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Item 1. Financial Statements

2020-08-05 compared with 2020-05-06 · 266 added, 160 removed, 351 unchanged (55% of the section changed)

3 unchanged sentences

Consolidated Statements of Operations

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2020 2019 2020 2019

Net revenue $ 1,807,719 $ 2,376,705 $ 3,930,412 $ 4,727,544

Cost of goods sold 1,538,312 2,090,187 3,392,445 4,164,407

Gross margin 269,407 286,518 537,967 563,137

Distribution, selling and administrative expenses 241,734 264,215 495,782 519,326

3 unchanged sentences

Interest expense, net 21,605 26,048 44,948 51,506

Other expense, net

Loss from continuing operations before income taxes

Income tax benefit

Loss from continuing operations, net of tax

Other (income) expense, net ( 4,552 ) 731 294 3,464

Income (loss) from continuing operations before income taxes 5,143 ( 10,880 ) ( 12,289 ) ( 22,469 )

Income tax provision (benefit) 4,982 ( 1,146 ) ( 3,541 ) ( 1,816 )

Income (loss) from continuing operations, net of tax 161 ( 9,734 ) ( 8,748 ) ( 20,653 )

Loss from discontinued operations, net of tax ( 55,788 ) ( 742 ) ( 58,203 ) ( 3,919 )

Loss from continuing operations per common share:

Net loss $ ( 55,627 ) $ ( 10,476 ) $ ( 66,951 ) $ ( 24,572 )

Income (loss) from continuing operations per common share:

basic and diluted $ — $ ( 0.16 ) $ ( 0.14 ) $ ( 0.34 )

4 unchanged sentences

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc.

1 unchanged sentence

Consolidated Statements of Comprehensive Loss

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended

(in thousands) 2020 2019 2020 2019

Other comprehensive loss, net of tax:

Net loss $ ( 55,627 ) $ ( 10,476 ) $ ( 66,951 ) $ ( 24,572 )

Other comprehensive income (loss), net of tax:

Currency translation adjustments (net of income tax of $0 in 2020 and 2019) 30,008 7,452 1,830 3,245

Change in unrecognized net periodic pension costs (net of income tax of $44 in 2020 and $69 in 2019)

Net unrealized loss on derivative instruments and other (net of income tax benefit of $4,302 in 2020 and $658 in 2019)

Other comprehensive loss

Change in unrecognized net periodic pension costs (net of income tax of $44 and $88 in 2020, and $63 and $126 in 2019) 595 197 765 394

Net unrealized loss on derivative instruments and other (net of income tax benefit of $238 and $4,064 in 2020, and $2,662 and $3,641 in 2019) ( 76 ) ( 5,262 ) ( 11,473 ) ( 7,675 )

Total other comprehensive income (loss), net of tax 30,527 2,387 ( 8,878 ) ( 4,036 )

Comprehensive loss $ ( 25,100 ) $ ( 8,089 ) $ ( 75,829 ) $ ( 28,608 )

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc.

1 unchanged sentence

Consolidated Balance Sheets

June 30, December 31,

(in thousands, except per share data) 2020 2019

8 unchanged sentences

Operating lease assets 142,200 142,219

Goodwill 391,670 393,181

Intangible assets, net 262,539 285,018

Other assets, net 93,316 99,956

Total assets $ 3,137,786 $ 3,643,084

Liabilities and equity

17 unchanged sentences

Accumulated other comprehensive loss ( 61,585 ) ( 52,707 )

Total equity 395,162 462,154

Total liabilities and equity $ 3,137,786 $ 3,643,084

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2020 2019

Operating activities:

Adjustments to reconcile net loss to cash provided by (used for) operating activities:

Net loss $ ( 66,951 ) $ ( 24,572 )

Adjustments to reconcile net loss to cash provided by operating activities:

Depreciation and amortization 48,804 58,902

Share-based compensation expense 7,814 8,093

Impairment charges

Loss on divestiture 65,472 —

Provision for losses on accounts receivable 7,589 6,534

6 unchanged sentences

Net change in other assets and liabilities ( 76,289 ) 32,226

Cash provided by (used for) operating activities

Other, net 146 5,748

Cash provided by operating activities 150,457 29,014

Investing activities:

Proceeds from divestiture 133,000 —

Additions to property and equipment ( 8,733 ) ( 21,020 )

1 unchanged sentence

Proceeds from sale of property and equipment 69 339

Cash used for investing activities

Proceeds from cash surrender value of life insurance policies 6,032 —

Cash provided by (used for) investing activities 126,959 ( 25,192 )

Financing activities:

4 unchanged sentences

Cash dividends paid ( 311 ) ( 4,918 )

Cash (used for) provided by financing activities

Other, net ( 4,479 ) ( 1,934 )

Cash used for financing activities ( 171,062 ) ( 16,053 )

Effect of exchange rate changes on cash and cash equivalents 5,412 203

6 unchanged sentences

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc.

1 unchanged sentence

Consolidated Statements of Changes in Equity

(in thousands, except per share data)

($2 par value )

Comprehensive Loss

(in thousands, except per share data) Common

Outstanding Common

($2 par value ) Paid-In

Capital Retained

Earnings Accumulated

Comprehensive Loss Total

Balance, December 31, 2018 62,294 $ 124,588 $ 238,773 $ 200,670 $ ( 45,612 ) $ 518,419

Net loss ( 14,096 ) ( 14,096 )

Other comprehensive loss ( 6,423 ) ( 6,423 )

2 unchanged sentences

Balance, March 31, 2019 62,936 125,872 241,547 186,455 ( 52,035 ) 501,839

Net loss ( 10,476 ) ( 10,476 )

Other comprehensive income 2,387 2,387

Dividends declared ($0.0025 per share) ( 114 ) ( 114 )

Share-based compensation expense, exercises and other 28 56 3,209 3,265

Balance, June 30, 2019 62,964 $ 125,928 $ 244,756 $ 175,865 $ ( 49,648 ) $ 496,901

Balance, December 31, 2019 62,843 $ 125,686 $ 251,401 $ 137,774 $ ( 52,707 ) $ 462,154

Net loss ( 11,324 ) ( 11,324 )

Other comprehensive loss ( 39,405 ) ( 39,405 )

2 unchanged sentences

Balance, March 31, 2020 62,885 125,770 256,357 126,323 ( 92,112 ) 416,338

Net loss ( 55,627 ) ( 55,627 )

Other comprehensive income 30,527 30,527

Dividends declared ($0.0025 per share) ( 156 ) ( 156 )

Share-based compensation expense, exercises and other 852 1,704 2,376 4,080

Balance, June 30, 2020 63,737 $ 127,474 $ 258,733 $ 70,540 $ ( 61,585 ) $ 395,162

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc.

5 unchanged sentences

The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc.

and the subsidiaries it controls (we, us, our or the Company) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S.

and the subsidiaries it controls (we, us, or our) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S.

generally accepted accounting principles (GAAP).

1 unchanged sentence

The Movianto business represents a component that met accounting requirements to be classified as discontinued operations and held-for-sale beginning December 31, 2019.

In accordance with GAAP, the financial position and results of operations of the Movianto business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented.

With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc.

In accordance with GAAP, the results of operations and financial position of the Movianto business are presented as discontinued operations through June 18, 2020 (the Divestiture Date) and, as such, have been excluded from continuing operations for all periods presented.

With the exception of Note 3, the Notes to Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc.

and its subsidiaries.

See Note 3 for additional information regarding discontinued operations.

10 unchanged sentences

Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash.

Restricted cash represents $ 16.3 million held in an escrow account as of March 31, 2020 as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) Advanced Program.

Restricted cash included in Other current assets represents $ 78.9 million held in a designated account as of June 30, 2020 as required by the Fifth Amendment to the Credit Agreement, which stipulates that the cash proceeds from the sale of the Movianto business is to be used to repay the 2021 Notes or the Term Loans.

Restricted cash included in Other assets, net as of June 30, 2020 represents $ 16.3 million held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) Advanced Program.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of those same amounts presented in the accompanying consolidated statements of cash flows.

The restricted cash presented below is classified as non-current in Other assets, net within the accompanying consolidated balance sheets.

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Cash and cash equivalents $ 101,276 $ 67,030

Restricted cash included in Other current assets 78,854 —

Restricted cash included in Other assets, net 16,323 16,261

9 unchanged sentences

See Note 8 for the fair value of derivatives.

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Note 3— Discontinued Operations

On January 16, 2020, we announced our intention to sell our European logistics business, Movianto, to EHDH Holding Group (EHDH), a privately held French company, for cash consideration of $ 133 million .

The Company concluded that the Movianto business met the criteria for discontinued operations as of March 31, 2020 and December 31, 2019 , as the intention to sell represented a strategic shift and the criteria for held-for-sale were met.

On June 18, 2020, we completed the previously announced divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $ 133 million.

We concluded that the Movianto business met the criteria for discontinued operations as of December 31, 2019 and through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met.

Movianto was previously reported in the Global Solutions segment.

The transaction is expected to close in the first half of 2020.

Accordingly, the results of operations from our Movianto business are reported in the accompanying consolidated statements of operations as “Loss from discontinued operations, net of tax” for the quarters ended March 31, 2020 and 2019, and the related assets and liabilities are classified as held-for-sale as of March 31, 2020 and December 31, 2019 in the accompanying balance sheets.

We recognized a loss of $ 9.1 million and $ 32.1 million in connection with the classification of the related assets and liabilities as held-for-sale as of March 31, 2020 and December 31, 2019 , respectively.

The following table summarizes the financial results of our discontinued operations for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31,

Accordingly, the results of operations from the Movianto business are reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the three and six months ended June 30, 2020 and 2019, and the related assets and liabilities are classified as held-for-sale as of December 31, 2019 in the accompanying balance sheet.

We are working with the Buyer on a final working capital adjustment that could result in a benefit in an amount up to $ 42 million.

There is no benefit of any such adjustment reflected in our consolidated financial statements as of June 30, 2020.

The following table summarizes the financial results of our discontinued operations for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, Six Months Ended

2020 2019 2020 2019

Net revenue $ 104,417 $ 107,495 $ 226,759 $ 218,043

Cost of goods sold 21,817 25,585 53,923 54,330

Gross margin 82,600 81,910 172,836 163,713

Distribution, selling, and administrative expenses 76,560 80,954 157,512 163,997

Asset impairment charges

Loss on divestiture 56,392 — 65,472 —

Acquisition-related and exit and realignment charges 4,554 265 4,825 391

Other operating income, net

Other operating expense (income), net 73 ( 285 ) ( 388 ) ( 472 )

Operating income (loss) ( 54,979 ) 976 ( 54,585 ) ( 203 )

1 unchanged sentence

Loss from discontinued operations before income taxes ( 56,403 ) ( 659 ) ( 57,729 ) ( 3,478 )

Income tax provision from discontinued operations

Income tax (benefit) provision from discontinued operations ( 615 ) 83 474 441

Loss from discontinued operations, net of tax $ ( 55,788 ) $ ( 742 ) $ ( 58,203 ) $ ( 3,919 )

We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No.

2016-02, for the three months ended March 31, 2020 .

The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheets at March 31, 2020 and December 31, 2019 , are as follows:

March 31, 2020

2016-02, for the three and six months ended June 30, 2020.

All revenue and expense included in discontinued operations during the three and six months ended June 30, 2020 relates to activity through the Divestiture Date.

No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date.

We have entered into transition services agreements with a subsidiary of the Buyer, pursuant to which we and a subsidiary of the Buyer will provide to each other various transitional services.

Certain transition service arrangement costs and reimbursements were recorded during the three and six months ended June 30, 2020.

These amounts were immaterial for the period ended June 30, 2020.

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The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheet at December 31, 2019 were as follows:

December 31, 2019

19 unchanged sentences

Total liabilities of discontinued operations $ 323,511

Assets and liabilities held for sale as of March 31, 2020 and December 31, 2019 are classified as current since we expect the divestiture to be completed within one year of the balance sheet dates.

Assets and liabilities held-for-sale as of December 31, 2019 were classified as current since we expected the Divestiture to be completed within one year of the balance sheet date.

The following table provides operating and investing cash flow information for our discontinued operations:

March 31, 2020

March 31, 2019

June 30, 2020 June 30, 2019

Operating Activities:

Depreciation and amortization $ — $ 10,834

Asset impairment charges

Loss on divestiture 65,472 —

Investing Activities:

1 unchanged sentence

Note 4— Goodwill and Intangible Assets

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through March 31, 2020 :

Global Solutions

Global Products

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through June 30, 2020:

Global Solutions Global Products Consolidated

Carrying amount of goodwill, December 31, 2019 $ 283,905 $ 109,276 $ 393,181

Currency translation adjustments — ( 1,511 ) ( 1,511 )

Carrying amount of goodwill, March 31, 2020

Intangible assets at March 31, 2020 and December 31, 2019 , were as follows:

March 31, 2020

December 31, 2019

Relationships

Carrying amount of goodwill, June 30, 2020 $ 283,905 $ 107,765 $ 391,670

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Intangible assets at June 30, 2020 and December 31, 2019 were as follows:

June 30, 2020 December 31, 2019

Relationships Tradenames Other

Intangibles Customer

Relationships Tradenames Other

Gross intangible assets $ 269,090 $ 90,000 $ 43,230 $ 270,693 $ 90,000 $ 43,055

1 unchanged sentence

Net intangible assets $ 161,749 $ 69,299 $ 31,491 $ 177,746 $ 73,480 $ 33,792

Weighted average useful life

At March 31, 2020 , $ 76.1 million in net intangible assets were held in the Global Solutions segment and $ 195.4 million were held in the Global Products segment.

Amortization expense for intangible assets was $ 10.6 million and $ 10.0 million for the three months ended March 31, 2020 and 2019 , respectively.

Weighted average useful life 10 years 11 years 8 years 10 years 11 years 8 years

At June 30, 2020, $ 71.4 million in net intangible assets were held in the Global Solutions segment and $ 191.1 million were held in the Global Products segment.

Amortization expense for intangible assets was $ 10.6 million and $ 12.8 million for the three months ended June 30, 2020 and 2019, respectively, and $ 21.2 million and $ 22.8 million for the six months ended June 30, 2020 and 2019, respectively.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $ 20.7 million for the remainder of 2020, $ 39.8 million for 2021, $ 38.9 million for 2022, $ 38.7 million for 2023, $ 33.9 million for 2024 and $ 28.2 million for 2025.

2 unchanged sentences

These charges also include costs associated with our strategic organizational realignment which include management changes, certain professional fees, and costs to streamline administrative functions and processes.

Exit and realignment charges by segment for the three months ended March 31, 2020 and 2019 were as follows:

Three Months Ended March 31,

Exit and realignment charges by segment for the three and six months ended June 30, 2020 and 2019 were as follows:

Three Months Ended June 30, Six Months Ended

2020 2019 2020 2019

Global Solutions segment $ 1,713 $ 1,614 $ 3,542 $ 2,180

1 unchanged sentence

Total exit and realignment charges $ 2,200 $ 1,717 $ 4,029 $ 2,421

The following table summarizes the activity related to exit and realignment cost accruals through March 31, 2020 and 2019 :

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The following table summarizes the activity related to exit and realignment cost accruals through June 30, 2020 and 2019:

Accrued exit and realignment costs, December 31, 2019 $ 8,162

Provision for exit and realignment activities:

Severance 1,391

Information system restructuring costs 183

Change in estimate

Cash payments ( 5,799 )

Accrued exit and realignment costs, March 31, 2020 4,192

Provision for exit and realignment activities:

Severance 809

Information system restructuring costs 671

Cash payments ( 2,072 )

Accrued exit and realignment costs, June 30, 2020 $ 4,320

Accrued exit and realignment costs, December 31, 2018 $ 7,477

Provision for exit and realignment activities:

Severance 360

Information system restructuring costs 261

Change in estimate

Cash payments ( 2,206 )

Accrued exit and realignment costs, March 31, 2019 5,975

(1) The accrued exit and realignment costs at March 31, 2020 and 2019 related primarily to information system restructuring costs and severance.

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 4.2 million for the three months ended March 31, 2020 and 2019, respectively, and consisted primarily of transition costs for the Halyard acquisition.

Provision for exit and realignment activities:

Severance 1,008

Information system restructuring costs 705

Cash payments ( 2,301 )

Accrued exit and realignment costs, June 30, 2019 $ 5,391

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 3.9 million and $ 8.1 million for the three and six months ended June 30, 2020 and $ 3.7 million and $ 7.8 million for the three and six months ended June 30, 2019, respectively, and consisted primarily of transition costs for the Halyard acquisition.

Debt consists of the following:

March 31, 2020

December 31, 2019

Carrying Amount

Estimated Fair Value

Carrying Amount

Estimated Fair Value

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June 30, 2020 December 31, 2019

Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value

3.875% Senior Notes, due September 2021 $ 178,510 $ 175,135 $ 236,234 $ 229,356

2 unchanged sentences

Term B Loan, due April 2025 478,729 445,505 480,337 442,217

Accounts Receivable Securitization Program

Revolver 130,000 130,000 177,900 177,900

Receivables Securitization Program 147,339 150,000 — —

Finance leases and other 12,251 12,251 13,783 13,783

Total debt 1,398,654 1,336,648 1,559,652 1,458,392

Less current maturities ( 128,800 ) ( 126,656 ) ( 51,237 ) ( 51,237 )

Long-term debt $ 1,269,854 $ 1,209,992 $ 1,508,415 $ 1,407,155

We have $ 233 million of 3.875 % senior notes due 2021 (the “2021 Notes”) and $ 275 million of 4.375 % senior notes due 2024 (the “2024 Notes”), with interest payable semi-annually.

We have $ 179 million of 3.875 % senior notes due in 2021 (the 2021 Notes) and $ 246 million of 4.375 % senior notes due in 2024 (the 2024 Notes), with interest payable semi-annually.

The 2021 Notes were sold at 99.5 % of the principal amount with an effective yield of 3.951 %.

The 2024 Notes were sold at 99.6 % of the principal with an effective yield of 4.422 % .

We used $ 4.4 million of cash to repurchase $ 4.6 million aggregate principal amount of the 2021 Notes during the first quarter of 2020.

We have a Credit Agreement (amended February 2020) with a borrowing capacity of $ 400 million and $ 697 million outstanding in term loans.

On February 13, 2020, we entered into a Fifth Amendment to the Credit Agreement.

The interest rate on our revolving credit facility and Term A loans is based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus an adjustment based on our Consolidated Total Leverage Ratio as defined by the Credit Agreement.

Our credit spread at March 31, 2020 was Eurocurrency Rate plus 4.25 % .

Our Term B loan accrues interest based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus interest rate margin of 3.50 % per annum with respect to Base Rate Loans (as defined in the Credit Agreement), and 4.50 % per annum with respect to Eurocurrency Rate Loans (as defined in the Credit Agreement).

We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the facility.

The terms of the Credit Agreement requires us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition.

We also have a Security and Pledge Agreement (the Security Agreement) pursuant to which we granted collateral on behalf of the holders of the 2021 Notes and the 2024 Notes and parties secured on the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries (limited, in the case of controlled foreign corporations, to a pledge of 100 % of the voting capital stock of each first-tier foreign subsidiary of each Credit Party) and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions.

The Fifth Amendment to the Credit Agreement included additional collateral requirements related to the parties secured on the Credit Agreement, including the obligation to pledge the Company's owned U.S.

real estate and remaining equity interests in foreign subsidiaries .

Our Credit Agreement has a “springing maturity date” with respect to the revolving loans and the Term A loans and the Term B loans.

If as of the date 91 days prior to the maturity date of our 2021 Notes all outstanding amounts under the 2021 Notes have not been paid in full, then the Termination Date (as defined in the Credit Agreement) of the revolving credit facility and the Term A loans shall be the date that is 91 days prior to the maturity date of the 2021 Notes.

Likewise, if as of the date 91 days prior to the maturity date of our 2024 Notes, all outstanding amounts under the 2024 Notes have not been paid in full, the Termination Date of the Term B loan shall be the date that is 91 days prior to the maturity date of the 2024 Notes.

The 2024 Notes were sold at 99.6 % of the principal amount with an effective yield of 4.422 %.

We have the option to redeem the 2021 Notes and 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100 % of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate plus 25 basis points for the 2021 Notes and the applicable Benchmark Treasury Rate plus 30 basis points for the 2024 Notes.

In June 2020, we announced cash tender offers for up to $ 240.0 million aggregate principal amount of our outstanding 2021 Notes and 2024 Notes.

As of the Early Settlement Date of June 22, 2020, $ 54.1 million of the 2021 Notes and $ 29.0 million of the 2024 Notes were repaid.

On the Early Settlement Date, the 2021 Notes were redeemed at 100 % of par, and the 2024 Notes were redeemed at 90 % of par, resulting in a net gain on extinguishment of debt of $ 2.9 million.

The tender offers remained open through July 2, 2020, and an additional $ 0.1 million of the 2021 Notes were redeemed at the Base Consideration price of 95 % of par by the time the offers closed.

Including the tender offer, we used $ 83.2 million of cash to repurchase $ 87.8 million aggregate principal amount of the 2021 Notes and 2024 Notes during the first six months of 2020.

Consistent with the terms of the Fifth Amendment to the Credit Agreement, we used $ 54.1 million of the proceeds from the sale of Movianto to fund the repayment of the 2021 Notes, which were retired in the second quarter as part of the tender offer.

As required by the Fifth Amendment to the Credit Agreement, the remaining $ 78.9 million of proceeds from the sale of Movianto were placed in a designated account and will be used to repurchase a portion of the outstanding 2021 Notes within 210 days of the Divestiture Date or repay a portion of our Term Loans.

As of June 30, 2020, we classified $ 78.9 million of 2021 Notes as current liabilities since we intend to use the remaining $ 78.9 million of proceeds from the sale of Movianto to repurchase a portion of our 2021 Notes within 210 days of the Divestiture Date.

We have a Credit Agreement (last amended February 13, 2020) with a $ 400 million revolving credit facility and $ 686 million in outstanding term loans.

The interest rate on our revolving credit facility and Term A Loans is based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage which varies depending on Consolidated Total Leverage Ratio (each as defined in the Credit Agreement).

Our credit spread on the revolving credit facility and Term A Loans at June 30, 2020 was Eurocurrency Rate plus 4.25 %.

Our Term B Loan accrues interest based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage of 3.50 % per annum for Base Rate Loans and 4.50 % per annum for Eurocurrency Rate Loans (each as defined in the Credit Agreement).

Our credit spread on the Term B Loan at June 30, 2020 was Eurocurrency Rate plus 4.50%.

We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the revolving credit facility.

Our Credit Agreement has a “springing maturity date” with respect to the revolving credit facility, the Term A Loans, and the Term B Loan.

If the outstanding balance of the 2021 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2021 Notes, then the Termination Date (as defined in the Credit Agreement) of the revolving credit facility, the Term A Loans, and the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2021 Notes.

Likewise, if the outstanding balance of the 2024 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2024 Notes, the Termination Date of the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2024 Notes.

At June 30, 2020 and December 31, 2019, we had borrowings of $ 130.0 million and $ 177.9 million, respectively, under the revolver and letters of credit of $ 13.9 million and $ 11.7 million, respectively, outstanding under the Credit Agreement.

At June 30, 2020 and December 31, 2019, we had $ 256.1 million and $ 209.3 million, respectively, available for borrowing.

The December 31, 2019 availability reflected letters of credit associated with discontinued operations of $ 1.1 million.

There were no letters of credit associated with discontinued operations as of June 30, 2020.

We also had letters of credit and bank guarantees outstanding for $ 3.6 million, of which $ 2.0 million are in process of being transferred to the buyer of Movianto, and $ 1.5 million as of June 30, 2020 and December 31, 2019, respectively, which supports certain leased facilities

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as well as other normal business activities in the United States and Europe.

These letters of credit and guarantees were issued independent of the Credit Agreement.

We also have a Security and Pledge Agreement (the Security Agreement) pursuant to which we granted collateral on behalf of the holders of the 2021 Notes, the holders of the 2024 Notes, and the parties secured under the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries of each Credit Party and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions.

The Fifth Amendment to the Credit Agreement included additional collateral requirements if the Credit Parties, including an obligation to pledge our owned U.S.

real estate and the remaining equity interests in foreign subsidiaries.

On February 19, 2020, we entered into an accounts receivable securitization program (the Receivables Securitization Program).

3 unchanged sentences

The Receivables Securitization Program matures on February 17, 2023.

In February 2020, $ 150 million in proceeds from the sale of accounts receivable pursuant to the Receivables Securitization Program were used to repay higher interest indebtedness under our Term A loans.

At March 31, 2020 and December 31, 2019 , we had borrowings of $ 171.7 million and $ 177.9 million , respectively, under the revolver and letters of credit of $ 11.7 million and $ 11.7 million , respectively, outstanding under the Credit Agreement along with $ 508.1 million and $ 512.7 million , respectively, in Senior Notes.

At March 31, 2020 and December 31, 2019, we had $ 215.5 million and $ 209.3 million , respectively, available for borrowing, which reflected the letters of credit associated with discontinued operations of $ 1.1 million and $ 1.1 million , respectively, against our borrowing capacity.

We also had letters of credit and bank guarantees outstanding for $ 1.5 million as of March 31, 2020 and December 31, 2019 , respectively, which supports certain facilities leased as well as other normal business activities in the United States and Europe.

In February 2020, we drew $ 150 million from the Receivables Securitization Program to repay portions of the Term A Loans, consistent with the terms of the Fifth Amendment to the Credit Agreement.

The Fifth Amendment to the Credit Agreement requires that any additional draws on the Receivables Securitization Program are restricted for use to repay the 2021 Notes or Term A loans to the extent those instruments are outstanding.

The Credit Agreement and Senior Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement.

We believe we were in compliance with our debt covenants at March 31, 2020 .

As of March 31, 2020 , scheduled future principal payments of debt were $ 37.2 million in 2020, $ 282.8 million in 2021, $ 320.5 million in 2022, $ 155.0 million in 2023, $ 280.0 million in 2024, and $ 468.8 million thereafter.

The terms of the Credit Agreement also require the company to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture.

We were in compliance with our debt covenants at June 30, 2020.

As of June 30, 2020, scheduled future principal payments of debt were $ 24.8 million in 2020, $ 228.6 million in 2021, $ 278.8 million in 2022, $ 155.0 million in 2023, $ 251.0 million in 2024, and $ 468.8 million thereafter.

Note 7— Retirement Plans

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Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective employees.

The components of net periodic benefit cost for the three months ended March 31, 2020 and 2019 , respectively, were as follows:

Three Months Ended March 31,

The components of net periodic benefit cost for the three and six months ended June 30, 2020 and 2019, respectively, were as follows:

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Service cost $ 357 $ 330 $ 708 $ 659

Interest cost 496 600 990 1,200

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The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

We pay interest under our Credit Agreement which fluctuates based on changes in our benchmark interest rates.

In order to mitigate the risk of increases in benchmark rates, we enter into interest rate swaps whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount.

We pay interest under our Credit Agreement and Receivables Securitization Program, which fluctuate based on changes in our benchmark interest rates.

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amounts calculated by reference to the notional amount.

The interest rate swaps were designated as cash flow hedges.

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Our derivatives are over-the-counter instruments with liquid markets.

All derivatives are carried at fair value in our consolidated balance sheets in other assets and other liabilities.

All derivatives are carried at fair value in our consolidated balance sheets in other assets, net and other liabilities.

We consider the risk of counterparty default to be minimal.

We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of March 31, 2020 :

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of June 30, 2020:

Derivative Assets Derivative Liabilities

Notional Amount Maturity Date Classification Fair Value Classification Fair Value

Cash flow hedges

Interest rate swaps

May 2022 and May 2025

Other assets, net

Other liabilities

Interest rate swaps $ 450,000 May 2022 and May 2025 Other assets, net $ — Other liabilities $ 32,974

Economic (non-designated) hedges

Foreign currency contracts

Other assets, net

Other liabilities

Foreign currency contracts $ 22,600 July 2020 Other assets, net $ 13 Other liabilities $ —

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2019:

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

Derivative Assets Derivative Liabilities

Notional Amount Maturity Date Classification Fair Value Classification Fair Value

Cash flow hedges

Interest rate swaps

May 2022 and May 2025

Other assets, net

Other liabilities

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three months ended March 31, 2020 :

Amount of Gain/(Loss) Recognized in Other Comprehensive Loss

Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income

Total Amount of Income/(Expense) Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded

Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income

Interest rate swaps

Interest expense, net

Interest rate swaps $ 450,000 May 2022 and May 2025 Other assets, net $ — Other liabilities $ 17,436

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and six months ended June 30, 2020:

Amount of Gain/(Loss) Recognized in Other Comprehensive Loss Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Income/(Expense) Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Interest rate swaps $ ( 2,439 ) $ ( 19,397 ) Interest expense, net $ ( 21,605 ) $ ( 44,948 ) $ ( 2,601 ) $ ( 3,860 )

The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

For the three months ended March 31, 2020 and 2019, we recognized a loss of $ 2.7 million and a gain of $ 0.5 million , respectively, associated with our economic (non-designated) foreign currency contracts.

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The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and six months ended June 30, 2019:

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Interest rate swaps $ ( 8,162 ) $ ( 12,577 ) Interest expense, net $ ( 26,048 ) $ ( 51,506 ) $ ( 361 ) $ ( 682 )

Foreign currency contracts $ 191 $ 636 Cost of goods sold $ ( 2,090,187 ) $ ( 4,164,407 ) $ 314 $ 57

The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

For the three months and six months ended June 30, 2020, we recognized a gain of $ 1.3 million and a loss of $ 1.4 million, respectively, associated with our economic (non-designated) foreign currency contracts.

For the three and six months ended June 30, 2019, we recognized gains of $ 0.5 million and $ 1.0 million, respectively, associated with our economic (non-designated) foreign currency contracts.

We recorded the change in fair value of derivative instruments and the remeasurement adjustment of the foreign currency denominated asset or liability in other operating (income) expense, net for our foreign exchange contracts.

Note 9— Income Taxes

The effective tax rate was 48.9 % for the three months ended March 31, 2020 , compared to 5.8 % in the same quarter of 2019.

The change in these rates resulted from an income tax benefit of $ 5.2 million recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax expense associated with the vesting of restricted stock.

The liability for unrecognized tax benefits was $ 11.7 million at March 31, 2020 and $ 11.5 million at December 31, 2019 .

Included in the liability at March 31, 2020 and December 31, 2019 were $ 3.1 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The effective tax rate was 96.9 % and 28.8 % for the three and six months ended June 30, 2020, compared to 10.5 % and 8.1 % in the same periods of 2019.

The change in these rates resulted from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax expense associated with the vesting of restricted stock.

The liability for unrecognized tax benefits was $ 11.7 million at June 30, 2020 and $ 11.5 million at December 31, 2019.

Included in the liability at June 30, 2020 and December 31, 2019 were $ 2.8 million and $ 3.1 million, respectively, of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Internal Revenue Services (IRS) is conducting an audit of our 2015 and 2016 Consolidated Income Tax Returns.

In connection with the audit, the IRS has asserted that our taxable income for 2015 and 2016 should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United States by our domestic subsidiaries.

Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date.

At this point, we cannot estimate the likelihood of potential liability associated with this audit or the applicability of the IRS’ position for taxable years following 2016.

However, we believe that the IRS' claims are without merit and plan to pursue all available administrative and judicial remedies necessary to resolve this matter.

We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves.

We believe that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows and that we have adequate tax reserves for all tax matters.

However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows.

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Note 10— Net Loss per Common Share

The following summarizes the calculation of net loss per common share attributable to common shareholders for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31,

The following summarizes the calculation of net loss per common share attributable to common shareholders for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30, Six Months Ended

(in thousands, except per share data) 2020 2019 2020 2019

Weighted average shares outstanding - basic and diluted 61,128 59,805 60,819 60,403

Loss from continuing operations

Income (loss) from continuing operations $ 161 $ ( 9,734 ) $ ( 8,748 ) $ ( 20,653 )

Basic and diluted per share $ — $ ( 0.16 ) $ ( 0.14 ) $ ( 0.34 )

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Basic and diluted per share $ ( 0.91 ) $ ( 0.01 ) $ ( 0.96 ) $ ( 0.07 )

Net loss $ ( 55,627 ) $ ( 10,476 ) $ ( 66,951 ) $ ( 24,572 )

Basic and diluted per share $ ( 0.91 ) $ ( 0.17 ) $ ( 1.10 ) $ ( 0.41 )

Note 11— Shareholders' Equity

In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $ 50 million.

We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes.

As of June 30, 2020, no shares were issued and $ 50 million of common stock remained available under the at-the-market equity financing program.

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Note 12— Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss by component for the three months ended March 31, 2020 and 2019 :

Retirement Plans

Derivatives and Other

Accumulated other comprehensive loss, December 31, 2019

Other comprehensive loss before reclassifications

Other comprehensive loss before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive income, net of tax

The following table shows the changes in accumulated other comprehensive loss by component for the three months ended June 30, 2020 and 2019:

Retirement Plans Currency

Adjustments Derivatives and Other Total

Accumulated other comprehensive loss, March 31, 2020 $ ( 14,521 ) $ ( 53,479 ) $ ( 24,112 ) $ ( 92,112 )

Other comprehensive income (loss) before reclassifications 14,428 ( 2,439 ) 11,989

Income tax — — 428 428

Other comprehensive income (loss) before reclassifications, net of tax — 14,428 ( 2,011 ) 12,417

Amounts reclassified from accumulated other comprehensive loss 639 15,580 2,601 18,820

Income tax ( 44 ) — ( 666 ) ( 710 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 595 15,580 1,935 18,110

Other comprehensive income (loss) 595 30,008 ( 76 ) 30,527

Accumulated other comprehensive loss, June 30, 2020 $ ( 13,926 ) $ ( 23,471 ) $ ( 24,188 ) $ ( 61,585 )

Retirement Plans Currency Translation Adjustments Derivatives and Other Total

Accumulated other comprehensive loss, March 31, 2019 $ ( 7,949 ) $ ( 36,758 ) $ ( 7,328 ) $ ( 52,035 )

Retirement Plans

Derivatives and Other

Other comprehensive income (loss) before reclassifications — 7,452 ( 7,971 ) ( 519 )

Income tax — — 2,678 2,678

Other comprehensive income (loss) before reclassifications, net of tax — 7,452 ( 5,293 ) 2,159

Amounts reclassified from accumulated other comprehensive loss 260 — 47 307

Income tax ( 63 ) — ( 16 ) ( 79 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 197 — 31 228

Other comprehensive income (loss) 197 7,452 ( 5,262 ) 2,387

Accumulated other comprehensive loss, June 30, 2019 $ ( 7,752 ) $ ( 29,306 ) $ ( 12,590 ) $ ( 49,648 )

Retirement Plans Currency Translation Adjustments Derivatives and Other Total

Accumulated other comprehensive loss, December 31, 2019 $ ( 14,691 ) $ ( 25,301 ) $ ( 12,715 ) $ ( 52,707 )

Other comprehensive loss before reclassifications — ( 13,750 ) ( 19,397 ) ( 33,147 )

Income tax — — 5,074 5,074

Other comprehensive loss before reclassifications, net of tax — ( 13,750 ) ( 14,323 ) ( 28,073 )

Amounts reclassified from accumulated other comprehensive income

Amounts reclassified from accumulated other comprehensive income, net of tax

Amounts reclassified from accumulated other comprehensive loss 853 15,580 3,860 20,293

Income tax ( 88 ) — ( 1,010 ) ( 1,098 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 765 15,580 2,850 19,195

Other comprehensive income (loss) 765 1,830 ( 11,473 ) ( 8,878 )

Accumulated other comprehensive loss, March 31, 2019

We include amounts reclassified out of accumulated other comprehensive loss related to defined benefit pension plans as a component of net periodic pension cost.

For the three months ended March 31, 2020 and 2019 , we reclassified $ 0.2 million and $ 0.3 million , respectively, of actuarial net losses.

Accumulated other comprehensive loss, June 30, 2020 $ ( 13,926 ) $ ( 23,471 ) $ ( 24,188 ) $ ( 61,585 )

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Retirement Plans Currency

Adjustments Derivatives and Other Total

Accumulated other comprehensive loss, December 31, 2018 $ ( 8,146 ) $ ( 32,551 ) $ ( 4,915 ) $ ( 45,612 )

Other comprehensive income (loss) before reclassifications — 3,245 ( 11,941 ) ( 8,696 )

Income tax — — 3,831 3,831

Other comprehensive income (loss) before reclassifications, net of tax — 3,245 ( 8,110 ) ( 4,865 )

Amounts reclassified from accumulated other comprehensive loss 520 — 625 1,145

Income tax ( 126 ) — ( 190 ) ( 316 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 394 — 435 829

Other comprehensive income (loss) 394 3,245 ( 7,675 ) ( 4,036 )

Accumulated other comprehensive loss, June 30, 2019 $ ( 7,752 ) $ ( 29,306 ) $ ( 12,590 ) $ ( 49,648 )

We include amounts reclassified out of accumulated other comprehensive loss related to defined benefit pension plans as a component of net periodic pension cost recorded in Other (income) expense, net.

For the three and six months ended June 30, 2020, we reclassified $ 0.6 million and $ 0.8 million, respectively, of actuarial net losses.

For the three and six months ended June 30, 2019, we reclassified $ 0.2 million and $ 0.4 million, respectively, of actuarial net losses.

Amounts reclassified from accumulated other comprehensive loss include currency translation adjustments released as a result of the Divestiture.

Note 13— Segment Information

7 unchanged sentences

We believe all inter-segment sales are at prices that approximate market.

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The following tables present financial information by segment:

Three Months Ended March 31,

Segment net revenue

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Global Solutions $ 1,548,639 $ 2,134,469 $ 3,396,233 $ 4,258,068

11 unchanged sentences

Acquisition-related and exit and realignment charges ( 6,054 ) ( 5,390 ) ( 12,118 ) ( 10,254 )

— ( 909 ) — ( 529 )

Consolidated operating income $ 22,196 $ 15,899 $ 32,953 $ 32,501

11 unchanged sentences

Retirement Plan as well as Software as a Service (SaaS) implementation costs associated with the upgrading of our global IT platforms in connection with the redesign of our global information system strategy.

March 31, 2020

December 31, 2019

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June 30, 2020 December 31, 2019

Total assets:

6 unchanged sentences

The following table presents net revenue by geographic area, which were attributed based on the location from which we ship products or provide services.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

United States $ 1,737,615 $ 2,270,768 $ 3,771,069 $ 4,574,680

21 unchanged sentences

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

We are currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.

We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU No.

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2016-13, the effective dates and the transition requirements for these amendments are the same as the effective date and transition requirements in ASU No.

2016-13, which will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

2016-13, which will be effective for fiscal years beginning after December 15, 2022, including

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interim periods within those fiscal years.

We adopted ASU No.

1 unchanged sentence

Its adoption did not have a material impact on our consolidated financial statements.

We are currently evaluating the potential impact of adopting this guidance for Issues 6 and 7 on its consolidated financial statements and disclosures.

We are currently evaluating the potential impact of adopting this guidance for Issues 6 and 7 on our consolidated financial statements and disclosures.

In March 2020, the FASB issued ASU No.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements