ACCENDRA HEALTH INC/VA/ 10-K

Item 9A. Controls and Procedures We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. 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. 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 Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, controls deemed effective now may become inadequate in the future because of changes in conditions, or because compliance with policies or procedures has deteriorated or been circumvented. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). 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 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 Edward A. Pesicka, President, Chief Executive Officer & Director /s/ Andrew G. Long Andrew G. Long, Executive Vice President & Chief Financial Officer Item 9B. Other Information None. 29 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Owens & Minor, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Owens & Minor, Inc. and subsidiaries' (the Company) 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. 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, 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 The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Richmond, Virginia February 24, 2021 30 Part III Items 10-14. 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 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. 31 Part IV Item 15. Exhibits and Financial Statement Schedules a) The following documents are filed as part of this report: Page Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019 33 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020 and 2019 34 Consolidated Balance Sheets as of December 31, 2020 and 2019 35 Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019 36 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2020 and 2019 37 Notes to Consolidated Financial Statements 38 Report of Independent Registered Public Accounting Firm 64 b) Exhibits: See Index to Exhibits on page 66. 32 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) 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 Acquisition-related and exit and realignment charges 37,752 30,050 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 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 ) Net income (loss) $ 29,871 $ ( 62,371 ) Income (loss) from continuing operations per common share: basic and diluted $ 1.39 $ ( 0.37 ) Loss from discontinued operations per common share: basic and diluted ( 0.92 ) ( 0.66 ) Net income (loss) per common share: basic and diluted $ 0.47 $ ( 1.03 ) See accompanying notes to consolidated financial statements. 33 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year ended December 31, 2020 2019 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) ( 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. 34 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, 2020 2019 Assets Current assets Cash and cash equivalents $ 83,058 $ 67,030 Accounts receivable, net 700,792 674,706 Merchandise inventories 1,233,751 1,146,192 Other current assets 118,264 79,372 Current assets of discontinued operations — 439,983 Total current assets 2,135,865 2,407,283 Property and equipment, net 315,662 315,427 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 Total assets $ 3,335,639 $ 3,643,084 Liabilities and equity Current liabilities Accounts payable $ 1,000,186 $ 808,035 Accrued payroll and related liabilities 109,447 53,584 Other current liabilities 236,094 231,029 Current liabilities of discontinued operations — 323,511 Total current liabilities 1,345,727 1,416,159 Long-term debt, excluding current portion 986,018 1,508,415 Operating lease liabilities, excluding current portion 119,932 117,080 Deferred income taxes 50,641 40,550 Other liabilities 121,267 98,726 Total liabilities 2,623,585 3,180,930 Commitments and contingencies Equity Common stock, par value $ 2 per share; authorized— 200,000 shares; issued and outstanding— 73,472 shares and 62,843 shares 146,944 125,686 Paid-in capital 436,597 251,401 Retained earnings 167,022 137,774 Accumulated other comprehensive loss ( 38,509 ) ( 52,707 ) Total equity 712,054 462,154 Total liabilities and equity $ 3,335,639 $ 3,643,084 See accompanying notes to consolidated financial statements. 35 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2020 2019 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 Share-based compensation expense 20,010 15,803 Impairment charges 8,724 32,112 Loss on divestiture 65,472 — Deferred income tax expense (benefit) 15,564 ( 17,402 ) Provision for losses on accounts receivable 11,292 12,914 Changes in operating lease right-of-use assets and lease liabilities ( 1,676 ) ( 2,599 ) Changes in operating assets and liabilities: Accounts receivable ( 34,818 ) 63,526 Merchandise inventories ( 85,154 ) 127,921 Accounts payable 193,240 ( 235,631 ) 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: Proceeds from divestiture 133,000 — Additions to property and equipment ( 50,424 ) ( 42,419 ) Additions to computer software ( 8,769 ) ( 9,809 ) Proceeds from sale of property and equipment 234 331 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 — Proceeds from issuance of common stock 189,971 — Repayments of revolving credit facility ( 74,700 ) ( 32,200 ) Repayment of debt ( 617,271 ) ( 85,592 ) Financing costs paid ( 10,367 ) ( 4,313 ) Cash dividends paid ( 648 ) ( 5,226 ) 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 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, net of payments $ ( 17,455 ) $ ( 6,198 ) Interest paid $ 89,961 $ 95,413 See accompanying notes to consolidated financial statements. 36 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (in thousands, except per share data) Common Shares Outstanding Common Stock ($ 2 par value) Paid-In Capital Retained Earnings Accumulated Other 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 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 Balance, December 31, 2020 73,472 $ 146,944 $ 436,597 $ 167,022 $ ( 38,509 ) $ 712,054 See accompanying notes to consolidated financial statements. 37 OWENS & MINOR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (in thousands, except per share data, unless otherwise indicated) Note 1— Summary of Significant Accounting Policies Owens & Minor, Inc. 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. Basis of Presentation. The consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls, in conformity with U.S generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations. Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Estimates are used for, but are not limited to, the allowances for losses on accounts receivable, inventory valuation allowances, supplier incentives, depreciation and amortization, goodwill valuation, valuation of intangible assets and other long-lived assets, self-insurance liabilities, tax liabilities, defined benefit obligations, share-based compensation and other contingencies. Actual results may differ from these estimates. Cash, Cash Equivalents and Restricted Cash. 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. Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in the United States, Europe, and Asia. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. 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. 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 Cash of discontinued operations — 1,396 Total cash, cash equivalents and restricted cash $ 134,506 $ 84,687 Book overdrafts represent the amount of outstanding checks issued in excess of related bank balances and are included in accounts payable in our consolidated balance sheets, as they are similar to trade payables and are not subject to finance charges or interest. Changes in book overdrafts are classified as operating activities in our consolidated statements of cash flows. Accounts Receivable, Net. In general, accounts receivable from customers are recorded at the invoiced amount and are reduced by any rebates due to the customer, which are estimated based on contractual terms or historical experience. We assess finance charges on overdue accounts receivable that are recognized as other operating income based on their estimated ultimate collectability. We have arrangements with certain customers under which they make deposits on account. Customer deposits in excess of outstanding receivable balances are classified as other current liabilities. For our direct to patient business, accounts receivable are recorded net of a contractual allowance. 38 We maintain valuation allowances based upon the expected collectability of accounts receivable. Our allowances include specific amounts for accounts that are likely to be uncollectible, such as customer bankruptcies and disputed amounts and general allowances for accounts that may become uncollectible. Allowances are estimated based on a number of factors, including industry trends, current economic conditions, creditworthiness of customers, age of the receivables, changes in customer payment patterns, and historical experience. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Merchandise Inventories. Merchandise inventories are valued at the lower of cost or market, with cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S. Cost of remaining inventories are determined using the first-in, first out (FIFO) or weighted-average cost method. Property and Equipment. Property and equipment are stated at cost less accumulated depreciation. 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 15 years for leasehold and land improvements. Straight-line and accelerated methods of depreciation are used for income tax purposes. Normal maintenance and repairs are expensed as incurred, and renovations and betterments are capitalized. 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. Leases. 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. Certain leases include renewal options, generally for one to five -year increments. The exercise of lease renewal options is at our sole discretion. We include options to renew (or terminate) in our lease term, and as part of our right-of-use assets and lease liabilities, when it is reasonably certain that we will exercise that option. We also lease some of our transportation and material handling equipment for terms generally ranging from three to 10 years. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of right-of-use assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of unpaid lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. We use the implicit rate when readily determinable. The right-of-use assets also include adjustments for any lease payments made and lease incentives received. Goodwill. 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. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. We determine the estimated fair value of our reporting units by using an income (discounted cash flow analysis) approach. The income approach is dependent upon several assumptions regarding future periods, including assumptions with respect to future sales growth and a terminal growth rate. In addition, a weighted average cost of capital (WACC) is used to discount future estimated cash flows to their present values. The WACC is based on externally observable data considering market participants’ cost of equity and debt, optimal capital structure and risk factors specific to our company. Intangible Assets. Intangible assets acquired through purchases or business combinations are stated at fair value at the acquisition date and net of accumulated amortization in the consolidated balance sheets. Intangible assets, consisting primarily of customer relationships, customer contracts, non-competition agreements, trademarks, and tradenames are amortized over their estimated useful lives. 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 39 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. Computer Software. We develop and purchase software for internal use. Software development costs incurred during the application development stage are capitalized. 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 10 years. Capitalized computer software costs are included in other assets, net, in the consolidated balance sheets. 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. Long-lived assets, which include property and equipment, finite-lived intangible assets, right-of-use assets, and unamortized software costs, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. We assess long-lived assets for potential impairment by comparing the carrying value of an asset, or group of related assets, to their estimated undiscounted future cash flows. We suspend depreciation and amortization on assets that are held for sale. Self-Insurance Liabilities. We are self-insured for certain employee healthcare, workers’ compensation and automobile liability costs; however, we maintain insurance for individual losses exceeding certain limits. Liabilities are estimated for healthcare costs using current and historical claims data. 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 adjust the liability and related expense accordingly. Self-insurance liabilities are included in other current liabilities on the consolidated balance sheets. Revenue Recognition. Our revenue is primarily generated from sales contracts with customers. Under most of our distribution and product sales arrangements, our performance obligations are limited to delivery of products to a customer upon receipt of a purchase order. For these arrangements, we recognize revenue at the point in time when shipment is completed, as control passes to the customer upon product receipt. Revenue for activity-based fees and other services is recognized over time as activities are performed. Depending on the specific contractual provisions and nature of the performance obligation, revenue from services may be recognized on a straight-line basis over the term of the service, on a proportional performance model, based on level of effort, or when final deliverables have been provided. Our contracts sometimes allow for forms of variable consideration including rebates, discounts and performance guarantees. In these cases, we estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer. Rebates and customer discounts are estimated based on contractual terms or historical experience and we maintain an accrual for rebates or discounts that have been earned but are unpaid. The amount accrued for rebates and discounts due to customers was $ 74.0 million at December 31, 2020 and $ 49.5 million at December 31, 2019. Additionally, we generate fees from arrangements that include performance targets related to cost-saving initiatives for customers that result from our supply-chain management services. Achievement against performance targets, measured in accordance with contractual terms, may result in additional fees paid to us or, if performance targets are not achieved, we may be obligated to refund or reduce a portion of our fees or to provide credits toward future purchases by the customer. For these arrangements, contingent revenue is deferred and recognized as the performance target is achieved and the applicable contingency is released. When we determine that a loss is probable under a contract, the estimated loss is accrued. The amount deferred under these arrangements is not material. For our direct to patient sales, revenues are recorded based upon the estimated amounts due from patients and third-party payors. Third-party payors include federal and state agencies (under Medicare and Medicaid programs), managed care health plans and commercial insurance companies. Estimates of contractual allowances are based upon historical collection rates for the related payor agreements. The estimated reimbursement amounts are made on a payor-specific basis and are recorded based on the best information available regarding management’s interpretation of the applicable laws, regulations and reimbursement terms. In most cases, we record revenue gross, as we are the primary obligor in the arrangement and we obtain control of the products before they are transferred to the customer. When we act as an agent in a sales arrangement and do not bear a significant portion of inventory risks, primarily for our outsourced logistics business, we record revenue net of product cost. Sales taxes collected from customers and remitted to governmental authorities are excluded from revenues. 40 See Note 20 for disaggregation of revenue by segment and geography as we believe that best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Cost of Goods Sold. Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor, bear the risk of general and physical inventory loss and carry all credit risk associated with sales. Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products business. We have contractual arrangements with certain suppliers that provide incentives, including cash discounts for prompt payment, operational efficiency and performance-based incentives. These incentives are recognized as a reduction in cost of goods sold as targets become probable of achievement. In situations where we act as an agent in a sales arrangement and do not bear a significant portion of these risks, primarily for our outsourced logistics business, there is no cost of goods sold and all costs to provide the service to the customer are recorded in distribution, selling and administrative expenses. As a result of different practices of categorizing costs and different business models throughout our industry, our gross margins may not necessarily be comparable to other companies in our industry. Distribution, Selling and Administrative (DS&A) Expenses. DS&A expenses include shipping and handling costs, labor, depreciation, amortization and other costs for selling and administrative functions and all costs associated with our fee-for-service arrangements. Shipping and Handling. 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 $ 389 million and $ 422 million for the years ended December 31, 2020 and 2019. Share-Based Compensation. 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 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 do not enter into derivative financial instruments for trading purposes. All derivatives are carried at fair value in our consolidated balance sheets. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we record the change in fair value of the derivative instrument in our financial statements. A derivative qualifies for hedge accounting if, at inception, we expect the derivative will be highly effective in offsetting the underlying hedged cash flows and we fulfill the hedge documentation standards at the time we enter into the derivative contract. We designate a hedge as a cash flow hedge, fair value hedge, or a net investment hedge based on the exposure we are hedging. For the effective portion of qualifying cash flow hedges, we record changes in fair value in other comprehensive income (“OCI”). We release the derivative’s gain or loss from OCI to match the timing of the underlying hedged items’ effect on earnings. We review the effectiveness of our hedging instruments quarterly, recognize current period hedge ineffectiveness immediately in earnings, and discontinue hedge accounting for any hedge that we no longer consider to be highly effective. 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 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. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided if it is more likely than not that a deferred tax asset will not be realized. When we have claimed tax benefits that may be challenged by a tax authority, an estimate of the effect of these uncertain tax positions is recorded. It is our policy to provide for uncertain tax positions and the related interest and penalties based upon an assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the tax outcome of these uncertain tax positions changes, based on our assessment, such changes in estimate may impact the income tax provision in the period in which such determination is made. 41 We earn a portion of our operating income in foreign jurisdictions outside the United States. We continue to remain permanently reinvested in our foreign subsidiaries, with the exception of a subsidiary in Thailand. We have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of December 31, 2020. As such, we have recorded withholding tax liabilities that would be incurred upon future distribution to the U.S. There are no unrecognized deferred taxes as there is no outside basis difference unrelated to unremitted earnings for Thailand. We will continue to evaluate our foreign earnings repatriation policy in 2021 for all our foreign subsidiaries. Our policy election for GILTI is that we will record such taxes as a current period expense once incurred and will follow the tax law ordering approach. Fair Value Measurements. Fair value is determined based on assumptions that a market participant would use in pricing an asset or liability. The assumptions used are in accordance with a three-tier hierarchy, defined by GAAP, that draws a distinction between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the use of present value and other valuation techniques in the determination of fair value (Level 3). The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The carrying amount of restricted cash also approximates fair value due to its nature. The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 10 for the fair value of debt. The fair value of interest rate swaps and foreign currency contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 13 for the fair value of derivatives. Acquisition-Related and Exit and Realignment Charges . We present costs incurred in connection with acquisitions in acquisition-related and exit and realignment charges in our consolidated statements of operations. 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, our client engagement center and IT restructuring charges. 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. Liabilities are established at the cease-use date for remaining contractual obligations discounted using a credit-adjusted risk-free rate of interest. 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, 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. Income (Loss) Per Share. Basic and diluted income (loss) per share are calculated pursuant to the two-class method, under which unvested share-based payment awards containing non-forfeitable rights to dividends are participating securities. Foreign Currency Translation. Our foreign subsidiaries generally consider their local currency to be their functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and revenues, cost of goods sold and expenses are translated at average exchange rates during the period. Cumulative currency translation adjustments are included in accumulated other comprehensive income (loss) in shareholders’ equity. Gains and losses on intercompany foreign currency transactions that are long-term in nature and which we do not intend to settle in the foreseeable future are also recognized in other comprehensive income (loss) in shareholders’ equity. 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. Discontinued Operations . 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. With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. See Note 3 for additional information regarding discontinued operations. 42 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 August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements for fair value measurements by removing the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy and the policy for timing of such transfers. 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). 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): Internal-Use Software. 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. 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: 43 In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU No. 2019-12 is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We 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 Many of our hospital customers in the U.S. are represented by group purchasing organizations (GPOs) that contract with us for services on behalf of the GPO members. GPOs representing a significant portion of our business are Vizient, Premier, Inc. (Premier) and Health Trust Purchasing Group (HPG). Members of these GPOs have incentives to purchase from their primary selected distributor; however, they operate independently and are free to negotiate directly with distributors and manufacturers. 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 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. 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. 44 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 income, net ( 388 ) ( 1,325 ) Operating loss ( 54,585 ) ( 32,172 ) Interest expense, net 3,144 6,752 Loss from discontinued operations before income taxes ( 57,729 ) ( 38,924 ) Income tax provision from discontinued operations 474 863 Loss from discontinued operations, net of taxes $ ( 58,203 ) $ ( 39,787 ) 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: 45 December 31, 2019 Assets of discontinued operations Cash and cash equivalents $ 1,396 Accounts receivable, net 78,643 Merchandise inventories 16,058 Other current assets 188,853 Current assets of discontinued operations 284,950 Property and equipment, net 65,710 Intangible assets, net 6,579 Other assets, net 27,431 Operating lease assets 87,425 Valuation allowance on disposal group classified as held-for-sale ( 32,112 ) Total assets of discontinued operations $ 439,983 Liabilities of discontinued operations Accounts payable $ 53,981 Other current liabilities 182,980 Current liabilities of discontinued operations 236,961 Long-term debt, excluding current portion 5,523 Operating lease liabilities, excluding current portion 76,270 Other liabilities 4,757 Total liabilities of discontinued operations $ 323,511 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: Year ended December 31, 2020 2019 Operating Activities: Depreciation and amortization $ — $ 17,111 Asset impairment charges — 32,112 Loss on divestiture 65,472 — Investing Activities: Capital expenditures ( 3,027 ) ( 18,952 ) 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. Note 5— Merchandise Inventories 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 6— Property and Equipment, Net Property and equipment, net, consists of the following: 46 December 31, 2020 2019 Land and land improvements $ 22,292 $ 22,269 Buildings and leasehold improvements 155,576 156,184 Machinery and equipment 377,225 371,324 Construction in progress 44,695 11,368 Property and equipment, gross 599,788 561,145 Accumulated depreciation and amortization ( 284,126 ) ( 245,718 ) Property and equipment, net $ 315,662 $ 315,427 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 Consolidated Carrying amount of goodwill, December 31, 2018 $ 464,080 $ 347,678 $ 811,758 Accumulated goodwill impairment, December 31, 2018 ( 180,175 ) ( 217,461 ) ( 397,636 ) Net carrying amount of goodwill, December 31, 2018 283,905 130,217 414,122 Currency translation adjustments — 2,936 2,936 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: 2020 2019 Customer Relationships Tradenames Other Intangibles Customer Relationships Tradenames Other Intangibles Gross intangible assets $ 270,505 $ 90,000 $ 43,245 $ 270,693 $ 90,000 $ 43,055 Accumulated amortization ( 121,209 ) ( 24,881 ) ( 14,309 ) ( 92,947 ) ( 16,520 ) ( 9,263 ) Net intangible assets $ 149,296 $ 65,119 $ 28,936 $ 177,746 $ 73,480 $ 33,792 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. Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $ 39.8 million for 2021, $ 38.9 million for 2022, $ 38.7 million for 2023, $ 33.9 million for 2024, and $ 28.2 million for 2025. Note 8— Leases We adopted ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019. 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 did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The new standard also provides practical expedients for an entity’s ongoing accounting. 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- 47 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 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 2019 Operating lease cost DS&A Expenses $ 53,675 $ 53,588 Finance lease cost: 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 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. Supplemental balance sheet information is as follows: As of December 31, Classification 2020 2019 Assets: 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 Liabilities: Current Operating Other current liabilities $ 33,412 $ 31,568 Finance Other current liabilities 1,085 1,014 Noncurrent 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 $ 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. 48 Other information related to leases was as follows: Years ended December 31, 2020 2019 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating and finance leases $ 54,541 $ 54,300 Financing cash flows from finance leases $ 879 $ 1,205 Right-of-use assets obtained in exchange for new operating and finance lease liabilities $ 41,616 $ 33,933 Weighted average remaining lease term (years) Operating leases 5.2 5.1 Finance leases 7.9 8.8 Weighted average discount rate Operating leases 11.8 % 11.9 % Finance leases 12.3 % 9.7 % Maturities of lease liabilities as of December 31, 2020 were as follows: 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 Less: 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, our client engagement center and IT restructuring charges. 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. Exit and realignment charges by segment for the years ended December 31, 2020 and 2019 were as follows: Year ended December 31, 2020 2019 Global Solutions $ 22,093 $ 9,133 Global Products 3,839 5,264 Total exit and realignment charges $ 25,932 $ 14,397 49 The following table summarizes the activity related to exit and realignment cost accruals through December 31, 2020: Total 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 Other 5,858 Cash payments ( 13,712 ) Accrued exit and realignment charges, December 31, 2019 8,162 Provision for exit and realignment activities: Severance 5,623 Information system restructuring costs 2,119 Lease obligations 1,051 Other 6,519 Cash payments ( 20,328 ) Accrued exit and realignment charges, December 31, 2020 $ 3,146 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: 2020 2019 December 31, Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value 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 $ 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 %. We have the option to redeem the 2024 Notes in part or in whole prior 50 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. 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 51 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 We maintain a share-based compensation plan (the Plan) that is administered by the Compensation and Benefits Committee of the Board of Directors. The Plan allows us to award or grant to officers, directors and employees incentive, non-qualified and deferred compensation stock options, stock appreciation rights (SARs), performance shares, and restricted and unrestricted stock. We use authorized and unissued common shares for grants of restricted stock or for stock option exercises. At December 31, 2020, approximately 4.2 million common shares were available for issuance under the Plan. Restricted stock awarded under the Plan generally vests over one , three or five years . Certain restricted stock grants contain accelerated vesting provisions, based on the satisfaction of certain performance criteria related to the achievement of certain financial and operational results. Performance shares awarded under the Plan are issuable as restricted stock upon meeting performance goals and generally have a total performance and vesting period of three years . Stock options awarded under the Plan are generally subject to graded vesting over three years and expire seven to ten years from the date of grant. The options are granted at a price equal to fair market value at the date of grant. 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. The fair value of performance shares as of the date of grant is estimated assuming that performance goals will be achieved at target levels. If such goals are not probable of being met, or are probable of being met at different levels, recognized compensation cost is adjusted to reflect the change in estimated fair value of restricted stock to be issued at the end of the performance period. Total share-based compensation expense for December 31, 2020 and 2019 was $ 19.7 million and $ 15.2 million with recognized tax benefits of $ 5.1 million and $ 4.0 million. Unrecognized compensation cost related to nonvested restricted stock awards, net of estimated forfeitures, was $ 25.3 million at December 31, 2020. This amount is expected to be recognized over a weighted-average period of 1.9 years, based on the maximum remaining vesting period required under the awards. Unrecognized compensation cost related to nonvested performance share awards as of December 31, 2020 was $ 9.7 million and will be recognized primarily in 2021 if the related performance targets are met. 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: 2020 2019 Number of Shares Weighted Average Grant-date Value Per Share Number of Shares Weighted Average Grant-date Value Per Share 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 52 The total fair value of restricted stock vesting during the years ended December 31, 2020 and 2019 was $ 17.8 million and $ 13.8 million. Note 12— Retirement Plans Savings and Retirement Plans. 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 countries outside of the United States in which we operate. Expenses related to these plans were not material in 2020 and 2019. U.S. Retirement Plans. We have a noncontributory, unfunded retirement plan for certain retirees in the United States (U.S. Retirement Plan). In February 2012, our Board of Directors amended the U.S. Retirement Plan to freeze benefit levels and modify vesting provisions under the plan effective as of March 31, 2012. The following table sets forth the U.S. Retirement Plan’s financial status and the amounts recognized in our consolidated balance sheets: December 31, 2020 2019 Change in benefit obligation Benefit obligation, beginning of year $ 53,602 $ 48,163 Interest cost 1,420 1,858 Actuarial loss 6,632 7,075 Benefits paid ( 4,270 ) ( 3,494 ) Benefit obligation, end of year $ 57,384 $ 53,602 Change in plan assets Fair value of plan assets, beginning of year $ — $ — Employer contribution 4,270 3,494 Benefits paid ( 4,270 ) ( 3,494 ) Fair value of plan assets, end of year $ — $ — Funded status, end of year $ ( 57,384 ) $ ( 53,602 ) Amounts recognized in the consolidated balance sheets Other current liabilities $ ( 3,933 ) $ ( 3,929 ) Other liabilities ( 53,451 ) ( 49,672 ) Accumulated other comprehensive loss 25,492 19,732 Net amount recognized $ ( 31,892 ) $ ( 33,869 ) Accumulated benefit obligation $ 57,384 $ 53,602 Weighted average assumptions used to determine benefit obligation Discount rate 1.95 % 2.75 % Rate of increase in compensation levels N/A N/A Plan benefit obligations of the U.S. Retirement Plan were measured as of December 31, 2020 and 2019. Plan benefit obligations are determined using assumptions developed at the measurement date. The weighted average discount rate, which is used to calculate the present value of plan liabilities, is an estimate of the interest rate at which the plan liabilities could be effectively settled at the measurement date. When estimating the discount rate, we review yields available on high-quality, fixed-income debt instruments and use a yield curve model from which the discount rate is derived by applying the projected benefit payments under the plan to points on a published yield curve. The components of net periodic benefit cost for the U.S. Retirement Plan were as follows: 53 Year ended December 31, 2020 2019 Interest cost $ 1,420 $ 1,858 Recognized net actuarial loss 872 1,065 Net periodic benefit cost $ 2,292 $ 2,923 Weighted average assumptions used to determine net periodic benefit cost Discount rate 2.75 % 4.00 % Rate of increase in future compensation levels N/A N/A Amounts recognized for the U.S. Retirement Plan as a component of accumulated other comprehensive loss as of the end of the year that have not been recognized as a component of the net periodic benefit cost are presented in the following table. We expect to recognize approximately $ 1.2 million of the net actuarial loss reported in the following table as of December 31, 2020, as a component of net periodic benefit cost during 2021. Year ended December 31, 2020 2019 Net actuarial loss $ ( 25,492 ) $ ( 19,732 ) Deferred tax benefit 9,552 7,866 Amounts included in accumulated other comprehensive loss, net of tax $ ( 15,940 ) $ ( 11,866 ) As of December 31, 2020, the expected benefit payments required for each of the next five years and the five-year period thereafter for the U.S. Retirement Plan were as follows: Year 2021 $ 3,914 2022 3,794 2023 3,674 2024 3,545 2025 3,417 2026-2030 14,962 International Retirement Plans. 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 $ 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 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 certain market risks. We do not enter into derivative financial instruments for trading purposes. 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. These derivative instruments are adjusted to fair value at the end of each period through earnings. 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 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. Cash flows related to the interest rate swap agreements are included in interest expense. We determine the fair value of our foreign currency derivatives and our interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data. 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. All derivatives are carried at fair value in our consolidated balance sheets in other assets, net and other liabilities. We consider the risk of 54 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 Fair Value Classification Fair Value Cash flow hedges 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 Fair Value Classification Fair Value Cash flow hedges 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 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. 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. 55 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 income (loss) before income taxes consist of the following: Year ended December 31, 2020 2019 Income (loss) before income taxes: U.S. $ 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: Year ended December 31, 2020 2019 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 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: Year ended December 31, 2020 2019 Federal statutory rate 21.0 % 21.0 % 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 ) % Restricted stock vestings 1.0 % ( 6.7 ) % Other 1.0 % 0.8 % Effective income tax rate 19.9 % 21.4 % 56 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: Employee benefit plans $ 28,546 $ 26,401 Accrued liabilities not currently deductible 23,872 24,441 Finance charges 1,928 2,678 Lease liabilities 43,342 42,077 Allowance for losses on accounts receivable 3,629 4,157 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 Less: valuation allowances ( 31,709 ) ( 14,282 ) Net deferred tax assets 117,311 134,847 Deferred tax liabilities: Merchandise inventories 42,509 42,872 Goodwill 1,603 296 Property and equipment 34,005 32,689 Right-of-use assets 39,514 39,043 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 for U.S. federal and state capital loss carryforwards and net operating loss carryforwards in various state jurisdictions. The U.S. 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: 2020 2019 Unrecognized tax benefits at January 1, $ 11,520 $ 9,568 Increases for positions taken during current period 1,488 394 Increases for positions taken during prior periods 9,073 1,629 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, 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 57 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 $ 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, 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. federal and various state and foreign jurisdictions. Our U.S. federal income tax returns for the years 2015, 2016, 2017, 2018 and 2019 are subject to examination. Our income tax returns for U.S. state and local jurisdictions are generally open for the years 2017 through 2019; however, certain returns may be subject to examination for differing periods. 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 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 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 ) Loss from discontinued operations $ ( 58,203 ) $ ( 39,787 ) 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 ) 58 Note 16— Shareholders’ Equity In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an 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. 59 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 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 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 $ ( 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 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, 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 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 $ 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. 60 In 2018, we transitioned the management of our U.S. private fleet transportation and drivers to a third party company, which provides a robust technology platform that includes customer tracking and additional delivery capabilities. 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 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. Note 19— Legal Proceedings We are subject to various legal actions that are ordinary and incidental to our business, including contract disputes, employment, workers’ compensation, product liability, regulatory and other matters. We have insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. We establish reserves from time to time based upon periodic assessment of the potential outcomes of pending matters. Based on current knowledge and the advice of counsel, we believe that the accrual as of December 31, 2020 for currently pending matters considered probable of loss, which is not material, is sufficient. In addition, we believe that other currently pending matters are not reasonably likely to result in a material loss, as payment of the amounts claimed is remote, the claims are insignificant, individually and in the aggregate, or the claims are expected to be adequately covered by insurance. Note 20— Segment Information We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance. We report our business under two segments: Global Solutions and Global Products. The Global Solutions segment includes our United States distribution, outsourced logistics and value-added services business. Global Products manufactures and sources medical surgical products through our production and kitting operations. 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. We believe all inter-segment sales are at prices that approximate market. 61 The following tables present financial information by segment: Year ended December 31, 2020 2019 Net revenue: Segment net revenue Global Solutions $ 7,212,011 $ 8,243,867 Global Products 1,810,331 1,433,977 Total segment net revenue 9,022,342 9,677,844 Inter-segment net revenue Global Products ( 542,165 ) ( 466,905 ) Total inter-segment net revenue ( 542,165 ) ( 466,905 ) Consolidated net revenue $ 8,480,177 $ 9,210,939 Operating income: Global Solutions $ 30,946 $ 83,592 Global Products 259,929 65,054 Inter-segment eliminations ( 7,515 ) 45 Intangible amortization ( 41,490 ) ( 44,009 ) Acquisition-related and exit and realignment charges ( 37,752 ) ( 30,050 ) Other (1) — ( 1,481 ) Consolidated operating income $ 204,118 $ 73,151 Depreciation and amortization: Global Solutions $ 41,286 $ 42,444 Global Products 52,050 54,302 Discontinued operations — 19,932 Consolidated depreciation and amortization $ 93,336 $ 116,678 Capital expenditures: Global Solutions $ 20,386 $ 10,987 Global Products 35,780 22,289 Discontinued operations 3,027 18,952 Consolidated capital expenditures $ 59,193 $ 52,228 (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. December 31, 2020 2019 Total assets: Global Solutions $ 2,117,372 $ 2,205,134 Global Products 1,135,209 930,937 Segment assets 3,252,581 3,136,071 Discontinued operations — 439,983 Cash and cash equivalents 83,058 67,030 Consolidated total assets $ 3,335,639 $ 3,643,084 62 The following tables present information by geographic area. Net revenues were attributed to geographic areas based on the locations from which we ship products or provide services. Year ended December 31, 2020 2019 Net revenue: United States $ 8,130,411 $ 8,871,599 International 349,766 339,340 Consolidated net revenue $ 8,480,177 $ 9,210,939 December 31, 2020 2019 Long-lived assets: United States $ 627,624 $ 632,643 International 114,122 153,604 Consolidated long-lived assets $ 741,746 $ 786,247 63 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Owens & Minor, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Owens & Minor, Inc. 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, 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 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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. 64 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. /s/ KPMG LLP We have served as the Company’s auditor since 1987. Richmond, Virginia February 24, 2021 65 Index to Exhibits 2.1 Purchase Agreement, dated as of October 31, 2017, by and among Halyard Health, Inc., the other sellers party thereto and Owens & Minor, Inc. (incorporated herein by reference to our Current Report on Form 8-K/A, Exhibit 2.1, dated November 1, 2017) ** 2.2 Amended and Restated Purchase Agreement, dated as of April 30, 2018, by and among Halyard Health, Inc., the other sellers party thereto and Owens & Minor, Inc. (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) 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. and U.S. Bank National Association, as trustee (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated September 17, 2014) 4.2 First Supplemental Indenture, dated September 16, 2014, by and among Owens & Minor, Inc., Owens and Minor Distribution, Inc., Owens & Minor Medical, Inc. and U.S. Bank National Association, as trustee (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.2, dated September 17, 2014) 4.3 Form of Global Note for the 3.875% Senior Notes due 2021 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit A of Exhibit 4.2, dated September 17, 2014) 4.4 Form of Global Note for the 4.375% Senior Notes due 2024 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit B of Exhibit 4.2, dated September 17, 2014) 4.5 Third Supplemental Indenture, dated as of April 30, 2018, by and among Owens & Minor, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated May 4, 2018) 4.6 Fourth Supplemental Indenture, dated as of February 12, 2019, among Owens & Minor, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated February 19, 2019) 4.7 Description of Securities - filed herewith 10.1 Form of Director Restricted Stock Agreement under the 2015 Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.3, for the quarter ended March 31, 2016)* 10.2 Form of Owens & Minor, Inc. Restricted Stock Agreement under the 2018 Stock Incentive Plan effective February 28, 2019 (incorporated herein by reference to our Current report on 8-K, Exhibit 10.1, dated March 1, 2019)* 10.3 Owens & Minor, Inc. Directors’ Deferred Compensation Plan, as amended and restated effective January 1, 2005 (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.3, for the quarter ended September 30, 2008)* 10.4 Form of Owens & Minor, Inc. Executive Severance Agreement effective January 1, 2011 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.10, for the year ended December 31, 2010)* 10.5 Form of Owens & Minor, Inc. Executive Change in Control Severance Agreement between Owens & Minor, Inc. and Edward A. Pesicka effective March 4, 2019 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 25, 2019)* 66 10.6 Form of Owens & Minor, Inc. Executive Change in Control Severance Agreement effective October 25, 2018 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.7, for the year ended December 31, 2018) * 10.7 Owens & Minor, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2005 (“SERP”) (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended September 30, 2008)* 10.8 Resolutions of the Board of Directors of the Company amending the SERP (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.12, for the year ended December 31, 2011)* 10.9 Amendment effective March 1, 2016 of the Company’s SERP (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.6, for the quarter ended March 31, 2016)* 10.10 Amendment effective March 1, 2016 of Exhibit II of the Company’s SERP (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.7, for the quarter ended March 31, 2016)* 10.11 Owens & Minor, Inc. Amended and Restated Management Equity Ownership Program and Stock Ownership Rewards Program (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.15, for the year ended December 31, 2009)* 10.12 Amendment to MEOP effective January 1, 2014 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.10, for the year ended December 31, 2013)* 10.13 Owens & Minor, Inc. Executive Deferred Compensation and Retirement Plan effective January 1, 2013 (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2013)* 10.14 Form of Owens & Minor, Inc. Restricted Stock Agreement under the 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.2, for the quarter ended March 31, 2016)* 10.15 Form of Owens & Minor, Inc. Restricted Stock Unit Agreement under the Company’s 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2016)* 10.16 Form of Owens & Minor Director Restricted Stock Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 9, 2018) * 10.17 Form of Owens & Minor Restricted Stock Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 9, 2018) * 10.18 Form of Owens & Minor Restricted Stock Unit Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.3, dated May 9, 2018) * 10.19 Form of 2016 Performance Share Award Agreement under the 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.4, for the quarter ended March 31, 2016)* 10.20 Form of Owens & Minor, Inc. 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. Officer Severance Policy dated May 7, 2018 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.4, dated May 9, 2018)* 10.23 Policy on Recoupment of Executive Incentive Compensation (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.36, for the year ended December 31, 2009)* 10.24 Owens & Minor, Inc. 2015 Stock Incentive Plan (incorporated herein by reference to our Registration Statement on Form S-8, Registration Number 333-203826)* 10.25 Owens & Minor, Inc. 2018 Stock Incentive Plan (incorporated herein by reference to our Registration Statement on Form S-8, Registration number 333-224787)* 67 10.26 Employment Term Sheet Effective May 20, 2015 for P. Cody Phipps (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.2, for the quarter ended June 30, 2015)* 10.27 Restricted Stock Grant Agreement dated July 1, 2015 between the Company and P. Cody Phipps (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.3, for the quarter ended June 30, 2015)* 10.28 Credit Agreement dated as of June 5, 2012 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc. (as Borrowers), Owens & Minor, Inc. and certain of its domestic subsidiaries (as Guarantors), Wells Fargo Bank, N.A. (as Administrative Agent), JPMorgan Chase Bank, N.A. (as Syndication Agent) and a syndicate of banks as specified on the signature pages thereof (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated June 8, 2012) 10.29 First Amendment dated as of September 17, 2014 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc. ( as Borrowers), Owens & Minor, Inc. and certain of its domestic subsidiaries (as Guarantors) and Wells Fargo Bank, N.A. ( as Administrative Agent), to the Credit Agreement dated as of June 5, 2012 by and among the Borrowers, the Guarantors, a syndicate of financial institutions party thereto, the Administrative Agent, and the other agents party thereto (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated September 18, 2014) 10.30 Share Purchase Agreement dated August 31, 2012 between Celesio AG, Admenta Deutschland GmbH, Admenta Denmark ApS, Admenta France S.A. and OCP Portugal Produtos Farmaceuticos, S.A. (as Sellers) and O&M-Movianto Nederland B.V., O&M-Movianto UK Holdings Ltd, O&M-Movianto France Holdings SAS (as Purchasers) and Owens & Minor, Inc. (as Purchasers’ Guarantor) (incorporated herein by reference to our Current Report on Form 8-K, Exhibit10.1, dated September 4, 2012) 10.31 Interest Purchase Agreement, dated as of May 2, 2017, by and among Owens & Minor, Inc., Barista Acquisition I, LLC, Barista Acquisition II, LLC , Mediq B.V. , Mediq International B.V. and Mediq USA Holdings (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2017) 10.32 Owens & Minor, Inc. 2017 Teammate Stock Purchase Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 22, 2017 (File No. 001-09810)) * 10.33 Credit Agreement, dated as of July 27, 2017, by and among Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC, and Barista Acquisition II, LLC, (the “Borrowers”), Owens & Minor, Inc. and certain of its domestic subsidiaries (together, the “Guarantors), Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Wells Fargo Bank, N.A. (the “Administrative Agent”), a syndicate of financial institutions party thereto, and the other agents party thereto (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated July 28, 2017) 10.34 Restated Guaranty Agreement, dated as of the February 12, 2019, by and among Owens & Minor, Inc., the other Guarantors party thereto and Bank of America, N.A., as administrative agent for the Pro Rata Facilities and the Term B Facility (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2019) 10.35 Executive Separation Agreement and General Release, dated as of August 16, 2018, by and between Richard A. Meier and Owens & Minor Medical, Inc. (incorporated herein by reference to our Current Report on Form 8-K/A, Exhibit 10.1, dated August 23, 2018) * 10.36 Executive Separation Agreement and General Release, dated as of August 3, 2018, by and between Rony Kordahi and Owens & Minor Medical, Inc. (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.10, for the quarter ended June 30, 2018)* 10.37 Executive Separation Agreement and General Release, dated as of January 10th, 2020, by and between Robert K. Snead, and Owens & Minor, Inc. (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. Bank National Association, and the other secured parties thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 4, 2018) 68 10.39 First Amendment to Credit Agreement, dated as of March 29, 2018, by and among Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC, and Barista Acquisition II, LLC, as Borrowers, Owens & Minor, Inc. and certain of its domestic subsidiaries, as Guarantors, the banks party thereto and Wells Fargo Bank, N.A., as Administrative Agent for the banks party thereto (incorporated herein by reference to our Current Report on Form 8-K/A, Exhibit 10.1, dated April 18, 2018) 10.40 Second Amendment to Credit Agreement, dated as of April 30, 2018, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Wells Fargo Bank, N.A., as administrative agent for certain of the credit facilities, Bank of America, N.A., as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 4, 2018) 10.41 Third Amendment to Credit Agreement, dated as of May 9, 2018, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Wells Fargo Bank, N.A., as administrative agent for certain of the credit facilities, Bank of America, N.A., as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Form 10-Q, Exhibit 10.9, dated May 10, 2018) 10.42 Fourth Amendment to Credit Agreement, dated as of February 12, 2019, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Bank of America, N.A., as administrative agent for certain of the credit facilities and as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2019) 10.43 Amendment to the Owens & Minor, Inc. 2018 Stock Incentive Plan (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 10, 2019* 10.44 Owens & Minor, Inc. Directors’ Deferred Compensation Plan, as Amended and Restated Effective May 10, 2019 ((Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 10, 2019* 10.45 Executive Separation Agreement and General Release, dated as of June 26, 2019, by and between Stuart Morris-Hipkins and Owens & Minor, Inc. (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended June 30, 2019)* 10.46 Fifth Amendment to Credit Agreement, dated as of February 13, 2020, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Bank of America, N.A., as administrative agent for certain of the credit facilities and as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 18, 2020) 10.47 Receivables Financing Agreement, dated as of February 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 Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2020) 10.48 Purchase and Sale Agreement, dated as of February 19, 2020, by and among Owens & Minor Distribution, Inc., as the originator, Owens & Minor Medical, Inc., as servicer, and O&M Funding LLC, as buyer. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated February 19, 2020) 10.49 Performance Guaranty of Owens & Minor, Inc., dated as of February 19, 2020 in favor of PNC Bank, National Association. (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. (File No. 001-09810))* 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) 69 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. 001-09810))* 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 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 31.1 Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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. We hereby undertake to furnish copies of such omitted materials supplementally upon request by the SEC. 70 SIGNATURES 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 24th day of February, 2021. OWENS & MINOR, INC. /s/ Edward A. Pesicka Edward A. Pesicka President, Chief Executive Officer & Director 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 24th day of February, 2021: /s/ Edward A. Pesicka /s/ Mark F. McGettrick Edward A. Pesicka Mark F. McGettrick President, Chief Executive Officer & Director Director /s/ Andrew G. Long /s/ Eddie N. Moore, Jr. Andrew G. Long Eddie N. Moore, Jr. Executive Vice President & Chief Financial Officer Director /s/ Mark A. Beck /s/ Michael C. Riordan Mark A. Beck Michael C. Riordan Chairman of the Board of Directors Director /s/ Gwendolyn M. Bingham /s/ Robert C. Sledd Gwendolyn M. Bingham Robert C. Sledd Director Director /s/ Robert J. Henkel Robert J. Henkel Director 71 Corporate Officers Edward A. Pesicka (53) President, Chief Executive Officer & Director President and Chief Executive Officer since joining Owens & Minor in March 2019. Mr. Pesicka was also appointed to the board of directors at the time he joined the company. Previously Mr. Pesicka served as an independent consultant and advisor in the healthcare, life sciences and distribution industries since January 1, 2016. From January 2000 through April 2015, Mr. Pesicka served in various roles of increasing responsibility at Thermo Fisher Scientific Inc., including, most recently, Chief Commercial Officer and Senior Vice President from January 2014 to April 2015. Prior to that, he was President, Customer Channels at Thermo Fisher from July 2008 to January 2014 and President, Research Market from November 2006 to July 2008. Earlier in his career, Mr. Pesicka held various Vice President-level roles in Thermo Fischer Scientific’s finance department, serving as Chief Financial Officer of numerous divisions. Prior to Thermo Fisher Scientific, Mr. Pesicka spent eight years with TRW, Inc. in its finance department and three years with PricewaterhouseCoopers as an auditor. Andrew G. Long (55) Executive Vice President & Chief Financial Officer Executive Vice President & Chief Financial Officer of Owens & Minor since joining the company on November 11, 2019. Prior to that, Mr. Long served as the Chief Executive Officer of Insys Therapeutics, Inc. (“Insys”) from April 2019 to November 8, 2019. Prior to that, Mr. Long served as the Chief Financial Officer of Insys from August 2017. Prior to joining Insys, Mr. Long served as senior vice president of Global Finance at Patheon, a pharmaceutical company, from 2015 to 2017. Prior to working at Patheon, Mr. Long served as Vice President of Finance for multiple divisions at Thermo Fisher Scientific from 2006 until 2015. Mr. Long has served as a Member of the Board of Directors of Insys, which filed for Chapter 11 bankruptcy protection in June 2019, from April 2019 until his resignation on November 8, 2019. Christopher Lowery (57) President, Global Products President, Global Products business unit of Owens & Minor since January 2018. Prior to that, from November 2014 to December 2017, Mr. Lowery served as Senior Vice President and Chief Operating Officer at Halyard Health, Inc. From April 2010 to October 2014, Mr. Lowery served as Vice President of Sales and Marketing at Kimberly-Clark Health Care. Prior to joining Kimberly-Clark Health Care, he held several senior marketing and sales roles at Covidien, a global health care products company. Jeffery T. Jochims (53) Executive Vice President, Chief Operating Officer & President, Medical Distribution Executive Vice President & Chief Operating Officer since November 1, 2019. Mr. Jochims joined Owens & Minor in April 2019 and served as Executive Vice President, Strategy & Solutions prior to becoming COO. Mr. 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. Additionally during that period, Mr. Jochims was a co-founder and principal of 4C Measures, a start-up technology business. Prior to that, from 2000 until 2014, Mr. 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 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. 72 Shana C. Neal (55) Executive Vice President & Chief Human Resources Officer Executive Vice President & Chief Human Resources Officer since February 2020. Prior to that, Ms. Neal served as Senior Vice President & Chief Human Resources Officer, after joining Owens & Minor in March 2018. 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. Additionally, Ms. Neal led the organization and talent integration for BD’s acquisitions of Bard and CareFusion. Nicholas J. Pace (50) Executive Vice President, General Counsel & Corporate Secretary Executive Vice President, General Counsel & Corporate Secretary since May 2018. Mr. Pace joined Owens & Minor in 2016, serving as its Senior Vice President, General Counsel & Corporate Secretary. Prior to joining the company, Mr. Pace served as Executive Vice President, General Counsel & Secretary of Landmark Health, LLC, from July-December 2015. From January 2014 to July 2015, he served in simultaneous roles of Senior Vice President, Strategy & General Counsel of Landmark Health, LLC and Executive Vice President, Corporate Development & General Counsel of Avalon Health Services, LLC, two Francisco Partners portfolio companies. From March to October 2013, Mr. Pace served as Executive Vice President, Operations & Compliance for Health Diagnostic Laboratory, Inc., which filed for Chapter 11 bankruptcy protection in June 2015. Prior to that role, he served as Executive Vice President, General Counsel & Secretary of Amerigroup Corporation, where he worked from 2006-2013 until its sale to Anthem, Inc. Mark P. Zacur (58) Executive Vice President, Chief Commercial Officer Executive Vice President & Chief Commercial Officer since November 1, 2019. Mr. Zacur joined Owens & Minor in June 2019 and served as Senior Vice President & Chief Procurement Officer until November 2019. Prior to joining the company, Mr. Zacur served as Vice President & General Manager of Fisher Healthcare, a national diagnostics laboratory distributor and operating division of Thermo Fisher Scientific, from November 2014 to May 2019. 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. Lebanon, PA. Jonathan A. Leon (54) Senior Vice President, Corporate Treasurer Senior Vice President, Corporate Treasurer of Owens & Minor since May 2018. Prior to that, Mr. Leon served as Vice President, Treasurer, after joining Owens & Minor in January 2017. Before joining Owens & Minor, Mr. Leon worked for the Brinks Company for nineteen years, beginning in 1998, where he served as Treasurer. Michael W. Lowry (59) Senior Vice President, Corporate Controller & Chief Accounting Officer Senior Vice President, Corporate Controller & Chief Accounting Officer since June 2018. Prior to that, from May 2016 to June 2018, Mr. Lowry was Senior Vice President, Corporate Controller and Vice President, Corporate Controller beginning in 2013. Prior to that, from 2009 to 2013 Mr. Lowry was the Vice President, Treasurer. Mr. Lowry joined Owens & Minor in 1988. 73