What changed in this filing

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Item 9A. Controls and Procedures

2021-02-24 compared with 2020-03-04 · 477 added, 603 removed, 942 unchanged (53% of the section changed)

2 unchanged sentences

Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020.

We entered into transition services agreements with Avanos pursuant to which they and we provided to each other various transitional services, including, but not limited to, facilities, product supply, financial and business services, procurement, human resources, research and development, regulatory affairs and quality assurance, sales and marketing, information technology and other support services.

The services under the transition services agreements and distribution agreements generally commenced on the Closing Date and terminated by December 31, 2019.

Management established controls to mitigate the risk over financial reporting as it relates to the transition services agreements.

There has been no change in our internal control over financial reporting during our last fiscal quarter (our fourth quarter in the case of an annual report) ended December 31, 2019 , that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We implemented internal controls to ensure we adequately assessed the adoption impact of the new lease standard, and its related amendments, on our consolidated financial statements.

There were no significant changes to our internal control over financial reporting due to the adoption of the new standard.

Other Information

There has been no change in our internal control over financial reporting during our last fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

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Based on management’s assessment and the COSO criteria, management believes that our internal control over financial reporting was effective as of December 31, 2020.

The effectiveness of the company’s internal control over financial reporting as of December 31, 2019, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in this annual report.

The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included in this annual report.

/s/ Edward A.

Pesicka, President & Chief Executive Officer

Pesicka, President, Chief Executive Officer & Director

/s/ Andrew G.

Long, Executive Vice President & Chief Financial Officer

Other Information

Report of Independent Registered Public Accounting Firm

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for the years then ended and the related notes (collectively, the consolidated financial statements), and our report dated March 4, 2020 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the years then ended and the related notes (collectively, the consolidated financial statements), and our report dated February 24, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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Richmond, Virginia

March 4, 2020

February 24, 2021

Information required by Items 10-14 can be found under Corporate Officers at the end of the electronic filing of this Form 10-K and the registrant’s 2021 Proxy Statement pursuant to instructions (1) and G(3) of the General Instructions to Form 10-K.

Because our common stock is listed on the New York Stock Exchange (NYSE), our Chief Executive Officer is required to make, and he has made, an annual certification to the NYSE stating that he was not aware of any violation of the corporate governance listing standards of the NYSE.

Our Chief Executive Officer made his annual certification to that effect to the NYSE as of June 4, 2019.

Our Chief Executive Officer made his annual certification to that effect to the NYSE as of May 28, 2020.

In addition, we have filed, as exhibits to this Annual Report on Form 10-K, the certifications of our principal executive officer and principal financial officer required under Sections 906 and 302 of the Sarbanes-Oxley Act of 2002 to be filed with the Securities and Exchange Commission regarding the quality of our public disclosure.

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Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019 and 2018

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020 and 2019

Consolidated Balance Sheets as of December 31, 2020 and 2019

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Year ended December 31, 2020 2019

Net revenue $ 8,480,177 $ 9,210,939

Cost of goods sold 7,199,343 8,082,448

Gross margin 1,280,834 1,128,491

Distribution, selling and administrative expenses 1,041,336 1,023,065

Goodwill and intangible asset impairment charges

Acquisition-related and exit and realignment charges 37,752 30,050

Other operating expense (income), net

Operating income (loss)

Other operating (income) expense, net ( 2,372 ) 2,225

Operating income 204,118 73,151

Interest expense, net 83,398 98,113

Other expense, net 10,812 3,757

Loss from continuing operations before income taxes

Income tax benefit

Loss from continuing operations

Income (loss) from continuing operations before income taxes 109,908 ( 28,719 )

Income tax provision (benefit) 21,834 ( 6,135 )

Income (loss) from continuing operations 88,074 ( 22,584 )

Loss from discontinued operations, net of tax ( 58,203 ) ( 39,787 )

Loss from continuing operations per common share:

Net income (loss) $ 29,871 $ ( 62,371 )

Income (loss) from continuing operations per common share:

basic and diluted $ 1.39 $ ( 0.37 )

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basic and diluted ( 0.92 ) ( 0.66 )

Net loss per common share:

Net income (loss) per common share:

basic and diluted $ 0.47 $ ( 1.03 )

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Year ended December 31, 2020 2019

Other comprehensive loss, net of tax:

Currency translation adjustments (net of income tax of $0 in 2019 and 2018)

Change in unrecognized net periodic pension costs (net of income tax benefit of $2,299 in 2019 and income tax of $1,377 in 2018)

Net income (loss) $ 29,871 $ ( 62,371 )

Other comprehensive income (loss), net of tax:

Currency translation adjustments 25,283 7,250

Change in unrecognized net periodic pension costs (net of income tax benefit of $ 1,579 in 2020 and $ 2,299 in 2019)

( 3,756 ) ( 6,545 )

Net unrealized loss on derivative instruments and other (net of income tax benefit of $ 3,180 in 2020 and $ 3,305 in 2019)

Other comprehensive loss

Comprehensive loss

( 7,329 ) ( 7,800 )

Other comprehensive income (loss) 14,198 ( 7,095 )

Comprehensive income (loss) $ 44,069 $ ( 69,466 )

See accompanying notes to consolidated financial statements.

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(in thousands, except per share data)

December 31, 2020 2019

Current assets

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Operating lease assets 144,755 142,219

Goodwill 394,086 393,181

Intangible assets, net 243,351 285,018

Other assets, net 101,920 99,956

Other assets of discontinued operations

Total assets $ 3,335,639 $ 3,643,084

Liabilities and equity

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Other liabilities 121,267 98,726

Other liabilities of discontinued operations

Total liabilities 2,623,585 3,180,930

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issued and outstanding— 73,472 shares and 62,843 shares

146,944 125,686

Paid-in capital 436,597 251,401

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Accumulated other comprehensive loss ( 38,509 ) ( 52,707 )

Total equity 712,054 462,154

Total liabilities and equity $ 3,335,639 $ 3,643,084

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Operating activities:

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

Net income (loss) $ 29,871 $ ( 62,371 )

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

Depreciation and amortization 93,336 116,678

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Impairment charges 8,724 32,112

Deferred income tax benefit

Loss on divestiture 65,472 —

Deferred income tax expense (benefit) 15,564 ( 17,402 )

Provision for losses on accounts receivable 11,292 12,914

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Net change in other assets and liabilities 5,278 104,801

Other, net 18,084 10,333

Cash provided by operating activities 339,223 166,085

Investing activities:

Acquisitions, net of cash acquired

Proceeds from divestiture 133,000 —

Additions to property and equipment ( 50,424 ) ( 42,419 )

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Proceeds from sale of property and equipment 234 331

Cash used for investing activities

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

Cash provided by (used for) investing activities 80,073 ( 51,897 )

Financing activities:

Proceeds from issuance of debt 155,100 —

(Repayments) borrowings from revolving credit facility

Proceeds from issuance of common stock 189,971 —

Repayments of revolving credit facility ( 74,700 ) ( 32,200 )

Repayment of debt ( 617,271 ) ( 85,592 )

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Cash dividends paid ( 648 ) ( 5,226 )

Cash (used for) provided by financing activities

Senior Notes make-whole premium paid ( 4,980 ) —

Other, net ( 16,491 ) ( 2,866 )

Cash used for financing activities ( 379,386 ) ( 130,197 )

Effect of exchange rate changes on cash and cash equivalents 9,909 ( 2,671 )

Net decrease in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 49,819 ( 18,680 )

Cash, cash equivalents and restricted cash at beginning of year 84,687 103,367

Cash, cash equivalents and restricted cash at end of year

$ 134,506 $ 84,687

Supplemental disclosure of cash flow information:

Income taxes (received) paid, net of refunds

Income taxes received, net of payments $ ( 17,455 ) $ ( 6,198 )

Interest paid $ 89,961 $ 95,413

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Common Shares

Outstanding Common Stock

($ 2 par value)

Capital Retained

Earnings Accumulated

Comprehensive

Loss Total Equity

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

Net loss ( 62,371 ) ( 62,371 )

Other comprehensive loss ( 7,095 ) ( 7,095 )

Dividends declared ($ 0.01 per share)

( 525 ) ( 525 )

Share-based compensation expense, exercises and other 549 1,098 12,628 13,726

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

Other comprehensive loss

Net income 29,871 29,871

Other comprehensive income 14,198 14,198

Dividends declared ($ 0.01 per share)

( 623 ) ( 623 )

Issuance of common stock, net of issuance costs 9,746 19,493 170,478 189,971

Share-based compensation expense, exercises and other 883 1,765 14,718 16,483

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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 and manufacturers 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 and manufacturers across the continuum of care.

Our teammates serve healthcare industry customers in over 70 countries, by producing 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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Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations.

Reclassifications.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates.

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Cash, Cash Equivalents and Restricted Cash.

Cash, cash equivalents and restricted cash includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less.

Cash, cash equivalents and restricted cash include cash and marketable securities with an original maturity or maturity at acquisition of three months or less.

Cash, cash equivalents and restricted cash are stated at cost.

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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 December 31, 2019 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 cash held in a designated account as of December 31, 2020 as required by the Fifth Amendment to the Credit Agreement, which stipulates that the cash held within this account is to be used to repay the 2021 Notes, which were fully repaid as of December 31, 2020, or the Term A Loans.

Restricted cash included in Other assets, net as of December 31, 2020 represents cash 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.

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Cash and cash equivalents $ 83,058 $ 67,030

Restricted cash included in Other current assets 35,126 —

Restricted cash included in Other assets, net 16,322 16,261

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Depreciation and amortization expense for financial reporting purposes is computed on a straight-line method over the estimated useful lives of the assets or, for capital leases and leasehold improvements, over the term of the lease, if shorter.

In general, the estimated useful lives for computing depreciation and amortization are three to 15 years for machinery and equipment, five to 40 years for buildings, and up to fifteen years for leasehold and land improvements.

In general, the estimated useful lives for computing depreciation and amortization are three to 15 years for machinery and equipment, five to 40 years for buildings, and up to 15 years for leasehold and land improvements.

Straight-line and accelerated methods of depreciation are used for income tax purposes.

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We suspend depreciation and amortization on assets that are held for sale.

In addition, we record capital-related government grants earned as reductions to the cost of property and equipment;

and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of our consolidated statements of cash flows.

We enter into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from one to 10 years.

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The right-of-use assets also include adjustments for any lease payments made and lease incentives received.

We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values.

Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

We evaluate goodwill for impairment annually, as of October 1, and whenever events occur or changes in circumstance indicate that the carrying amount of goodwill may not be recoverable.

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In determining the useful life of an intangible asset, we consider our historical experience in renewing or extending similar arrangements.

Customer relationships are generally amortized over three to 15 years and other intangible assets are amortized generally for periods between one and 15 years, based on their pattern of economic benefit or on a straight-line basis.

Customer relationships are generally amortized over three to 15 years and other

intangible assets are amortized generally for periods between one and 15 years, based on their pattern of economic benefit or on a straight-line basis.

We suspend amortization on assets that are held for sale.

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Once the software has been installed and tested, and is ready for use, additional costs incurred in connection with the software are expensed as incurred.

Capitalized computer software costs are amortized over the estimated useful life of the software, usually between three and ten years.

Capitalized computer software costs are amortized over the estimated useful life of the software, usually between three and 10 years.

Capitalized computer software costs are included in other assets, net, in the consolidated balance sheets.

Unamortized software at December 31, 2019 and 2018 was $ 43.6 million and $ 46.9 million , respectively.

Depreciation and amortization expense includes $ 9.3 million and $ 9.5 million of software amortization for the years ended December 31, 2019 and 2018 , respectively.

Implementation costs incurred for a cloud computing arrangement that is considered a service contract (software as a service or SaaS) are expensed as incurred.

Unamortized software at December 31, 2020 and 2019 was $ 38.0 million and $ 43.6 million.

Depreciation and amortization expense includes $ 10.2 million and $ 9.3 million of software amortization for the years ended December 31, 2020 and 2019.

Beginning in 2020, implementation costs incurred for a cloud computing arrangement that is considered a service contract (software as a service or SaaS) are capitalized consistent with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

In 2019, these costs were expensed as incurred.

Long-Lived Assets.

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Self-Insurance Liabilities.

We are self-insured for most employee healthcare, workers’ compensation and automobile liability costs;

We are self-insured for certain employee healthcare, workers’ compensation and automobile liability costs;

however, we maintain insurance for individual losses exceeding certain limits.

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Liabilities for workers’ compensation and automobile liability claims are estimated using historical claims data and loss development factors.

If the underlying facts and circumstances of existing claims change or historical trends are not indicative of future trends, then we may be required to record additional expense or reductions to expense.

If the underlying facts and circumstances of existing claims change or historical trends are not indicative of future trends, then we may be required to adjust the liability and related expense accordingly.

Self-insurance liabilities are included in other current liabilities on the consolidated balance sheets.

Revenue Recognition.

On January 1, 2018, we adopted ASC 606 Revenue from Contracts with Customers , which establishes principles for recognizing revenue and reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

We applied the guidance using the modified retrospective transition method.

The adoption of this guidance had no impact on the amount and timing of revenue recognized, therefore, no adjustments were recorded to our consolidated financial statements upon adoption.

Our revenue is primarily generated from sales contracts with customers.

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Shipping and handling costs are primarily included in DS&A expenses on the consolidated statements of operations and include costs to store, to move, and to prepare products for shipment, as well as costs to deliver products to customers.

Shipping and handling costs totaled $ 422.3 million and $ 563.4 million for the years ended December 31, 2019 and 2018 , respectively.

Shipping and handling costs totaled $ 389 million and $ 422 million for the years ended December 31, 2020 and 2019.

Share-Based Compensation.

We account for share-based payments to employees at fair value and recognize the related expense in distribution, selling and administrative expenses over the service period for awards expected to vest.

We account for share-based payments to teammates at fair value and recognize the related expense in distribution, selling and administrative expenses over the service period for awards expected to vest.

Derivative Financial Instruments.

We are directly and indirectly affected by changes in certain market conditions, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks, primarily foreign currency exchange risk and interest rate risk.

We are directly and indirectly affected by changes in foreign currency and interest rates, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of these market risks.

We use forward contracts, which are agreements to buy or sell a quantity at a predetermined future date and at a predetermined rate or price, and interest rate swaps.

We enter into derivative transactions that we believe will be highly effective at offsetting the underlying risk and do not enter into derivative financial instruments for trading purposes.

We do not enter into derivative financial instruments for trading purposes.

All derivatives are carried at fair value in our consolidated balance sheets.

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We recognize changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings.

The cash flow impact of the derivative instruments is primarily included in our consolidated statements of cash flows in net cash provided by operating activities.

The cash flow impacts of the derivative instruments are primarily included in our consolidated statements of cash flows as a component of operating or financing activities.

Income Taxes.

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Acquisition-related charges consist primarily of transaction costs incurred to perform due diligence and to analyze, negotiate and consummate an acquisition, costs to perform post-closing activities to establish the organizational structure, and costs to transition the acquired company’s information technology and other operations and administrative functions from the former owner.

Exit and realignment charges consist of costs associated with optimizing our operations which include the closure and consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses.

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

These charges also include costs associated with the sale of certain assets of Fusion5, our strategic organizational realignment which include management changes, certain professional fees, costs to streamline administrative functions and processes and divestiture related costs.

Costs associated with exit and realignment activities are recorded at their fair value when incurred.

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We evaluate these assumptions quarterly and adjust the liability accordingly.

The current portion of contractual termination costs are included in other current liabilities on the consolidated balance sheets, and the non-current portion is included in other liabilities.

The current portion of contractual termination costs are included in other current liabilities on the consolidated balance sheets, and the non-current portion is included in other liabilities, which were not material to our consolidated balance sheets as of December 31, 2020 and 2019.

Severance benefits are recorded when payment is considered probable and reasonably estimable.

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Realized gains and losses from foreign currency transactions are recorded in other operating income, net in the consolidated statements of operations and were not material to our consolidated results of operations in 2020 and 2019.

Business Combinations .

Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Discontinued Operations .

The Movianto business represents a component that met accounting requirements to be classified as discontinued operations and held for sale.

The Movianto business represented a component that met accounting requirements to be classified as discontinued operations through June 18, 2020 (the Divestiture Date) and held for sale as of 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.

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See Note 3 for additional information regarding discontinued operations.

Contingent Consideration .

Consideration for the sale of certain assets of Fusion5 included contingent earn-outs.

The earn-outs were excluded from the initial loss on the divestiture and will be recognized in income when realized and earned, consistent with the accounting guidance for gain contingencies.

Recent Accounting Pronouncements .

During 2020, we adopted Accounting Standard Updates (ASU’s) issued by the Financial Accounting Standards Board (FASB).

In February 2016, the FASB established Topic 842, Leases , by issuing ASU No.

2016-02, which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements.

The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

We adopted ASU No.

2016-02 in the first quarter of 2019.

We elected to use the adoption date as our date of initial application and thus have not restated comparative prior periods.

See Note 9 for additional information.

In August 2018, the FASB issued ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities .

2017-12 is intended to simplify the application of hedge accounting and provide increased transparency as to the scope and results of hedging programs.

The Company adopted ASU No.

2017-12 effective beginning January 1, 2019.

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

On February 14, 2018, the FASB issued ASU No.

2018-02, Income Statement - Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

2018-02 allows companies to reclassify stranded tax effects resulting from the Tax Cuts and Jobs Act (the Act) from accumulated other comprehensive income (loss) to retained earnings.

2018-02 was effective for the Company on January 1, 2019 and we elected not to reclassify income tax effects due to the Act from accumulated other comprehensive loss to retained earnings on the consolidated balance sheet in the period of adoption.

In August 2018, the SEC adopted a final rule under SEC Release No.

33-10532, Disclosure Update and Simplification that amends certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded.

The amendments also expanded the disclosure requirements on the analysis of shareholders' equity for interim financial statements, in which registrants must now analyze changes in shareholders’ equity, in the form of reconciliation, for the current and comparative year-to-date periods, with subtotals for each interim period.

This final rule was effective on November 5, 2018.

As of the first quarter of 2019, the Company adopted all relevant disclosure requirements, including the shareholders’ equity interim disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted as of December 31, 2019:

On June 16, 2016, the FASB issued ASU No.

2016-13 Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments , which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings.

This standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

We are evaluating the impact the adoption of ASU No.

2016-13 will have on our consolidated financial statements and related disclosures.

Subsequent to the issuance of ASU No.

2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU No.

2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief .

These ASUs do not change the core principle of the guidance in ASU No.

Instead these

amendments are intended to clarify and improve operability of certain topics included within the credit losses standard.

These ASUs will have the same effective date and transition requirements as ASU No.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

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This ASU expands the disclosure requirements for Level 3 fair value measurements, primarily focused on changes in unrealized gains and losses included in other comprehensive income (loss).

The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

2018-13 is generally required to be applied retrospectively to all periods presented upon their effective date with the exception of certain amendments, which should be applied prospectively to the most recent interim or annual period presented in the year of adoption.

We do not expect this ASU to have a material impact on our consolidated financial statements and disclosures.

We adopted ASU No.

2018-13 effective beginning January 1, 2020.

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

In August 2018, the FASB issued ASU No.

2018-14, Compensation—Retirement Benefits—Defined Benefit Plans— General (Subtopic 715-20):

Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.

ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant for companies with defined benefit retirement plans.

The amendments in ASU No.

2018-14 are effective for fiscal years ending after December 15, 2020 and its adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other (Topic 350):

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This standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and we do not expect this to have a material impact on our consolidated financial statements and disclosures.

We adopted ASU No.

2018-15 effective beginning January 1, 2020.

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

In March 2020, the FASB issued ASU No.

2020-03, Codification Improvements to Financial Instruments.

The standard is part of FASB’s ongoing project to improve and clarify its Accounting Standards Codification and avoid unintended application.

The items addressed are not expected to significantly affect current practice or create a significant administrative cost for most entities.

The amendment is divided into issues with different effective dates as follows:

The amendments related to Issue 1, Issue 2, Issue 4, and Issue 5 are conforming amendments.

The amendments are effective upon issuance of this update.

The amendment related to Issue 3 is a conforming amendment that affects the guidance related to the amendments in ASU No.

2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities.

The effective date of this update for the amendments to ASU No.

2016-01 is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

We adopted ASU No.

2020-03 effective beginning January 1, 2020 for Issues 1 through 5.

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

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments are effective for all entities as of March 12, 2020 through December 31, 2022.

At the present time, none of our lenders have requested that we transition away from LIBOR for our borrowings that bear interest based on LIBOR and we will continue to evaluate the impact through transition.

In October 2020, the FASB issued ASU No.

2020-09, Debt (Topic 470), to amend and supersede SEC paragraphs in the FASB Accounting Standards Codification to reflect the issuance of SEC Release No.

33-10762 related to financial disclosure requirements for subsidiary issuers and guarantors of registered debt securities and affiliates whose securities are pledged as collateral for registered securities.

This new guidance, issued under new Rules 13-01 and 13-02, narrows the circumstances that require separate financial statements of subsidiary issuers and guarantors and affiliates whose securities are pledged as collateral and streamlines the alternative disclosures required in lieu of those statements.

This rule is effective January 4, 2021 with earlier adoption permitted.

We adopted this new standard in the fourth quarter of 2020.

Accordingly, summarized financial information has been presented only for the issuer and guarantors of the our registered debt securities and affiliates whose securities are pledged as collateral for registered securities for the most recent fiscal year, and the location of the required disclosures has been moved outside the Notes to Consolidated Financial Statements and is provided in the “Guarantor and Collateral Group Summarized Financial Information” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Recently Issued Accounting Pronouncements Not Yet Adopted as of December 31, 2020:

In December 2019, the FASB issued ASU No.

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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.

The Company is currently evaluating the potential impact of adopting this guidance on its consolidated financial statements and disclosures.

We do not expect this to have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements, to improve consistency by amending the FASB Accounting Standards Codification (the Codification) to include all disclosure guidance in the appropriate disclosure sections.

This ASU also clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology.

The amendments in this ASU do not change GAAP and, therefore, are not expected to result in a significant change in practice.

The amendments of this ASU are effective for annual periods beginning after December 15, 2020.

Early application of the amendments in this ASU is permitted.

The amendments in this ASU should be applied retrospectively.

We do not expect this to have a material impact on our consolidated financial statements.

Note 2— Significant Risks and Uncertainties

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however, they operate independently and are free to negotiate directly with distributors and manufacturers.

For 2019 and 2018 , net revenue from hospitals under contract with these GPOs represented the following approximate percentages of our net revenue annually:

Vizient— 37 % to 40 % ;

Premier— 19 % to 21 % ;

and HPG— 13 % to 14 % .

For 2020, net revenue from hospitals under contract with these GPOs represented the following approximate percentages of our net revenue annually:

Vizient— 36 %;

Premier— 21 %;

and HPG— 15 %.

In 2020 and 2019, no sales of products of any individual suppliers exceeded 10% of our consolidated net revenue.

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 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 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 years ended December 31, 2019 and 2018, and the related assets and liabilities are classified as held-for-sale as of December 31, 2019 and 2018 in the accompanying balance sheets.

We recognized a loss of $ 32.1 million in connection with the classification of the related assets and liabilities as held-for-sale.

The following table summarizes the financial results of our discontinued operations for the years ended December 31, 2019 and 2018:

Accordingly, the results of operations from the Movianto business were reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the years ended December 31, 2020 and 2019, and the related assets and liabilities were classified as held-for-sale as of December 31, 2019 in the accompanying consolidated 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 $ 41.5 million.

There is no benefit of any such adjustment reflected in our consolidated financial statements as of December 31, 2020.

The following table summarizes the financial results of our discontinued operations:

Year ended December 31, 2020 2019

Net revenue $ 226,759 $ 439,104

Cost of goods sold 53,923 106,896

Gross margin 172,836 332,208

Distribution, selling, and administrative expenses 157,512 330,737

Asset impairment charges — 32,112

Loss on divestiture 65,472 —

Acquisition-related and exit and realignment charges 4,825 2,856

Other operating expense (income), net

Other operating income, net ( 388 ) ( 1,325 )

Operating loss ( 54,585 ) ( 32,172 )

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Loss from discontinued operations, net of taxes $ ( 58,203 ) $ ( 39,787 )

The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheets at December 31, 2019 and 2018, are as follows:

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 year ended December 31, 2020.

All revenue and expense included in discontinued operations during the year ended December 31, 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 year ended December 31, 2020.

These amounts were immaterial for the year ended December 31, 2020.

We had no assets and liabilities associated with the discontinued Movianto business reflected on the consolidated balance sheet as of December 31, 2020.

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

December 31, 2019

Assets of discontinued operations

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Total liabilities of discontinued operations $ 323,511

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

In the prior year, the assets and liabilities held for sale are classified separately as current or noncurrent because the noncurrent assets and liabilities did not meet the criteria for current classification as of December 31, 2018.

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:

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Asset impairment charges — 32,112

Loss on divestiture 65,472 —

Investing Activities:

Capital expenditures ( 3,027 ) ( 18,952 )

Note 4— Acquisition

On April 30, 2018 (the Closing Date), we completed the acquisition of substantially all of Avanos Medical, Inc.'s (Avanos, previously Halyard Health, Inc.) Surgical and Infection Prevention 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 S&IP 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.

This business is reported as part of the Global Products segment.

The following table presents the fair value of the assets acquired and liabilities assumed recognized as of the acquisition date.

The fair value of intangibles from this acquisition was primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows and a discount rate.

These inputs are considered Level 3 inputs.

Preliminary Fair Value

Originally Estimated as of

Acquisition Date (1)

Differences Between Prior and Current Period Preliminary Fair Value Estimate

Fair Value as of Acquisition Date

Assets acquired:

Current assets

Intangible assets

Other noncurrent assets

Liabilities assumed:

Current liabilities

Noncurrent liabilities

Total liabilities

Fair value of net assets acquired, net of cash

(1) As previously reported in our 2018 Form 10-K.

We are amortizing the fair value of acquired intangible assets, primarily customer relationships, a trade name and other intellectual property, over their estimated weighted average useful lives of eight to 12 years .

Goodwill of $ 106 million , which we assigned to our Global Products segment, consists largely of expected opportunities to expand into new markets and further develop a presence in the medical products segment.

None of the goodwill recognized is expected to be deductible for income tax purposes.

The unaudited pro forma results of net revenue for the year ended December 31, 2018 as if Halyard S&IP was acquired on January 1, 2018 was $ 9.7 billion .

The pro forma results of net income (loss) and net income (loss) per common share are not presented because the effects were not material to our historic consolidated financial statements.

Accordingly, the pro forma results are not necessarily indicative of the results that would have been if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.

Acquisition-related expenses in 2019 and 2018 consisted primarily of transition and transaction costs for the Halyard transaction.

We recognized pre-tax acquisition-related expenses of $ 15.7 million and $ 45.3 million for the years ended December 31, 2019 and 2018.

Note 4— Accounts Receivable, Net

Allowances for losses on accounts receivable of $ 19.1 million and $ 21.0 million have been applied as reductions of accounts receivable at December 31, 2020 and 2019.

Write-offs of accounts receivable were $ 1.1 million and $ 2.8 million for 2019 and 2018 .

Note 5— Merchandise Inventories

At December 31, 2019 and 2018 we had inventory of $ 1,146 million and $ 1,274 million , of which $ 866.8 million and $ 1,023.1 million were valued under LIFO.

At December 31, 2020 and 2019 we had inventory of $ 1.2 billion and $ 1.1 billion, of which $ 807 million and $ 867 million were valued under LIFO.

If LIFO inventories had been valued on a current cost or FIFO basis, they would have been greater by $ 170 million and $ 155 million as of December 31, 2020 and 2019.

At December 31, 2020 and 2019, included in our inventory was $ 66.7 million and $ 37.4 million in raw materials, $ 59.2 million and $ 61.8 million in work in process and the remainder was finished goods.

Note 7— Property and Equipment

Property and equipment consists of the following:

Note 6— Property and Equipment, Net

Property and equipment, net, consists of the following:

December 31, 2020 2019

Land and land improvements $ 22,292 $ 22,269

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Property and equipment, net $ 315,662 $ 315,427

Depreciation expense for property and equipment and assets under finance leases was $ 43.5 million and $ 29.1 million for the years ended December 31, 2019 and 2018 , respectively.

Note 8— Goodwill and Intangible Assets

As of October 1, 2019, we performed our annual impairment test and concluded that there were no impairments of goodwill as the estimated fair value of each reporting unit exceeded its carrying value.

In 2018, as a result of a decline in market capitalization of the company, and lower than projected financial results of certain reporting units due to customer losses and operational inefficiencies, which caused us to revise our expectations with regard to future performance, we determined there were indicators present that would require an interim impairment analysis.

During 2018, we performed goodwill impairment tests and concluded that the fair values for certain reporting units were below their carrying amounts.

The amount by which the carrying values of the impaired reporting units' goodwill exceeded their fair values was $ 180.2 million within our Global Solutions segment and $ 217.5 million within our Global Products segment, which were recognized as an impairment losses for the year ended December 31, 2018.

We recorded these amounts in “Goodwill and intangible asset impairment charges” in our 2018 consolidated statement of operations.

Depreciation expense for property and equipment and assets under finance leases was $ 41.5 million and $ 43.5 million for the years ended December 31, 2020 and 2019.

Note 7— Goodwill and Intangible Assets, Net

As of October 1, 2020, we performed our annual impairment test and concluded that there were no impairments of goodwill.

The following table summarizes the changes in the carrying amount of goodwill through December 31, 2020:

Global Solutions

Global Products

Carrying amount of goodwill, January 1, 2018

Currency translation adjustments

Acquisitions (see Note 4)

Global Solutions Global Products Consolidated

Carrying amount of goodwill, December 31, 2018 $ 464,080 $ 347,678 $ 811,758

Accumulated goodwill impairment, January 1, 2018

Goodwill impairment charge

Accumulated goodwill impairment, December 31, 2018 ( 180,175 ) ( 217,461 ) ( 397,636 )

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Currency translation adjustments — 2,936 2,936

Acquisition (see Note 4)

Measurement period acquisition adjustments — ( 23,877 ) ( 23,877 )

Net carrying amount of goodwill, December 31, 2019 283,905 109,276 393,181

Currency translation adjustments — 905 905

Net carrying amount of goodwill, December 31, 2020 $ 283,905 $ 110,181 $ 394,086

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

Relationships

Relationships Tradenames Other

Intangibles Customer

Relationships Tradenames Other

Gross intangible assets $ 270,505 $ 90,000 $ 43,245 $ 270,693 $ 90,000 $ 43,055

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Net intangible assets $ 149,296 $ 65,119 $ 28,936 $ 177,746 $ 73,480 $ 33,792

Weighted average useful life

During 2018, we noted impairment indicators related to our intangible assets.

We performed impairment tests for the asset groups to which our intangible assets are assigned and based on the projected undiscounted future cash flows, we recorded an impairment charge of $ 16.5 million related to a write-off of customer relationships for the year ended December 31, 2018.

We recorded this amount in “Goodwill and intangible asset impairment charges” in our accompanying consolidated statements of operations.

At December 31, 2019 and 2018, $ 80.7 million and $ 99.2 million in net intangible assets were held in the Global Solutions segment and $ 204.3 million and $ 214.9 million were held in the Global Products segment, respectively.

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

At December 31, 2020 and 2019, $ 63.2 million and $ 80.7 million in net intangible assets were held in the Global Solutions segment and $ 180 million and $ 204 million were held in the Global Products segment.

Amortization expense for intangible assets was $ 41.5 million for 2020 and $ 44.0 million for 2019.

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We elected to use the adoption date as our date of initial application and thus have not restated comparative prior periods.

We elected the ‘package of practical

expedients’, which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs under the new standard.

We elected the ‘package of practical expedients’, which permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs under the new standard.

We did not elect the use-of-hindsight or the practical expedient pertaining to land easements;

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We elected the short-term lease recognition exemption for all leases that qualify.

This means, for those leases that qualify, we will not recognize right-of-use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition.

This means, for those leases that qualify, we will not recognize right-of-

use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition.

We also elected the practical expedient to not separate lease and non-lease components for all of our leases.

The adoption of the new standard resulted in the recording of operating lease assets and lease liabilities of approximately $ 197 million and $ 201 million , respectively, as of January 1, 2019.

The standard did not materially impact our consolidated net loss and had no impact on cash flows.

The adoption of the new standard resulted in the recording of operating lease assets and lease liabilities of approximately $ 197 million and $ 201 million as of January 1, 2019.

The standard did not materially impact our consolidated net income (loss) and had no impact on cash flows.

The components of lease expense were as follows:

Years ended December 31,

Classification 2020

Year Ended December 31, 2019

Operating lease cost

DS&A Expenses

Operating lease cost DS&A Expenses $ 53,675 $ 53,588

Finance lease cost:

Amortization of lease assets

DS&A Expenses

Interest on lease liabilities

Interest expense, net

Amortization of lease assets DS&A Expenses 963 1,322

Interest on lease liabilities Interest expense, net 1,283 1,189

Total finance lease cost 2,246 2,511

Short-term lease cost

DS&A Expenses

Variable lease cost

DS&A Expenses

Short-term lease cost DS&A Expenses 1,081 348

Variable lease cost DS&A Expenses 15,611 16,415

Total lease cost $ 72,613 $ 72,862

Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities which are paid as incurred.

Rent expense for all operating leases for the year ended December 31, 2018 was $ 56.1 million .

Supplemental balance sheet information is as follows:

Classification

As of December 31,

Operating lease assets

Finance lease assets

Property and equipment, net

Classification 2020

Operating lease assets Operating lease assets $ 144,755 $ 142,219

Finance lease assets Property and equipment, net 7,222 7,948

Total lease assets $ 151,977 $ 150,167

Other current liabilities

Operating lease liabilities, excluding current portion

Long-term debt, excluding current portion

Operating Other current liabilities $ 33,412 $ 31,568

Finance Other current liabilities 1,085 1,014

Operating Operating lease liabilities, excluding current portion 119,932 117,080

Finance Long-term debt, excluding current portion 10,124 11,692

Total lease liabilities $ 164,553 $ 161,354

The gross value recorded under finance leases was $ 15.9 million and $ 26.2 million with associated accumulated depreciation of $ 8.0 million and $ 14.8 million as of December 31, 2019 and 2018 , respectively.

The gross value recorded under finance leases was $ 17.4 million and $ 15.9 million with associated accumulated depreciation of $ 10.2 million and $ 8.0 million as of December 31, 2020 and 2019.

Other information related to leases was as follows:

Year Ended December 31, 2019

Years ended December 31,

Supplemental cash flow information

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Maturities of lease liabilities as of December 31, 2020 were as follows:

Operating Leases

Finance Leases

Operating Leases Finance Leases Total

2021 $ 47,930 $ 2,077 $ 50,007

2022 42,382 2,008 44,390

2023 34,053 1,961 36,014

2024 26,964 1,919 28,883

2025 18,348 1,916 20,264

Thereafter 41,101 6,492 47,593

Total lease payments 210,778 16,373 227,151

Interest ( 57,434 ) ( 5,164 ) ( 62,598 )

Present value of lease liabilities $ 153,344 $ 11,209 $ 164,553

Note 9— Exit and Realignment Costs

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses.

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.

engagement center and IT restructuring charges.

Exit and realignment charges by segment for the years ended December 31, 2020 and 2019 were as follows:

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

Accrued exit and realignment charges, January 1, 2018

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

Provision for exit and realignment activities:

Severance 6,008

Information system restructuring costs 2,531

Change in estimate

Cash payments ( 13,712 )

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Provision for exit and realignment activities:

Severance 5,623

Information system restructuring costs 2,119

Change in estimate

Lease obligations 1,051

Cash payments ( 20,328 )

Accrued exit and realignment charges, December 31, 2020 $ 3,146

(1) The accrued exit and realignment costs at December 31, 2019 and 2018 related primarily to information system restructuring costs and severance.

We do no t expect significant additional costs in 2020 for activities that were initiated through December 31, 2019;

however, we anticipate new actions will be taken in 2020.

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 10.6 million of costs that were expensed as incurred for the year ended December 31, 2020, including $ 4.9 million in impairment charges related to our client engagement center right-of-use asset, $ 3.7 million in loss on the sale of certain Fusion5 assets and $ 2.0 million in other asset charges.

We do not expect material additional costs in 2021 for activities that were initiated through December 31, 2020.

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 11.8 million and $ 15.7 million for the years ended December 31, 2020 and 2019, and consisted primarily of transition costs for the Halyard acquisition.

Note 10— Debt

Debt consists of the following:

3.875% Senior Notes, $238 million par value, maturing September 2021

4.375% Senior Notes, $275 million par value, maturing December 2024

December 31, Carrying

Amount Estimated

Fair Value Carrying

Amount Estimated

3.875 % Senior Notes

$ — $ — $ 236,234 $ 229,356

4.375 % Senior Notes, due December 2024

244,780 253,241 273,978 212,086

Term Loan A-1 — — 206,521 209,375

Term Loan A-2 33,865 34,390 170,899 173,675

Term Loan B 477,525 486,614 480,337 442,217

Revolver 103,200 103,200 177,900 177,900

Receivable Securitization 152,929 155,100 — —

Finance leases and other 13,668 13,668 13,783 13,783

Total debt 1,025,967 1,046,213 1,559,652 1,458,392

Less current maturities ( 39,949 ) ( 40,453 ) ( 51,237 ) ( 51,237 )

Long-term debt $ 986,018 $ 1,005,760 $ 1,508,415 $ 1,407,155

We have $ 238 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 $ 245 million, net of debt issuance costs and deferred fees, of 4.375 % senior notes due in 2024 (the 2024 Notes), with interest payable semi-annually.

The 3.875 % Senior Notes (2021 Notes), which were fully repaid as of December 31, 2020, 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 amount with an effective yield of 4.422 %.

The 2024 Notes were sold at 99.6 % of the principal 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 Treasury Rate plus 30 basis points.

We have the option to redeem the 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 Treasury Rate plus 30 basis points.

In June 2020, we announced cash tender offers for up to $ 240 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.

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 pending their application to either the outstanding 2021 Notes or Term A Loans within 210 days of the Divestiture Date.

On November 30, 2020 (Redemption Date), we elected to redeem all of our outstanding 2021 Notes.

As required by the Fourth Supplemental Indenture, the redemption price included accrued and unpaid interest to, but not including, the Redemption Date, and a redemption premium of $ 5.0 million, which reflected the sum of the present values of the remaining scheduled payments of principal and interest thereon (exclusive of interest accrued to the Redemption Date) discounted to the Redemption Date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 25 basis points.

Including the tender offer, we used $ 269 million of cash to repurchase $ 267 million aggregate principal amount of the 2021 Notes and 2024 Notes during 2020.

We used $ 36.2 million of cash to repurchase $ 37.3 million aggregate principal amount of the 2021 Notes during 2019.

As of December 31, 2019, we had a Credit Agreement (amended February 2019) with a borrowing capacity of $ 400 million and $ 858 million in outstanding term loans.

In connection with the 2018 Halyard S&IP acquisition, we amended our Credit Agreement to include, among others things, an additional $ 195.8 million Term A-2 loan and $ 500 million Term B loan.

The revolving credit facility and Term A loans mature in July 2022 and the Term B loan matures in April 2025.

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 65 % 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.

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

If as of the date that is 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 prior to the maturity date of the 2024 Notes.

We make principal payments under the term loans on a quarterly basis with the remaining outstanding principal due upon maturity.

The interest rate on our revolving credit facility and Term A loans, which is subject to adjustment quarterly, is based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus an adjustment based on our EBITDA ratio as defined by the Credit Agreement.

Our credit spread at December 31, 2019 was the Eurocurrency Rate plus 3.50 % .

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 limit the amount of indebtedness that we may incur and require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition.

At December 31, 2019 and 2018, we had letters of credit of $ 11.7 million and $ 15.2 million , respectively, outstanding under the Credit Agreement.

We also had letters of credit and bank guarantees outstanding for $ 1.5 million as of

December 31, 2019 and $ 4.4 million as of December 31, 2018, which supports certain facilities leased as well as other normal business activities in the United States and Europe.

As of December 31, 2019, scheduled future principal payments of debt were $ 49.6 million in 2020, $ 287.4 million in 2021, $ 476.7 million in 2022, $ 5.0 million in 2023, $ 280.0 million in 2024, and $ 468.8 million thereafter.

In February of 2020 we amended our Credit Agreement.

Please see Note 23 for further information.

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 December 31, 2019.

We have a Credit Agreement (last amended February 13, 2020) with a $ 400 million revolving credit facility and $ 511 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 interest rate on the revolving credit facility at December 31, 2020 was Eurocurrency Rate plus 2.75 %.

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 interest rate on the Term B Loan at December 31, 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 Term B Loan.

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.

The revolving credit facility matures in July 2022 and the Term B Loan matures in April 2025.

We used the proceeds from the follow-on equity offering completed on October 6, 2020 to repay the remaining $ 109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $ 51.7 million of our Term Loan A-2 at par on October 15, 2020, and to repay $ 30.0 million of borrowings under the revolving credit facility.

See Note 16 for additional information regarding the follow-on equity offering.

At December 31, 2020 and 2019, we had borrowings of $ 103 million and $ 178 million and letters of credit of $ 13.9 million and $ 11.7 million outstanding under the revolving credit facility.

At December 31, 2020 and 2019, we had $ 283 million and $ 209 million available for borrowing.

There were no letters of credit associated with discontinued operations as of December 31, 2020.

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

We also had letters of credit and bank guarantees outstanding for $ 1.6 million and $ 1.5 million as of December 31, 2020 and 2019, which supports certain leased facilities 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 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 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 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 of 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).

Pursuant to the Receivables Securitization Program the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $ 325 million outstanding at any time.

The interest rate under the Receivables Securitization Program is based on a spread over the London Interbank Offered Rate (LIBOR) dependent on the tranche period thereto and any breakage fees accrued.

Under the Receivables Securitization Program, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC.

The Receivables

Securitization Program matures on February 17, 2023.

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, Receivables Securitization Program, and Senior Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement.

The terms of the Credit Agreement also require us 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 December 31, 2020.

As of December 31, 2020, scheduled future principal payments of debt were $ 24.7 million in 2021, $ 123 million in 2022, $ 160 million in 2023, $ 251 million in 2024, and $ 469 million in 2025.

Maturities in 2021 and 2022 include $ 19.7 million and $ 14.7 million related to the Term A-2 Loans, which were fully repaid on January 4, 2021.

Note 11— Share-Based Compensation

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The options are granted at a price equal to fair market value at the date of grant.

We did not grant any stock options in 2019 or 2018.

We did no t grant any stock options in 2020 or 2019.

We recognize the fair value of stock-based compensation awards, which is based upon the market price of the underlying common stock at the grant date, on a straight-line basis over the estimated requisite service period, which may be based on a service condition, a performance condition, a market condition, or any combination of these.

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The following table summarizes the activity and value of nonvested restricted stock and performance share awards for the years ended December 31, 2020 and 2019:

Shares Weighted

Per Share Number of

Shares Weighted

Nonvested awards at beginning of year 4,515 $ 9.69 2,585 $ 19.94

Granted 2,289 7.29 3,624 5.29

Vested ( 1,487 ) 11.94 ( 729 ) 18.90

Forfeited ( 501 ) 7.69 ( 965 ) 11.86

Nonvested awards at end of year 4,816 7.64 4,515 9.69

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Savings and Retirement Plans.

We maintain a voluntary 401(k) savings and retirement plan covering substantially all full-time and certain part-time employees in the United States who have completed one month of service and have attained age 18 .

We match a certain percentage of each employee’s contribution.

The plan also provides for a discretionary contribution by us to the plan for all eligible employees of 1 % of their salary, subject to certain limits, and discretionary profit-sharing contributions.

We maintain a voluntary 401(k) savings and retirement plan covering substantially all full-time and certain part-time teammates in the United States who have completed one month of service and have attained age 18 .

We match a certain percentage of each teammates’ contribution.

The plan also provides for a discretionary contribution by us to the plan for all eligible teammates, subject to certain limits, and discretionary profit-sharing contributions.

We may increase or decrease our contributions at our discretion, on a prospective basis.

We incurred $ 21.6 million and $ 10.5 million of expense related to this plan in 2020 and 2019.

We also maintain defined contribution plans in some of the European countries in which we operate.

We also maintain defined contribution plans in some countries outside of the United States in which we operate.

Expenses related to these plans were not material in 2020 and 2019.

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Retirement Plan’s financial status and the amounts recognized in our consolidated balance sheets:

December 31, 2020 2019

Change in benefit obligation

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Interest cost 1,420 1,858

Actuarial (gain) loss

Actuarial loss 6,632 7,075

Benefits paid ( 4,270 ) ( 3,494 )

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Discount rate 1.95 % 2.75 %

Rate of increase in compensation levels

Rate of increase in compensation levels N/A N/A

Plan benefit obligations of the U.S.

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Discount rate 2.75 % 4.00 %

Rate of increase in future compensation levels

Rate of increase in future compensation levels N/A N/A

Amounts recognized for the U.S.

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Retirement Plan were as follows:

2026-2030 14,962

International Retirement Plans.

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

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

As of December 31, 2020 and 2019, the accumulated benefit obligation under these plans was $ 11.5 million and $ 7.3 million.

We recorded $ 1.0 million in net periodic benefit cost in Other expense, net for the year ended December 31, 2019 and $ 1.0 million for the year ended December 31, 2018 .

We recorded $ 2.3 million and $ 1.0 million in net periodic benefit cost in Other expense, net for the years ended December 31, 2020 and 2019.

Note 13— Derivatives

We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks.

We do not enter into derivative financial instruments for trading purposes.

We use a layered hedging program to hedge select anticipated foreign currency cash flows to reduce volatility in cash flows.

We account for the designated foreign exchange forward contracts as cash flow hedges.

These foreign exchange forward contracts, the remaining of which expired during 2019, generally had maturities up to 12 months and the counterparties to the transactions were typically large international financial institutions.

We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting.

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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.

In order to mitigate the risk of increases in benchmark rates, from time to time 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.

The interest rate swaps were designated as cash flow hedges.

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We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure.

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.

We consider the risk of counterparty default to be minimal.

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 December 31, 2020:

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

Interest rate swaps $ 300,000 May 2022 and May 2025 Other assets, net $ — Other liabilities $ 17,872

Economic (non-designated) hedges

Foreign currency contracts $ 30,300 January 2021 Other current assets $ 151 Other current liabilities $ —

We terminated $ 150 million in notional value of interest rate swaps on September 30, 2020.

The remaining December 31, 2020 balance of the fair value adjustments of $ 10.1 million, which related to these terminated interest rate swaps within accumulated other comprehensive loss, will be recognized in interest expense ratably over the remaining life of the Term B Loan.

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

Foreign currency contracts

January 2019 - December 2019

Other assets, net

Other liabilities

Economic (non-designated) hedges

Foreign currency contracts

January 2019 - April 2019

Other assets, net

Other liabilities

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 year ended December 31, 2020:

Amount of Loss Recognized in Other Comprehensive Loss

Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income

Total Amount of 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

Foreign currency contracts

Cost of goods sold

Amount of Loss Recognized in Other Comprehensive Income Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of 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 $ ( 19,741 ) Interest expense, net $ ( 83,398 ) $ ( 9,232 )

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

For the year ended December 31, 2019 we recognized a gain of $ 1.0 million associated with our economic (non-designated) foreign currency contracts.

For the year ended December 31, 2018, we recognized a loss of $ 1.6 million associated with our economic (non-designated) foreign currency contracts.

We recorded the change in fair value of derivative instruments and the remeasurement adjustment on the foreign currency denominated asset or liability in acquisition-related and exit and realignment charges for contracts assumed with the Halyard acquisition and in other operating expense, net for all other foreign exchange contracts.

For the year ended December 31, 2019, we reclassified $ 2.4 million associated with our interest rate swaps and $ 0.5 million associated with our foreign currency contracts out of accumulated other comprehensive loss.

For the year ended December 31, 2018, we reclassified $ 1.0 million associated with our interest rate swaps and $ 0.1 million associated with our foreign currency contracts out of accumulated other comprehensive loss.

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2019:

Amount of Loss Recognized in Other Comprehensive Loss Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of 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 $ ( 12,983 ) Interest expense, net $ ( 98,113 ) $ ( 2,423 )

Foreign currency contracts $ ( 28 ) Cost of goods sold $ ( 8,082,448 ) $ 517

For the years ended December 31, 2020 and 2019, we recognized a loss of $ 0.7 million and a gain of $ 1.0 million, 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 14— Income Taxes

The components of loss before income taxes consist of the following:

The components of income (loss) before income taxes consist of the following:

Year ended December 31, 2020 2019

Income (loss) before income taxes:

Loss before income taxes

$ 80,632 $ ( 32,953 )

Foreign 29,276 4,234

Income (loss) before income taxes $ 109,908 $ ( 28,719 )

The income tax provision (benefit) consists of the following:

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Current tax provision (benefit):

Federal $ ( 4,430 ) $ 2,501

State 6,527 197

Foreign 4,172 8,569

Total current tax provision 6,269 11,267

Deferred tax benefit:

Total deferred tax benefit

Total income tax benefit

Deferred tax provision (benefit):

Federal 16,512 ( 6,150 )

State ( 1,132 ) ( 1,575 )

Foreign 185 ( 9,677 )

Total deferred tax provision (benefit) 15,565 ( 17,402 )

Total income tax provision (benefit) $ 21,834 $ ( 6,135 )

A reconciliation of the federal statutory rate to our effective income tax rate is shown below:

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Increases (decreases) in the rate resulting from:

Net capital loss on Divestiture ( 24.8 ) % — %

Tax reform ( 11.4 ) % — %

Unrecognized tax benefits 5.0 % ( 5.0 ) %

State income taxes, net of federal income tax impact 3.2 % 6.6 %

Research and development credit ( 2.9 ) % 9.8 %

Foreign income taxes 0.7 % ( 3.7 ) %

Valuation allowance 27.1 % ( 1.4 ) %

Research and development credit

Uncertain tax positions

Tax Reform and other prior period adjustments

Restricted stock vestings 1.0 % ( 6.7 ) %

Goodwill and intangible asset impairment charges

Other 1.0 % 0.8 %

Effective income tax rate 19.9 % 21.4 %

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

December 31, 2020 2019

Deferred tax assets:

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Net operating loss carryforwards 4,924 8,394

Capital loss carryover 27,624 —

Outside basis difference — 12,408

Interest limitation 1,502 12,905

Derivatives 7,920 5,057

Other 5,733 10,611

Total deferred tax assets 149,020 149,129

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Merchandise inventories 42,509 42,872

Goodwill 1,603 296

Property and equipment 34,005 32,689

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Computer software 7,447 9,032

Insurance 1,108 1,082

Intangible assets 27,349 35,451

Withholding tax liabilities 7,451 6,965

Other 344 697

Total deferred tax liabilities 161,330 168,127

Net deferred tax liability $ ( 44,019 ) $ ( 33,280 )

The valuation allowances relate to deferred tax assets in various state and non-U.S.

jurisdictions.

Based on management’s judgments using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2019.

The valuation allowances primarily relate to deferred tax assets recorded on an outside basis difference, representing the difference between the book and tax bases of our Movianto foreign subsidiaries.

The valuation allowances also relate to net operating loss carryforwards in state jurisdictions which have various expiration dates ranging from five years to an unlimited carryforward period.

As of December 31, 2019, the U.S.

federal net operating loss was $ 17.4 million , which has an unlimited carryforward period.

Cash payments for income taxes, including interest, for 2019 and 2018 were $ 18.1 million and $ 28.9 million , respectively.

Cash tax refunds received for 2019 and 2018 were $ 24.3 million and $ 9.8 million , respectively.

At December 31, 2019 and 2018, the liability for unrecognized tax benefits was $ 11.5 million and $ 9.6 million , respectively.

A reconciliation of the changes in unrecognized tax benefits from the beginning to the end of the reporting period is as follows:

The valuation allowances relate to deferred tax assets for U.S.

federal and state capital loss carryforwards and net operating loss carryforwards in various state jurisdictions.

capital loss carryforward, which has a full valuation allowance, has an expiration date of five years.

The capital loss and net operating loss carryforwards in various state jurisdictions have various expiration dates ranging from five years to an unlimited carryforward period.

Based on management’s judgment using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2020.

Cash payments for income taxes, including interest, for 2020 and 2019 were $ 15.4 million and $ 18.1 million.

Cash tax refunds received for 2020 and 2019 were $ 32.8 million and $ 24.3 million.

A summary of the changes in the liability for unrecognized tax benefits from the beginning to the end of the reporting period is as follows:

Unrecognized tax benefits at January 1, $ 11,520 $ 9,568

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Increases for positions taken during prior periods 9,073 1,629

Decreases for positions taken during prior periods

Lapse of statute of limitations ( 1,311 ) ( 71 )

Unrecognized tax benefits at December 31, 20,770 11,520

Included in the liability for unrecognized tax benefits at December 31, 2019 and 2018, were $ 3.1 million and $ 1.9 million , respectively, of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

Included in the liability for unrecognized tax benefits at December 31, 2020 and 2019, were $ 2.7 million and $ 3.1 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the

timing of such deductibility.

These tax positions are temporary differences which do not impact the annual effective tax rate under deferred tax accounting.

Any change in the deductibility period of these tax positions would impact the timing of cash payments to taxing jurisdictions.

Unrecognized tax benefits of $ 8.4 million and $ 7.7 million at December 31, 2019 and 2018, respectively, would impact our effective tax rate if recognized.

Unrecognized tax benefits of $ 18.0 million and $ 8.4 million at December 31, 2020 and 2019 would impact our effective tax rate if recognized.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

Accrued interest at December 31, 2019 and 2018 was $ 1.3 million and $ 0.6 million , respectively.

The amounts recognized in interest expense for the years ended December 31, 2019 and 2018 were $ 0.7 million and less than $ 0.1 million , respectively.

Accrued interest at December 31, 2020 and 2019 was $ 2.6 million and $ 1.3 million.

The amounts recognized in interest expense for the years ended December 31, 2020 and 2019 were $ 1.3 million and $ 0.7 million.

There were no penalties accrued at December 31, 2020 and 2019 or recognized in 2020 and 2019.

On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Services (IRS) regarding our 2015 and 2016 Consolidated Income Tax Returns.

Within the NOPA, 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.

We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies including those available under the U.S.

- Ireland Income Tax Treaty to alleviate double taxation.

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 we have adequately reserved for this matter and that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows.

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.

We file income tax returns in the U.S.

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The former owners are contractually obligated to indemnify us for all income tax liabilities incurred by Byram entities prior to its acquisition on August 1, 2017, and for all income tax liabilities incurred by the Halyard foreign entities located in Thailand, Mexico, and Honduras prior to its acquisition on April 30, 2018 .

Note 16— Net Loss per Common Share

The following table summarizes the calculation of net loss per share attributable to common shareholders for the years ended December 31, 2019 and 2018 :

Note 15— Net Income (Loss) per Common Share

The following table summarizes the calculation of net income (loss) per share attributable to common shareholders for the years ended December 31, 2020 and 2019:

Year ended December 31, 2020 2019

Weighted average shares outstanding - basic and diluted

Loss from continuing operations

Weighted average shares outstanding - basic 63,368 60,574

Dilutive shares 144 —

Weighted average shares outstanding - diluted 63,512 60,574

Income (loss) from continuing operations $ 88,074 $ ( 22,584 )

Basic and diluted per share $ 1.39 $ ( 0.37 )

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Basic and diluted per share $ ( 0.92 ) $ ( 0.66 )

Net income (loss) $ 29,871 $ ( 62,371 )

Basic and diluted per share $ 0.47 $ ( 1.03 )

Note 16— Shareholders’ Equity

In October 2016, our Board of Directors authorized a three-year share repurchase program of up to $ 100 million of the company’s outstanding common stock to be executed at the discretion of management over a three-year period.

The authorization took effect in December 2016 upon the completion of the previous authorization and ended in December 2019.

We did no t repurchase any shares during the years ended December 31, 2019 and 2018.

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 ag gregate offering price of up to $ 50.0 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 December 31, 2020, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program.

On October 6, 2020, we completed a follow-on equity offering wherein we sold an aggregate of 8,475,000 shares of our common stock at an offering price of $ 20.50 , resulting in net proceeds to us of approximately $ 165 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.

Pursuant to the underwriting agreement, we granted the underwriters an option to purchase up to an additional 1,271,250 shares of our common stock, which the underwriters exercised in full.

Inclusive of this exercised option, net proceeds to us were approximately $ 190 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.

We used the proceeds from the follow-on equity offering to repay the remaining $ 109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $ 51.7 million of our Term Loan A-2 at par on October 15, 2020, and to repay $ 30.0 million of borrowings under the revolving credit facility.

Note 17— Accumulated Other Comprehensive Loss

The following tables show the changes in accumulated other comprehensive loss by component for the years ended December 31, 2020 and 2019:

Retirement Plans

Currency Translation Adjustments

Derivatives and Other

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive loss, December 31, 2019

$ ( 14,691 ) $ ( 25,301 ) $ ( 12,715 ) $ ( 52,707 )

Other comprehensive income (loss) before reclassifications ( 6,632 ) 9,703 ( 19,741 ) ( 16,670 )

Income tax 1,945 — 5,789 7,734

Other comprehensive income (loss) before reclassifications, net of tax ( 4,687 ) 9,703 ( 13,952 ) ( 8,936 )

Amounts reclassified from accumulated other comprehensive income (loss)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax

Amounts reclassified from accumulated other comprehensive income 1,297 15,580 9,232 26,109

Income tax ( 366 ) — ( 2,609 ) ( 2,975 )

Amounts reclassified from accumulated other comprehensive income, net of tax 931 15,580 6,623 23,134

Other comprehensive income (loss) ( 3,756 ) 25,283 ( 7,329 ) 14,198

Accumulated other comprehensive loss, December 31, 2020

Retirement Plans

Currency Translation Adjustments

Derivatives and Other

Accumulated other comprehensive income (loss), December 31, 2017

$ ( 18,447 ) $ ( 18 ) $ ( 20,044 ) $ ( 38,509 )

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive loss, December 31, 2018

$ ( 8,146 ) $ ( 32,551 ) $ ( 4,915 ) $ ( 45,612 )

Other comprehensive income (loss) before reclassifications ( 10,040 ) 7,250 ( 13,011 ) ( 15,801 )

Income tax 2,610 — 3,915 6,525

Other comprehensive income (loss) before reclassifications, net of tax ( 7,430 ) 7,250 ( 9,096 ) ( 9,276 )

Amounts reclassified from accumulated other comprehensive income (loss)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax

Amounts reclassified from accumulated other comprehensive income 1,196 — 1,906 3,102

Income tax ( 311 ) — ( 610 ) ( 921 )

Amounts reclassified from accumulated other comprehensive income, net of tax 885 — 1,296 2,181

Other comprehensive income (loss) ( 6,545 ) 7,250 ( 7,800 ) ( 7,095 )

Accumulated other comprehensive loss, December 31, 2019

$ ( 14,691 ) $ ( 25,301 ) $ ( 12,715 ) $ ( 52,707 )

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 expense, net.

For the years ended December 31, 2019 and 2018 , we reclassified $ 1.2 million and $ 2.1 million , respectively, of actuarial net losses.

For the years ended December 31, 2020 and 2019, we reclassified $ 1.3 million, which included $ 0.4 million as a result of the Divestiture, and $ 1.2 million of actuarial net losses.

Amounts reclassified from accumulated other comprehensive loss for the year ended December 31, 2020 include currency translation adjustments released as a result of the Divestiture.

Note 18— Commitments and Contingencies

We have a contractual commitment to outsource information technology operations, including the management and operation of our information technology systems and distributed services processing, as well as application support, development and enhancement services.

This agreement expires in November 2021, with an optional 180 day extension.

The commitment is cancelable with 180 days notice and payment of a termination fee based upon the remaining period left under the agreement.

This agreement expires in July 2025, with two optional, consecutive one-year extensions.

The commitment is cancellable with 90 days' notice and payment of a termination fee based upon the remaining period left under the agreement.

We pay scheduled fees under the agreement, which can vary based on changes in the level of support required.

Assuming no early termination of the contract, our estimated remaining annual obligations under this agreement are $ 28.9 million in 2020, and $ 25.4 million in 2021.

Assuming no early termination of the contract, our estimated remaining annual obligations under this agreement are $ 30.5 million in 2021, $ 33.6 million in 2022, $ 32.6 million in 2023, $ 32.1 million in 2024, and $ 15.9 million in 2025.

In 2018, we transitioned the management of our U.S.

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Under this contractual commitment, we pay scheduled fees which can vary based on changes in the level of support required.

Assuming no early termination of this contract, our estimated remaining annual obligations under this agreement are $ 2.3 million in 2020, $ 2.3 million in 2021, $ 2.3 million in 2022, $ 2.3 million in 2023, and $ 2.1 million in 2024.

Assuming no early termination of this contract, our estimated remaining annual obligations under this agreement are $ 2.3 million in 2021, $ 2.3 million in 2022, $ 2.3 million in 2023, and $ 2.1 million in 2024.

In addition to these fixed annual obligations disclosed herein, we are also contractually obligated to reimburse the third party company for variable costs including, but not limited to, vehicle costs, driver wages and fringe benefits, fuel, and insurance premiums.

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

The Halyard S&IP business, acquired on April 30, 2018, is a part of Global Products.

We evaluate the performance of our segments based on their operating income excluding acquisition-related and exit and realignment charges, certain purchase price fair value adjustments, and other substantive items that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis.

We evaluate the performance of our segments based on their operating income excluding acquisition-related and exit and realignment charges and other substantive items that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis.

Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading and not meaningful.

10 unchanged sentences

Consolidated net revenue $ 8,480,177 $ 9,210,939

Operating income (loss):

Operating income:

Global Solutions $ 30,946 $ 83,592

1 unchanged sentence

Inter-segment eliminations ( 7,515 ) 45

Goodwill and intangible asset impairment charges

Intangible amortization ( 41,490 ) ( 44,009 )

Acquisition-related and exit and realignment charges ( 37,752 ) ( 30,050 )

Consolidated operating income (loss)

Consolidated operating income $ 204,118 $ 73,151

Depreciation and amortization:

8 unchanged sentences

Consolidated capital expenditures $ 59,193 $ 52,228

(1) 2019 and 2018 included interest cost and net actuarial losses related to the U.S.

(1) 2019 included interest cost and net actuarial losses related to the U.S.

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.

2018 also includes the incremental charge to cost of goods sold from purchase accounting impacts related to the sale of acquired inventory that was written up to fair value.

December 31, 2020 2019

Total assets:

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Consolidated net revenue $ 8,480,177 $ 9,210,939

December 31, 2020 2019

Long-lived assets:

2 unchanged sentences

Consolidated long-lived assets $ 741,746 $ 786,247

Note 22— Condensed Consolidating Financial Information

The following tables present condensed consolidating financial information for:

Owens & Minor, Inc.

the guarantors of Owens & Minor, Inc.’s 2021 Notes and 2024 Notes, on a combined basis;

and the non-guarantor subsidiaries of the 2021 Notes and 2024 Notes, on a combined basis.

The guarantor subsidiaries are 100 % owned by Owens & Minor, Inc.

Separate financial statements of the guarantor subsidiaries are not presented because the guarantees by our guarantor subsidiaries are full and unconditional, as well as joint and several, and we believe the condensed consolidating financial information is more meaningful in understanding the financial position, results of operations and cash flows of the guarantor subsidiaries.

The prior period has been recast for the change in guarantor structure as a result of the amended Credit Agreement.

Condensed Consolidating Financial Information

Year ended December 31, 2019

Non-guarantor

Statements of Operations

Cost of goods sold

Distribution, selling and administrative expenses

Goodwill and intangible asset impairment charges

Acquisition-related and exit and realignment charges

Other operating (income) expense, net

Operating income (loss)

Interest expense, net

Other (income) expense, net

Income (loss) from continuing operations before income taxes

Income tax (benefit) provision

Equity in earnings (loss) of subsidiaries

Income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

Year ended December 31, 2018

Non-guarantor

Statements of Operations

Cost of goods sold

Distribution, selling and administrative expenses

Goodwill and intangible asset impairment charges

Acquisition-related and exit and realignment charges

Other operating (income) expense, net

Operating income (loss)

Interest expense, net

Other (income) expense, net

Income (loss) from continuing operations before income taxes

Income tax (benefit) provision

Equity in earnings (loss) of subsidiaries

Income (loss) from continuing operations

Income (loss) from discontinued operations, net of tax

Net income (loss)

Other comprehensive income (loss), net of tax

Comprehensive income (loss)

December 31, 2019

Non-guarantor

Balance Sheets

Current assets

Cash and cash equivalents

Accounts receivable, net

Merchandise inventories

Other current assets

Current assets of discontinued operations

Total current assets

Property and equipment, net

Operating lease assets, net

Goodwill, net

Intangible assets, net

Due from O&M and subsidiaries

Advances to and investments in consolidated subsidiaries

Other assets, net

Liabilities and equity

Current liabilities

Accounts payable

Accrued payroll and related liabilities

Other current liabilities

Current liabilities of discontinued operations

Total current liabilities

Long-term debt, excluding current portion

Due to O&M and subsidiaries

Intercompany debt

Operating Lease Liabilities, excluding current portion

Deferred income taxes

Other liabilities

Total liabilities

Paid-in capital

Retained earnings (deficit)

Accumulated other comprehensive income (loss)

Total liabilities and equity

Condensed Consolidating Financial Information

December 31, 2018

Non-guarantor

Balance Sheets

Current assets

Cash and cash equivalents

Accounts receivable, net

Merchandise inventories

Other current assets

Current assets of discontinued operations

Total current assets

Property and equipment, net

Goodwill, net

Intangible assets, net

Due from O&M and subsidiaries

Advances to and investments in consolidated subsidiaries

Other assets, net

Other assets of discontinued operations

Liabilities and equity

Current liabilities

Accounts payable

Accrued payroll and related liabilities

Other current liabilities

Current liabilities of discontinued operations

Total current liabilities

Long-term debt, excluding current portion

Due to O&M and subsidiaries

Intercompany debt

Deferred income taxes

Other liabilities

Other liabilities of discontinued operations

Total liabilities

Paid-in capital

Retained earnings (deficit)

Accumulated other comprehensive income (loss)

Total liabilities and equity

Condensed Consolidating Financial Information

Year ended December 31, 2019

Non-guarantor

Statements of Cash Flows

Operating activities:

Net income (loss)

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

Equity in earnings of subsidiaries

Depreciation and amortization

Share-based compensation expense

Impairment charges

Deferred income tax (benefit) expense

Provision for losses on accounts receivable

Change in operating right of use assets and lease liabilities

Changes in operating assets and liabilities:

Accounts receivable

Merchandise inventories

Accounts payable

Net change in other assets and liabilities

Cash provided by (used for) operating activities

Investing activities:

Additions to property and equipment

Additions to computer software

Proceeds from sale of property and equipment

Cash used for investing activities

Financing activities:

Change in intercompany advances

Repayments from revolving credit facility

Repayment of debt

Financing costs paid

Cash dividends paid

Cash (used for) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash and cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted at end of year

Year ended December 31, 2018

Non-guarantor

Statements of Cash Flows

Operating activities:

Net income (loss)

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

Equity in earnings of subsidiaries

Intercompany dividend

Depreciation and amortization

Share-based compensation expense

Goodwill and intangible asset impairment charges

Provision for losses on accounts receivable

Deferred income tax (benefit) expense

Changes in operating assets and liabilities:

Accounts receivable

Merchandise inventories

Accounts payable

Net change in other assets and liabilities

Cash provided by (used for) operating activities

Investing activities:

Acquisition, net of cash acquired

Additions to computer software and intangible assets

Additions to property and equipment

Proceeds from sale of property and equipment

Cash used for investing activities

Financing activities:

Change in intercompany advances

Intercompany dividend

Proceeds from issuance of debt

Proceed from revolving credit facility

Repayment of debt

Financing costs paid

Cash dividends paid

Cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Note 23— Subsequent Events

On February 13, 2020, we entered into a Fifth Amendment to the Credit Agreement, dated as of July 27, 2017.

The Fifth Amendment implements certain changes to the Credit Agreement, including modification to the leverage and interest coverage financial covenants;

changes to certain negative covenants, including to increase the limit on accounts receivable securitization obligations to $ 350 million and to permit the use of asset sale proceeds from our previously announced intention to sell our Movianto business to repay our 2021 Notes;

amendments to certain other affirmative and negative covenants in connection with the transactions;

changes to increase the interest rate margin on revolving loans, swingline loans, term A loans, and the standby letter of credit fee from 3.50 % to 4.25 % with one stepdown based on a leverage calculation;

and modifications that limit our ability to borrow $ 60 million from the revolving credit facility without the consent of all Revolving Lenders (as defined in the Credit Agreement).

On February 19, 2020, we entered into an accounts receivable securitization program with certain lenders.

The aggregate principal amount of the loans made by the lenders will not exceed $ 325 million outstanding at any time.

The proceeds from the sale of receivables pursuant to the accounts receivable securitization program may be used to repay higher interest indebtedness and for other general corporate purposes.

The accounts receivable securitization program contains certain customary representations and warranties and affirmative and negative covenants and matures on February 17, 2023.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Owens & Minor, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), changes in shareholders’ equity, and cash flows for the years then ended and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 4, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in note 1 to the consolidated financial statements, the Company changed its method of accounting for leases as of January 1, 2019 due to the adoption of Financial Accounting Standards Board Accounting Standards Update 2016-02, Leases (Topic 842).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of goodwill impairment assessment

As discussed in notes 1 and 7 to the consolidated financial statements, the Company evaluates its goodwill for impairment annually, as of October 1, and whenever events occur or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.

Through an assessment of qualitative factors, the Company determined it was more likely than not that the fair value of the Global Products reporting unit exceeded its carrying amount.

The Global Products segment manufactures and sources medical surgical products.

The carrying amount of goodwill as of December 31, 2020 was $394 million.

Of this amount, the carrying amount of goodwill for the Global Products reporting unit was $110 million.

We identified the evaluation of the goodwill impairment assessment of the Global Products reporting unit as a critical audit matter.

A higher degree of auditor judgment was required to evaluate the outlook of general economic conditions and market demand for the Company’s medical surgical products, which are inherently uncertain.

These qualitative factors could have a significant effect on the Company’s determination of whether a further quantitative test is performed.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill impairment process.

This included a control related to the Company’s assessment of the outlook of general economic conditions and market demand for the Company’s medical surgical products.

We evaluated the Company’s assessment of these qualitative factors by (1) comparing financial results to prior valuations and forecasts and performing a sensitivity analysis on expected changes to certain inputs from the most recent fair value calculation and whether those changes would increase/decrease the fair value, and (2) analyzing macroeconomic information contained in third party analyst reports on the Company and certain other market data sources.

We involved valuation professionals with specialized skills and knowledge, who assisted in analyzing general economic conditions and market demand for the Company’s medical surgical products.

We have served as the Company’s auditor since 1987.

Richmond, Virginia

March 4, 2020

February 24, 2021

Index to Exhibits

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(incorporated herein by reference to our Current Report on Form 8-K, Exhibit 2.1, dated May 1, 2018)

2.3 Purchase Agreement, dated as of April 6, 2020 by and among EHDH Holding Group and Owens & Minor, Inc.

(incorporated herein by reference to our Current Report on Form 8-K/A Exhibit 2.1, dated January 16, 2020)**

3.1 Amended and Restated Articles of Incorporation of Owens & Minor, Inc.

(incorporated herein by reference to our Current Report on Form 8-K, Exhibit 3.1, dated July 29, 2008)

Amended and Restated Bylaws of Owens & Minor, Inc.

as adopted March 5, 2020 (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 3.1, dated March 2, 2020)

3.2 Amended and Restated Bylaws of Owens & Minor, Inc., as adopted April 3, 2020 (incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed April 6, 2020)

4.1 Indenture, dated September 16, 2014, by and among Owens & Minor, Inc., Owens and Minor Distribution, Inc., Owens & Minor Medical, Inc.

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2019 Performance Share Award Agreement under the 2018 Stock Incentive Plan (incorporated herein by reference to our Current report on 8-K, Exhibit 10.2, dated March 1, 2019)*

10.21 Form of Owens & Minor, Inc.

2020 Performance Share Award Agreement under the 2018 Stock Incentive Plan (incorporated herein by reference to our Current report on 8-K, Exhibit 10.2, dated May 1, 2020)*

10.22 Owens & Minor, Inc.

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Snead, and Owens & Minor, Inc.

- filed herewith*

(incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.36, for the year ended December 31, 2019)*

10.38 Security and Pledge Agreement, dated as of April 30, 2018, by and among Owens & Minor, Inc., O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Bank of America, N.A., U.S.

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(Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.3, dated February 19, 2020)

10.50 Amendment No.

2 to the Owens & Minor, Inc.

2018 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 19, 2020.

10.51 First Amendment to the Receivables Financing Agreement, dated as of May 19, 2020, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended June 30, 2020)

10.52 Second Amendment to the Receivables Financing Agreement, dated as of July 1, 2020, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.2, for the quarter ended June 30, 2020)

10.53 Owens & Minor, Inc.

2021 Teammate Stock Purchase Plan (incorporated by reference to Appendix C to the Company’s definitive Proxy Statement filed March 19, 2020 (File No.

11.1 Calculation of Net Income (Loss) per Common Share.

Information related to this item is in Part II, Item 8, Notes to Consolidated Financial Statements, Note 16-Net Loss per Common Share

Information related to this item is in Part II, Item 8, Notes to Consolidated Financial Statements, Note 15-Net Income (Loss) per Common Share

21.1 Subsidiaries of Registrant

22.1 List of Guarantor Subsidiaries

22.2 List of Subsidiaries Pledged as Collateral

23.1 Consent of KPMG LLP, independent registered public accounting firm

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.

** Certain exhibits and schedules to the Purchase Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 4th day of March, 2020.

We hereby undertake to furnish copies of such omitted materials supplementally upon request by the SEC.

OWENS & MINOR, INC.

/s/ Edward A.

President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 4th day of March, 2020:

President, Chief Executive Officer & Director

/s/ Edward A.

/s/ Robert J.

President & Chief Executive Officer

Pesicka Mark F.

President, Chief Executive Officer & Director Director

/s/ Andrew G.

Chief Financial Officer

Long Eddie N.

Executive Vice President & Chief Financial Officer

/s/ Michael C.

Beck Michael C.

Chairman of the Board of Directors Director

/s/ Gwendolyn M.

/s/ Robert C.

Chairman of the Board of Directors

/s/ Mark Beck

/s/ Michael Riordan

Michael Riordan

Bingham Robert C.

Director Director

/s/ Robert J.

Corporate Officers

President & Chief Executive Officer

President, Chief Executive Officer & Director

President and Chief Executive Officer since joining Owens & Minor in March 2019.

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Prior to joining Kimberly-Clark Health Care, he held several senior marketing and sales roles at Covidien, a global health care products company.

Executive Vice President & Chief Operating Officer

Executive Vice President, Chief Operating Officer & President, Medical Distribution

Executive Vice President & Chief Operating Officer since November 1, 2019.

Jochims joined Owens & Minor in April 2019 and served as Executive Vice President, Strategy & Solutions until November 2019.

Jochims is responsible for operations, including the Company’s supply chain, services, IT, marketing and strategy and client engagement center functions.

Prior to joining the company, Mr.

Jochims joined Owens & Minor in April 2019 and served as Executive Vice President, Strategy & Solutions prior to becoming COO.

Jochims recently assumed the additional duties of President, Medical Distribution.

In his capacities as COO and President, Medical Distribution, Mr.

Jochims is responsible for the performance and operations of our Medical Distribution business unit as well as the Company’s, specialty services, IT, marketing, strategy and continuous improvement functions.

Prior to joining Owens & Minor, Mr.

Jochims served from 2015 to 2019 as an executive consultant and board member to companies in the healthcare, pharmaceutical and life sciences industries.

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Jochims served in positions of increasing authority at Thermo Fisher Scientific, including January 2012 - December 2014 as President of the Global Research & Safety Market division publicly known as Fisher Scientific.

Prior to that, he was Vice President of Global Development & Strategy from May 2007 to December 2009 and Vice President - Division General Counsel & Deputy General Counsel from May 2000-2007.

Prior to that, he was President of the Safety Market Division from January 2010 to January 2012, Vice President of Global Channel Development & Strategy from May 2007 to December 2009 and Vice President - Division General Counsel & Deputy General Counsel from May 2000-2007.

Executive Vice President & Chief Human Resources Officer

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A global Human Resources professional, Ms.

Neal worked for Becton Dickinson (BD), from 2005 to 2018, where she most recently served as Senior Vice

President, Human Resources, Life Sciences.

Neal worked for Becton Dickinson (BD), from 2005 to 2018, where she most recently served as Senior Vice President, Human Resources, Life Sciences.

Additionally, Ms.

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Executive Vice President, General Counsel & Corporate Secretary

Executive Vice President, General Counsel and Corporate Secretary since May 2018.

Executive Vice President, General Counsel & Corporate Secretary since May 2018.

Pace joined Owens & Minor in 2016, serving as its Senior Vice President, General Counsel & Corporate Secretary.

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Previously, he held a variety of marketing, product management, procurement and operations leadership roles at Thermo Fisher Scientific, Bayer Corporation and Reichhold Chemicals.

Mark currently serves on the Board of Directors at St.

Clair Hospital, a 330-bed independent, non-profit hospital located in Mt.

Senior Vice President, Corporate Treasurer

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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 9A. Controls and Procedures