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Owens&Minor, Inc.


                  125
One Hundred Twenty-five Years of Service to the Healthcare Industry




                                                                      Annual Report
                                                                      and Form 10-k
Company Overview 2006
                                                                   Founded in Richmond in 1882, Owens &
           roudly celebrating its 125th anniversary,

   P                                                           Minor continues to rely on its essential mission,
           Owens & Minor, Inc., a FORTUNE 500
                                                               vision and values to support an enduring culture
           company headquartered in Richmond,
                                                               that focuses on customer service excellence,
   Virginia, is the leading distributor of medical and sur-
                                                               teammate well-being, shareholder value, business
   gical supplies to the acute-care market, a sought-after
                                                               integrity and social responsibility. Despite the daily
   healthcare supply-chain management company, and a
                                                               demands of business, the company contributes
   national direct-to-consumer supplier of diabetes
                                                               time, energy and talent to the communities it
   testing supplies.Thanks to strong organic growth and
                                                               serves by encouraging a culture of volunteerism
   a strategic acquisition late in the year, revenues for
                                                               and charitable giving among its teammates.
   Owens & Minor topped $5.5 billion in 2006,
                                                                   Throughout its 125-year history of serving cus-
   solidifying the company’s market leading position.
                                                               tomers, Owens & Minor has always dedicated itself
       Using its nationwide network of efficiently run
                                                               to delivering long-term value to shareholders.With
   distribution centers, the company serves hospitals,
                                                               strong operating performance and a consistent divi-
   integrated healthcare systems, alternate-care facilities,
                                                               dend policy, the company has produced a 13% total
   the federal government and individuals by providing
                                                               return over the last five years for its shareholders.
   a diverse medical and surgical product and service
                                                                   Today, Owens & Minor common shares are
   offering. Owens & Minor leverages its operational
                                                               traded on the New York Stock Exchange under
   efficiency, technology innovation and advanced
                                                               the symbol OMI. As of December 31, 2006, there
   supply-chain management services, enabling health-
                                                               were approximately 40, 257,000 common shares
   care providers to improve efficiency and lower costs
                                                               outstanding. For more information, visit the com-
   across the entire medical supply chain.
                                                               pany’s Web site at www.owens-minor.com.




                                                               Contents
                                                               Financial Highlights . . . . . . . . . . . . . . . . 1
                                                               Letter to Shareholders . . . . . . . . . . . . . . . 2
                                                               Culture . . . . . . . . . . . . . . . . . . . . . . . . . 6
                                                               People . . . . . . . . . . . . . . . . . . . . . . . . . . 8
                                                               Growth . . . . . . . . . . . . . . . . . . . . . . . . 10
                                                               Innovation . . . . . . . . . . . . . . . . . . . . . . 12
                                                               Board of Directors . . . . . . . . . . . . . . . . 14
                                                               Corporate Officers . . . . . . . . . . . . . . . . 15
                                                               Corporate Information . . . . . . . . . . . . . 16
                                                               Form 10-K . . . . . . . . . . . . . . . . . . . . . . 17
                                                               Mission Statement . . . . . Inside Back Cover



Annual Report 2006
Financial Highlights
(in thousands, except ratios and per share data)
                                                                                                                                       Percent Change
Year ended December 31,                                                        2006             2005                   2004             06/05             05/04
             (1)
Revenue                                                                $5,533,736         $4,822,414             $4,525,105             14.8%              6.6%
As reported:
Net income(2)(3)                                                       $       48,752     $     64,420           $         60,500      (24.3%)             6.5%
                                                      (2)(3)
Net income per common share - basic                                    $         1.22     $           1.63       $           1.55      (25.2%)             5.2%
                                                        (2)(3)
Net income per common share - diluted                                  $         1.20     $           1.61       $           1.53      (25.5%)             5.2%
Cash dividends per common share                                        $         0.60     $           0.52       $           0.44       15.4%             18.2%
Book value per common share at year-end                                $        13.60     $         12.84        $          11.65         5.9%            10.2%
Stock price per common share at year-end                               $        31.27     $         27.53        $          28.17       13.6%             (2.3%)
Shares of common stock outstanding                                             40,257           39,890                     39,519         0.9%            0.9%
Gross margin as a percent of revenue                                             10.8%                10.7%                  10.2%
Operating earnings as a percent of revenue                       (2)
                                                                                  1.9%                 2.4%                   2.4%
Long term debt                                                         $ 433,133          $ 204,418              $ 207,476             111.9%             (1.5%)
Average inventory turnover                                                        8.9                  9.8                    9.9
Days sales outstanding                                                           30.5                 26.3                   26.5
Operating cash flow                                                    $ (73,580)         $ 135,374              $         58,654

(1) In 2006, revenue included $282 million, resulting from the acquired acute-care medical and surgical supply business of McKesson Medical-Surgical Inc.,
    a business unit of McKesson Corporation (McKesson acquisition).
(2) In 2006, net income included $9.3 million, or $5.7 million net of tax, of charges related to the increase in the allowance for doubtful accounts receivable in
    the direct-to-consumer distribution business. Also, in 2006, net income included $2.6 million, or $1.6 million net of tax, of expenses related to the expensing
    of stock options in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and $16.0 million, or $9.7 million
    net of tax, of dilution resulting from the McKesson acquisition. In 2005 and 2004, net income included software impairment charges of $3.5 million and
    $1.0 million, or $2.1 million and $0.6 million net of tax.
(3) In 2006, net income included an $11.4 million loss on the early extinguishment of debt, or $7.0 million net of tax.




          REVENUE                                                                               DILUTED EPS                                 DIVIDENDS
                                                 NET INCOME
      (Dollars in billions)                                                                      (Dollars per share)                        (Dollars per share)
                                                 (Dollars in millions)
                                                        $64.4
                                                                                                        $1.61
                                              $60.5
                         $5.5
                                                                                              $1.53
              $4.8                                                                                                                                           $0.60
   $4.5                                                                $48.8
                                                                                                                                                  $0.52
                                                                                                                  $1.20

                                                                                                                                        $0.44




   ’04        ’05        ’06                                                                  ’04       ’05          ’06                 ’04       ’05        ’06
                                               ’04        ’05          ’06




                                                                                                                                                                         1
                                                                                                                                                    Annual Report 2006
Letter to Shareholders

               Craig R. Smith
               President &
               Chief Executive Officer


               Dear
               Shareholders,
               Teammates,
               and Friends:


                          nother year has

               A          passed for Owens
                          & Minor, and as
               we open the door to 2007,
               we proudly begin the
               celebration of our 125th
               anniversary.We have come
               a long way from supplying
               the 19th-century citizens of
               Richmond,Virginia, with
               tonics and elixirs.Today
               we are the market leader
               in serving the needs of
               the nation’s hospitals with
               unmatched distribution
               services, advanced supply-
               chain management tech-
               niques, clinical inventory
               management, technology
               innovation, and outsourcing
               and consulting services.
“I am very proud that Owens & Minor has made its

 125-year journey without sacrificing
 what is most important — our culture.”




                                                                               Back in 1882, Owens & Minor served
     In today’s fast-paced economy, it is a real milestone to reach a 125th
                                                                               the healthcare industry from a storefront
anniversary with essentially the same company name and the enduring            in downtown Richmond,Virginia.
leadership of the founding family — in our case, the Minor family. But
we have done more than just survive, we have thrived. Owens & Minor
is now the leading distributor of medical and surgical supplies to the
nation’s acute-care market.We have been recognized in recent years for
our technology leadership and for our ethical business practices.
     Over the years, we have worked every day to fulfill an important
element of our mission, vision and values — delivering long-term value
to our shareholders. Some years may be more difficult than others, but
we know that our performance over the long term has benefited our
investors.The year 2006 was no exception.Though we faced some
obstacles along the way, it was a good year for our shareholders.With a
closing price on December 29, 2006, of $31.27, we saw a 14% improve-           The Owens & Minor company baseball
                                                                               team of 1907 was a great example of
ment in our share price over the previous year. Our total return for the
                                                                               early teamwork.
year was 16%, while our five-year total return was 13%.
     Looking back at 2006, we saw significant activity in just about every
area of our company.We moved into a new Home Office.We refinanced
$200 million in bonds at a more favorable rate.We renewed agreements
with two of our important GPO partners.We renegotiated our out-
sourcing arrangement with Perot Systems Corporation.We weathered
some storms in our direct-to-consumer business. Organic revenue
growth was the strongest we have reported in at least ten years, and late
in the year we acquired the acute-care business of McKesson Medical-
Surgical Inc. All of this activity sets the stage for us in 2007 and 2008 to
focus on serving our customers, improving our processes, creating better       Using a fleet of leased trucks,
services and growing our company. Our teammates, new and veteran               Owens & Minor serves hospitals
                                                                               around the nation.
alike, are focused on delivering the difference for our customers.
     We began the year by moving to our new Home Office facility, which
finally allows our team to work under one roof. Designed with suggestions
from our teammates, the building gives us all a comfortable, collaborative
work environment that facilitates our culture of teamwork.The new


                                                                                                                       3
                                                                                           Annual Report 2006
building also houses a real campus for Owens & Minor University, or
                                               OMU. This in-house training facility now has sufficient classrooms and
                                               meeting space for large and small groups of students.We are very pleased
    Running an efficient warehousing
    system is as important today, as it was    that OMU is now extending its course offerings to our customers,
    several generations ago.
                                               providing classes in supply-chain management.
                                                    We refinanced $200 million in bonds at a more favorable rate in
                                               April 2006, lowering the borrowing rate from 8.5% to 6.35%. For this
                                               bond issue, we were given investment grade ratings from Fitch Ratings
                                               and from Standard & Poor’s consistent with our existing corporate
                                               credit rating.
                                                    We renewed agreements with two of our important GPO partners,
                                               Novation and Broadlane, and completed the associated customer
                                               sign-ups during the year.Along with a new Premier contract signed late
                                               in 2005, we now have agreements in place for approximately 70% of
                                               our business.
    Owens & Minor embarked on a period
    of rapid growth after the acquisition of
                                                    By extending our agreement with Perot Systems Corporation in
    the Bodeker Drug Company in 1955.
                                               2006, we cemented our information technology (IT) outsourcing
                                               relationship until 2014 and committed to an important mainframe migra-
                                               tion project that will improve our flexibility and capacity for growth. Perot
                                               Systems also played a crucial role in the fourth quarter, as we began the
                                               conversion of the acquired McKesson business, by helping us link our
                                               systems to those of our new customers.
                                                    Unfortunately, we experienced some stormy weather with our
                                               direct-to-consumer business, following a period of rapid growth.After
                                               adding teammates with expertise in day-to-day operations and accounts
                                               receivable portfolio management, we discovered the need to increase
                                               our allowance for doubtful accounts receivable for this effort.Although
    Once a drug wholesaler, Owens & Minor
                                               we were disappointed with third and fourth quarter results, we are now
    now concentrates on the distribution of
                                               focused on daily blocking and tackling, which allows us to efficiently run
    medical and surgical supplies.

                                               the business.We have become the third largest player in the direct-to-
                                               consumer mail-order diabetes supply sector in less than two years.
                                                    We are extremely excited about the acquisition of the McKesson
                                               acute-care business.We anticipate that it will add in excess of $900 million
                                               in new business.At this writing, we are on schedule with our aggressive,
                                               six-month conversion plan, under which we are paying McKesson to
                                               serve our new customers until they are transitioned to Owens & Minor.
                                               With this important acquisition, Owens & Minor is now the leading
                                               provider of medical and surgical supply distribution to the acute-care
                                               sector. This added scale and volume will allow us to operate even more

    Owens & Minor began trading on the
    NYSE under the symbol OMI in1988.




4      Annual Report 2006
efficiently and effectively once the conversion is completed.With the
McKesson acquisition and the re-signing of much of our business, we are
well positioned to work with our hospital customers and suppliers to improve
the cost and efficiency of the healthcare supply chain. In turn, executives of
large healthcare systems know that by working with Owens & Minor, they
have the opportunity to collaborate with a trusted partner to reach their        By upgrading our distribution centers
supply-chain goals.                                                              and deploying technology throughout,
                                                                                 we have developed a highly efficient
     I am very proud that Owens & Minor has made its 125-year
                                                                                 warehousing system.
journey without sacrificing what is most important — our culture.We
were founded on the principles of business integrity, exceptional customer
service, and caring for our teammates and our communities. Even today,
in our fast-paced digital world, we take time to care for our customers
and celebrate our teammates and their successes.We have been very fortu-
nate over the years — through good times and bad, through highs
and lows — to effectively manage our company with the highest ethics
and integrity, and to provide real value for our shareholders.This continues
to be our culture and way of life here at Owens & Minor.We manage
our business for the long term and intend to do so for another 125 years.        Owens & Minor believes in supporting
                                                                                 the communities it serves and
Happy Anniversary, Owens & Minor!
                                                                                 encourages teammates to volunteer
                                                                                 with a variety of organizations.
Sincerely,




Craig R. Smith
President & CEO
Owens & Minor

                                                                                 In 2006, we acquired the acute-care
                                                                                 business of McKesson Medical-Surgical Inc.




                                                                                 Owens & Minor moved into its new
                                                                                 Home Office in 2006.




                                                                                                                          5
                                                                                              Annual Report 2006
125
         The Owens & Minor
         Culture
         At Owens & Minor, we have long prided ourselves on the kind of culture that
         earns 97% customer satisfaction ratings and teammates that stay with our
         company for many years. Now and into the future, we are determined to thrive.




         W
                      hen, 125 years ago, a                                                         country’s leading medical and
                      Richmond whole                                                                   surgical supply distributor in the
                      sale drug company                                                                  acute-care sector.Also in 2006,
         opened its doors on East                                                                         the company moved into a
         Main Street for the very first                                                                   new 160,000 square foot
         time, a company — as well as                                                                     Home Office on 25 acres.
         a culture — was born.Today,                                                                      The move represents a
         the founding principles of                                                                     continued investment in the
         Owens & Minor remain                                                                          well-being of our Home Office
         unchanged. Founders Otho O.                                                                teammates, who can now work
         Owens and George Gilmer Minor                                                              together under one roof, as well as
                                               Otho O. Owens and George Gilmer Minor, once
                                               competitors, joined together in 1882 to create the
         conducted their business with                                                              our teammates around the country
                                               Owens & Minor Drug Company.
         honesty and integrity, and made                                                            who visit the Home Office for
         teammate well-being a top priority,                                                        training and meetings.
                                               changes, but our cultural compass
         creating a true team culture.                                                                  At Owens & Minor, we pride
                                               has been our steady guide. For
             Serving customers respectfully                                                         ourselves on a business culture that
                                               more than 12 decades, we have
         and efficiently — and earning their                                                        earns 97% customer satisfaction
                                               remained vital by continually
         trust — is another principle that                                                          ratings and inspires teammate loyalty.
                                               reinventing ourselves.
         has stood the test of time at Owens                                                        Now and into the future, we are
         & Minor. Having a strong sense of                                                          determined to thrive.We will con-
                                               A New Chapter
         social responsibility, volunteering                                                        tinue to stand by our customers as
                                               Building upon our rich past, 2006
         and giving back to the communi-                                                            we move with the changing times,
                                               marked yet another historic year.
         ties we serve, are also important                                                          never losing sight of what got us
                                               With the acquisition of the acute-
         traditions.Through the years, our                                                          here to begin with: a fierce dedica-
                                               care distribution business of
         customers, as well as our markets,                                                         tion to integrity, a commitment to
                                               McKesson Medical-Surgical Inc.,
         products and business strategies,                                                          delivering value, and unflinching
                                               Owens & Minor now stands as the
         have gone through remarkable                                                               support from our teammates.



6   Annual Report 2006
The People of
         Owens & Minor
         Last year gave Owens & Minor teammates the opportunity to showcase their
         dedication and strong work ethic like never before. With the McKesson
         acquisition, an energized workforce is now managing more business per person
         than at any other time in our history.




         T
                  hroughout our history,                                                                 Making a New Era Possible
                  Owens & Minor has relied
                                                                                                         In 2006, Owens & Minor team-
                  on inspired and trusted
                                                                                                         mates showcased their strong work
         leadership. Early visionaries, like
                                                                                                         ethic like never before.With the
         stock-boy-turned-company presi-
                                                                                                         McKesson acquisition, an ener-
         dent Conway M. Knox, and gener-
                                                                                                         gized workforce is now managing
         ations of Minor family members,
                                                                                                         more business per person than at
         like G. Gilmer Minor, Jr., president
                                                                                                         any other time in our history.
         from 1947-1976, helped build the
                                                                                                         Throughout this transition
         company into a national power-
                                                                                                         process, which included training
         house. His son, our current
                                                                                                         new teammates to help accommo-
         Chairman, G. Gilmer Minor, III,         In distribution, efficiency counts. Owens & Minor has
                                                                                                         date the new business, we contin-
                                                 always made the most of available warehouse space and
         offered strong, steady leadership for
                                                 teammate time and talent to turn inventory quickly.     ued to strive for strong service
         nearly two decades. But it is our
                                                                                                         levels and highly satisfied cus-
         thousands of teammates, past and
                                                                                                         tomers, both new and old.
         present, whether working the front-     capabilities. Subsequently in 1998,
                                                                                                             Our company training facility,
         lines in our distribution centers or    the cancellation of a major cus-
                                                                                                         Owens & Minor University, or
         selling our technology programs         tomer contract resulted in a
                                                                                                         OMU, has grown from a modest
         and services, who are the true          substantial revenue loss, which
                                                                                                         start to a program offering a full
         reason for our success.                 Owens & Minor essentially
                                                                                                         slate of skill-building courses to
              Owens & Minor has faced some       replaced within a year by signing
                                                                                                         teammates and customers alike. At
         challenges through the years. For       new customer agreements.
                                                                                                         Owens & Minor, we remain dedi-
         example, in 1992 the company                Despite these hurdles, we have
                                                                                                         cated to ensuring the satisfaction
         made a bold decision to sell its drug   held fast to our beliefs, teaching
                                                                                                         of our teammates.We know that
         division — the bedrock of the busi-     generations of teammates how to
                                                                                                         the support we show our team-
         ness for 110 years.Two years later      provide the best possible service.
                                                                                                         mates leads to the delivery of
         in 1994, the company acquired           Customers have rewarded our
                                                                                                         exceptional customer service, and
         Stuart Medical, Inc., greatly en-       dedication to service with decades
         hancing our national distribution                                                               that means a thriving business.
                                                 of loyalty.



8   Annual Report 2006
9
Annual Report 2006
Owens & Minor
          and Growth
          Today, Owens & Minor continues to rely on our financial strength, a strong
          core business, and a strategic focus on the future of healthcare.



          F
                or 125 years at Owens &                                                                    Owens & Minor, and continues our
                Minor, we have continually                                                                 long tradition of bringing in like-
                applied the essential business                                                             minded companies to help us grow.
          values of responsible financial stew-                                                                Also in 2006, we renewed our
          ardship, careful investment of our                                                               agreements with important group
          resources, and strategically-focused                                                             purchasing organization (GPO)
          growth.Throughout our journey                                                                    partners, Novation and Broadlane.
          from a storefront drug wholesaler                                                                Combined with the U.S. Depart-
          to the largest medical and surgical                                                              ment of Defense and Premier Inc.
          supply distributor in the acute-care                                                             contracts signed in the second half
                                                  Even today, our drivers are important customer service
          sector, growth has defined our                                                                   of 2005, we have signed a healthy
                                                  representatives for the company, as they interact with
          company in many ways.                                                                            percentage of our business for the
                                                  our customers every day.
              Our history is rich with                                                                     near term.
                                                  turns high. Because of our res-pon-
          milestones.With our first major                                                                      With an eye to the future, we
                                                  sible financial stewardship, we took
          acquisition, the Bodeker Drug                                                                    are also reaching out to the increas-
                                                  advantage of favorable market
          Company, we established a tradi-                                                                 ing number of individual customers
                                                  conditions in 2006 and refinanced
          tion of thoughtful building. A                                                                   who are consuming medical sup-
                                                  $200 million in bonds, lowering our
          period of acquisition soon fol-                                                                  plies in their homes. In two years,
                                                  interest rate from 8.5% to 6.35%.
          lowed; from 1964 to 1981 we                                                                      since the 2005 acquisition of
                                                  Today, with 2006 revenues of $5.5
          acquired ten companies. By 1970,                                                                 Access Diabetic Supply, LLC, we
                                                  billion, Owens & Minor stands
          we had made our debut in the                                                                     have nearly tripled the size of our
                                                  more ready than ever to respond
          medical and surgical supply                                                                      direct-to-consumer supplier of
                                                  and grow in changing times.
          distribution business, and in 1978                                                               diabetes testing supplies. Our busi-
          our revenues topped $100 million.                                                                ness is now the third largest mail-
                                                  Setting the Stage for
          With the 1992 sale of our drug                                                                   order supplier of diabetes supplies,
                                                  the Next 125 Years
          division, medical and surgical                                                                   primarily blood glucose monitors
          supply distribution rose to become                                                               and test strips, directly to con-
                                                  While our unwavering focus on
          the core business line. Despite                                                                  sumers in the home.
                                                  our core business values and
          some setbacks, we have expanded                                                                      In addition, we are providing
                                                  practices has enabled us to reach
          and prospered.                                                                                   more clinical asset-management
                                                  our 125th anniversary, the 2006
              Owens & Minor’s asset manage-                                                                programs to our customers.We are
                                                  McKesson acquisition is also an
          ment strategies have continued to                                                                leveraging our advanced technolo-
                                                  important new chapter in our
          generate a healthy operating cash                                                                gy infrastructure, discipline and
                                                  growth story.With new customers
          flow and overall financial strength.                                                             experience to offer our hospital
                                                  around the nation, as well as new
          We work daily to maintain a very                                                                 customers ways to monitor and
                                                  teammates, that business now
          low days sales outstanding (DSO) –                                                               control costly and sophisticated
                                                  represents in excess of $900 million
          the best performance in our market                                                               clinical inventory, saving them
                                                  in new revenue.This acquisition
          sector — and to keep our inventory                                                               valuable time and resources.
                                                  is a catalyst for the future of



10   Annual Report 2006
Owens & Minor
          and Innovation
          For years, Owens & Minor has been recognized as the industry leader for our
          innovative use of technology, and we have taken great strides to improve our
          service capabilities to our customers.




          A
                    t Owens & Minor,                                                                      tools to help lower overall costs
                    intelligent use of the most                                                           in the supply chain and reduce
                     advanced technology                                                                  inefficiencies by avoiding product
          available drives our success. In fact,                                                          expirations and waste.We also offer
          we were early adopters of comput-                                                               our customers value through a
          er technology. For decades, we’ve                                                               private-label line of products called
          offered customers and suppliers                                                                 MediChoice®.
          innovations that create cost-effec-                                                                 In 2006, we consolidated our
          tive, streamlined supply-chain solu-                                                            hospital asset-management technol-
                                                   Teamwork, technology and customer service excellence
                                                   have enabled us to meet the needs of our customers.
          tions.The advanced technologies                                                                 ogy onto an integrated Web-based
          we use create incredible efficiencies                                                           platform, which enables our
                                                   addition, operating rooms across
          without a corresponding need for                                                                customers to efficiently track and
                                                   the nation have derived savings
          an increase in manpower.                                                                        replenish inventories, across a broad
                                                   and critical management capabilities
              Our innovations win industry                                                                range of medical and surgical
                                                   with our QSightTM, SurgiTrack® and
          accolades but, more importantly,                                                                supplies. Our healthcare customers
                                                   PANDAC® tools.
          they improve our service capabili-                                                              can now access all of our clinical
                                                   Developing Tools for
          ties to our customers. In 2002, we                                                              asset management tools through
                                                   the Next Generation
          expanded our offerings to cus-                                                                  this new, consolidated platform.
          tomers with supply-chain consult-                                                                   At Owens & Minor, we recog-
                                                   of Customers
          ing and outsourcing through                                                                     nize that the healthcare sector will
                                                   Healthcare costs are rising faster
          OMSolutionsSM.We also enlisted                                                                  continue to evolve and grow in its
                                                   than the rate of inflation, and
          Perot Systems as our IT outsourc-                                                               complexity. In response, we will
                                                   hospital executives are looking
          ing partner in 1998, creating con-                                                              continue to provide the most inno-
                                                   for ways to control overall supply-
          siderable internal efficiencies. Our                                                            vative supply-chain management
                                                   chain costs. At Owens & Minor,
          earliest supply-chain management                                                                tools. Now and into the future, we
                                                   one strategy is to apply our existing
          programs, CostTrackSM and                                                                       will leverage our leading position
                                                   technology to other areas of
          WISDOMSM, continue to bring                                                                     in the acute-care market to serve
                                                   medical distribution and inventory
          enormous benefit as premier                                                                     our customers, create shareholder
                                                   management, such as catheteriza-
          activity-based management and                                                                   value and invest in our most valued
                                                   tion and radiology labs. Increasingly,
          web-based support systems. In                                                                   asset — our teammates.
                                                   customers can use our innovative



12   Annual Report 2006
13
Annual Report 2006
Front Row, seated, left to right: Richard E. Fogg, James B.Farinholt, Jr., James E. Rogers, G. Gilmer Minor, III,Anne Marie Whittemore,A.Marshall Acuff, Jr.
          Back Row, left to right: Eddie N. Moore, Jr., Peter S. Redding, Craig R. Smith, James E. Ukrop, John T. Crotty, J. Alfred Broaddus, Jr.




          Board of Directors
                                                                                                                                          John T. Crotty (69) 2,4*
                                                                                               J. Alfred Broaddus, Jr. (67) 3,5
          G. Gilmer Minor, III (66) 1*               A. Marshall Acuff, Jr. (67) 1,3,5*
                                                                                                                                          Managing Partner,
                                                                                               Retired President,
          Chairman & Retired CEO,                    Retired Senior Vice President
                                                                                                                                          CroBern Management Partnership
                                                                                               Federal Reserve Bank
          Owens & Minor, Inc.                        & Managing Director,
                                                                                                                                          President, CroBern, Inc.
                                                                                               of Richmond
                                                     Salomon Smith Barney, Inc.



                                                                                                                                          Peter S. Redding (68) 2,4
          James B. Farinholt, Jr. (72)2,4           Richard E. Fogg (66) 1,2*,4                Eddie N. Moore, Jr. (59) 2,5
                                                                                                                                          Retired President & CEO,
          Managing Director,                        Retired Partner,                           President,
                                                                                                                                          Standard Register Company
          Tall Oaks Capital Partners, LLC           PricewaterhouseCoopers LLP                 Virginia State University



                                                                                                                                          Anne Marie Whittemore (60) 1, 3*,5
          James E. Rogers (61) 1                    Craig R. Smith (55) 1,4                    James E. Ukrop (69) 3,5
                                                                                                                                          Partner, McGuireWoods LLP
          Lead Director,                            President & CEO,                           Chairman,
          Owens & Minor, Inc.                       Owens & Minor, Inc.                        Ukrop’s Super Markets, Inc.
          President, SCI Investors Inc.                                                        Chairman, First Market Bank




                                                                             Board Committees:
                                               1Executive    Committee, 2Audit Committee, 3 Compensation & Benefits Committee,
                                                     4 Strategic Planning Committee, 5 Governance & Nominating Committee,
                                                                               *Denotes Chairman




14   Annual Report 2006
Corporate Officers
Craig R. Smith (55)                                            Richard F. Bozard (59)
President & Chief Executive Officer                            Vice President,Treasurer
President since 1999 and Chief Executive Officer               Vice President,Treasurer since 1991.
since July 2005. Mr. Smith has been with the                   Mr. Bozard has been with the company since 1988.
company since 1989.
                                                               Olwen B. Cape (57)
Charles C. Colpo (49)                                          Vice President, Controller
Senior Vice President, Operations                              Vice President, Controller since 1997.
Senior Vice President, Operations since 1999 and               Ms. Cape has been with the company since 1997.
Senior Vice President, Operations & Technology from
April 2005 to July 2006. Mr. Colpo has been with the           Hugh F. Gouldthorpe, Jr. (68)
company since 1981.                                            Vice President, Quality & Communications
                                                               Vice President, Quality & Communications since 1993.
Erika T. Davis (43)                                            Mr. Gouldthorpe has been with the company since 1986.
Senior Vice President, Human Resources
Senior Vice President, Human Resources since 2001.             Scott W. Perkins (50)
From 1999 to 2001, Ms. Davis was Vice President                Group Vice President, Sales & Distribution
of Human Resources. Ms. Davis has been with the                Group Vice President, Sales & Distribution – West, since
company since 1993.                                            October 2005. Previously, Mr. Perkins served as Senior
                                                               Vice President, Sales & Distribution from January to
Grace R. den Hartog (55)                                       October 2005. Prior to that, he served as Regional Vice
Senior Vice President, General Counsel & Corporate Secretary   President – West, from March to December 2004, and an
Senior Vice President, General Counsel & Corporate             Area Vice President from 2002 to 2004. Mr. Perkins has been
Secretary since 2003. Ms. den Hartog previously served         with Owens & Minor since 1989.
as a Partner of McGuire Woods LLP from 1990 to 2003.
                                                               W. Marshall Simpson (38)
Jeffrey Kaczka (47)                                            Group Vice President, Sales & Distribution
Senior Vice President, Chief Financial Officer                 Group Vice President, Sales & Distribution – East, since
Senior Vice President, Chief Financial Officer since 2001.     October 2005. Previously, Mr. Simpson served as Regional
Previously, Mr. Kaczka served as Senior Vice President,        Vice President from 2004 to October 2005. Prior to
Chief Financial Officer for Allied Worldwide, Inc. from        that, Mr. Simpson served as Operating Vice President
1999 to 2001.                                                  of Corporate Accounts from 2003 to 2004, and as Operating
                                                               Vice President of Business Integration from 2002 to 2003.
                                                               Mr. Simpson has been with the company since 1991.
Richard W. Mears (46)
Senior Vice President, Chief Information Officer
                                                               Numbers inside parentheses indicate age.
Senior Vice President, Chief Information Officer
since June 2005. Previously, Mr. Mears was an Executive
Director with Perot Systems from 2003 to June 2005, and
an account executive from 1998 to 2003.

Mark A.Van Sumeren (49)
Senior Vice President, Business Development
Senior Vice President, Business Development since July 2006.
Senior Vice President, OMSolutionsSM from 2003 to July
2006. Mr.Van Sumeren previously served as Vice President
for Cap Gemini Ernst & Young from 2000 to 2003.




                                                                                                                                           15
                                                                                                                      Annual Report 2006
Corporate Information
          Annual Meeting                                                Information for Investors
          The annual meeting of Owens & Minor, Inc.’s shareholders      The company files annual, quarterly and current reports,
          will be held at 10:00 a.m. on Friday, April 27, 2007, at      information statements and other information with the
          Owens & Minor, Inc., 9120 Lockwood Boulevard,                 Securities and Exchange Commission (SEC).The public
          Mechanicsville,Virginia, 23116.                               may read and copy any materials that the company files
                                                                        with the SEC at the SEC’s Public Reference Room at
          Transfer Agent, Registrar                                     100 F Street, N.E.,Washington, D.C. 20549.The public
          and Dividend Disbursing Agent                                 may obtain information on the operation of the Public
          The Bank of New York                                          Reference Room by calling the SEC at 1-800-SEC-0330.
          Investor Services Department                                  The SEC also maintains an Internet site that contains
          P.O. Box 11258                                                reports, proxy and information statements, and other infor-
          Church Street Station                                         mation regarding issuers that file electronically with the
          New York, NY 10286-1258                                       SEC.The address of that site is http://www.sec.gov.The
          800-524-4458                                                  address of the company’s Internet Web site is www.owens-
          shareowners@bankofny.com                                      minor.com.Through a link to the SEC’s Internet site on
                                                                        the Investor Relations portion of our Web site we make
          BuyDIRECTSM Stock Purchase                                    available all of our filings with the SEC, including our
          and Dividend Reinvestment Plan                                annual report on Form 10-K, quarterly reports on Form
          Our transfer agent,The Bank of New York, offers a Direct      10-Q, current reports on Form 8-K and amendments to
          Purchase and Sale Plan for shares of Owens & Minor, Inc.      those reports, as well as beneficial ownership reports filed
          common stock known as the BuyDIRECTSM Plan.The                with the SEC by directors, officers and other reporting per-
          BuyDIRECTSM Plan provides registered shareholders of          sons relating to holdings in Owens & Minor, Inc. securities.
          Owens & Minor and interested first-time investors a way       This information is available as soon as the filing is accepted
          to buy and sell shares of Owens & Minor common stock.         by the SEC.
          Inquiries should be directed to The Bank of New York
          (see contact information above).                              Corporate Governance
                                                                        The company’s Bylaws, Corporate Governance Guidelines,
          Shareholder Records                                           Code of Honor and the charters of the Audit,
          Direct correspondence concerning Owens & Minor, Inc.          Compensation & Benefits, and Governance & Nominating
          stock holdings or change of address to The Bank of            Committees are available on the company’s Internet Web
          New York’s Investor Services Department (listed above).       site at www.owens-minor.com and are available in print to
          Direct correspondence concerning lost or missing dividend     any shareholder upon request by writing to:
          checks to:
                                                                        Corporate Secretary
          The Bank of New York
                                                                        Owens & Minor, Inc.
          Receive and Deliver Department
                                                                        9120 Lockwood Boulevard
          P.O. Box 11002
                                                                        Mechanicsville,Virginia 23116
          Church Street Station
          New York, NY 10286-1002
                                                                        Communications with
                                                                        the Board of Directors
          Duplicate Mailings
                                                                        The Board of Directors has approved a process for
          When a shareholder owns shares in more than one account
                                                                        shareholders to send communications to the Board.
          or when several shareholders live at the same address, they
                                                                        Shareholders can send written communications to the
          may receive multiple copies of annual reports.To eliminate
                                                                        Board, any committee of the Board, the Lead Director
          multiple mailings, please write to the transfer agent.
                                                                        or any other individual director at the following address:
                                                                        P.O. Box 26383, Richmond,Virginia 23260. All communi-
          Counsel
                                                                        cations will be relayed directly to the applicable director(s),
          Hunton & Williams
                                                                        except for communications screened for security purposes.
          Richmond,Virginia
                                                                        Certifications
          Independent Auditors
                                                                        The company’s chief executive officer certified to the
          KPMG LLP
                                                                        New York Stock Exchange (NYSE) within 30 days after
          Richmond,Virginia
                                                                        the company’s 2006 Annual Meeting of Shareholders that
          Press Releases                                                he was not aware of any violation by the company of
          Owens & Minor, Inc.’s press releases are available            NYSE corporate governance listing standards.The company
          at www.owens-minor.com.                                       also filed with the SEC as exhibits 31.1, 31.2, 32.1 and 32.2
                                                                        to its Annual Report on Form 10-K for the year ended
          Communications and Investor Relations                         December 31, 2006, certifications by its chief executive
          804-723-7000                                                  officer and chief financial officer.




16   Annual Report 2006
Mission
To create consistent value for our customers and supply-chain partners that
will maximize shareholder value and long-term earnings growth; we will do
this by managing our business with integrity and the highest ethical standards,
while acting in a socially responsible manner with particular emphasis on the
well-being of our teammates and the communities we serve.



Vision
To be a world class provider of supply-chain management solutions to the
selected segments of the healthcare industry we serve.



Values
We believe in high integrity as the guiding principle of doing business.
We believe in our teammates and their well-being.
We believe in providing superior customer service.
We believe in supporting the communities we serve.
We believe in delivering long-term value to our shareholders.




                                                                                  Annual Report 2006
125           One Hundred Twenty-five Years of Service
                              to the Healthcare Industry




Owens & Minor, Inc. • Corporate Office • 804-723-7000 • www.owens-minor.com
   Street Address                                       Mailing Address
   9120 Lockwood Boulevard                              Post Office Box 27626
   Mechanicsville,Virginia 23116                        Richmond,Virginia 23261-7626

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owens & minor OM2006AR

  • 1. Owens&Minor, Inc. 125 One Hundred Twenty-five Years of Service to the Healthcare Industry Annual Report and Form 10-k
  • 2. Company Overview 2006 Founded in Richmond in 1882, Owens & roudly celebrating its 125th anniversary, P Minor continues to rely on its essential mission, Owens & Minor, Inc., a FORTUNE 500 vision and values to support an enduring culture company headquartered in Richmond, that focuses on customer service excellence, Virginia, is the leading distributor of medical and sur- teammate well-being, shareholder value, business gical supplies to the acute-care market, a sought-after integrity and social responsibility. Despite the daily healthcare supply-chain management company, and a demands of business, the company contributes national direct-to-consumer supplier of diabetes time, energy and talent to the communities it testing supplies.Thanks to strong organic growth and serves by encouraging a culture of volunteerism a strategic acquisition late in the year, revenues for and charitable giving among its teammates. Owens & Minor topped $5.5 billion in 2006, Throughout its 125-year history of serving cus- solidifying the company’s market leading position. tomers, Owens & Minor has always dedicated itself Using its nationwide network of efficiently run to delivering long-term value to shareholders.With distribution centers, the company serves hospitals, strong operating performance and a consistent divi- integrated healthcare systems, alternate-care facilities, dend policy, the company has produced a 13% total the federal government and individuals by providing return over the last five years for its shareholders. a diverse medical and surgical product and service Today, Owens & Minor common shares are offering. Owens & Minor leverages its operational traded on the New York Stock Exchange under efficiency, technology innovation and advanced the symbol OMI. As of December 31, 2006, there supply-chain management services, enabling health- were approximately 40, 257,000 common shares care providers to improve efficiency and lower costs outstanding. For more information, visit the com- across the entire medical supply chain. pany’s Web site at www.owens-minor.com. Contents Financial Highlights . . . . . . . . . . . . . . . . 1 Letter to Shareholders . . . . . . . . . . . . . . . 2 Culture . . . . . . . . . . . . . . . . . . . . . . . . . 6 People . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Growth . . . . . . . . . . . . . . . . . . . . . . . . 10 Innovation . . . . . . . . . . . . . . . . . . . . . . 12 Board of Directors . . . . . . . . . . . . . . . . 14 Corporate Officers . . . . . . . . . . . . . . . . 15 Corporate Information . . . . . . . . . . . . . 16 Form 10-K . . . . . . . . . . . . . . . . . . . . . . 17 Mission Statement . . . . . Inside Back Cover Annual Report 2006
  • 3. Financial Highlights (in thousands, except ratios and per share data) Percent Change Year ended December 31, 2006 2005 2004 06/05 05/04 (1) Revenue $5,533,736 $4,822,414 $4,525,105 14.8% 6.6% As reported: Net income(2)(3) $ 48,752 $ 64,420 $ 60,500 (24.3%) 6.5% (2)(3) Net income per common share - basic $ 1.22 $ 1.63 $ 1.55 (25.2%) 5.2% (2)(3) Net income per common share - diluted $ 1.20 $ 1.61 $ 1.53 (25.5%) 5.2% Cash dividends per common share $ 0.60 $ 0.52 $ 0.44 15.4% 18.2% Book value per common share at year-end $ 13.60 $ 12.84 $ 11.65 5.9% 10.2% Stock price per common share at year-end $ 31.27 $ 27.53 $ 28.17 13.6% (2.3%) Shares of common stock outstanding 40,257 39,890 39,519 0.9% 0.9% Gross margin as a percent of revenue 10.8% 10.7% 10.2% Operating earnings as a percent of revenue (2) 1.9% 2.4% 2.4% Long term debt $ 433,133 $ 204,418 $ 207,476 111.9% (1.5%) Average inventory turnover 8.9 9.8 9.9 Days sales outstanding 30.5 26.3 26.5 Operating cash flow $ (73,580) $ 135,374 $ 58,654 (1) In 2006, revenue included $282 million, resulting from the acquired acute-care medical and surgical supply business of McKesson Medical-Surgical Inc., a business unit of McKesson Corporation (McKesson acquisition). (2) In 2006, net income included $9.3 million, or $5.7 million net of tax, of charges related to the increase in the allowance for doubtful accounts receivable in the direct-to-consumer distribution business. Also, in 2006, net income included $2.6 million, or $1.6 million net of tax, of expenses related to the expensing of stock options in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and $16.0 million, or $9.7 million net of tax, of dilution resulting from the McKesson acquisition. In 2005 and 2004, net income included software impairment charges of $3.5 million and $1.0 million, or $2.1 million and $0.6 million net of tax. (3) In 2006, net income included an $11.4 million loss on the early extinguishment of debt, or $7.0 million net of tax. REVENUE DILUTED EPS DIVIDENDS NET INCOME (Dollars in billions) (Dollars per share) (Dollars per share) (Dollars in millions) $64.4 $1.61 $60.5 $5.5 $1.53 $4.8 $0.60 $4.5 $48.8 $0.52 $1.20 $0.44 ’04 ’05 ’06 ’04 ’05 ’06 ’04 ’05 ’06 ’04 ’05 ’06 1 Annual Report 2006
  • 4. Letter to Shareholders Craig R. Smith President & Chief Executive Officer Dear Shareholders, Teammates, and Friends: nother year has A passed for Owens & Minor, and as we open the door to 2007, we proudly begin the celebration of our 125th anniversary.We have come a long way from supplying the 19th-century citizens of Richmond,Virginia, with tonics and elixirs.Today we are the market leader in serving the needs of the nation’s hospitals with unmatched distribution services, advanced supply- chain management tech- niques, clinical inventory management, technology innovation, and outsourcing and consulting services.
  • 5. “I am very proud that Owens & Minor has made its 125-year journey without sacrificing what is most important — our culture.” Back in 1882, Owens & Minor served In today’s fast-paced economy, it is a real milestone to reach a 125th the healthcare industry from a storefront anniversary with essentially the same company name and the enduring in downtown Richmond,Virginia. leadership of the founding family — in our case, the Minor family. But we have done more than just survive, we have thrived. Owens & Minor is now the leading distributor of medical and surgical supplies to the nation’s acute-care market.We have been recognized in recent years for our technology leadership and for our ethical business practices. Over the years, we have worked every day to fulfill an important element of our mission, vision and values — delivering long-term value to our shareholders. Some years may be more difficult than others, but we know that our performance over the long term has benefited our investors.The year 2006 was no exception.Though we faced some obstacles along the way, it was a good year for our shareholders.With a closing price on December 29, 2006, of $31.27, we saw a 14% improve- The Owens & Minor company baseball team of 1907 was a great example of ment in our share price over the previous year. Our total return for the early teamwork. year was 16%, while our five-year total return was 13%. Looking back at 2006, we saw significant activity in just about every area of our company.We moved into a new Home Office.We refinanced $200 million in bonds at a more favorable rate.We renewed agreements with two of our important GPO partners.We renegotiated our out- sourcing arrangement with Perot Systems Corporation.We weathered some storms in our direct-to-consumer business. Organic revenue growth was the strongest we have reported in at least ten years, and late in the year we acquired the acute-care business of McKesson Medical- Surgical Inc. All of this activity sets the stage for us in 2007 and 2008 to focus on serving our customers, improving our processes, creating better Using a fleet of leased trucks, services and growing our company. Our teammates, new and veteran Owens & Minor serves hospitals around the nation. alike, are focused on delivering the difference for our customers. We began the year by moving to our new Home Office facility, which finally allows our team to work under one roof. Designed with suggestions from our teammates, the building gives us all a comfortable, collaborative work environment that facilitates our culture of teamwork.The new 3 Annual Report 2006
  • 6. building also houses a real campus for Owens & Minor University, or OMU. This in-house training facility now has sufficient classrooms and meeting space for large and small groups of students.We are very pleased Running an efficient warehousing system is as important today, as it was that OMU is now extending its course offerings to our customers, several generations ago. providing classes in supply-chain management. We refinanced $200 million in bonds at a more favorable rate in April 2006, lowering the borrowing rate from 8.5% to 6.35%. For this bond issue, we were given investment grade ratings from Fitch Ratings and from Standard & Poor’s consistent with our existing corporate credit rating. We renewed agreements with two of our important GPO partners, Novation and Broadlane, and completed the associated customer sign-ups during the year.Along with a new Premier contract signed late in 2005, we now have agreements in place for approximately 70% of our business. Owens & Minor embarked on a period of rapid growth after the acquisition of By extending our agreement with Perot Systems Corporation in the Bodeker Drug Company in 1955. 2006, we cemented our information technology (IT) outsourcing relationship until 2014 and committed to an important mainframe migra- tion project that will improve our flexibility and capacity for growth. Perot Systems also played a crucial role in the fourth quarter, as we began the conversion of the acquired McKesson business, by helping us link our systems to those of our new customers. Unfortunately, we experienced some stormy weather with our direct-to-consumer business, following a period of rapid growth.After adding teammates with expertise in day-to-day operations and accounts receivable portfolio management, we discovered the need to increase our allowance for doubtful accounts receivable for this effort.Although Once a drug wholesaler, Owens & Minor we were disappointed with third and fourth quarter results, we are now now concentrates on the distribution of focused on daily blocking and tackling, which allows us to efficiently run medical and surgical supplies. the business.We have become the third largest player in the direct-to- consumer mail-order diabetes supply sector in less than two years. We are extremely excited about the acquisition of the McKesson acute-care business.We anticipate that it will add in excess of $900 million in new business.At this writing, we are on schedule with our aggressive, six-month conversion plan, under which we are paying McKesson to serve our new customers until they are transitioned to Owens & Minor. With this important acquisition, Owens & Minor is now the leading provider of medical and surgical supply distribution to the acute-care sector. This added scale and volume will allow us to operate even more Owens & Minor began trading on the NYSE under the symbol OMI in1988. 4 Annual Report 2006
  • 7. efficiently and effectively once the conversion is completed.With the McKesson acquisition and the re-signing of much of our business, we are well positioned to work with our hospital customers and suppliers to improve the cost and efficiency of the healthcare supply chain. In turn, executives of large healthcare systems know that by working with Owens & Minor, they have the opportunity to collaborate with a trusted partner to reach their By upgrading our distribution centers supply-chain goals. and deploying technology throughout, we have developed a highly efficient I am very proud that Owens & Minor has made its 125-year warehousing system. journey without sacrificing what is most important — our culture.We were founded on the principles of business integrity, exceptional customer service, and caring for our teammates and our communities. Even today, in our fast-paced digital world, we take time to care for our customers and celebrate our teammates and their successes.We have been very fortu- nate over the years — through good times and bad, through highs and lows — to effectively manage our company with the highest ethics and integrity, and to provide real value for our shareholders.This continues to be our culture and way of life here at Owens & Minor.We manage our business for the long term and intend to do so for another 125 years. Owens & Minor believes in supporting the communities it serves and Happy Anniversary, Owens & Minor! encourages teammates to volunteer with a variety of organizations. Sincerely, Craig R. Smith President & CEO Owens & Minor In 2006, we acquired the acute-care business of McKesson Medical-Surgical Inc. Owens & Minor moved into its new Home Office in 2006. 5 Annual Report 2006
  • 8. 125 The Owens & Minor Culture At Owens & Minor, we have long prided ourselves on the kind of culture that earns 97% customer satisfaction ratings and teammates that stay with our company for many years. Now and into the future, we are determined to thrive. W hen, 125 years ago, a country’s leading medical and Richmond whole surgical supply distributor in the sale drug company acute-care sector.Also in 2006, opened its doors on East the company moved into a Main Street for the very first new 160,000 square foot time, a company — as well as Home Office on 25 acres. a culture — was born.Today, The move represents a the founding principles of continued investment in the Owens & Minor remain well-being of our Home Office unchanged. Founders Otho O. teammates, who can now work Owens and George Gilmer Minor together under one roof, as well as Otho O. Owens and George Gilmer Minor, once competitors, joined together in 1882 to create the conducted their business with our teammates around the country Owens & Minor Drug Company. honesty and integrity, and made who visit the Home Office for teammate well-being a top priority, training and meetings. changes, but our cultural compass creating a true team culture. At Owens & Minor, we pride has been our steady guide. For Serving customers respectfully ourselves on a business culture that more than 12 decades, we have and efficiently — and earning their earns 97% customer satisfaction remained vital by continually trust — is another principle that ratings and inspires teammate loyalty. reinventing ourselves. has stood the test of time at Owens Now and into the future, we are & Minor. Having a strong sense of determined to thrive.We will con- A New Chapter social responsibility, volunteering tinue to stand by our customers as Building upon our rich past, 2006 and giving back to the communi- we move with the changing times, marked yet another historic year. ties we serve, are also important never losing sight of what got us With the acquisition of the acute- traditions.Through the years, our here to begin with: a fierce dedica- care distribution business of customers, as well as our markets, tion to integrity, a commitment to McKesson Medical-Surgical Inc., products and business strategies, delivering value, and unflinching Owens & Minor now stands as the have gone through remarkable support from our teammates. 6 Annual Report 2006
  • 9.
  • 10. The People of Owens & Minor Last year gave Owens & Minor teammates the opportunity to showcase their dedication and strong work ethic like never before. With the McKesson acquisition, an energized workforce is now managing more business per person than at any other time in our history. T hroughout our history, Making a New Era Possible Owens & Minor has relied In 2006, Owens & Minor team- on inspired and trusted mates showcased their strong work leadership. Early visionaries, like ethic like never before.With the stock-boy-turned-company presi- McKesson acquisition, an ener- dent Conway M. Knox, and gener- gized workforce is now managing ations of Minor family members, more business per person than at like G. Gilmer Minor, Jr., president any other time in our history. from 1947-1976, helped build the Throughout this transition company into a national power- process, which included training house. His son, our current new teammates to help accommo- Chairman, G. Gilmer Minor, III, In distribution, efficiency counts. Owens & Minor has date the new business, we contin- always made the most of available warehouse space and offered strong, steady leadership for teammate time and talent to turn inventory quickly. ued to strive for strong service nearly two decades. But it is our levels and highly satisfied cus- thousands of teammates, past and tomers, both new and old. present, whether working the front- capabilities. Subsequently in 1998, Our company training facility, lines in our distribution centers or the cancellation of a major cus- Owens & Minor University, or selling our technology programs tomer contract resulted in a OMU, has grown from a modest and services, who are the true substantial revenue loss, which start to a program offering a full reason for our success. Owens & Minor essentially slate of skill-building courses to Owens & Minor has faced some replaced within a year by signing teammates and customers alike. At challenges through the years. For new customer agreements. Owens & Minor, we remain dedi- example, in 1992 the company Despite these hurdles, we have cated to ensuring the satisfaction made a bold decision to sell its drug held fast to our beliefs, teaching of our teammates.We know that division — the bedrock of the busi- generations of teammates how to the support we show our team- ness for 110 years.Two years later provide the best possible service. mates leads to the delivery of in 1994, the company acquired Customers have rewarded our exceptional customer service, and Stuart Medical, Inc., greatly en- dedication to service with decades hancing our national distribution that means a thriving business. of loyalty. 8 Annual Report 2006
  • 12. Owens & Minor and Growth Today, Owens & Minor continues to rely on our financial strength, a strong core business, and a strategic focus on the future of healthcare. F or 125 years at Owens & Owens & Minor, and continues our Minor, we have continually long tradition of bringing in like- applied the essential business minded companies to help us grow. values of responsible financial stew- Also in 2006, we renewed our ardship, careful investment of our agreements with important group resources, and strategically-focused purchasing organization (GPO) growth.Throughout our journey partners, Novation and Broadlane. from a storefront drug wholesaler Combined with the U.S. Depart- to the largest medical and surgical ment of Defense and Premier Inc. supply distributor in the acute-care contracts signed in the second half Even today, our drivers are important customer service sector, growth has defined our of 2005, we have signed a healthy representatives for the company, as they interact with company in many ways. percentage of our business for the our customers every day. Our history is rich with near term. turns high. Because of our res-pon- milestones.With our first major With an eye to the future, we sible financial stewardship, we took acquisition, the Bodeker Drug are also reaching out to the increas- advantage of favorable market Company, we established a tradi- ing number of individual customers conditions in 2006 and refinanced tion of thoughtful building. A who are consuming medical sup- $200 million in bonds, lowering our period of acquisition soon fol- plies in their homes. In two years, interest rate from 8.5% to 6.35%. lowed; from 1964 to 1981 we since the 2005 acquisition of Today, with 2006 revenues of $5.5 acquired ten companies. By 1970, Access Diabetic Supply, LLC, we billion, Owens & Minor stands we had made our debut in the have nearly tripled the size of our more ready than ever to respond medical and surgical supply direct-to-consumer supplier of and grow in changing times. distribution business, and in 1978 diabetes testing supplies. Our busi- our revenues topped $100 million. ness is now the third largest mail- Setting the Stage for With the 1992 sale of our drug order supplier of diabetes supplies, the Next 125 Years division, medical and surgical primarily blood glucose monitors supply distribution rose to become and test strips, directly to con- While our unwavering focus on the core business line. Despite sumers in the home. our core business values and some setbacks, we have expanded In addition, we are providing practices has enabled us to reach and prospered. more clinical asset-management our 125th anniversary, the 2006 Owens & Minor’s asset manage- programs to our customers.We are McKesson acquisition is also an ment strategies have continued to leveraging our advanced technolo- important new chapter in our generate a healthy operating cash gy infrastructure, discipline and growth story.With new customers flow and overall financial strength. experience to offer our hospital around the nation, as well as new We work daily to maintain a very customers ways to monitor and teammates, that business now low days sales outstanding (DSO) – control costly and sophisticated represents in excess of $900 million the best performance in our market clinical inventory, saving them in new revenue.This acquisition sector — and to keep our inventory valuable time and resources. is a catalyst for the future of 10 Annual Report 2006
  • 13.
  • 14. Owens & Minor and Innovation For years, Owens & Minor has been recognized as the industry leader for our innovative use of technology, and we have taken great strides to improve our service capabilities to our customers. A t Owens & Minor, tools to help lower overall costs intelligent use of the most in the supply chain and reduce advanced technology inefficiencies by avoiding product available drives our success. In fact, expirations and waste.We also offer we were early adopters of comput- our customers value through a er technology. For decades, we’ve private-label line of products called offered customers and suppliers MediChoice®. innovations that create cost-effec- In 2006, we consolidated our tive, streamlined supply-chain solu- hospital asset-management technol- Teamwork, technology and customer service excellence have enabled us to meet the needs of our customers. tions.The advanced technologies ogy onto an integrated Web-based we use create incredible efficiencies platform, which enables our addition, operating rooms across without a corresponding need for customers to efficiently track and the nation have derived savings an increase in manpower. replenish inventories, across a broad and critical management capabilities Our innovations win industry range of medical and surgical with our QSightTM, SurgiTrack® and accolades but, more importantly, supplies. Our healthcare customers PANDAC® tools. they improve our service capabili- can now access all of our clinical Developing Tools for ties to our customers. In 2002, we asset management tools through the Next Generation expanded our offerings to cus- this new, consolidated platform. tomers with supply-chain consult- At Owens & Minor, we recog- of Customers ing and outsourcing through nize that the healthcare sector will Healthcare costs are rising faster OMSolutionsSM.We also enlisted continue to evolve and grow in its than the rate of inflation, and Perot Systems as our IT outsourc- complexity. In response, we will hospital executives are looking ing partner in 1998, creating con- continue to provide the most inno- for ways to control overall supply- siderable internal efficiencies. Our vative supply-chain management chain costs. At Owens & Minor, earliest supply-chain management tools. Now and into the future, we one strategy is to apply our existing programs, CostTrackSM and will leverage our leading position technology to other areas of WISDOMSM, continue to bring in the acute-care market to serve medical distribution and inventory enormous benefit as premier our customers, create shareholder management, such as catheteriza- activity-based management and value and invest in our most valued tion and radiology labs. Increasingly, web-based support systems. In asset — our teammates. customers can use our innovative 12 Annual Report 2006
  • 16. Front Row, seated, left to right: Richard E. Fogg, James B.Farinholt, Jr., James E. Rogers, G. Gilmer Minor, III,Anne Marie Whittemore,A.Marshall Acuff, Jr. Back Row, left to right: Eddie N. Moore, Jr., Peter S. Redding, Craig R. Smith, James E. Ukrop, John T. Crotty, J. Alfred Broaddus, Jr. Board of Directors John T. Crotty (69) 2,4* J. Alfred Broaddus, Jr. (67) 3,5 G. Gilmer Minor, III (66) 1* A. Marshall Acuff, Jr. (67) 1,3,5* Managing Partner, Retired President, Chairman & Retired CEO, Retired Senior Vice President CroBern Management Partnership Federal Reserve Bank Owens & Minor, Inc. & Managing Director, President, CroBern, Inc. of Richmond Salomon Smith Barney, Inc. Peter S. Redding (68) 2,4 James B. Farinholt, Jr. (72)2,4 Richard E. Fogg (66) 1,2*,4 Eddie N. Moore, Jr. (59) 2,5 Retired President & CEO, Managing Director, Retired Partner, President, Standard Register Company Tall Oaks Capital Partners, LLC PricewaterhouseCoopers LLP Virginia State University Anne Marie Whittemore (60) 1, 3*,5 James E. Rogers (61) 1 Craig R. Smith (55) 1,4 James E. Ukrop (69) 3,5 Partner, McGuireWoods LLP Lead Director, President & CEO, Chairman, Owens & Minor, Inc. Owens & Minor, Inc. Ukrop’s Super Markets, Inc. President, SCI Investors Inc. Chairman, First Market Bank Board Committees: 1Executive Committee, 2Audit Committee, 3 Compensation & Benefits Committee, 4 Strategic Planning Committee, 5 Governance & Nominating Committee, *Denotes Chairman 14 Annual Report 2006
  • 17. Corporate Officers Craig R. Smith (55) Richard F. Bozard (59) President & Chief Executive Officer Vice President,Treasurer President since 1999 and Chief Executive Officer Vice President,Treasurer since 1991. since July 2005. Mr. Smith has been with the Mr. Bozard has been with the company since 1988. company since 1989. Olwen B. Cape (57) Charles C. Colpo (49) Vice President, Controller Senior Vice President, Operations Vice President, Controller since 1997. Senior Vice President, Operations since 1999 and Ms. Cape has been with the company since 1997. Senior Vice President, Operations & Technology from April 2005 to July 2006. Mr. Colpo has been with the Hugh F. Gouldthorpe, Jr. (68) company since 1981. Vice President, Quality & Communications Vice President, Quality & Communications since 1993. Erika T. Davis (43) Mr. Gouldthorpe has been with the company since 1986. Senior Vice President, Human Resources Senior Vice President, Human Resources since 2001. Scott W. Perkins (50) From 1999 to 2001, Ms. Davis was Vice President Group Vice President, Sales & Distribution of Human Resources. Ms. Davis has been with the Group Vice President, Sales & Distribution – West, since company since 1993. October 2005. Previously, Mr. Perkins served as Senior Vice President, Sales & Distribution from January to Grace R. den Hartog (55) October 2005. Prior to that, he served as Regional Vice Senior Vice President, General Counsel & Corporate Secretary President – West, from March to December 2004, and an Senior Vice President, General Counsel & Corporate Area Vice President from 2002 to 2004. Mr. Perkins has been Secretary since 2003. Ms. den Hartog previously served with Owens & Minor since 1989. as a Partner of McGuire Woods LLP from 1990 to 2003. W. Marshall Simpson (38) Jeffrey Kaczka (47) Group Vice President, Sales & Distribution Senior Vice President, Chief Financial Officer Group Vice President, Sales & Distribution – East, since Senior Vice President, Chief Financial Officer since 2001. October 2005. Previously, Mr. Simpson served as Regional Previously, Mr. Kaczka served as Senior Vice President, Vice President from 2004 to October 2005. Prior to Chief Financial Officer for Allied Worldwide, Inc. from that, Mr. Simpson served as Operating Vice President 1999 to 2001. of Corporate Accounts from 2003 to 2004, and as Operating Vice President of Business Integration from 2002 to 2003. Mr. Simpson has been with the company since 1991. Richard W. Mears (46) Senior Vice President, Chief Information Officer Numbers inside parentheses indicate age. Senior Vice President, Chief Information Officer since June 2005. Previously, Mr. Mears was an Executive Director with Perot Systems from 2003 to June 2005, and an account executive from 1998 to 2003. Mark A.Van Sumeren (49) Senior Vice President, Business Development Senior Vice President, Business Development since July 2006. Senior Vice President, OMSolutionsSM from 2003 to July 2006. Mr.Van Sumeren previously served as Vice President for Cap Gemini Ernst & Young from 2000 to 2003. 15 Annual Report 2006
  • 18. Corporate Information Annual Meeting Information for Investors The annual meeting of Owens & Minor, Inc.’s shareholders The company files annual, quarterly and current reports, will be held at 10:00 a.m. on Friday, April 27, 2007, at information statements and other information with the Owens & Minor, Inc., 9120 Lockwood Boulevard, Securities and Exchange Commission (SEC).The public Mechanicsville,Virginia, 23116. may read and copy any materials that the company files with the SEC at the SEC’s Public Reference Room at Transfer Agent, Registrar 100 F Street, N.E.,Washington, D.C. 20549.The public and Dividend Disbursing Agent may obtain information on the operation of the Public The Bank of New York Reference Room by calling the SEC at 1-800-SEC-0330. Investor Services Department The SEC also maintains an Internet site that contains P.O. Box 11258 reports, proxy and information statements, and other infor- Church Street Station mation regarding issuers that file electronically with the New York, NY 10286-1258 SEC.The address of that site is http://www.sec.gov.The 800-524-4458 address of the company’s Internet Web site is www.owens- shareowners@bankofny.com minor.com.Through a link to the SEC’s Internet site on the Investor Relations portion of our Web site we make BuyDIRECTSM Stock Purchase available all of our filings with the SEC, including our and Dividend Reinvestment Plan annual report on Form 10-K, quarterly reports on Form Our transfer agent,The Bank of New York, offers a Direct 10-Q, current reports on Form 8-K and amendments to Purchase and Sale Plan for shares of Owens & Minor, Inc. those reports, as well as beneficial ownership reports filed common stock known as the BuyDIRECTSM Plan.The with the SEC by directors, officers and other reporting per- BuyDIRECTSM Plan provides registered shareholders of sons relating to holdings in Owens & Minor, Inc. securities. Owens & Minor and interested first-time investors a way This information is available as soon as the filing is accepted to buy and sell shares of Owens & Minor common stock. by the SEC. Inquiries should be directed to The Bank of New York (see contact information above). Corporate Governance The company’s Bylaws, Corporate Governance Guidelines, Shareholder Records Code of Honor and the charters of the Audit, Direct correspondence concerning Owens & Minor, Inc. Compensation & Benefits, and Governance & Nominating stock holdings or change of address to The Bank of Committees are available on the company’s Internet Web New York’s Investor Services Department (listed above). site at www.owens-minor.com and are available in print to Direct correspondence concerning lost or missing dividend any shareholder upon request by writing to: checks to: Corporate Secretary The Bank of New York Owens & Minor, Inc. Receive and Deliver Department 9120 Lockwood Boulevard P.O. Box 11002 Mechanicsville,Virginia 23116 Church Street Station New York, NY 10286-1002 Communications with the Board of Directors Duplicate Mailings The Board of Directors has approved a process for When a shareholder owns shares in more than one account shareholders to send communications to the Board. or when several shareholders live at the same address, they Shareholders can send written communications to the may receive multiple copies of annual reports.To eliminate Board, any committee of the Board, the Lead Director multiple mailings, please write to the transfer agent. or any other individual director at the following address: P.O. Box 26383, Richmond,Virginia 23260. All communi- Counsel cations will be relayed directly to the applicable director(s), Hunton & Williams except for communications screened for security purposes. Richmond,Virginia Certifications Independent Auditors The company’s chief executive officer certified to the KPMG LLP New York Stock Exchange (NYSE) within 30 days after Richmond,Virginia the company’s 2006 Annual Meeting of Shareholders that Press Releases he was not aware of any violation by the company of Owens & Minor, Inc.’s press releases are available NYSE corporate governance listing standards.The company at www.owens-minor.com. also filed with the SEC as exhibits 31.1, 31.2, 32.1 and 32.2 to its Annual Report on Form 10-K for the year ended Communications and Investor Relations December 31, 2006, certifications by its chief executive 804-723-7000 officer and chief financial officer. 16 Annual Report 2006
  • 19. Mission To create consistent value for our customers and supply-chain partners that will maximize shareholder value and long-term earnings growth; we will do this by managing our business with integrity and the highest ethical standards, while acting in a socially responsible manner with particular emphasis on the well-being of our teammates and the communities we serve. Vision To be a world class provider of supply-chain management solutions to the selected segments of the healthcare industry we serve. Values We believe in high integrity as the guiding principle of doing business. We believe in our teammates and their well-being. We believe in providing superior customer service. We believe in supporting the communities we serve. We believe in delivering long-term value to our shareholders. Annual Report 2006
  • 20. 125 One Hundred Twenty-five Years of Service to the Healthcare Industry Owens & Minor, Inc. • Corporate Office • 804-723-7000 • www.owens-minor.com Street Address Mailing Address 9120 Lockwood Boulevard Post Office Box 27626 Mechanicsville,Virginia 23116 Richmond,Virginia 23261-7626