Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to __________
Commission File Number 1-9810
OWENS & MINOR, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-01701843
(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)
Registrant's telephone number, including Area Code (804) 747-9794
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $2 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of Common Stock held by non-affiliates (based
upon the closing sales price) was approximately $286,184,622 as of March 5,
1996. In determining this figure, the Company has assumed that all of its
officers, directors and persons known to the Company to be the beneficial
owners of more than five percent of the Company's Common Stock are
affiliates. Such assumption shall not be deemed conclusive for any other
purpose.
The number of shares of the Company's Common Stock outstanding as of
March 5, 1996 was 30,872,293 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Owens & Minor, Inc. Annual Report to Shareholders for the year
ended December 31, 1995 (the "1995 Annual Report") are incorporated by reference
into Part II of this Form 10-K and portions of the Owens & Minor, Inc.
definitive Proxy Statement for the 1996 Annual Meeting of Shareholders (the
"1996 Proxy Statement") are incorporated by reference into Part III of this Form
10-K. With the exception of the specific information referred to in Items 5, 6,
7 and 8 hereof with respect to the 1995 Annual Report and Items 10, 11, 12 and
13 hereof with respect to the 1996 Proxy Statement, the 1995 Annual Report and
the 1996 Proxy Statement are not deemed to be filed as a part of this report.
TABLE OF CONTENTS
and
CROSS REFERENCE SHEET
Page Number(s)/Sections
Form Annual Proxy
10-K Report Statement
PART I
Item 1 Business 2-10
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a
Vote of Security Holders 11
PART II
* Item 5 Market for Registrant's Common
Equity and Related Stockholder
Matters 15 35
* Item 6 Selected Financial Data 15 12-13
* Item 7 Management's Discussion and
Analysis of Financial
Condition and Results
of Operation 15 14-17
* Item 8 Financial Statements and
Supplementary Data 15 18-33
Item 9 Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 15
PART III
** Item 10 Directors and Executive Officers Proposal 1:
of the Registrant Election of
16 Directors
** Item 11 Executive Compensation 16 Proposal 1:
Election of
Directors-
Executive
Compensation
** Item 12 Security Ownership of Certain Proposal 1:
Beneficial Owners and Election of
Management 16 Directors-
Capital Stock
Owned by
Principal
Shareholders
and Management
** Item 13 Certain Relationships and
Related Transactions 16 None
PART IV
Item 14 Exhibits, Financial Statement
Schedules, and Reports on 17-20
Form 8-K
___________________________________________________________________________
* Information related to this item is hereby incorporated by reference to the
1995 Annual Report.
** Information related to this item is hereby incorporated by reference to the
1996 Proxy Statement.
OWENS & MINOR, INC.
PART I
Item 1.Business
Owens & Minor, Inc. (the "Company" or "O&M") is one of the two largest
distributors of medical/surgical supplies in the United States. The Company
distributes approximately 300,000 finished medical/surgical products produced by
approximately 3,000 manufacturers to over 4,000 customers from 49 distribution
centers nationwide. The Company's customers are primarily hospitals and also
include alternate care facilities such as physicians' offices, clinics, nursing
homes and surgery centers. The majority of the Company's sales consists of
dressings, endoscopic products, intravenous products, needles and syringes,
sterile procedure trays, surgical products and gowns, sutures and urological
products. The Company was incorporated in Virginia on December 7, 1926 as a
successor to a partnership founded in Richmond, Virginia in 1882.
The Company has significantly expanded its national presence over the last
five years. This expansion resulted from both internal growth and acquisitions,
including the May 1994 acquisition of Stuart Medical, Inc. ("Stuart"), then the
third largest distributor of medical/surgical supplies in the United States with
1993 net sales of approximately $890.5 million. Since 1991, the Company has
grown from 27 medical distribution centers serving 37 states to 49 distribution
centers serving 50 states currently. Over the same period, the Company's net
sales increased at a 30.7% compound annual rate, almost tripling from
approximately $1.0 billion in 1991 to approximately $3.0 billion in 1995.
The Company believes that in 1995 sales of medical/surgical supplies in the
United States approximated $30.0 billion and that approximately half of these
sales were made through distributors, with the balance having been sold directly
by manufacturers. In recent years, the medical/surgical supply distribution
industry has grown due to the rising consumption of medical supplies and the
increasing reliance by manufacturers and customers on distributors. This
increasing reliance is driven by customers seeking to take advantage of cost
savings achievable through the use of distributors. In addition, the healthcare
industry has been characterized by the consolidation of healthcare providers
into larger and more sophisticated entities that are increasingly seeking lower
delivered product costs and incremental services through a broad distribution
network capable of supplying their inventory management needs. These pressures
have in turn driven significant and continuing consolidation within the
medical/surgical supply distribution industry.
The Company is committed to providing its customers and suppliers with the
most responsive, efficient and cost effective distribution system for the
delivery of medical/surgical supplies and services. In order to meet this
commitment, the Company has implemented the following strategy: (i) maintain
market leadership and leverage the benefits of its national distribution
capabilities; (ii) continue to be a low-cost provider of distribution services;
(iii) increase sales to existing customers and obtain new customers by providing
responsive customer service and offering a broad range of inventory management
services; and (iv) enhance relationships with major medical/surgical supply
manufacturers.
Industry Overview
Distributors of medical/surgical supplies provide a wide variety of
disposable medical and surgical products to healthcare providers, including
hospitals, integrated healthcare systems ("IHSs") and alternate care providers.
Medical/surgical supplies do not include pharmaceuticals. In 1995, hospital and
alternate care facilities purchased approximately $23.0 billion and $7.0
billion, respectively, of medical/surgical supplies. Sales of medical/surgical
supplies are estimated to have grown at a compound annual growth rate of
approximately 7% over the last three years. Factors contributing to this growth
include an aging population, the availability of new healthcare procedures and
new product introductions.
The healthcare industry has been characterized by the consolidation of
healthcare providers into larger and more sophisticated entities that are
increasingly seeking lower delivered product costs and incremental services
through a broad distribution network capable of supplying their inventory
management needs. The economies of scale that a distributor can generate by
servicing a number of facilities should allow it to perform this service at a
lower cost than an individual healthcare provider or manufacturer. Customers
also benefit from a complete range of enhanced inventory management services
developed by medical/surgical supply distributors that include continuous
inventory replenishment process ("CRP"), asset management consulting and
stockless and just-in-time inventory programs.
The above trends have driven significant and continuing consolidation in
the medical/surgical supply distribution industry since the mid-1980s. The
Company believes that large distributors with national geographic capabilities
and broad product offerings are capturing market share from regional and local
distributors. As the industry continues to consolidate, large distributors are
selectively acquiring regional and local distributors whose facilities can
provide access to new metropolitan areas or expand geographic coverage to serve
existing national accounts more effectively.
The traditional role of a distributor involves warehousing and delivering
medical/surgical supplies to a customer's loading dock. Increasingly,
distributors have assumed the additional roles of asset managers and information
managers. Larger distributors are offering a wide array of customized asset
management services that many smaller distributors are unable to provide. In
addition, as the ability of medical/surgical supply distributors to manage
information becomes an increasingly important factor, the larger, national
distributors will have a distinct advantage. The quality of information
generated by a national distributor, in terms of its ability to discern
utilization patterns across a broad spectrum of products, customers and
locations, will be more useful to both manufacturers and customers than that of
a local or regional distributor.
Customers
The Company currently markets its distribution services to several types of
healthcare providers, including hospitals, IHSs and alternate care providers.
O&M contracts with these providers directly and through national healthcare
networks ("Networks") and group purchasing organizations ("GPOs").
National Healthcare Networks and Group Purchasing Organizations. Networks
and GPOs are entities that act on behalf of a group of healthcare providers to
obtain pricing and other benefits that the individual members may not be able to
obtain. Hospitals, physicians and other types of healthcare providers have
joined Networks and GPOs to obtain services from medical/surgical supply
distributors ranging from discounted product pricing to logistical and clinical
support in exchange for a fee. Networks and GPOs negotiate directly with both
medical/surgical supply manufacturers and distributors on behalf of their
members, establishing exclusive or multi-vendor relationships.
Because the combined purchasing volumes of their member institutions are
very large, Networks and GPOs have the buying power to negotiate price discounts
for the most commonly used medical/surgical products and logistical services.
Accordingly, O&M believes that successful relationships with Networks and GPOs
are central to the Company's ability to maintain market share. Sales to the
Company's top ten Network or GPO customers represented approximately 70% of its
net sales in 1995.
Networks and GPOs do not issue purchase orders or collect funds on behalf
of their members and they cannot ensure that members will purchase their
supplies from a given vendor. However, the buying power of Networks and GPOs is
such that they are able to negotiate price discounts without having to guarantee
minimum purchasing volumes. Members may belong to more than one Network or GPO,
and they are also free to negotiate directly with distributors and
manufacturers. As a result, healthcare providers often select the best pricing
and other benefits from among those offered through several Networks and GPOs.
Despite the inability of most Networks and GPOs to compel members to use O&M
when it is the Network's or the GPO's primary distributor, O&M believes that, in
such circumstances, the incentives for Network or GPO members to buy supplies
through the Network's or GPO's contract with the Company are strong, and that
these contracts yield significant sales volumes. The Company plans to continue
to maintain and strengthen its relationships with selected Networks and GPOs as
a means of securing its leading market position. The Company's Network or GPO
customers include VHA Inc. ("VHA"), AmeriNet, Inc. ("AmeriNet"),
AmHS/Premier/Sun Health ("Premier") and University Health System Consortium
("UHC").
Since 1985, the Company has been a distributor for VHA, the nation's second
largest network for not-for-profit hospitals, representing over 1,200 healthcare
organizations. In November 1994, VHA added Baxter International Inc. ("Baxter")
as its fourth authorized VHA distributor and initiated a policy permitting the
other three authorized VHA distributors, including the Company, to distribute
certain Baxter-manufactured products. During 1995, members of VHA were given the
opportunity to select one of four medical/surgical supply distributors as their
authorized VHA distributor. The Company retained over 85% of its previous sales
volume to VHA members. The loss of volume to VHA members has been partially
offset by the gain in distributing Baxter's self-manufactured products to VHA
members and by increasing market share within VHA facilities. Sales through VHA
and AmeriNet represented approximately 39.6% and 5.6%, respectively, of the
Company's net sales in 1995.
Integrated Healthcare Systems. An IHS is an organization which is composed
of several healthcare facilities that jointly offer a variety of healthcare
services in a given market. These providers may be individual not-for-profit or
investor-owned entities that are joined by a formal business arrangement, or
they may all be part of the same legal entity. An IHS is distinguished by the
fact that it is typically a network of different types of healthcare providers
that are strategically located within a defined service area, and seek to offer
a broad spectrum of healthcare services and comprehensive geographic coverage to
a particular local market. Although an IHS may include alternate care
facilities, hospitals remain the key component of any IHS.
O&M believes that IHSs will become increasingly important because of their
expanding role in healthcare delivery and cost containment and their reliance
upon the hospital, O&M's traditional customer, as a key component of their
organizations. Individual healthcare providers within a multiple-entity IHS
may be able to contract individually for distribution services; however, O&M
believes that the providers' shared economic interests create strong incentives
for participation in distribution contracts which are established at the system
level. Additionally, single-entity IHSs are usually committed to using the
primary distributor designated at the corporate level because they are all part
of the same legal entity. Because the IHSs frequently rely on cost containment
as a competitive advantage, IHSs have become an important source of demand for
O&M's enhanced inventory management and other value-added services.
In February 1994, the Company was selected by Columbia/HCA Healthcare
Corporation ("Columbia/HCA"), an investor-owned system of hospitals and
alternate care facilities, as its primary distributor of medical/surgical
supplies. Pursuant to its agreement with Columbia/HCA, the Company provides
distribution and other inventory management process services to Columbia/HCA
hospitals and other healthcare facilities. Columbia/HCA is the Company's
largest customer owning over 300 hospitals and IHSs throughout the United
States. Sales to Columbia/HCA represented approximately 8.4% of the Company's
net sales in 1995. Other than VHA, AmeriNet and Columbia/HCA, no Network, GPO
or individual customer accounted for as much as 5% of the Company's net sales
during such year.
Individual Providers. In addition to contracting with healthcare providers
at the IHS level and indirectly through Networks and GPOs, O&M contracts
directly with healthcare providers. In 1995, hospitals represented
approximately 90% of the Company's net sales. Not-for-profit hospitals
represented a majority of these facilities. The Company targets high-volume
independent hospitals and those which are part of larger healthcare systems such
as IHSs. The Company also markets to alternate care providers that are
primarily owned by, or members of, an IHS. Sales to such alternate care
customers comprised the balance of the Company's net sales in 1995. The
Company's hospital customers include Brigham & Women's Hospital, The Hospital of
the University of Pennsylvania, Johns Hopkins Health System, Massachusetts
General Hospital, Ohio State University Hospital, Shands Hospital at the
University of Florida, Stanford Health Services, University of California, Los
Angeles Medical Center ("UCLA"), University of Nebraska Medical Center,
University of Texas-M.D. Anderson Cancer Center and Yale-New Haven Hospital.
Contracts and Pricing
Industry practice is for the healthcare providers to negotiate product
pricing directly with manufacturers and then negotiate distribution pricing
terms with distributors. Contracts in the medical/surgical supply distribution
industry set forth the price at which products will be distributed, but
generally do not require minimum volume purchases by customers and are
terminable by the customer upon short notice. Accordingly, most of the Company's
contracts with customers do not guarantee minimum sales volumes.
The majority of the Company's contracts compensate the Company on a fixed
cost-plus percentage basis under which a negotiated percentage distributor fee
is added to the product cost agreed to by the customer and the manufacturer. In
April 1994, however, the Company began to sell products to VHA-member hospitals
and affiliates on a variable cost-plus percentage basis that varies according to
the services rendered, the dollar volume of purchases and the percentage of the
institution's total purchase volume that is directed to the Company. The
Company has since entered into this type of pricing arrangement with other
Networks and GPOs. As the Company's sales to a Network or GPO member
institution grow, the cost-plus pricing charged to such customers decreases.
The Company has recently negotiated contracts that charge incremental fees for
additional distribution and enhanced inventory management services, such as
frequent deliveries and distribution of products in small units of measure.
Although the Company's marketing and sales personnel based in the distribution
centers negotiate local contracts and pricing levels with customers, management
has established minimum pricing levels.
Services
The Company's core competency is the timely and accurate delivery of bulk
medical/surgical supplies at low cost. In addition to these core distribution
services, the Company offers flexible delivery alternatives supported by
inventory management services to meet the varying needs of its customers.
Electronic data interchange ("EDI") is an integral component of the
Company's business strategy. EDI includes computer-to-computer electronic data
interchange for business transactions, such as purchasing, invoicing, funds
transfer and contract pricing. The Company encourages all customers to use EDI
for product orders and, in some cases, imposes additional charges on customers
who do not use EDI for purchasing. Approximately 75% of items ordered by the
Company's customers are made through EDI. By expediting communication between
the Company and its customers and manufacturers and reducing the use of paper
for purchasing and invoicing, EDI enhances efficiencies and generates cost
savings.
EDI and the Company's information technology ("IT") systems enable the
Company to offer its customers the following services to minimize their
inventory holding requirements:
(BULLET) PANDAC(R) Since 1968, the Company has offered the PANDAC(R) wound
closure management system that provides customers with an accurate
evaluation of their current wound closure inventories and usage
levels in order to reduce costs for wound closure products. The
Company guarantees that PANDAC(R) will generate a minimum of 5%
savings in total wound closure inventory expenditures during its
first year of use.
(BULLET) Interactive Value Model(TM) The Interactive Value Model(TM) is a
software program that uses an interactive question and answer
format to calculate potential cost savings achievable through the
use of O&M's distribution services.
(BULLET) Stockpoint(TM) Stockpoint(TM) is a just-in-time inventory
management program designed to provide customers with delivery of
products in a cost-efficient combination of bulk and lowest unit
of measure.
(BULLET) Pallet Architecture Location System. The Pallet Architecture
Location System provides a customized approach to the delivery of
products by expediting the "put-away" functions at customer's
stockrooms.
(BULLET) TracePak(TM) The Company, in partnership with DeRoyal Industries,
Inc., packages medical/surgical supplies under the TracePak(TM)
name for use by healthcare providers for specific medical/surgical
procedures. TracePak(TM) reduces the time spent by healthcare
personnel assembling medical/surgical supplies for such
procedures.
(BULLET) Net/GAIN(SM) The Company and Henry Schein, Inc. are developing a
program called Net/GAIN(SM) to permit physician practices
associated with an IHS to order medical and other supplies from
the customized Net/GAIN(SM) product selection or from Henry
Schein, Inc.'s extensive catalogue of products.
(BULLET) Cost Trak(SM) Cost Trak(SM) is an activity-based costing program
utilized to price value-added services accurately. By identifying
costs associated with activities, Cost Trak(SM) enables customers
to select the most cost-effective services.
Sales and Marketing
The Company's sales and marketing force is organized on a decentralized
basis in order to provide individualized services to customers by giving the
local sales force at each distribution center the discretion to respond to
customers' needs quickly and efficiently. The sales and marketing force, which
is divided into three tiers, consists of approximately 300 locally based sales
personnel. In order to ensure that all of the Company's customers receive high
levels of customer service, each tier of the sales force is dedicated to
specific functions, including: developing relationships with large hospitals and
IHS customers; targeting increased penetration of existing accounts; and
providing daily support services. Corporate personnel and IT employees work
closely with the local sales force to support the marketing of O&M's inventory
management capabilities and the strengthening of customer relationships.
All sales and marketing personnel receive performance based compensation
aligned with customer satisfaction and O&M's expectations. In addition, the
Company, with the support of its suppliers, emphasizes quality and IT in
comprehensive training programs for its sales and marketing force to sharpen
customer service skills. In order to respond rapidly to its customers needs,
all marketing and sales personnel are equipped with laptop computers that
provide access to (i) order, inventory and payment status, (ii) customized
reporting and data analysis and (iii) computer programs, such as the Interactive
Value Model(TM) and PANDAC(R).
Suppliers
The Company is the only national distributor that does not manufacture or
sell products under its own label, and believes that this independence has
enabled it to develop strong and mutually beneficial relationships with its
suppliers. The Company believes that its size, strong, long-standing
relationships and independence enable it to obtain attractive terms from
manufacturers, including discounts for prompt payment, volume incentives and
fees for customer sales information. These terms contribute significantly to
the Company's gross margin.
The Company has relationships with virtually all major manufacturers of
medical/surgical supplies and has long-standing relationships with
manufacturers, such as C.R. Bard, Inc., Becton Dickinson and Company ("Becton
Dickinson"), Johnson & Johnson Hospital Services, Inc. ("Johnson & Johnson"),
Kendall Healthcare Products ("Kendall"), Kimberly Clark Professional Health Care
("Kimberly Clark"), and 3M Health Care ("3M"). O&M is the largest distributor of
these manufacturers' medical/surgical products. Approximately 18.3% and 5.3% of
the Company's net sales in 1995 were sales of Johnson & Johnson and Becton
Dickinson products, respectively. In 1995, no other manufacturer accounted for
more than 5% of the Company's net sales.
Asset Management
Inventory
Due to the Company's significant investment in inventory to meet the rapid
delivery requirements of its customers, efficient asset management is essential
to the Company's profitability. O&M maintains inventories of approximately
300,000 finished medical/surgical products (up from less than 100,000 in 1992)
produced by approximately 3,000 manufacturers. The significant increase in the
number of stock keeping units ("SKUs") has challenged distributors and
healthcare providers to create more efficient inventory management systems.
The Company has responded to the significant increase in the number of SKUs
by improving warehousing techniques, including the use of radio-frequency
hand-held computers and bar-coded labels that identify location, routing and
inventory picking and replacement, which allow the Company to monitor inventory
throughout its distribution systems. The Company is implementing additional
programs to manage inventory including a state-of-the-art inventory forecasting
system, warehouse slotting and reconfiguration techniques, CRP, FOCUS(SM) and
vendor certification programs. The forecasting system uses historical
information for the three prior years to predict the future demand for
particular items thereby reducing the cost of carrying unnecessary inventory and
increasing inventory turnover. As of December 31, 1995, 20 of the Company's
distribution centers utilized the inventory forecasting system and the remaining
distribution centers are expected to be utilizing it by mid-1996. CRP, which
utilizes computer-to-computer interfaces, allows manufacturers to monitor daily
sales and inventory levels so that they can automatically and accurately
replenish the Company's inventory. The Company has initiated a vendor
certification program that will require "preferred manufacturers" to satisfy
minimum requirements, such as purchasing by EDI, exceeding minimum fill rates
and offering a flexible returned goods policy. O&M believes the increased
efficiency resulting from vendor certification will reduce SG&A expenses.
Accounts Receivable
The Company's average days sales outstanding have been significantly less
than the industry average as determined by the National Health Care Credit
Group. The Company actively manages its accounts receivable to minimize credit
risk and does not believe that credit risk associated with accounts receivable
poses a risk to its results from operations.
Competition
The medical/surgical supply distribution industry in the United States is
highly competitive and consists of (i) three major, nationwide distributors, the
Company, Baxter and General Medical Corporation ("General Medical"), (ii) a few
smaller, nationwide distributors and (iii) a number of regional and local
distributors. Competition within the medical/surgical supply distribution
industry exists with respect to total delivered product cost, product
availability and the ability to fill orders accurately, delivery time, efficient
computer communication capabilities, services provided, breadth of product line
and the ability to meet special requirements of customers.
Regional and local distributors often provide high levels of customer
service but are constrained by relatively high operating costs which are passed
on to customers. The Company believes that the higher costs associated with
purchasing through regional and local distributors will result in opportunities
for the Company to augment its market share as customers continue to seek to
lower costs.
Baxter manufactures medical/surgical supplies and distributes its own
products as well as the products of other manufacturers primarily to the
hospital and IHS market. General Medical distributes medical/surgical products
under its own label as well as the products of other manufacturers. General
Medical services alternate care facilities, such as physicians' offices,
clinics, nursing homes and surgery centers, in addition to serving hospital
customers and the wholesale hospital market.
In November 1995, Baxter announced its intention to distribute to its
shareholders the stock of its subsidiary that conducts cost management, United
States distribution and surgical products operations. The Company does not
believe the Baxter restructuring will have a significant effect on the Company's
competitive position in the industry.
Distribution
The Company employs a decentralized approach to sales and customer service,
operating 49 distribution centers throughout the United States. The Company's
distribution centers currently provide products and services to customers in 50
states and the District of Columbia. The range of products and customer and
administrative services provided by a particular distribution facility are
determined by the characteristics of the market it serves. Most distribution
centers are managed as separate profit centers. Most functions, including
purchasing, customer service, warehousing, sales, delivery and basic financial
tasks, are conducted at the distribution center and are monitored by corporate
personnel. The Company believes that the decentralized nature of its
distribution system provides customers with flexible and individualized service
and contributes to overall cost reductions.
The Company delivers most medical/surgical supplies with a leased fleet of
trucks. Parcel services are used to transport all other medical/surgical
supplies. Distribution centers generally service hospitals and other customers
within a 100 to 150 mile radius. The frequency of deliveries from distribution
centers to principal accounts varies by customer account.
Information Technology
O&M continuously invests in advanced IT, which includes automated
warehousing technology and EDI, to increase efficiencies and facilitate the
exchange of information with its customers and suppliers and thereby reduce
costs to the Company, its suppliers and customers. Following its acquisition of
Stuart, the Company expended significant resources to integrate Stuart's systems
with those of the Company, including incorporating certain aspects of Stuart's
IT, and to outsource the operation of the Company's mainframe computer system to
Integrated Systems Solutions Corporation, an affiliate of International Business
Machines Corporation. In 1994, the Company began a major initiative to convert
its mainframe computer system to a client/server, local area network system.
The conversion to client/server technology will be completed over the next
several years. The client/server technology will have several applications,
including inventory forecasting, procurement, warehousing, order processing,
accounts receivable, accounts payable and contract management. The Company
began to implement the first of these applications, the inventory forecasting
application, in the fourth quarter of 1995 and 20 distribution centers utilized
this application as of December 31, 1995. The remaining distribution centers
are expected to be utilizing this inventory forecasting application by mid-1996.
Through client/server technology, the Company expects to improve significantly
the efficiency of each distribution center. The Company's commitment to IT will
enable it to serve profitably larger volumes of business and more complex
contracts.
Regulation
The medical/surgical supply distribution industry is subject to regulation
by federal, state and local governmental agencies. Each of the Company's
distribution centers is licensed to distribute medical/surgical supply products
as well as certain pharmaceutical and related products. The Company must comply
with regulations, including operating and security standards for each of its
distribution centers, of the Food and Drug Administration, the Drug Enforcement
Agency, the Occupational Safety and Health Administration, state boards of
pharmacy and, in certain areas, state boards of health. The Company believes
that it is in material compliance with all statutes and regulations applicable
to distributors of medical/surgical supply products and pharmaceutical and
related products, as well as other general employee health and safety laws and
regulations.
The current government focus on healthcare reform and the escalating cost
of medical care has increased pressures on all participants in the healthcare
industry to reduce the costs of products and services. The Company does not
believe that the continuation of these trends will have a significant effect on
the Company's results of operations or financial condition.
Employees
As of December 31, 1995, the Company employed approximately 3,200 full and
150 part-time employees. Approximately 40 employees are currently covered by a
collective bargaining agreement at one of the Company's distribution centers.
The Company believes that its relations with its employees are good.
O&M believes that on-going employee training is critical to employee
performance. The Company emphasizes quality and technology in training programs
designed to increase employee efficiency by sharpening overall customer service
skills and by focusing on functional best practices.
Item 2. Properties
The corporate headquarters of the Company is located in western Henrico
County, a suburb of Richmond, Virginia, in leased facilities. The Company owns
two undeveloped parcels of land which are adjacent to the Company's corporate
headquarters. In addition, the Company owns its warehouse facilities in
Youngstown, Ohio and Greensburg, Pennsylvania as well as a former
office/warehouse facility in Sanford, Florida which is fully leased. All three
of these facilities are currently being offered for sale. Greensburg is under
contract. In 1995, the Company sold its La Mirada, California facility and has
leased it back for a one year period.
O&M continuously reevaluates the efficiency of its distribution system.
Over the past two years, the Company has realigned its distribution operations
through the closure or consolidation of 12 distribution centers and the opening
or expansion of 22 distribution centers. The Company anticipates further
reduction of distribution center costs through the closure of two and the
downsizing of five distribution centers in 1996. Also in 1996 and early 1997,
new facilities are planned for five locations including Houston, Boston, Los
Angeles, Baltimore and Cincinnati and expansions are planned for three more
facilities.
O&M believes that its facilities are adequate to carry on its business as
currently conducted. Except for the Greensburg, Pennsylvania and Youngstown,
Ohio facilities, which are owned by the Company and held for sale and leaseback,
all of the Company's distribution centers are leased from unaffiliated third
parties. A number of the leases relating to the above properties are scheduled
to terminate within the next several years. The Company believes that, if
necessary, it could find facilities to replace such leased premises without
suffering a material adverse effect on its business.
Item 3. Legal Proceedings
Stuart has been named as a defendant along with manufacturers, healthcare
providers and others in a number of lawsuits 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 O&M's acquisition of Stuart in 1994. Stuart did not manufacture
the devices. The Company believes that Stuart is entitled to indemnification by
the manufacturers of the devices with respect to claims alleging defects in the
products. The Company and Stuart are also 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. Although
the Company believes it is unlikely that Stuart will be held liable as a result
of such lawsuits, the Company believes that Stuart's available insurance
coverage together with the indemnification rights discussed above are adequate
to cover any losses should they occur. The Company is not aware of any
uncertainty as to the availability and adequacy of such insurance or
indemnification.
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 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
Executive and Other Officers of the Registrant
Identification of Executive and Other Officers
Following are the names and ages, as of December 31, 1995, of the executive
and other officers of Owens & Minor, their positions and summaries of their
backgrounds and business experience. During 1995, new officers were elected at
the Board of Directors meetings including Charlie C. Colpo, elected and
effective February 27, 1995, Wayne B. Luck, elected and effective on May 2,
1995, Paul J. Julian and Bruce J. MacAllister elected on July 24, 1995,
effective August 10, 1995, and Ann Greer Rector elected and effective August 7,
1995. All of the other officers were elected at the annual meeting of the Board
of Directors held May 2, 1995. All officers are elected to serve until the 1996
Annual Meeting of Shareholders, or such time as their successors are elected.
G. Gilmer Minor, III, age 55, has been employed by the Company for 33 years
since 1963 and has served as President since 1981 and Chief Executive Officer
since 1984. In May 1994, he was elected Chairman of the Board. Mr. Minor also
serves as a member of the Boards of Directors of Crestar Financial Corporation
and Richfood Holdings, Inc.
Craig R. Smith, age 44, has been employed by the Company and National
Healthcare and Hospital Supply Corporation, which was acquired by the Company in
1989, for 13 years. From 1990 to 1992, Mr. Smith served as Group Vice President
for the western region. In January 1993, Mr. Smith assumed responsibilities of
Senior Vice President, Distribution. Later in 1993, Mr. Smith assumed the new
role of Senior Vice President, Distribution and Information Systems, and in
1994, he was elected Executive Vice President, Distribution and Information
Systems. In February 1995, Mr. Smith was promoted to Chief Operating Officer.
Robert E. Anderson, III, age 61, has been employed by the Company for 29
years since 1967. Mr. Anderson was employed by the Company in the
Medical/Surgical Division in sales and marketing and was elected Vice President
in 1981. In October 1987, he was elected Senior Vice President, Corporate
Development. In April 1991, Mr. Anderson was elected Senior Vice President,
Marketing and Planning. In 1992, Mr. Anderson assumed a new role as Senior Vice
President, Planning and Development and in 1994, he was elected Executive Vice
President, Planning and Development. In May 1995, Mr. Anderson was elected
Executive Vice President, Planning and Business Development.
Henry A. Berling, age 53, has been employed by the Company for 30 years
since 1966. Mr. Berling was employed by the Company in the Medical/Surgical
Division and was elected Vice President in 1981 and Senior Vice President, Sales
and Marketing, in 1987. In 1989, he was elected Senior Vice President and Chief
Operating Officer. In 1991, Mr. Berling assumed a new role as Senior Vice
President, Sales and Distribution. In 1992, Mr. Berling assumed the role of
Senior Vice President, Sales and Marketing and in 1994, he was elected Executive
Vice President, Sales and Customer Development. In May 1995, Mr. Berling was
elected Executive Vice President, Partnership Development.
Drew St. J. Carneal, age 57, has been employed by the Company for seven
years since 1989 when he joined the Company as Vice President and Corporate
Counsel. From 1985 to 1988, he served as the Richmond City Attorney and, prior
to that date, he was a partner in the law firm of Cabell, Moncure and Carneal.
In 1989, he was elected Secretary, and in March 1990, Senior Vice President,
Corporate Counsel and Secretary. In May 1995, the title Corporate Counsel was
changed to General Counsel.
Glenn J. Dozier, age 45, has been employed by the Company for six years
since 1990 in the position of Senior Vice President, Finance, Chief Financial
Officer. In April 1991, he assumed the additional responsibility of Senior Vice
President, Operations and Systems. In 1992, Mr. Dozier assumed a new role of
Senior Vice President, Finance and Information Systems and Chief Financial
Officer. In 1993, Mr. Dozier assumed the role of Senior Vice President,
Finance, Chief Financial Officer. Prior to joining the Company, Mr. Dozier had
been Chief Financial Officer and Vice President of Administration and Control
since 1987 for AMF Bowling, Inc.
Dick F. Bozard, age 49, has been employed by the Company for eight years
since 1988. In 1991, Mr. Bozard was elected Vice President, Treasurer. Prior to
joining the Company, he served as an officer for CIT/Manufacturers Hanover Bank
and Trust. From 1984 to 1986, he was with Williams Furniture where his last
position was President.
Charles C. Colpo, age 38, has been employed by the Company for 15 years
since 1981 when he joined the Company as Manager, Internal Audit. In April
1984, Mr. Colpo was promoted to Division Vice President (DVP) and served as DVP
for three divisions from 1987 to 1994. In 1994, he served as Director, Business
Process Redesign. In 1995, Mr. Colpo was promoted to Vice President, Inventory
Management.
Hugh F. Gouldthorpe, age 57, has been employed by the Company for ten years
since 1986 when he joined the Company as Director of Hospital Sales for the
Wholesale Drug Division. In 1987, Mr. Gouldthorpe was promoted to Vice
President and in 1989, he was promoted to Vice President, General Manager. In
1991, he was elected Vice President, Corporate Communications and in 1993, Vice
President, Quality and Communications. Prior to joining the Company, Mr.
Gouldthorpe was employed by E.R. Squibb and Sons serving in a variety of
positions.
Paul C. Julian, age 40, has been employed by the Company and Stuart, which
was acquired by the Company, for ten years since 1986. With the Company's
acquisition of Stuart in 1994, he became Group Vice President. From 1986 to
1994, Mr. Julian had been employed by Stuart and Eastern Hospital Supply, which
was acquired by Stuart, serving in various positions and most recently,
Executive Vice President, Chief Operating Officer. In 1995, he was elected to
Corporate Vice President, Group Vice President, Northern and Central Regions.
Wayne B. Luck, age 39, has been employed by the Company for four years
since 1992. Prior to joining the Company, Mr. Luck had been employed by Best
Products Co. Inc. working on various management systems. In 1992, he served as
Manager of Electronic Data Interchange (EDI) and subsequently Manager,
Applications and Director, Application Services. In 1995, he was elected Vice
President, Information Technology.
Bruce J. MacAllister, age 44, has been employed by the Company for three
years since 1993 when he joined the Company as Division Vice President. Prior
to joining the Company, Mr. MacAllister was employed by Proctor & Gamble in a
variety of sales and marketing positions. In 1995, he was elected Corporate
Vice President, Group Vice President, Southern and Western Regions.
Ann Greer Rector, age 38, joined the Company in August 1995 as Vice
President, Controller. Prior to joining the Company, Ms. Rector was employed by
USAir Group, Inc. from 1983 to 1995 serving in various financial positions and
from 1992 through July 1995, Vice President and Controller.
Michael L. Roane, age 41, has been employed by the Company for four years
since 1992 when he joined the Company as Vice President, Human Resources. Prior
to joining the Company, Mr. Roane was employed by Philip Morris Co. from 1980 to
1992 where his last position was Manager, Employee Relations Operations. Prior
to that he was employed by Gulf Western Industries in a variety of human
resources positions.
Thomas J. Sherry, age 47, has been employed by the Company and Stuart,
which was acquired by the Company, for 20 years. With the Company's acquisition
of Stuart in 1994, he became Vice President, Sales and Marketing. From 1976 to
1994, Mr. Sherry had been employed by Stuart, serving in various sales and
management positions and most recently, Executive Vice President.
F. Thomas Smiley, age 40, has been employed by the Company for 17 years
since 1979 when he joined the Company as Manager of Internal Audit. In 1981, he
became Assistant Controller and in 1985, he became Controller. In 1986, Mr.
Smiley was elected Assistant Vice President, Controller and from 1989 to 1995,
he served as Vice President, Controller. In 1995, he was elected Vice
President, Operations and Cost Management.
Hue Thomas, III, 57, has been employed by the Company for 26 years since
1970. In 1984, Mr. Thomas served as Assistant General Manager,
Medical/Surgical Division. In 1985, he served as Assistant Corporate Vice
President, and in 1987 he was elected Vice President. In 1989, he was elected
Vice President, General Manager, Medical/Surgical Division. In 1991, he was
elected Vice President, Corporate Relations.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Information regarding the market price of the Company's Common Stock and
related stockholder matters is set forth in the 1995 Annual Report under the
heading "Stock Market and Dividend Information" on page 35 and is incorporated
by reference herein.
Item 6. Selected Financial Data
The information required under this item is contained in the 1995 Annual
Report under the heading "Selected Financial Data" on pages 12 and 13 and is
incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is contained in the 1995 Annual
Report under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 14 through 17 and is incorporated
by reference herein.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes as of December 31, 1995 and
1994 and for each of the years in the three-year period ended December 31, 1995,
together with the independent auditors' report of KPMG Peat Marwick LLP dated
February 2, 1996 except as to Note 7, which is as of March 1, 1996, appearing on
pages 18 through 33 of the 1995 Annual Report are incorporated by reference
herein.
The information required under Item 302 of Regulation S-K is set forth in
the 1995 Annual Report in Note 13 - "Quarterly Financial Data (Unaudited)" in
the Notes to Consolidated Financial Statements on page 32 and is incorporated by
reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements with accountants on accounting
and financial disclosures during the two-year period ended December 31, 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required for this item is contained in Part I of this Form
10-K and in the 1996 Proxy Statement under the heading "Proposal 1: Election of
Directors" and is incorporated by reference herein.
Item 11. Executive Compensation
The information required under this item is contained in the 1996 Proxy
Statement under the heading "Proposal 1: Election of Directors - Executive
Compensation" and is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is contained in the 1996 Proxy
Statement under the heading "Proposal 1: Election of Directors - Capital Stock
Owned by Principal Shareholders and Management" and is incorporated by reference
herein.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Page Numbers
1995 Annual Form
Report * 10-K
(a) The following documents are filed as part of this report:
1. Consolidated Financial Statements:
Independent Auditors' Report of
KPMG Peat Marwick LLP 33
Consolidated Balance Sheets at
December 31, 1995 and 1994 19
Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 18
Consolidated Statements of Cash Flows for the
years ended December 31, 1995, 1994 and 1993 20
Notes to Consolidated Financial Statements 21-32
2. Financial Statement Schedules:
Independent Auditors' Report of KPMG
Peat Marwick LLP 22
Schedule - Valuation and Qualifying Accounts 23
* Incorporated by reference from the indicated
pages of the 1995 Annual Report.
All other schedules are omitted because the related information is included
in the Consolidated Financial Statements or notes thereto or because they
are not applicable.
3. Exhibits
(2) Agreement of Exchange dated December 22, 1993, as amended and restated on
March 31, 1994, by and among Stuart Medical, Inc., the Company and certain
shareholders of Stuart Medical, Inc. (incorporated herein by reference to
the Company's Proxy Statement/Prospectus dated April 6, 1994, Annex III)**
(3) (a) Amended and Restated Articles of Incorporation of the Company
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 3(a), for the year ended December 31, 1994)
(b) Amended and Restated Bylaws of the Company (incorporated herein by
reference to the Company's Annual Report on Form 10-K, Exhibit 3(b),
for the year ended December 31, 1994)
(4) (a) Owens & Minor, Inc. $11.5 million, 0% Subordinated Note dated May 31,
1989, due May 31, 1997, between the Company and Hygeia Ltd.
(incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990)
(b) Amendment to Owens & Minor, Inc. 0% Subordinated Note due May 31, 1997
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 4(b), for the year ended December 31, 1994)
(c) Owens & Minor, Inc. $3,332,912, 9.10% Convertible Subordinated Note
dated May 10, 1994, due May 31, 1996, between the Company and Hygeia
Ltd. (incorporated herein by reference to the Company's Annual Report
on Form 10-K, Exhibit 4(c), for the year ended December 31, 1994)
(d) Amended and Restated Rights Agreement dated as of May 10, 1994 between
the Company and Wachovia Bank of North Carolina, N.A., Rights Agent
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q, Exhibit 4, for the quarter ended June 30, 1995)
(e) Credit Agreement dated as of April 29, 1994 among the Company, as
borrower, certain of the Company's subsidiaries, as guarantors,
NationsBank of North Carolina, N.A., as Agent, Chemical Bank and
Crestar Bank, as Co-Agents, and the Banks identified therein ("Credit
Agreement") (incorporated herein by reference to the Company's Annual
Report on Form 10-K, Exhibit 4(d), for the year ended December 31,
1994)
(f) First Amendment to Credit Agreement dated February 28, 1995
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 4(e), for the year ended December 31, 1994)
(g) Second Amendment to Credit Agreement dated October 20, 1995
(incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q, Exhibit (4), for the quarter ended September 30, 1995)
(h) Third Amendment to Credit Agreement dated March 1, 1996
(10) (a) Owens & Minor, Inc. Annual Incentive Plan (incorporated herein by
reference to the Company's definitive Proxy Statement dated March 25,
1991)*
(b) 1985 Stock Option Plan as amended on January 27, 1987 (incorporated
herein by reference to the Company's Annual Report on Form 10-K,
Exhibit 10(f), for the year ended December 31, 1987)*
(c) Owens & Minor, Inc. Pension Plan (incorporated herein by reference to
the Company's Annual Report on Form 10-K, Exhibit 10(h), for the year
ended December 31, 1990)*
(d) Supplemental Executive Retirement Plan dated July 1, 1991
(incorporated herein by reference to the Company's Annual Report on
Form 10-K, Exhibit 10(i), for the year ended December 31, 1991)*
(e) Owens & Minor, Inc. Executive Severance Agreements (incorporated
herein by reference to the Company's Annual Report on Form 10-K,
Exhibit 10(i), for the year ended December 31, 1991)*
(f) Owens & Minor, Inc. Directors' Stock Option Plan (incorporated herein
by reference to the Company's Annual Report on Form 10-K, Exhibit
10(i), for the year ended December 31, 1991)*
(g) Agreement dated December 31, 1985 by and between Owens & Minor, Inc.
and Philip M. Minor (incorporated herein by reference to the Company's
Annual Report on Form 10-K, exhibit 10(1), for the year ended December
31, 1992)*
(h) Agreement dated May 1, 1991 by and between Owens & Minor, Inc. and W.
Frank Fife (incorporated herein by reference to the Company's Annual
Report on Form 10-K, exhibit 10(m), for the year ended December 31,
1992)*
(i) Owens & Minor, Inc. 1993 Stock Option Plan (incorporated herein by
reference to the Company's Annual Report on Form 10-K, exhibit 10(k),
for the year ended December 31, 1993)*
(j) Owens & Minor, Inc. Directors' Compensation Plan (incorporated herein
by reference to the Company's Annual Report on Form 10-K, exhibit
10(1), for the year ended December 31, 1993)*
(k) Form of Enhanced Authorized Distribution Agency Agreement ("ADA
Agreement") dated as of November 16, 1993 by and between VHA, Inc.
(formerly Voluntary Hospitals of America, Inc.) and Owens & Minor,
Inc. (incorporated herein by reference to Form 10-K/A to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993)***
(l) Form of Amendments to ADA Agreement dated as of August 9, 1994,
September 15, 1994 and November 15, 1994, respectively (incorporated
herein by reference to the Company's Annual Report on Form 10-K,
exhibit 10(n), for the year ended December 31, 1994)
(m) Form of Amendment to ADA Agreement dated as of November 10, 1995***
(n) Purchase and Sale Agreement dated as of December 28, 1995 among Owens
& Minor Medical, Inc. ("O&M Medical"), the Company and O&M Funding
Corp. ("O&M Funding")
(o) Receivables Purchase Agreement dated as of December 28, 1995 among O&M
Funding, O&M Medical, the Company, Receivables Capital Corporation and
Bank of America National Trust and Savings Association, as
Administrator
(p) Parallel Asset Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, the Parallel Purchasers from
time to time party thereto and Bank of America National Trust and
Savings Association, as Administrative Agent
(11) Calculation of Net Income (Loss) Per Common Share
(13) Owens & Minor, Inc. 1995 Annual Report to Shareholders
(21) Subsidiaries of Registrant
(23) Consent of KPMG Peat Marwick LLP, independent auditors
* A management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K.
** The schedules to this Agreement have been omitted pursuant to Item
601(b)(2) of Regulation S-K. The Company hereby undertakes to file
supplementally with the Commission upon request a copy of the omitted
schedules.
*** 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.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth quarter of 1995.
Note 1. With the exception of the information incorporated in this Form 10-K by
reference thereto, the 1995 Annual Report shall not be deemed "filed" as a part
of this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
by /s/ G. Gilmer Minor, III
G. Gilmer Minor, III
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dated indicated:
/s/ G. Gilmer Minor, III /s/ C. G. Grefenstette
G. Gilmer Minor, III C. G. Grefenstette
Chairman, President and Chief Executive Director
Officer and Director (Principal Executive
Officer)
/s/ Glenn J. Dozier /s/ Vernard W. Henley
Glenn J. Dozier Vernard W. Henley
Senior Vice President, Finance and Chief Director
Finance Officer (Principal Financial
Officer)
/s/ Ann Greer Rector /s/ E. Morgan Massey
Ann Greer Rector E. Morgan Massey
Vice President, Controller Director
(Principal Accounting Officer)
/s/ Josiah Bunting, III /s/ James E. Rogers
Josiah Bunting, III James E. Rogers
Director Director
/s/ R. E. Cabell, Jr. /s/ James E. Ukrop
R. E. Cabell, Jr. James E. Ukrop
Director Director
/s/ James B. Farinholt, Jr. /s/ Anne Marie Whittemore
James B. Farinholt, Jr. Anne Marie Whittemore
Director Director
/s/ William F. Fife
William F. Fife
Director
Each of the above signatures is affixed as of March 13, 1996.
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Owens & Minor, Inc.:
Over date of February 2, 1996, except as to Note 7, which is as of March 1,
1996, we reported on the consolidated balance sheets of Owens & Minor, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations and cash flows for each of the years in the three-year
period ended December 31, 1995, as contained in the 1995 annual report to
shareholders. These consolidated financial statements and our report thereon
are incorporated by reference in the December 31, 1995 annual report on Form
10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedule
included on page 23 of this annual report on Form 10-K. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Richmond, Virginia
February 2, 1996
Schedule
OWENS & MINOR, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
Additions
Balance at Charged to
Beginning Costs Additions Balance
Year-End of and Charged to at End
Description Year Expenses Other** Deductions* of Year
Allowance for doubtful accounts deducted from accounts and notes receivable in
the Consolidated Balance Sheets
1995 $5,340 $ 827 - $157 $6,010
1994 $4,678 $1,149 $40 $527 $5,340
1993 $4,442 $ 497 - $261 $4,678
* Uncollectible accounts written off.
** Adjusted for the allowance reserve acquired with the Emery acquisition.
Form 10-k
Exhibit Index
Exhibit #
4 (h) Third Amendment to Credit Agreement dated March 1, 1996
10 (m) Form of Amendment to ADA Agreement dated as of November 10, 1995
10 (n) Purchase and Sale Agreement dated as of December 28, 1995 among Owens
& Minor Medical, Inc ("O&M Medical"), the Company and O&M Funding
Corp. ("O&M Funding")
10 (o) Receivables Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, Receivables Capital
Corporation and Bank of America National Trust and Savings
Association, as Administrator
10 (p) Parallel Asset Purchase Agreement dated as of December 28, 1995 among
O&M Funding, O&M Medical, the Company, the Parallel Purchasers from
time to time party thereto and Bank of America National Trust and
Savings Association, as Administrative Agent
11 Calculation of Net Income (Loss) per Common Share
13 Owens & Minor, Inc. 1995 Annual Report to Shareholders
21 Subsidiaries of Registrant
23 Consent of KPMG Peat Marwick LLP, independent auditors