Good morning, ladies and gentlemen, and welcome to the Owens & Minor’s First Quarter 2014 Financial Results Conference Call. My name is Latoya, and I will be your operator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference call. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Craig Smith, Chairman and Chief Executive Officer of Owens & Minor. Please proceed, sir.

Thank you, Latoya, and good morning, everyone. Welcome to the Owens & Minor first quarter 2014 conference call. After I introduce my colleagues on the call today, we will review our results and then take your questions. Here with me this morning are; Jim Bierman, our President and Chief Operating Officer; Randy Meier, our Chief Financial Officer; and Grace den Hartog, our General Counsel. So, before we begin, I’m going to ask Trudi Allcott from our Investor Relations team to read a Safe Harbor statement. Trudi?

Thank you, Craig. Our comments today will be focused on financial results for the first quarter of 2014, which are included in our press release. In our discussion today, we will reference certain non-GAAP financial measures. Information about these measures and reconciliations to GAAP financial measures are included in our press release and in the first quarter supplemental slide presentation, both of which are posted on our website. Also, our call today will also be archived on the website. In the course of our discussion today, we may make forward-looking statements. These statements are subject to risk and uncertainty that could cause actual results to differ materially from those projected. Please see our press release and our SEC filings for a full discussion of these risk factors. And finally, during the first quarter, we will be participating in the following healthcare conferences, Bank of America Merrill Lynch, UBS, Jefferies and Morgan Stanley (ph). And this week we will hold of Annual Shareholders Meeting at our home office. And we look forward to seeing you on the road. Thank you. Craig?

Thank you Trudi. I’d like to call on Jim Bierman for an operational overview, and a closer look at our domestic results. Then we’ll turn it over to Randy to brief us on the financial results and then he’ll give us an update on our international segment. And then finally, I’ll have a few comments before we start to take your questions. Jim.

Thank you, Craig and good morning everyone. Last quarter we outlined some of the investments we are making in our domestic segment to address the changing needs of our U.S. market. But we have not yet achieved all of the efficiencies planned for this year, we continue to make progress. And we are encouraged that our offerings are gaining traction in the marketplace. For example, after redesigning our sales and service model to meet the needs of the larger, more sophisticated provider customers we are seeing positive results as it relates to revenue growth and expansion of our service offerings, resulting in improved margin for these customers. Our strategy has been validated in the continuing growth in our larger customer accounts. This quarter, we continue to see a trend, we have been experiencing for some time. Revenues from the larger customer accounts grew nicely but revenues with the smallest customers declined. As we mentioned last quarter, we have signed a very large for-profit healthcare system as a new customer, as a part of last year’s GPO renewal cycle. We are now targeting the transition of the majority of this customer to begin in the third quarter of 2014. This is a somewhat later start than we had originally anticipated when we held our December Investor Day meeting. As with all large customer conversions, we will incur transition related cost in advance of the new revenues coming on. Due to this customer conversion, shifting to later in the year, we are carrying incremental costs in advance of the on-boarding process thereby helping to ensure a smooth conversion for this significant account. We are very optimistic about the potential with this new customer as it consists of both acute and non-acute points of care. During the first quarter, our gross margin results…

Thanks Jim and good morning everyone. As Craig indicated, I will provide an update on our financial results. But first, I’d like to take a few moments to talk about or European operations. During the quarter, we decided to take the next step in our longer term international strategy. We have created a small group of experienced Owens & Minor operations experts, the formal leadership team in Europe. This group is tasked with providing operational expertise to simplify, align, standardize process and continue the integration of our European platform, of the same time identifying future expansion and growth opportunities in Europe. This structure will enable us to move quickly to optimize our existing platform and to evaluate and integrate other expansion opportunities. In the first quarter, the U.K. division experienced an acute challenge with lower than expected activity from existing customers and higher expenses resulting from on-boarding of a large new customer. We have already taken steps in the U.K. to get operations back on track, including adjustments to the management structure. And we are asking the Owens and Minor operations team to focus immediately on improving operations in the U.K. Because this team is very experienced in our business, we believe it will be invaluable as we grow our platform in Europe, develop new customer relations and seek other opportunities for expansion. With that, let’s turn to the first quarter results. Consolidated revenues in the first quarter was $2.26 billion up slightly compared to the same period last year. This increase in quarterly revenues resulted primarily from strong business growth on a quarter-over-quarter basis in the international segment. On a segment basis, first quarter domestic revenues were $2.15 billion, a slight decline when compared to last year. Domestic segment revenues were affected by ongoing market trends including lower overall…

Thank you, Randy. For the update on the quarter and I would like to add a few thoughts. As I reflect on the first quarter, there are several positive points that I would like to point out. The first is that the total revenues improved in what continues to be a tough market. International sales were up strongly, consolidated gross margin improved, asset management as always was solid, operating cash flow continues to be positive with more than $90 million for the quarter. And we are on-boarding significant new business this year in both the domestic and international platforms. As for the challenges this quarter, we did see an increase in expenses largely as a result of our international platform. On the domestic side, I’m pleased with the progress on expenses – overall expenses. So, as we look at the year ahead, we see an opportunity with expense management in particular with our international platform. While we experience challenges in our U.K. operation throughout 2013, these issues were heightened in the first quarter, due to the on-boarding of a new customer. Randy and I had the opportunity to travel to Europe in April to meet with the leadership and they are actively working to get the U.K. unit back on track. We are also taking the next step in our strategy development by enhancing the Owens & Minor team in Europe. In fact, we’ve asked several of our most experienced operators to lead this effort and they will relocate to Europe in the near term. This step will enable us to move more aggressively in building out the international platform in identifying and capturing opportunities for future growth. As Randy said, obviously their first assignment is to work with the U.K. team to reposition the division for profitable growth. Turning to the domestic front, as Jim said, we’re working on a number of areas that will ensure strong future for our domestic business. During the quarter, the team did a great job in a tough environment making progress in sales and managing expenses. We have identified the areas we need to focus on and our teams are actively executing on our plans. All-in-all, we are encouraged by the revenue development in both segments, and we believe we are better positioned than ever before for growth. I would also want to take a moment to thank all of our team mates that through a very tough quarter from a weather standpoint from the West Coast to the East Coast, every one of our teammates stepped up and made sure that deliveries were made. And that we didn’t miss a beep on our service as we continue on focusing on customer excellence and making sure that our customers can operate during any tough times that they face. And with that, we’d be happy to take your questions. Operator?

Thank you. (Operator Instructions). And our first question comes from Glen Santangelo of Credit Suisse. Your line is now open. Glen Santangelo – Credit Suisse: Hi, yes, thanks and good morning. Craig, and Randy, just want to follow-up with – on some of the comments that you made with respect to gross margins. It kind of sounds like you called out a number of things that impacted your profitability whether it be supplier, price changes or renewing some of the contracts are doing more business with bigger customers which I traditionally think about having lower margin. But yet, your gross margins came in above your range now. Even if I sort of back out the litigation settlement you’re still kind of at the upper end of the range. So, maybe could you just give us a little bit more clarity in terms of what you’re thinking about gross margins relative to that initial guidance that you provided at Analyst Day?

Sure Glen. I think overall when we looked at our gross margins, I think where we came in at 12.46% is largely a function of just the continued evolution of our international business and the impact its having on the overall gross margin. We still feel fairly comfortable, where the modeling guidance was as you know. Back on Investor Day, Jim indicated would be on-boarding a number of larger customers throughout this year which will have a little bit of an impact on the overall gross margin as we move through. So, I think really just seeing some seasonality with the balance between our international margins and our domestic margins. Glen Santangelo – Credit Suisse: And Randy, just to follow-up on that guidance a little bit more. I mean, obviously you had a price and benefit this quarter from the litigation settlement. Was that part of your original thinking with respect to your guidance or is that new?

We always model a variety of opportunities that we may have on other income. And while this one was not part of the overall forecast, this is part of our longer term operating strategy to pursue a lot of these recoveries. Our General Counsel’s office certainly has renewed in this over the last decade or so. So, as we see some of these things that we’ve had historically, a little bit of volatility in our other operating income. And I would expect that to continue. But all-in-all, we just called this out because of the magnitude of it in terms of materiality. But we consider this part of our normal operating performance. Glen Santangelo – Credit Suisse: Maybe if I can just squeeze one last one, when I look at the quarter and the $0.44 reported. If I would back out that the settlement for second, it looks like you earned about $0.39 from operations, which kind of look like, it steepens the ramp as we head to the back half of the year to make your full year numbers. And Randy, in your prepared remarks you seemed to suggest that we’re expecting a lift in the second half. I’m wondering if you could just elaborate a little bit more and what some of those primary drivers would be in the second half to kind of get you to the range for the full year.

Hi Glen, this is Jim Bierman. Yes, I think as we reflect on the story for 2014, we definitely have several opportunities that will come to fruition in the second half of the year. Big one, internationally is the rationalization of resources to align with the business in the U.K. and then furthermore of the servicing of the larger customer that Randy referred to that is coming on in the U.K. In the United States, it really revolves around on-boarding a very large customer in the second half of the year. And the opportunities to then rationalize resources aligned with the business that comes on. So, I think you’re right, it is a second half of the year story. I think when we, we’re with everyone and talking about 2014 initially in the December timeframe at our Investor Day in New York. It was our expectation that these events would be more staged throughout the year and maybe a little more front-end loaded. But as things are evolving, clearly, they’re going to compress into the second half of the year. Glen Santangelo – Credit Suisse: Okay, Jim. Thanks for those comments.

Thank you. And the next question is from Robert Willoughby of Bank of America. Your line is open. Robert Willoughby – Bank of America: Just to follow on Glen’s question, on the EPS ramp. I’m not sure how you’re actually thinking about the international profit ramp. On the bigger revenue base, do you swing the profitability in the second quarter or is that to Jim’s comments more the back-half phenomena?

I think as we looked at our international business, we would expect again for the full year to be solidly profitable for the year. Certainly the loss in the first quarter is almost entirely due to the operating shortfall in the U.K. The balance of the network was solidly profitably. We think as we successfully onboard this customer and continue to onboard other customers throughout the year that we will swing to a profitable year. Robert Willoughby – Bank of America: Okay, perfect. And just can you flush out anecdotally in the U.K. you characterized reduced level of activity. But what products are going out the door that you might have expected to happen. What exactly is the weakness around?

As you may recall, we’re operating over 3PL business. So, it’s not our products, it’s our customer’s product. And their activity broadly speaking, we had a few customers that just experienced some softness in the first quarter. So, the level of activity going through our warehouses was down slightly sequentially. The other areas that we have are just the on-boarding this particularly large customer that was a little bit more complex than we had anticipated. So it required some incremental expenses throughout that period. Both of those incidents we feel comfortable, have begun to turn themselves around in the second quarter. We should see some benefits in the second half of the year. Robert Willoughby – Bank of America: So I guess, Randy, the question is more what kind of products were these, were these band-aids or were they some higher tech products. I mean, how would you characterize the softness?

Sure. Most of the products that we pass through our warehouse are of pharmaceutical in nature. Robert Willoughby – Bank of America: Okay, thank you.

Bob, yeah this is Craig. It was really in particular to two manufacturers that just had a slow quarter. And as we’ve also said, historically in this business, the first quarter is a little bit slower and has the tendency to ramp up the flu season towards the end of the year. But in retrospect, it was two manufacturers that were little light on the pallets in and pallets out, primarily pharmaceutical. Robert Willoughby – Bank of America: Perfect. Thank you.

Thank you. And the next question comes from Lisa Gill of JPMorgan. Your line is open. Hi Lisa, please check to see if your line is on mute. And we’ll take our next question from Robert Jones of Goldman Sachs. Your line is open. Robert Jones – Goldman Sachs: Thanks. So, just going to the domestic side, domestic segment operating profit and margin in the quarter. We were down compared to first quarter last year if you adjust out the one-time settlement that you guys called out. And I know you call that area, Craig, you sound like you were pleased with on the expense control side. Yet, operating margins were down. Can you talk about how gross margin in the domestic business is tracking compared to your expectations?

Hi Robert, this is Jim Bierman again. Let me start by saying that I think when one looks at the first quarter of 2013, we had always known that we had a difficult comp when – as we went into this quarter. So, last year we saw the benefit of manufacturer price changes that impacted the quarter. So, on a dollar basis, we’re down domestically gross margin year-over-year about $9.3 million. And the vast majority of that relates to manufacture price increases. When you relate that to our expectations and our thinking for the first quarter this year, obviously we were able to factor that into our thinking. And the gap between where we end up in the first quarter of 2014 and sort of the amounts we were targeting is really quite small. If I had to summarize where the area are that, we’ll remain focused on for the remainder of 2014, a little bit of softness on manufacturer services revenue is what we saw. In terms of complexity of the ability to close the gap, that’s one of the areas that none of it is easy but that’s one of the areas that is a little bit more within our control to try to fix in the shorter term. Robert Jones – Goldman Sachs: Okay, got it. And then I guess just a bigger picture question, the revenue from larger customers, you guys described as growing faster than smaller, I think there is a phenomenon. We’ve seen going on for some time right now. I was just – and clearly it does seem like it has a drag on profitability in this mix-shift. Can you maybe just talk a little bit about where we are in your mind as far as this transition of this mix shift from the medium to smaller customer provider base towards the larger IDN base?

Yes, that’s a great question Robert. We spent a fair amount of time proposing that ourselves. I think again, within expectations and what we were targeting for the quarter as we reflected on our 2014, we – because of the timing of the new business that we’ll be bringing on, we actually generated more revenue in the first quarter of 2014 than we were targeting. So, in that sense we were very pleased. It’s down relatively small amount from the prior year but it’s ahead of where we were targeting. When we look at where in our components of our targets, we were off. And therefore the good news, the fact that the big continue to get bigger is again the phenomenon that we’re experiencing and we underestimated their growth in our projections and how we thought about the quarter, which is all good. When this begins to level out and we get a little better feel for this, the ability to predict this, I’m not sure if that’s going to occur. I think this is a transformation within the healthcare industry. And I think your guess is as good as mine as to sort of how it plays out in total. We do think though that we have placed the resources in the appropriate, with the appropriate customers. And we are constantly being validated in the marketplace the bet is in fact the case. Robert Jones – Goldman Sachs: Got it. Appreciate your thoughts Jim.

Thank you. And the next question is from Lisa Gill of JPMorgan. Your line is open. Gavin Weiss – JPMorgan: Hi, it’s Gavin Weiss, sorry for the silence earlier, we’re having some technical issues on my end. I apologize if this has been asked already, but in terms of your large new customer now coming on later in the year than you originally anticipated and keeping the revenue outlook the same. Are there any tailwinds that maybe helping you to achieve that 2% target? Are you seeing any benefit from ACA related volumes?

No, Gavin. I wouldn’t characterize it as being ACA driven. I think it really ties pretty directly into the question Robert asked. And which was, it’s a function of our larger customers growing at a rate that’s faster than we had originally projected. Gavin Weiss – JPMorgan: Okay. And then, in the past you’ve talked about the opportunities with medical device manufacturers. Have you seen any increased level there and that’s something that you think will benefit ‘14?

We hope it benefits ‘14 to some degree. But we have seen a significant amount of interest in our offerings and how we might help the medical device manufacturers, reduce cost and really improve their service within the four walls of a hospital. So, again, we are encouraged by the level of activity and discussions that are going on. But at this point the amount of revenue or margin that’s being created is relatively small. Gavin Weiss – JPMorgan: Okay. Thank you very much. That’s helpful.

Thank you. And the next question is from David Larson of Leerink. Your line is open. David Larson – Leerink: Hi, with respect to the international operations. Can you give us a sense for what those costs were for that large customer you were bringing onboard? Was it $1 million, $2 million, can you give us any sense?

The on-boarding costs were approximately about $1.5 million in the first quarter. David Larson – Leerink: Okay.

And we’ve going to expect that to continue somewhat early in the second quarter, and diminish as we get late in the quarter and then into the third quarter. David Larson – Leerink: Okay. And then, the international revenue actually I think looked pretty good, it was a pretty good sequential increase there. Was it just sort of the mix-shift that caused the operating loss and what portion of that business is U.K. related? Thanks.

I think we saw a pretty nice increase throughout the network in the first quarter. When you look year-over-year, we had a couple of new customers come on-board in the first quarter. Most of the costs then were related to the loss was U.K. based cost. But a lot of the revenue is fairly evenly spread throughout the network. We on-boarded the large customer in the U.K. effective March 1, so while we had pretty much a full quarter of cost associated with that customer, we really only had about 30 days of revenue as it came up to speed. So, again, we think that will have a very different perspective in the second quarter. But otherwise, we saw some nice balanced revenue growth throughout the network. David Larson – Leerink: Okay, great. Thanks very much.

Thank you. (Operator Instructions). Next question is from Steven Valiquette of UBS. Your line is open. Steven Valiquette – UBS: All right, thanks, hi, good morning, also couple of questions on the international. I guess, I’m just curious you guys did a pretty good job explaining some of the things that happened in the first quarter. But I guess, in a normal year going forward, is there any seasonality in this business or should we assume that the profitability in this business generally speaking will be fairly consistent across the four quarters of the given calendar year?

Nice question, Steve. As we’ve indicated in the past, there is a certain amount of seasonality in both the business that we operate in, due to the flu season that Craig alluded to earlier. So that’s kind of end of the third quarter, fourth quarter event. And then the normal seasonality of Europe that usually sees softness in the first and third quarters. And we would expect that to continue throughout this year. Offsetting some of that, we do expect as we continue to improve capacity utilization year-over-year, we’ll start to see the benefit of that as we get into the second half of the year. Steven Valiquette – UBS: Okay. And also I guess, near term, should we expect that as you on-board additional customers that there always could be a little bit of lumpiness in the earnings as well until the business gets more mature that unfortunately the start-up for each new customer might be material enough to kind of cause some of these swings. I’m just curious to get your thoughts around those, your start-up costs for future customers?

That’s actually a great question. And it really depends on the nature of the customer, the nature of the service that we’re providing. This particular customer in the U.K. is a fairly complex customer on that involves a lot of deliveries to local customers. And so, as part of that I think we just, our own team over there underestimated some of the integration hurdles that we would have in the complexity of that particular customer. On the flipside of that, another customer another customer that we on-boarded in the first quarter was more of a buy-sell in nature and had very low cost coming in, and actually could on-board within about 30 days. So it really depends on the nature of the business, what services we’re providing and the related complexity of the services to the end markets. Steven Valiquette – UBS: Okay, got it. Okay, thanks.

Thank you. There are no further questions at this time. I’ll turn the call back over to Mr. Smith for closing remarks.

Thank you, Latoya. And I want to thank everybody for listening in this morning and for their questions. And as you can tell, we’re going to be out talking to a lot of folks over the next several months. So we’re looking forward to seeing you hopefully over the next quarter or two. And if you have any questions, we’ll answer them at different meetings. But I appreciate your participation today. Thank you.

Thank you for participating in today’s conference. This concludes the call. You may now disconnect. Good day.