RICHMOND, Va., July 21 /PRNewswire-FirstCall/ -- Owens & Minor reported revenue for the second quarter ended June 30, 2004, of $1.12 billion, up 6.2 percent compared to $1.05 billion in the second quarter last year. Earnings per diluted common share (EPS) for the second quarter of 2004 were $0.39, up 5.4 percent, compared to $0.37 in the prior year second quarter. Net income was $15.3 million for the quarter, a 12.8 percent increase over net income of $13.6 million in the second quarter of 2003.
“Our second quarter and year-to-date results are very heartening,” said G. Gilmer Minor, III, chairman and chief executive officer of Owens & Minor. “This year’s second quarter results compared favorably against one of our strongest ever second quarters last year. Revenues and profits continue to grow as expected. Productivity, asset management results, and cash flow are exceeding our expectations so far this year. And, our teammates have never been more committed to our customers’ success. It is truly the strength of our people that produces these excellent results.”
Other Second Quarter Results
Operating earnings for the second quarter 2004 were 2.5 percent of revenue, compared to operating earnings of 2.6 percent in the second quarter last year. Gross margin for the quarter was 10.3 percent of revenue, unchanged from the comparable period last year. Selling, general and administrative expenses (SG&A) were 7.6 percent of revenue, compared to 7.5 percent of revenue one year ago. Core distribution productivity improvement partially offset continued investment in strategic initiatives, and spending on information technology support and teammate healthcare costs.
“This year, we’ve continued to demonstrate the value of Owens & Minor in the marketplace, and as a result, we’ve seen solid growth in our top line,” said Craig R. Smith, president and chief operating officer of Owens & Minor. “I am very proud of our team’s efforts to grow CostTrack(SM), which is a growing percentage of our business. We continue to make progress on our strategic initiatives, and we are focused on growing profitable sales and improving margin.”
Asset management for the second quarter of 2004 was exceptionally strong, with days sales outstanding (DSO) of 25.5 days, compared to 28.0 days in the prior year quarter, and inventory turns of 10.0, compared to 9.9 turns in the second quarter last year. This resulted in cash flow from operations of $18.2 million.
The tax rate for the quarter was 37.5 percent, bringing the year-to-date rate to 38.3 percent. This rate reflects reductions in the company’s estimates of its ultimate tax liability for years subject to audit.
Year-to-Date Results
For the six months ended June 30, 2004, revenue improved 7.4 percent to $2.23 billion, compared to revenue of $2.07 billion in the comparable period of 2003. Net income for the first half of 2004 was $30.0 million, up 13.1 percent compared to $26.5 million in the first six months of 2003. Year-to- date, diluted EPS was $0.76, compared to $0.72 in 2003, an increase of 5.6 percent.
Year-to-date, operating earnings were 2.5 percent of revenue, compared to 2.6 percent of revenue in the first half of 2003. Gross margin for the first half of 2004 was 10.3 percent of revenue compared to 10.4 percent in the first six months of 2003, while SG&A was 7.6 percent of revenue compared to 7.5 percent last year. Cash flow from operations year-to-date was $71.1 million.
Outlook for 2004
Financial guidance for 2004 remains unchanged. The company anticipates that it will report revenue growth in the 5 to 7 percent range, and diluted EPS in a range of $1.54 to $1.56 for the year.
Quarterly Highlights
US News & World Report’s recently published 2004 “Best Hospitals in America” issue named 14 hospitals to its prestigious Honor Roll, and 7 of these hospitals have prime vendor customer relationships with Owens & Minor for medical and surgical products. Hospitals were named to the prestigious Honor Roll only if they excelled in six or more medical specialties. Collectively, these hospital customers use a wide array of Owens & Minor’s distribution and supply chain consulting services, including CostTrack(SM), WISDOM2SM, PANDAC(R), MediChoice(R), FOCUS(TM) and various OMSolutions(SM) consulting and outsourcing engagements.
During the quarter, Owens & Minor was among 12 organizations worldwide that were named as winners of the Data Warehousing Institute’s 2004 Best Practices in Data Warehousing Awards. The Data Warehousing Institute (TDWI) considered 85 organizations in 11 categories. This year, Owens & Minor won top honors in the category “Radical Data Warehousing/Business Intelligence.” This category covered organizations that have taken data warehouse capabilities beyond normal use and have successfully implemented an innovative and unique solution. This marks the fourth time Owens & Minor has won recognition from TDWI. In 1997 and 1999, Owens & Minor was cited as a “Best Practices” winner, while in 1999, Owens & Minor won the “Leadership Award.” Other 2004 winners include Union Pacific Corporation, Quicken Loans, and Anthem, Inc.
Also during the second quarter 2004, Owens & Minor and its information technology partner, Perot Systems Corporation, were named as the 2004 “Best Partnership” in the distinguished Outsourcing Excellence Awards (formerly Editor’s Choice Awards), sponsored annually by the Outsourcing Center and its parent company the Everest Group. A panel of industry experts selected winners after a rigorous review of relationship structures and outcomes achieved among the 100 nominations. Owens & Minor has been a Perot Systems customer since 1998, and in 2002 outsourced essentially all of its information technology functions to Perot Systems. Together, Owens & Minor and Perot Systems have developed a number of innovative solutions that allow Owens & Minor to effectively manage business processes and supply chain logistics for their customers and suppliers. The annual Outsourcing Excellence Awards were developed by the Outsourcing Center, an online community specializing in thought leadership, best practices and innovation in outsourcing.
Safe Harbor Statement
Except for the historical information contained herein, the matters discussed in this press release may constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These include: the rate at which new business can be converted to the company, intense competitive pressures within the industry, the success of any strategic initiatives, changes in customer order patterns, pricing pressures, changes in government funding to hospitals and other healthcare providers, loss of major customers, and other factors discussed from time to time in the reports filed by the company with the Securities and Exchange Commission. The company assumes no obligation to update information contained in this release.
Owens & Minor, Inc., a FORTUNE 500 company headquartered in Richmond, Virginia, is the leading distributor of national name-brand medical and surgical supplies and a healthcare supply chain management company. With a diverse product and service offering and distribution centers throughout the United States, the company serves hospitals, integrated healthcare systems, alternate care locations, group purchasing organizations and the federal government. Owens & Minor provides technology and consulting programs that enable healthcare providers to maximize efficiency and cost-effectiveness in materials purchasing, improve inventory management and streamline logistics across the entire medical supply chain -- from origin of product to patient bedside. The company also has established itself as a leader in the development and use of technology. For news releases, or for more information about Owens & Minor, visit the company Web site at http://www.owens-minor.com/.
Conference Call and Webcast Information: The second quarter conference call is scheduled for Thursday, July 22, 2004 at 8:30am EDT. The telephone number for the conference call is: 800-299-0148; no access code is required. A playback of the call will be available for five business days at 888-286-8010 with access code #29735579. The conference call will also be Webcast at http://www.owens-minor.com/ under the Investor Relations section.
Owens & Minor, Inc. Consolidated Statements of Income (unaudited) (in thousands, except ratios and per share data) Three Months Ended June 30, % of % of % Fav 2004 revenue 2003(1) revenue (Unfav) Revenue $1,119,375 100.0% $1,054,502 100.0% 6.2% Cost of revenue 1,004,544 89.7 945,610 89.7 (6.2) Gross margin 114,831 10.3 108,892 10.3 5.5 Selling, general and administrative expenses 84,533 7.6 78,834 7.5 (7.2) Depreciation and amortization 3,815 0.3 3,952 0.4 3.5 Other operating (income) and expense, net (1,171) (0.1) (1,313) (0.1) (10.8) Operating earnings 27,654 2.5 27,419 2.6 0.9 Interest expense, net 3,043 0.3 3,492 0.3 12.9 Discount on accounts receivable securitization 83 0.0 178 0.0 53.4 Distributions on mandatorily redeemable preferred securities - - 1,402 0.1 100.0 Income before income taxes 24,528 2.2 22,347 2.1 9.8 Income tax provision 9,203 0.8 8,759 0.8 (5.1) Net income $ 15,325 1.4% $ 13,588 1.3% 12.8% Net income per basic common share $ 0.39 $ 0.41 Net income per diluted common share $ 0.39 $ 0.37 Weighted average shares - basic 39,002 33,383 Weighted average shares - diluted 39,601 39,016 Six Months Ended June 30, % of % of % Fav 2004 revenue 2003(1) revenue (Unfav) Revenue $2,225,449 100.0% $2,072,471 100.0% 7.4% Cost of revenue 1,996,558 89.7 1,856,778 89.6 (7.5) Gross margin 228,891 10.3 215,693 10.4 6.1 Selling, general and administrative expenses 168,550 7.6 156,245 7.5 (7.9) Depreciation and amortization 7,521 0.3 7,933 0.4 5.2 Other operating (income) and expense, net (2,272) (0.1) (2,480) (0.1) (8.4) Operating earnings 55,092 2.5 53,995 2.6 2.0 Interest expense, net 6,289 0.3 7,011 0.3 10.3 Discount on accounts receivable securitization 261 0.0 382 0.0 31.7 Distributions on mandatorily redeemable preferred securities - - 2,898 0.1 100.0 Other expense - - 154 0.0 100.0 Income before income taxes 48,542 2.2 43,550 2.1 11.5 Income tax provision 18,592 0.8 17,071 0.8 (8.9) Net income $ 29,950 1.3% $ 26,479 1.3% 13.1% Net income per basic common share $ 0.77 $ 0.79 Net income per diluted common share $ 0.76 $ 0.72 Weighted average shares - basic 38,937 33,458 Weighted average shares - diluted 39,558 39,278 (1) Certain components of selling, general and administrative expenses and interest expense, net for the 2003 statement of income have been reclassified to cost of revenue and other operating income and expense, net in order to conform to the current presentation. Owens & Minor, Inc. Consolidated Balance Sheets (unaudited) (in thousands) June 30, December 31, 2004 2003 Assets Current assets Cash and cash equivalents $ 48,674 $ 16,335 Accounts and notes receivable, net 329,049 353,431 Merchandise inventories 413,611 384,266 Other current assets 30,391 27,343 Total current assets 821,725 781,375 Property and equipment, net 22,596 21,088 Goodwill 198,938 198,063 Other assets, net 43,323 45,222 Total assets $ 1,086,582 $ 1,045,748 Liabilities and shareholders’ equity Current liabilities Accounts payable $ 331,411 $ 314,723 Accrued payroll and related liabilities 12,399 13,279 Other accrued liabilities 68,245 67,630 Total current liabilities 412,055 395,632 Long-term debt 207,032 209,499 Other liabilities 31,274 30,262 Total liabilities 650,361 635,393 Shareholders’ equity Common stock 78,594 77,958 Paid-in capital 122,763 118,843 Retained earnings 241,778 220,468 Accumulated other comprehensive loss (6,914) (6,914) Total shareholders’ equity 436,221 410,355 Total liabilities and shareholders’ equity $ 1,086,582 $ 1,045,748 Owens & Minor, Inc. Consolidated Statements of Cash Flows (unaudited) (in thousands) Six Months Ended June 30, 2004 2003 Operating activities Net income $ 29,950 $ 26,479 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 7,521 7,933 Provision for LIFO reserve 2,595 2,870 Provision for losses on accounts and notes receivable 891 1,380 Changes in operating assets and liabilities: Accounts and notes receivable 23,513 31,162 Merchandise inventories (31,940) (42,218) Accounts payable 38,161 88,790 Net change in other current assets and current liabilities (3,341) (5,739) Other, net 3,706 4,243 Cash provided by operating activities 71,056 114,900 Investing activities Additions to property and equipment (5,087) (2,615) Additions to computer software (2,570) (5,106) Net cash paid for acquisition of business (2,500) - Other, net 12 25 Cash used for investing activities (10,145) (7,696) Financing activities Repurchase of mandatorily redeemable preferred securities - (20,412) Repurchase of common stock - (10,884) Net payments on revolving credit facility - (27,900) Cash dividends paid (8,640) (5,714) Proceeds from exercise of stock options 2,751 2,880 Decrease in drafts payable (21,500) (30,000) Other, net (1,183) - Cash used for financing activities (28,572) (92,030) Net increase in cash and cash equivalents 32,339 15,174 Cash and cash equivalents at beginning of period 16,335 3,361 Cash and cash equivalents at end of period $ 48,674 $ 18,535 Owens & Minor, Inc. Financial Statistics (unaudited) Quarter Ended (in thousands, except ratios and per share data) 06/30/2004 03/31/2004 12/31/2003 Operating results: Revenue $1,119,375 $1,106,074 $1,108,087 Gross margin(1) $ 114,831 $ 114,060 $ 111,489 Gross margin as a percent of revenue(1) 10.3% 10.3% 10.1% SG&A expense(1) $ 84,533 $ 84,017 $ 82,682 SG&A expense as a percent of revenue(1) 7.6% 7.6% 7.5% Operating earnings(1) $ 27,654 $ 27,438 $ 26,263 Operating earnings as a percent of revenue(1) 2.5% 2.5% 2.4% Net income $ 15,325 $ 14,625 $ 14,327 Net income per basic common share $ 0.39 $ 0.38 $ 0.37 Net income per diluted common share $ 0.39 $ 0.37 $ 0.36 Accounts receivable: Accounts and notes receivable, net $ 329,049 $ 335,028 $ 353,431 Days sales outstanding 25.5 26.1 27.8 Inventory: Merchandise inventories $ 413,611 $ 395,053 $ 384,266 Average inventory turnover 10.0 10.2 10.2 Financing: Debt $ 207,032 $ 211,051 $ 209,499 Mandatorily redeemable preferred securities $ - $ - $ - Stock information: Cash dividends per common share $ 0.11 $ 0.11 $ 0.09 Stock price at quarter-end $ 25.90 $ 25.30 $ 21.91 Quarter Ended (in thousands, except ratios and per share data) 09/30/2003 06/30/2003 Operating results: Revenue $1,063,509 $1,054,502 Gross margin(1) $ 109,220 $ 108,892 Gross margin as a percent of revenue(1) 10.3% 10.3% SG&A expense(1) $ 80,868 $ 78,834 SG&A expense as a percent of revenue(1) 7.6% 7.5% Operating earnings(1) $ 25,453 $ 27,419 Operating earnings as a percent of revenue(1) 2.4% 2.6% Net income $ 12,835 $ 13,588 Net income per basic common share $ 0.37 $ 0.41 Net income per diluted common share $ 0.34 $ 0.37 Accounts receivable: Accounts and notes receivable, net $ 323,103 $ 322,314 Days sales outstanding 27.5 28.0 Inventory: Merchandise inventories $ 387,356 $ 391,183 Average inventory turnover 9.7 9.9 Financing: Debt $ 211,311 $ 213,698 Mandatorily redeemable preferred securities $ - $ 104,378 Stock information: Cash dividends per common share $ 0.09 $ 0.09 Stock price at quarter-end $ 24.10 $ 22.35 (1) Certain components of selling, general and administrative expenses and interest expense, net for the 2003 statement of income have been reclassified to cost of revenue and other operating income and expense, net in order to conform to the current presentation.
Owens & Minor, Inc.
CONTACT: Jeff Kaczka, Senior Vice President & CFO, +1-804-965-5896,Richard F. Bozard, Vice President, Treasurer, +1-804-965-2921, or TrudiAllcott, Manager, Investor Communications, +1-804-935-4291, all of Owens &Minor, Inc.
Web site: http://www.owens-minor.com/
Company News On-Call: http://www.prnewswire.com/comp/667125.html
