What changed in this filing

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Item 1. Business

2021-02-24 compared with 2020-03-04 · 78 added, 38 removed, 133 unchanged (47% of the section changed)

Owens & Minor, Inc.

and subsidiaries (we, us or our), a Fortune 500 company headquartered in Richmond, Virginia, is a leading global healthcare solutions company with integrated technologies, products and services aligned to deliver significant and sustained value for healthcare providers, manufacturers and directly to patients across the continuum of care.

and subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a leading global healthcare solutions company with integrated technologies, products and services aligned to deliver significant and sustained value for healthcare providers, manufacturers and directly to patients across the continuum of care.

Our teammates serve healthcare industry customers in over 70 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.

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Today, we have distribution, production, customer service and sales facilities located across Asia, Europe, Latin America and the United States.

On April 30, 2018, we acquired substantially all of Avanos Medical, Inc.'s (Avanos, previously Halyard Health, Inc.) Surgical and Infection Prevention (S&IP) business, the name “Halyard Health” (and all variations of that name and related intellectual property rights) and its information technology (IT) systems in exchange for $758 million, net of cash acquired.

The Halyard business is a leading global provider of medical supplies and solutions for the prevention of healthcare associated infections across acute care and non-acute care markets.

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.

The divestiture is intended to provide us with a greater ability to focus on and invest in our differentiated products, services and U.S.

distribution businesses.

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.

See Note 3, “Discontinued Operations,” of the Notes to Consolidated Financial Statements included in this annual report for further information.

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Our service offerings to healthcare providers include supplier management, analytics, inventory management, and clinical supply management.

These value-add services help providers improve their process for contracting with vendors, purchasing supplies and streamlining inventory.

These value-add services help providers improve their processes for contracting with vendors, purchasing supplies and streamlining inventory.

These services include our operating room-focused inventory management program that helps healthcare providers manage suture and endo-mechanical inventory, as well as our customizable surgical supply service that includes the kitting and delivery of surgical supplies in procedure-based totes to coincide with the healthcare providers' surgical schedule.

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We also use contract carriers and parcel delivery services when they are more cost-effective and timely.

The majority of our distribution arrangements compensate us on a cost-plus percentage basis, under which a negotiated percentage mark-up is added to the contract cost of the product agreed to by the customer and the supplier or Group Purchasing Organization (GPO).

The majority of our distribution arrangements compensate us on a cost-plus percentage basis, under which a negotiated percentage mark-up is added to the contract cost of the product agreed to by the supplier and customer or Group Purchasing Organization (GPO).

We price our services for other arrangements under activity-based pricing models.

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As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative expenses, rather than with the cost of the product, which is a component of cost of goods sold.

Byram Healthcare expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies.

Byram specializes in various patient care product lines including ostomy, wound care, diabetes, urology, incontinence and enteral.

Byram Healthcare (Byram or Home Healthcare) expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies.

Byram specializes in various patient care product lines including diabetes, ostomy, wound care, urology, incontinence and other.

We receive payments for products sold through Byram from managed care plans, the U.S.

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Byram has a nationwide sales force, focusing on managed care and key referral sources, six centers of excellence aligned with specific product categories, and a nationwide network to optimize shipping distance and time.

In 2018, our new customer solution, Fusion5, began in earnest and was created to help healthcare providers succeed in the shift from fee-for-service to value based care.

A principal area where Fusion5 is currently engaged is helping providers manage bundled payment episodes under the Bundled Payments for Care Improvement, or BPCI, Advanced program.

Fusion5 incurred start-up operating costs during 2019 and 2018 as the venture prepared to provide services to a portfolio of customers including acute care hospitals and physician group practices in 2019 and beyond.

Certain assets, liabilities and contracts of Fusion5 were sold on December 31, 2020.

The sold assets and liabilities are not included in our consolidated balance sheet at December 31, 2020.

This business did not qualify as discontinued operations and, accordingly, its financial results were included in income from continuing operations during 2020.

Global Products

Our Global Products segment manufactures and sources medical surgical products through our production and kitting operations.

With the acquisition of our Halyard Surgical and Infection Prevention (“Halyard”) business, we have expanded to provide medical supplies and solutions for the prevention of healthcare-associated infections across the acute and alternate site channels.

We provide medical supplies and solutions for the prevention of healthcare-associated infections across the acute and alternate site channels.

Our manufacturing facilities are located in the United States, Thailand, Honduras, Mexico and Ireland.

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We currently provide products and services to thousands of healthcare provider customers either directly or indirectly through third-party distributors.

These customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals in the United States.

These customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals.

In addition to contracting with healthcare providers at the Integrated Delivery Network (IDN) level and through GPOs, we also contract with other types of healthcare providers including surgery centers, physicians’ practices and smaller networks of hospitals that have joined together to negotiate terms.

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Below is a summary of these agreements:

Year of Renewal

Sales to Members as a % of Consolidated Net Revenue in 2019

GPO Year of Renewal or Extension Term Sales to Members as a % of Consolidated Net Revenue in 2020

Vizient 2020 2 years 36%

Premier 2016 5 years 21%

HPG 2017 4 years 15%

We have our own independent relationships with most of our hospital customers through separate contractual commitments that may or may not be based upon the terms of our agreement with the GPO.

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We have long-term relationships with these important companies in the healthcare supply chain and have long provided traditional distribution services to them.

In the Global Solutions segment, no sales of products of any individual suppliers exceeded 10% of our consolidated net revenue for 2019.

In the Global Solutions segment, no sales of products from any individual suppliers exceeded 10% of our consolidated net revenue for 2020.

Asset Management

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We continually work to refine our processes to optimize inventory and collect accounts receivable.

We actively monitor inventory for obsolescence and use inventory turnover and other operational metrics to measure our performance in managing inventory.

We are focused in our efforts to optimize inventory and continually consolidate products and collaborate with suppliers on inventory productivity initiatives.

When we convert large-scale IDN customers to our distribution network, an additional investment in inventory in advance of expected sales is generally required.

We actively monitor inventory for obsolescence and use inventory turnover and other operational metrics to measure our performance in managing inventory.

Accounts Receivable

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We utilize patents in our surgical and infection protection products and currently have approximately 140 issued patents in the U.S.

and over 500 issued patents in countries outside the U.S.

and approximately 680 issued patents in countries outside the U.S.

These patents generally expire between 2021 and 2040.

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With respect to trademarks, we have approximately 1,100 trademarks and trademark applications pending in the United States and other countries that are used to designate or identify our company or products.

We have over 100 U.S.

registration trademarks and over 700 registered trademarks outside of the U.S.

We also have 27 pending trademark applications in the U.S.

and 91 pending trademark applications outside of the U.S.

Since the Halyard acquisition, we have and will continue to distribute products bearing the well-known “Halyard” brand.

We have approximately 120 U.S.

registration trademarks and approximately 860 registered trademarks outside of the U.S.

We also have approximately 50 pending trademark applications in the U.S.

and approximately 80 pending trademark applications outside of the U.S.

We distribute products bearing the well-known “Halyard” brand.

Other well-known registered trademarks we use include Aero Blue, Quick Check, Smart-Fold, One Step, Purple, Purple Nitrile, and Purple Nitrile-Xtra.

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The development, manufacture, marketing, sale, promotion and distribution of our products, as well as the provision of logistics and services in the healthcare industry are subject to comprehensive regulation by federal, state and local government agencies.

product approvals and manufacturing, labeling, packaging, marketing and promotion, pricing and reimbursement, sampling, distribution, quality control, post-market surveillance, record keeping, storage and disposal practices.

Government regulation by various national, regional, federal, state and local agencies, globally, addresses (among other matters) inspection of, and controls over, research and laboratory procedures, clinical investigations, product approvals and manufacturing, labeling, packaging, marketing and promotion, pricing and reimbursement, sampling, distribution, quality control, post-market surveillance, record keeping, storage and disposal practices.

Our operations are impacted by trade regulations in many countries that govern the import of raw materials and finished products, as well as data privacy laws (including the General Data Protection Regulation) that require safeguards for the protection of healthcare and other personal data.

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Foreign Corrupt Practices Act and the United Kingdom Bribery Act, which provide guidance on corporate interactions with government officials) as well as laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the United States.

We must also comply with laws and regulations, including those governing operations, storage, transportation, manufacturing, sales, safety and security standards for each of our manufacturing and distribution centers, of the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

Compliance with these laws and regulations is costly and materially affects our business.

Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products.

We believe we are in material compliance with all statutes and regulations applicable to our operations.

Administration, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

Our operations outside the U.S.

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We cannot predict the nature of such measures or their impact on our business, results of operations, financial condition and cash flows.

Any reduction in the amount of reimbursements received by our customers could harm our business by reducing their selection of our products and the prices they are willing to pay.

Any reduction in the amount of reimburse ments received by our customers could harm our business by reducing their selection of our products, their ability to pay and the prices they are willing to pay.

Compliance with these laws and regulations is costly and materially affects our business.

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We believe we are in material compliance with all statutes and regulations applicable to our operations.

At the end of 2019 , we employed approximately 6,400 full- and part-time teammates in the U.S.

and 9,000 outside of the U.S.

Most of our teammates outside the U.S.

are covered by collective bargaining agreements.

We continue to have positive relationships with teammates and works councils.

Human Capital Resources

Employee Overview

At Owens & Minor, teammates are at the heart of everything that we do.

Through their creativity, talent and hard work, our teammates allow Owens & Minor to offer exceptional products and services and provide the force that propels our mission to empower our customers to advance healthcare.

Thus, Owens & Minor is committed to providing a culture and benefits necessary to attract and retain top talent.

Owens & Minor also is committed to creating an environment that allows our teammates to perform at a high level, emphasizes a culture of safety and is conducive to professional and personal growth.

At the end of 2020, Owens & Minor employed approximately 6,300 full- and part-time teammates in the U.S.

and 12,500 teammates outside of the U.S.

None of Owens & Minor’s domestic teammates are represented by a labor union or subject to a collective bargaining agreement (“CBA”), but most of our teammates outside the U.S.

(OUS) are represented and covered by a CBA.

Throughout our operations, we continue to have positive relationships with our teammates, as well as the unions and works councils that represent our OUS teammates.

We depend on our key personnel to successfully operate our business, including our executive officers, senior corporate management and management at our operating segments.

We seek to attract and retain top talent for these critical roles by offering competitive base and incentive compensation packages (and in certain instances share-based compensation and retention incentives), attractive benefits and opportunities for advancement and rewarding careers.

We periodically review and adjust, if needed, our teammates’ total compensation (including salaries, annual cash incentive compensation, other cash and equity incentives, and benefits) to ensure that our offerings are competitive within the industry and consistent with Company performance.

We have also implemented enterprise-wide talent development and succession planning programs designed to identify future and/or replacement candidates for key positions.

In addition to compensation, we promote numerous charitable, philanthropic, and social awareness programs that not only support the communities we serve, but also provide experiences for teammates to promote a collaborative and rewarding work environment.

In order to take advantage of available opportunities and successfully implement our long-term strategy, Owens & Minor understands that we must be able to employ, train and retain the necessary skilled personnel.

To that end, Owens & Minor supports and utilizes various training and educational initiatives, and we have developed Company-wide and project-specific employee training and educational programs.

Key programs focus on employee safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and employee engagement.

At Owens & Minor,

we believe that diversity, inclusion and teammate engagement are integral to our vision, strategy and business success, and we pride ourselves on sustaining a culture that respects teammates and values concern for others.

We believe that fostering an environment that values diversity, inclusion and ethical conduct creates an organization that is able to embrace, leverage and respect differences among our teammates, customers and the communities where we live, work and serve.

We also believe that our teammates are the face of Owens & Minor, and we expect every teammate to model our shared values and commitment to ethical business practices set forth in our Code of Honor.

We believe that our efforts to create an environment that is conducive to our values and teammate success have been rewarded, as Owens & Minor continues to enjoy high levels of teammate engagement, satisfaction and retention.

We also hold our teammates to a high standard of performance, and we regularly evaluate teammates’ productivity against current requirements, future demand expectations and historical trends.

From time to time, we may add, reduce or adjust resources in certain areas in an effort to align with changing demands.

Our Board of Directors’ Role in Human Capital Resource Management

Our Board of Directors believes that human capital management, and the ability to attract, retain and develop key talent, is an essential component of Owens & Minor’s continued growth and success.

Our Board also believes that effective human capital management is vital to maintaining a culture that reflects Owens & Minor’s core values and our shared commitment to excellence and ethical business practices.

Management regularly reports to the Compensation and Benefits Committee of the Board of Directors on human capital management topics, including corporate culture, diversity and inclusion, teammate development and compensation and benefits.

From time to time, Owens & Minor also conducts teammate engagement surveys to solicit feedback, and reports to the Board on findings developed through these surveys.

The Compensation and Benefits Committee has oversight of talent retention and development, including succession planning, and the Board of Directors provides input on important decisions in each of these areas.

Employee Benefits

The Compensation and Benefits Committee believes employee benefits are an essential component of a competitive total compensation package.

Owens & Minor’s benefits programs are designed to attract and retain our top talent, and include medical, health and dental insurance, long-term disability insurance, accidental death and disability insurance, travel and accident insurance, and our 401(k) Savings and Retirement Plan.

As part of the 401(k) Savings and Retirement Plan, Owens & Minor generally matches 100 percent of the first 4 percent of compensation contributed by a teammate into the 401(k) Savings and Retirement Plan, subject to the Internal Revenue Code and our 401(k) Savings and Retirement Plan limits.

Additionally, Owens & Minor may make a discretionary contribution (subject to certain limitations as defined in the 401(k) Savings and Retirement Plan document) to each participant employed on the last day of the plan year who has worked at least 1,000 hours during the year.

Lastly, Owens & Minor may also make a profit sharing contribution to the 401(k) Savings and Retirement Plan, at the discretion of the Board of Directors.

COVID-19 Response

In response to the COVID-19 pandemic experienced in 2020, Owens & Minor implemented health and safety protocols to protect our teammates and customers.

These protocols meet or exceed health and safety standards required by federal, state and local government agencies, and are based on guidance from the Centers for Disease Control and Prevention and other public health authorities.

Actions taken to protect our teammates and customers in response to the COVID-19 pandemic include:

• Providing personal protective equipment (PPE) to teammates in distribution and manufacturing locations;

• Training teammates on proper use of PPE, social distancing, and other mitigation efforts;

• Implementing temperature scans and quarantine protocols;

• Significantly increased remote work and virtual interactions among teammates and with customers;

• Policies were adjusted to assist teammates that need time away from work due to illness, potential exposure or to care for sick family members;

• Adjusted product delivery methods to keep drivers and hospital personnel safe.

For additional discussion of the impact of the COVID-19 pandemic on our business, including on our human capital resources, refer to the Risk Factors in Item 1A of this Form 10-K.

Available Information

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You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding the company (http://www.sec.gov).

The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding Owens & Minor, Inc.

(http://www.sec.gov).

Additionally, we have adopted a written Code of Honor that applies to all of our directors, officers and teammates, including our principal executive officer and senior financial officers.

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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-K

Item 1. Business