Owens_MinorMorningSession

Owens & Minor
Expanding on Our Traditions
2007 Investor Day
Baltimore/Washington Distribution Center
December 5, 2007

Safe Harbor
Except for the historical information contained herein, the matters discussed in this
presentation may constitute forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those projected.
These include: the ability to assimilate the operations of an acquired business, the
potential loss of key personnel, intense competitive pressures, such as pricing, within
the healthcare industry. They also include the success of direct marketing programs
in attracting new customers, the ability to retain existing customers, changes in
customer order patterns, changes in healthcare laws and regulations, changes in
government, including Medicare, reimbursement guidelines and private insurer
reimbursement amounts, the ability to maintain product suppliers, product price
increases by suppliers and other factors discussed from time to time in the reports
filed by the company with the Securities & Exchange Commission. The company
assumes no obligation, and expressly disclaims any such obligation, to update or alter
information, whether as a result of new information, future events, or otherwise.

2007 OMI Investor Day

Investor Day 2007

Craig R. Smith
President & Chief Executive Officer
Owens & Minor, Inc.


Morning Session
• Healthcare Market Overview
• O&M Market Position
• Providing Value to Partners
• Strategic Direction

• Financial Overview – James Bierman

Healthcare Universe
A $4 Trillion Market by 2015

Providers
Acute Care
Non-Acute Disposables
Technology Long-Term Non-Clinical
Outsourcing Devices
Home Health
Clinical Devices
Information Labs
Pharmaceuticals
Insurance
Consumer
Products
Services

Healthcare Universe
Owens & Minor’s Market Today
Providers
Acute Care
Disposables
Non-Acute
Technology Long-Term Non-Clinical
Outsourcing Devices
Home Health
Clinical Devices
Information Labs
Pharmaceuticals
Insurance
Consumer
Services Products

Hospital Supply Chain =
Significant Expense
Total Cost Incurred by Hospitals* 100%
Percent
15%
15%

25%

45%

Supply Chain Management Expense

Labor Supplies Other Total
Logistics

*Figures are based on estimates of Healthcare Financial Management Association. Source: S&P Industry Surveys: Healthcare
Facilities; Healthcare Financial Management Association; industry reporting; O&M Research analysis

Celebrating 125 Years
of Industry Leadership
Integrity

Dependability

Superior Customer Service

Integrated Partnerships

Culture

Culture Matters
Customer Service Excellence
• Distinguishes O&M in the marketplace
• Right product, right place, right time, right price
• 94% customer satisfaction rating

Owens & Minor University (OMU)
• Ongoing training & education for teammates
• Investing approx. $1,200 annually per teammate
• Customer courses in supply-chain management launched in 2007


Marketplace Leadership
Market-leading distributor of med/surg supplies in acute-
•
care market
$6.7B in LTM* revenue
•
45 Distribution Centers nationwide
•
4,000 healthcare provider customers
•
1,300 suppliers; 170,000 SKUs; 1,400 private label SKUs
•

* Last twelve months as of 09/30/07; ** Health Industry Distributors Association (HIDA); company estimates


Investor Day 2007

Providing Value
to Healthcare Providers


Marketplace Evolution
CEO, COO, CFO
Offices
Offsite
Warehouse
Specialty
Areas
(Cath Lab; Par Areas
Radiology) (Nursing
Floors)
Operating
Room

Purchasing/ Receiving
Procurement

Accounts Storeroom
Transportation
Payable


Evolution of Services
Anticipating Customer Need
• Bulk Shipments
Traditional Distribution • MediChoice®
• Supplier Programs

• J-I-T; L-U-M; OMDirectSM
Logistics / Services
• CostTrackSM – activity based management
• Inventory: PANDAC , SurgiTrackSM
®

• Clinical Inventory: QSightTM, Cyrus
Asset Management
• Information Mgmt: WISDOMSM Family

• OMSolutionsSM
Consulting & Outsourcing
• ISCs

Product Focus Process Focus

Investor Day 2007

Providing Value
to Suppliers


Supplier Programs
• O&M provides essential services to suppliers
• Accounts receivable management
• Improved supply chain transparency
• Warehousing & distribution

• Marketing relationships help drive market-share
• FOCUS & EMPHASIS programs

• MediChoice® – area of focus Owens & Minor


2007 Suppliers of the Year

Supplier of the Year
MediChoice® Category

Large Supplier Category

Small-Medium Category


Investor Day 2007

Strategic Direction


Expanding on Our Traditions

$60+ Billion
$14 Billion

OUR MARKET
OUR MARKET
OPPORTUNITY
Source: Frost & Sullivan; GHX and Company Estimates

Strategic Avenues
• Selling new product lines to
existing customer base
– Products outside traditional med/surg
distribution
$60+ Billion
• Developing new markets for
existing product lines
– Non acute-care settings

• Continue to grow core OUR MARKET
OPPORTUNITY
business


Sustainable
Competitive Advantage
• Nationwide Footprint
– 45 distribution centers in the United States
• Workforce Quality & Longevity
– Commitment to training and retention
– Investment in teammates = dedicated, knowledgeable staff
• Significant Customer Relationships in Healthcare Market
– O&M serves 2/3 of the acute-care hospitals in the U.S.
– Trust-based, long-standing relationships (avg. 9 to 11 yrs)
• Reputation Built Over 125 Years in Healthcare
– O&M = dependability, exceptional service, extensive knowledge of
logistics

* Last twelve months revenue as of 09/30/07

Investor Day 2007

James L. Bierman
Chief Financial Officer
Owens & Minor, Inc.


Financial Overview
& Outlook

• Financial Drivers
• Sequential Improvement
• Recent Trends
• 2008 Outlook


Financial Drivers
• Revenue Growth
– Sales force effectiveness
– Product offering
• Gross Margin
– Service offering
– GPO contracts
• SG&A
– Labor costs
– Distribution network
• Cash Flow
– Receivables management (DSO)
– Inventory management (Inventory turns)


Sequential Improvement -
Income Statement
as of 9/30/07 ($ in millions, except per share data)

2Q-2007 1Q-2007
3Q-2007
Net Revenues $1,686.7 $1,679.0 $1,686.2
Gross Margin 10.6% 10.5% 10.4%
SG&A 7.8% 7.9% 8.5%
Operating Margin 2.4% 2.2% 1.5%
Net Income $ 21.2 $ 18.3 $ 10.8
Diluted EPS $ 0.52 $ 0.45 $ 0.27

Sequential comparisons include:
• Improved operating margin driven by stable gross margin results & progress in
expense reduction due to cessation of service fees paid in Q1 to MCK; and
leveraging the acquired business


Sequential Improvement -
Asset/Liability Management
as of 9/30/07 ($ in millions)

2Q-2007 1Q-2007
3Q-2007

Operating Cash Flow $ 115.7 $ 89.7 $ (3.3)
DSO 29.5 28.0 29.7
Inventory turns 9.8 9.4 9.2
Debt $ 231.1 $ 369.0 $ 457.9

Sequential comparisons include:
• Improved asset/liability management resulted in generation of significant
operating cash flow used to de-lever the balance sheet


Revenue Trends
($ in billions)

$6.70

$5.53
• YTD 9/30/07 revenue of $5.1B
$4.82
$4.53 • 5-Year CAGR = 11.1%;
$4.24
$3.96 excl. McK = 7.3%
• Excluding MCK, revenue
grew:
- 8.9% in 2006
7.1% 6.8% 6.4% 14.7% 21.2%
- 9.7% YTD

* LTM = last twelve months as of 09/30/07
2002 2003 2004 2005 2006 LTM*

Gross Margin Trends
($ in millions)

$704.8
• 3Q-07 gross margin was
$596.8
$178.3M, or 10.6% of
$516.1
revenues
$463.3
$417.2 $436.4
• YTD 9/30/07 gross margin
was $529.8M, or 10.5% of
revenues
10.5% 10.3% 10.2% 10.7% 10.8% 10.5%

2002 2003 2004 2005 2006 LTM*
Note: percentages represent gross margin as a % of revenue

SG&A Trends
($ in millions)

$559.8
$471.9
$381.4
• 3Q-07 SG&A was
$341.0
$319.8
$131.4M, or 7.8% of
$303.4
revenues
• YTD 9/30/07 SG&A
was $407.6M, or 8.1%
7.7% 7.5% 7.5% 7.9% 8.5% 8.4%

of revenues

2002 2003 2004 2005 2006 LTM*
Note: percentages represent SG&A as a % of revenue

SG&A Costs
As a % of
Total SG&A

Personnel Costs All Other Costs
+/- 50% +/- 50%


SG&A Cost Characteristics

Selling Expense Semi-Variable
Administrative Fixed
Warehousing Semi-Variable
Delivery Semi-Variable
Occupancy Fixed
Information Services Semi-Variable


Operating Earnings Trends
($ in millions)

$117.9
$117.4
$110.1
• 3Q-07 operating earnings
$105.7 $102.8
$101.6
were $40.9M, or 2.4% of
revenues
• YTD 9/30/07 operating
2.6% 2.5% 2.4% 2.4% 1.9% 1.8%
earnings were $102.4M,
or 2.0% of revenues

2002 2003 2004 2005 2006 LTM*
Note: percentages represent operating earnings as a % of revenue

Operating Margin Trend
3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07


Operating Earnings

Impact on Core
DTC Performance
2.5%
GROSS
MARGIN SG&A

+ -
Services
Core
97.5%
++ --
D-T-C


Diluted EPS Trends
($ in millions)

$1.61

$1.53

$1.42 $1.41

• 3Q-07 EPS was $0.52
• YTD 9/30/07 EPS = $1.23
$1.27
$1.20
compared to $1.03
as of 9/30/06

2002 2003 2004 2005 2006 LTM*

Dividend History
Annual Dividend per Common Share

$0.68
$0.60 • Dividends paid every year
since 1930
$0.52
$0.44 • 5-year CAGR = 18%
• 4th Quarter ’07 dividend:
$0.35

− $0.17 per share
− record date 12/14/07
− payable date 12/31/07

2003 2004 2005 2006 2007


Total Shareholder Return
Cumulative Total Return through 9/30/07

%
300
OMI
200
S&P 500
100
Russell 2000
0
1-Year 3-Year 5-Year 10-Year

Source: Standard & Poors

2008 Outlook
Income Statement
• Revenue Growth
– Targeted to be in the mid-single digit % range

• Gross Margin
– Targeted to be consistent as a % of revenues compared
to the 2nd half of 2007

• SG&A
– Targeted mid-single digit basis point improvement compared
to the 2nd half of 2007

• Annual Tax Rate
– Targeted to be consistent with 2007

2008 Outlook
Cash Deployment

• Annual Dividend Payout Ratio
– Targeted to be consistent with historical practice

• Capital Expenditures
– Targeted to be in the range of $25-$35 million

• Excess Capital Usage
– Financially/strategically attractive acquisitions
– De-lever revolver debt


Variables for 2008

• Contract Renewals
• DOD Activity
• Distribution Center Relocations
• Customer Credit Quality


Why Owens & Minor?

• Attractive component of the healthcare
sector
• Benefits from the economies of scale
• A legacy – successful business for 125
years


Questions?


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