Owens & Minor 4th Quarter Results Cap a Strong 2008, with Record Annual Revenue and Earnings

Owens & Minor (NYSE:OMI) reported record quarterly revenue of $1.96 billion for the fourth quarter ended December 31, 2008, increased 13.6% from revenue of $1.72 billion in the same period last year. Income from continuing operations for the quarter was $27.4 million, improved 19.6% from $22.9 million in the comparable quarter of 2007. For the quarter, income per diluted share from continuing operations was $0.66, increased 17.9% from $0.56 per diluted share in last year’s fourth quarter. Net income for the quarter was $20.2 million, decreased from $22.5 million in the prior year, while net income per diluted share was $0.49, compared to $0.55 for the same period last year. Results for the fourth quarter 2008 reflect the acquisition of certain assets and liabilities of The Burrows Company (Burrows), a Chicago-based distributor of medical and surgical supplies to the acute-care market, and the company’s decision to exit the direct-to-consumer (DTC) diabetes supply business. Consequently, DTC results of operations are shown as discontinued operations for all periods presented.

"Our steady performance in the fourth quarter capped a strong year for Owens & Minor,” said Craig R. Smith, president & chief executive officer of Owens & Minor. "By effectively and efficiently serving the needs of our hospital customers around the country, we grew revenue and improved our earnings during 2008, even in the face of tough economic conditions. At the same time, we invested in our business to achieve improved operational efficiency with an eye toward building on our strengths for the future.”

2008 Full Year Results

For the year ended December 31, 2008, Owens & Minor reported revenue of $7.24 billion, improved 8.2% from revenue of $6.69 billion in 2007. For the year, income from continuing operations was $101.3 million, increased nearly $30 million, or 41.8%, from $71.4 million last year. Income per diluted share from continuing operations for 2008 was $2.44, increased 38.6% from $1.76 per share in 2007. For 2008, net income was $93.3 million, improved from $72.7 million from the prior year, and net income per diluted share was $2.25, increased 25.7% from $1.79 per share in 2007.

Burrows Acquisition Update

Following the October 1, 2008, acquisition of Burrows, Owens & Minor began converting the customers to its own platforms, systems and facilities. The on-going, phased conversion activities are expected to conclude by the end of the second quarter 2009. Certain assets and liabilities of Burrows were purchased for $16.8 million in cash, reflecting a January 2009 decrease in the purchase price of $7.0 million. In addition, the company assumed $56.1 million of debt.

"Using proven processes and our experienced transition teammates, our Burrows conversion activities are proceeding according to plan,” said Charles C. Colpo, executive vice president, administration. "We are very pleased with the reception we have received from our new customers and look forward to serving them with Owens & Minor’s industry leading supply chain management practices.”

Exiting the DTC Business

During the fourth quarter of 2008, Owens & Minor signed a definitive agreement to sell certain assets of its DTC business and began the process of exiting the consumer-based business. The decision is consistent with the company’s strategic plan to expand its product and service offerings as a business-to-business distributor to healthcare markets adjacent to the hospital sector. For the fourth quarter, the company recorded a loss from discontinued operations of $7.2 million, or $0.17 per diluted share, due, in part, to charges associated with exiting the DTC business. These charges resulted from losses recognized for abandoned software, severance expenses, and certain contract termination costs. For the year, the company recorded a loss from discontinued operations of $7.9 million, or $0.19 per diluted share.

2008 Asset Management

For 2008, the company reported operating cash flow of $75.8 million. Long-term debt at year-end was $359.2 million, increased $75.4 million from long-term debt of $283.8 million as of year-end 2007, primarily as a result of the Burrows acquisition. Days sales outstanding (DSO) were 24.5, as of December 31, 2008, increased from DSO of 23.6, as of December 31, 2007. For the year, inventory management efforts resulted in inventory turns of 10.4, compared to turns of 9.7 for 2007.

2009 Outlook

"When looking at 2009, we are targeting revenue growth for the year in a range of 8% to 12%, and income per diluted share from continuing operations in a range of $2.55 to $2.70,” said Smith. "By broadening the ranges of our guidance, we are acknowledging current economic conditions.”

The 2009 outlook is based on certain assumptions that are subject to the risk factors discussed in the company’s filings with the Securities & Exchange Commission.

Highlights

• The Owens & Minor board of directors announced today it has approved a 15% increase in the first quarter 2009 dividend. The dividend of $0.23 per share is payable on March 31, 2009, to shareholders of record as of March 13, 2009.
• On January 2, 2009, Owens & Minor completed the divestiture of certain assets of its direct-to-consumer diabetes supply company, receiving $63 million in cash.
• The company embarked on a new three-year agreement with Premier Inc., effective January 1, 2009; and the company also entered into a new three-year agreement with HealthTrust Purchasing Group, effective October 1, 2008.
• Owens & Minor completed the purchase of certain assets and liabilities of the Chicago-based Burrows Company on October 1, 2008. Transition activities are expected to be completed by the end of the second quarter of 2009. In a separate transaction, Owens & Minor purchased real estate associated with the Burrows business for approximately $17 million; the company intends to sell the properties.
• Owens & Minor was successful in signing significant new business in the fourth quarter of 2008 and will be engaged in transitioning these customers to its platform through the first quarter of 2009.

Information for Investors:

Management Conference Call & Supplemental Material

Conference Call: Owens & Minor management will conduct a conference call for professional analysts and investors on Friday, February 6, 2009 at 8:30 a.m. Eastern Time. Participants may access the live call at 877-748-0043 with conference code #82339543. A replay of the call will be available for 14 days by dialing 800-642-1687, using conference code #82339543. The event will also be webcast on www.owens-minor.com under "Investor Relations”; supplemental information will be provided on the webcast page. The international dial-in number is 706-758-5871 with conference code #82339543.

Safe Harbor Statement

Except for historical information, 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 risk factors are discussed in reports filed by the company with the Securities & Exchange Commission. All of this information is available at www.owens-minor.com. The company assumes no obligation, and expressly disclaims any such obligation, to update or alter information, whether as a result of new information, future events, or otherwise.

Owens & Minor, Inc., (NYSE: OMI) 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. Owens & Minor is also a member of the Russell 2000^® Index, which measures the performance of the small-cap segment of the U.S. equity universe, as well as the S&P SmallCap 600, which includes companies with a market capitalization of $300 million to $2 billion that meet certain financial standards. 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 improve inventory management and streamline logistics across the entire medical supply chain--from origin of product to patient bedside. For news releases, or for more information about Owens & Minor, visit the company Web site at www.owens-minor.com.