Cases seek damages for personal injuries allegedly attributable to spinal fixation devices. The great majority of the Cases seek compensatory and punitive damages in unspecified amounts. Prior to December 1992, Stuart distributed spinal fixation devices manufactured by Sofamor SNC, a predecessor of Sofamor Danek Group, Inc. (Sofamor Danek). Approximately a third of the claims involve plaintiffs implanted with spinal fixation devices manufactured by Sofamor Danek. Such plaintiffs allege that Stuart is liable to them under applicable products liability law for injuries caused by such devices distributed and sold by Stuart. In addition, such plaintiffs allege that Stuart distributed and sold the spinal fixation devices through deceptive and misleading means and in violation of applicable law. In the remaining Cases, plaintiffs seek to hold Stuart liable for injuries caused by other manufacturers devices that were neither distributed nor sold by Stuart. Such plaintiffs allege that Stuart engaged in a civil conspiracy and concerted action with manufacturers, distributors and others to promote the sale of spinal fixation devices through deceptive and misleading means and in violation of applicable law. Stuart never manufactured any spinal fixation devices. The Company believes that affirmative defenses are available to Stuart. All Cases filed against Stuart have been, and will continue to be, vigorously defended.
A majority of the 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. Discovery proceedings, including the taking of depositions have been ongoing in certain of the Cases, and, in a number of Cases, discovery has been completed and these Cases have been remanded back for trial to those jurisdictions where they were originally filed. As no Case has yet been prepared for trial involving the Company, the Company is unable at this time to determine with certainty whether or not Stuart may be held liable. In October 1997, the presiding judge entered an order approving a settlement agreement between one manufacturer of spinal fixation devices, AcroMed Corporation (AcroMed), and the plaintiffs legal committee in the multi-district litigation. Under the proposed terms of the settlement, AcroMed would establish a settlement fund consisting of $100 million in cash and the proceeds of its product liability insurance coverage. Stuart did not distribute devices manufactured by AcroMed and is not a party to the AcroMed settlement. It is anticipated that nonsettling defendants, including other manufacturers and distributors, will appeal the approval of the settlement. The Company believes that Stuart may be named as a defendant in additional similar cases in the future as a result of the pending AcroMed settlement or as statutes of limitations approach expiration. Based upon managements analysis of indemnification agreements between Stuart and Sofamor Danek, the manufacturer of the devices distributed by Stuart, the Company believes that Stuart is entitled to indemnification by Sofamor Danek at least with respect to claims brought by plaintiffs implanted with devices manufactured by Sofamor Danek. Such Cases are being defended by Stuarts insurance carriers. Regarding those Cases filed by plaintiffs implanted with other manufacturers devices, one of Stuarts primary insurance carriers has notified a representative of the former shareholders of Stuart that it will withdraw its provision of defense of such Cases and another one of Stuarts primary insurance carriers has notified a representative of the former shareholders of Stuart that it has declined to provide a defense for such Cases, in both instances asserting that such Cases involve only conspiracy and concerted action claims. The former shareholders of Stuart are contesting the insurance companies withdrawal and declination of the defense of such Cases. The Company and Stuart are also contractually entitled to indemnification by the former shareholders of Stuart for any liabilities and related expenses incurred by the Company or Stuart in connection with the foregoing litigation. The Company believes that Stuarts available insurance coverage together with the indemnification rights discussed above are adequate to cover any losses should they occur, and accordingly has accrued no liability therefor. Except as set forth above, the Company is not aware of any uncertainty as to the availability and adequacy of such insurance or indemnification, although there can be no assurance that Sofamor Danek and the former shareholders will have sufficient financial resources in the future to meet such obligations.
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 Companys financial condition or results of operation. Item 6. Exhibits and Reports on Form 8-K (a) Item 601 Exhibits Those exhibits required to be filed by Item 601 of Regulation S-K are listed in the Exhibit Index immediately preceding the exhibits filed herewith and such listing is incorporated herein by reference. (b) Report on Form 8-K No reports on Form 8-K were filed by the Company during the quarter for which this Report is filed.
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 November 13, 1997 /s/ Ann Greer Rector ------------------- Ann Greer Rector Senior Vice President & Chief Financial Officer Date November 13, 1997 /s/ Olwen B. Cape ----------------- Olwen B. Cape Vice President & Controller Chief Accounting Officer
Exhibit Index Exhibit # 4 Credit Agreement dated as of September 15, 1997 by and among Owens & Minor, Inc., certain of its subsidiaries, the various banks and lending institutions identified on the signature pages hereto, NationsBank, N.A., as agent, Bank of America NT and SA and Crestar Bank, as co-agents, and NationsBank, N.A., as administrative agent 10(a) Owens & Minor, Inc. Management Equity Ownership Program 10(b) First Amendment dated as of October 17, 1997 to the Amended and Restated Receivables Purchase Agreement 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) First Amendment dated as of October 17, 1997 to the Amended and Restated Parallel Asset Purchase Agreement among O&M Funding Corp., Owens & Minor Medical, Inc., Owens & Minor, Inc., Parallel Purchasers and Bank of America National Trust and Savings Association 10(d) Form of Enhanced Authorized Distribution Agency Agreement dated as of August 20, 1997 between VHA, Inc. and Owens & Minor* 27 Financial Data Schedule * The Company has requested confidential treatment by the Commission of certain portions of this Agreement, which portions have been omitted and filed separately with the Commission.