Owens & Minor (NYSE:OMI) reported revenue of $1.95 billion, increased 12.8% for the quarter ended March 31, 2009, when compared to revenue of $1.73 billion in the same period last year. Results for the first quarter 2009 reflect the company’s divestiture of certain assets of its direct-to-consumer (DTC) diabetes supply business, which is shown as discontinued operations for all periods presented. Income from continuing operations for the quarter was $22.4 million, or $0.54 per diluted share, decreased from $24.0 million, or $0.58 per diluted share, in the comparable period of 2008. For the first quarter, the company recorded a loss from discontinued operations of $8.4 million, or $0.20 per diluted share. Consequently, net income for the quarter was $14.0 million, decreased from $24.2 million in the prior year, while net income per diluted share was $0.34, compared to $0.59 per diluted share for the same period last year.
“We reported strong sales growth for the first quarter, while managing our business in a cost-effective manner,” said Craig R. Smith, president & chief executive officer of Owens & Minor. “Our teams did an exceptional job transitioning the acquired Burrows business to Owens & Minor’s systems, while holding the line on spending. We also completed the sale of the major assets of our DTC business, using the proceeds to improve the strength of our balance sheet. The wind-down activities for this discontinued business are nearing completion. Consequently, we believe we are well-positioned for the year ahead. Our efforts are focused squarely on growing our business, improving efficiency and moving forward with our strategic initiatives.”
In the first quarter of 2009, the company reported gross margin of $183.6 million, or 9.42% of revenues, compared to $170.2 million, or 9.85% of revenues, for the same period of 2008. In comparing quarter-to-quarter, the increase in gross margin dollars was due to the increase in revenues, net of an increase of $6.0 million in the provision for last-in, first-out (LIFO) inventory valuation and the deferral of $4.4 million of revenue during the first quarter of 2009. The increase in the LIFO provision was driven by unusually large increases in certain suppliers’ list prices, a portion of which were not eligible for supplier rebates. The deferral of revenue reflects the required accounting treatment of certain contract fees that are subject to future performance commitments under the contract terms. The company expects to recognize the majority of this deferred revenue in late 2009.
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