What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-05 · 117 added, 71 removed, 185 unchanged (50% of the section changed)

8 unchanged sentences

distribution businesses.

As a result of the Divestiture, the results of operations from our Movianto business are reported as “Loss from discontinued operations, net of tax” for the three months ended March 31, 2020.

As a result of the Divestiture, the results of operations from our Movianto business are reported as “Loss from discontinued operations, net of tax” for the three and six months ended June 30, 2020.

See Note 3, “Discontinued Operations,” of the Notes to Consolidated Financial Statements for further information.

Unless otherwise indicated, the following information relates to continuing operations.

Income (loss) from continuing operations per diluted share was $0.98 for the three months ended March 31, 2021 as compared to $(0.15) for the three months ended March 31, 2020.

Global Solutions segment operating income was $8.9 million for the three months ended March 31, 2021, compared to $7.7 million for the three months ended March 31, 2020.

Global Products segment operating income was $164 million for the three months ended March 31, 2021, compared to $18.6 million

for the three months ended March 31, 2020.

The increase was a result of higher revenues and favorable product mix combined with continued operating efficiencies compared to the prior year.

Income from continuing operations per diluted share was $0.87 and $1.80 for the three and six months ended June 30, 2021 as compared to $0.00 and $(0.14) for the three and six months ended June 30, 2020.

Global Solutions segment operating income (loss) was $18.5 million and $27.4 million for the three and six months ended June 30, 2021, compared to $(10.1) million and $(2.5) million for the three and six months ended June 30, 2020.

The increase was a result of higher volumes

coupled with productivity and efficiency gains in our Medical Distribution business compared to the prior year.

Global Products segment operating income was $95.3 million and $259 million for the three and six months ended June 30, 2021, compared to $51.8 millon and $70.3 million for the three and six months ended June 30, 2020.

The increase was a result of higher personal protective equipment (PPE) sales, favorable timing of cost pass-through on gloves, productivity initiatives, favorable product mix, and improved fixed cost leverage, partially offset by higher commodity prices and elevated transportation costs, compared to the prior year.

COVID-19 Update

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We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our teammates, customers, suppliers and shareholders.

Revenue for the three months ended March 31, 2021 of $2.3 billion includes an increase in demand for personal protective equipment (PPE), which was partially offset by a reduction in elective surgical procedures primarily due to the impact of COVID-19.

Revenue for the three and six months ended June 30, 2021 of $2.5 billion and $4.8 billion continues to be impacted by COVID-19 and includes the effective response to the ongoing recovery of elective procedures, higher sales of PPE, and pass-through of elevated glove costs.

Operating income also benefited from improved productivity and increased manufacturing output related to PPE, favorable product mix and operating efficiencies.

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Department of Defense initiated a technology investment agreement with us involving up to $30.0 million of anticipated funding of assets to expand capacity to supply N-95 respirator masks.

Through March 31, 2021, approximately $27.8 million had been expended, substantially all of which had been reimbursed in accordance with this arrangement .

We are unable to predict the timing of the pandemic and the full impact that COVID-19 will have on our future financial position and operating results due to numerous variables and continued uncertainties.

Through June 30, 2021, substantially all of the anticipated funding had been expended and reimbursed in accordance with this arrangement.

We are unable to predict the timing of the pandemic and the full impact that COVID-19 will have on our future operating results, financial position and cash flows due to numerous variables and continued uncertainties.

Travel, transportation, and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations in certain locations, including within Asia.

Essential activity exceptions from these restrictions have allowed us to continue to operate but virus containment efforts have resulted in additional direct costs from supply chain challenges.

Although we have experienced growth in sales volumes for certain of our products (such as PPE) during the COVID-19 pandemic, as well as improved productivity and manufacturing output, there can be no assurance that such growth rates, increased sales volumes or other improvements will be maintained during or following the COVID-19 pandemic.

1 unchanged sentence

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

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Net revenue $ 2,489,460 $ 1,807,719 $ 681,741 37.7 %

The change in net revenue for the three months ended March 31, 2021 reflected the impact of revenue growth in Global Products from increased demand for PPE, higher cost pass-through in gloves, along with strong performance in our Byram Patient Direct business.

These were partially offset by a reduction in elective surgical procedures, primarily due to the impact of COVID-19, and one less selling day.

Foreign currency translation had a favorable impact on net revenue of $9.3 million for the three months ended March 31, 2021 as compared to the prior year.

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Global Solutions $ 3,827,088 $ 3,396,233 $ 430,855 12.7 %

Global Products 1,347,318 761,593 585,725 76.9 %

Inter-segment (358,412) (227,414) (130,998) (57.6) %

Net revenue $ 4,815,994 $ 3,930,412 $ 885,582 22.5 %

The change in net revenue for the three and six months ended June 30, 2021 reflected the effective response to the ongoing recovery of elective procedures, higher sales of PPE, pass-through of elevated glove costs, as well as continued strong performance in our Patient Direct business.

Foreign currency translation had a favorable impact on net revenue of $12.3 million and $21.7 million for the three and six months ended June 30, 2021 as compared to the prior year.

Cost of goods sold.

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Cost of goods sold $ 2,089,392 $ 1,538,312 $ 551,080 35.8 %

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Cost of goods sold $ 3,973,175 $ 3,392,445 $ 580,730 17.1 %

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 and bear risk of general and physical inventory loss.

These are sometimes referred to as distribution contracts.

Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products business.

Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products segment.

There is no cost of goods sold associated with our fee-for-service arrangements.

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Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

1 unchanged sentence

As a % of net revenue 16.07 % 14.90 %

Gross margin increase in the three months ended March 31, 2021 was driven by sales growth, market dynamics including timing of cost changes, an overall improved sales mix, operating efficiencies primarily in Global Products and a favorable impact from foreign currency translation of $6.2 million.

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Gross margin $ 842,819 $ 537,967 $ 304,852 56.7 %

As a % of net revenue 17.50 % 13.69 %

Gross margin increase in the three and six months ended June 30, 2021 was driven by revenue growth, market dynamics including timing of glove price and cost changes, an overall improved sales mix and operating efficiencies, partially offset by higher commodity prices and transportation costs in our Global Products segment.

Foreign currency translation had an unfavorable impact on gross margin of $0.8 million for the three months ended June 30, 2021 and a favorable impact on gross margin of $5.4 million for the six months ended June 30, 2021, as compared to the prior year.

Operating expenses.

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

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Acquisition-related and exit and realignment charges $ 8,624 $ 6,054 $ 2,570 42.5 %

Other operating income, net $ (2,605) $ (2,309) $ (296) 12.8 %

Other operating expense (income), net $ 464 $ (577) $ 1,041 180.4 %

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Distribution, selling and administrative expenses $ 586,796 $ 495,782 $ 91,014 18.4 %

As a % of net revenue 12.18 % 12.61 %

Acquisition-related and exit and realignment charges $ 14,587 $ 12,118 $ 2,469 20.4 %

Other operating expense (income), net $ (2,141) $ (2,886) $ 745 25.8 %

Distribution, selling and administrative (DS&A) expenses include labor and warehousing costs associated with our distribution and outsourced logistics services and all costs associated with our fee-for-service arrangements.

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

Overall DS&A expenses were affected by revenue growth, higher accrued incentive compensation, teammate benefits and charitable contributions, partially offset by operational efficiencies.

DS&A expenses also included an unfavorable impact for foreign currency translation of $1.0 million for the three months ended March 31, 2021.

There were no acquisition-related charges for the three months ended March 31, 2021 compared to $4.2 million for the same period of 2020, which consisted primarily of transition costs for the Halyard acquisition.

Exit and realignment charges were $6.0 million for the three months ended March 31, 2021 and consisted primarily of an increase in reserves associated with certain retained assets of Fusion5, IT restructuring charges and other costs related to the reorganization of the U.S.

commercial, operations and executive teams.

Exit and realignment charges were $1.8 million for the three months ended March 31, 2020 and consisted primarily of IT restructuring charges and other costs related to the reorganization of the U.S.

Overall DS&A expenses were affected by revenue growth, increase in incentive compensation, and teammate benefits, partially offset by operational efficiencies for the three and six months ended June 30, 2021.

In addition, overall DS&A expenses were affected by charitable contributions for the six months ended June 30, 2021.

DS&A expenses also included an unfavorable impact for foreign currency translation of $1.2 million and $2.2 million for the three and six months ended June 30, 2021.

There were no acquisition-related charges for the three and six months ended June 30, 2021 compared to $3.9 million and $8.1 million for the same periods of 2020, which consisted primarily of transition costs for the Halyard acquisition.

Exit and realignment charges were $8.6 million and $14.6 million for the three and six months ended June 30, 2021 and consisted primarily of an increase in reserves associated with certain retained assets of Fusion5, IT restructuring charges and other costs related to the reorganization of the U.S.

Exit and realignment charges were $2.2 million and $4.0 million for the three and six months ended June 30, 2020 and consisted primarily of severance from reduction in force and other costs related to the reorganization of the U.S.

commercial, operations and executive teams.

The change in other operating income, net was attributed primarily to lower foreign currency transaction gains offset by lower losses from the adjustments to fair value on our foreign currency contracts compared to prior year.

The change in other operating income, net for the three months ended June 30, 2020 was attributed primarily to foreign currency transaction gains as compared to losses in the prior year and losses from the adjustments to fair value on our foreign currency contracts compared to gains in the prior year.

The change in other operating income, net for the six months ended June 30, 2020 was attributed primarily to lower foreign currency transaction gains compared to prior year.

Interest expense, net .

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

1 unchanged sentence

Effective interest rate 4.30 % 5.63 %

Interest expense, net and the effective interest rate fo r the three months ended March 31, 2021 decreased primarily due to a reduction of debt and lower interest rates.

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Interest expense, net $ 25,212 $ 44,948 $ (19,736) (43.9) %

Effective interest rate 4.94 % 6.50 %

Interest expense, net and the effective interest rate fo r the three and six months ended June 30, 2021 decreased primarily due to a reduction of debt and lower interest rates.

See Note 6 in Notes to Consolidated Financial Statements.

Loss on extinguishment of debt.

(Gain) loss on extinguishment of debt.

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Loss on extinguishment of debt $ 40,433 $ 4,127 $ 36,306 879.7 %

Loss on extinguishment of debt for the three months ended March 31, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in March 2021 of $15.

(Gain) loss on extinguishment of debt $ — $ (1,856) $ 1,856 100.0 %

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

(Gain) loss on extinguishment of debt $ 40,433 $ 2,271 $ 38,162 1,680.4 %

Loss on extinguishment of debt for the six months ended June 30, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in March 2021 of $15.

3 million and amounts reclassified from accumulated other comprehensive loss as a result of the termination of our interest rate swaps of $25.1 million.

Loss on extinguishment of debt for the three months ended March 31, 2020 primarily includes the write-off of deferred financing costs and third party fees.

Other expense, net .

(Gain) loss on extinguishment of debt for the three and six months ended June 30, 2020 primarily includes the write-off of deferred financing costs and third party fees, offset by the gain on extinguishment of debt related to the partial repurchase of our 2021 and 2024 Notes.

Other expense (income), net .

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Other expense, net $ 569 $ 719 $ (150) (20.9) %

Other expense, net for the three months ended March 31, 2021 and 2020 represents interest cost and net actuarial losses related to our retirement plans.

Other expense (income), net $ 1,028 $ (2,696) $ 3,724 138.1 %

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Other expense (income), net $ 1,598 $ (1,977) $ 3,575 180.8 %

Other expense (income), net for the three and six months ended June 30, 2021 represents interest cost and net actuarial losses related to our retirement plans.

Other expense (income), net for the three and six months ended June 30, 2020 includes a gain from the surrender of company-owned life insurance policies interest cost and net actuarial losses related to our retirement plans.

Income taxes.

Three Months Ended

March 31, Change

June 30, Change

(Dollars in thousands) 2021 2020 $ %

1 unchanged sentence

Effective tax rate 21.8 % 96.9 %

The change in the effective tax rate for the three months ended March 31, 2021 compared to the same period in 2020 resulted primarily from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax benefit associated with the vesting of restricted stock recorded in the first quarter of 2021.

Six Months Ended

June 30, Change

(Dollars in thousands) 2021 2020 $ %

Income tax provision (benefit) $ 40,848 $ (3,541) $ 44,389 1,253.6 %

Effective tax rate 23.2 % 28.8 %

The change in the effective tax rate for the three and six months ended June 30, 2021 compared to the same periods in 2020 resulted primarily from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax benefit associated with the vesting of restricted stock.

Financial Condition, Liquidity and Capital Resources

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Changes in our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.

March 31, 2021 December 31, 2020 Change

June 30, 2021 December 31, 2020 Change

(Dollars in thousands) $ %

5 unchanged sentences

Accounts payable $ 1,126,355 $ 1,000,186 $ 126,169 12.6 %

(1) Based on period end accounts receivable and net revenue for the quarters ended March 31, 2021 and December 31, 2020

(2) Based on period end merchandise inventories and cost of goods sold for the quarters ended March 31, 2021 and December 31, 2020

(1) Based on period end accounts receivable and net revenue for the quarters ended June 30, 2021 and December 31, 2020

(2) Based on period end merchandise inventories and cost of goods sold for the quarters ended June 30, 2021 and December 31, 2020

Liquidity and capital expenditures.

The following table summarizes our consolidated statements of cash flows for the three months ended March 31, 2021 and 2020, which relates to continuing operations and discontinued operations:

The following table summarizes our consolidated statements of cash flows for the six months ended June 30, 2021 and 2020, which relates to continuing operations and discontinued operations:

(Dollars in thousands) 2021 2020

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Net (decrease) increase in cash, cash equivalents and restricted cash $ (72,759) $ 111,766

Cash provided by operating activities in the first three months of 2021 and 2020 reflected fluctuations in net income along with changes in working capital.

Cash used for investing activities in the first three months of 2021 and 2020 included capital expenditures of $6.6 million and $5.7 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas, and capitalized software.

C ash used for financing activities in the first three months of 2021 included dividend payments of $0.2 million and repayments of $96.5 million under our revolving credit facility, compared to $0.2 million and $6.2 million for the same period of 2020.

We also had proceeds from borrowings of $575 million related to the 2029 Unsecured Notes and Accounts Receivable Securitization Program for the first three months of 2021, compared to $150 million related to the Accounts Receivable Securitization Program for the first three months of 2020.

Financing activities also included repayments of $523 million for the first three months of 2021 compared to $167 million in the same period of 2020 on our term loans and 2021 and 2024 Notes.

We used $4.4 million of cash to repurchase $4.6 million aggregate principal amount of the 2021 and 2024 Notes during the first three months of 2020.

Cash provided by operating activities in the first six months of 2021 and 2020 reflected fluctuations in net income along with changes in working capital.

Cash used for investing activities in the first six months of 2021 and 2020 included capital expenditures of $18.7 million and $12.1 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas, and capitalized software.

Cash provided by investing activities in the first six months of 2020 also included cash consideration received of $133 million from the sale of Movianto and proceeds of $6.0 million from the surrender of company-owned life insurance policies.

C ash used for financing activities in the first six months of 2021 included dividend payments of $0.4 million and repayments of $69.9 million under our revolving credit facility, compared to $0.3 million and $47.9 million for the same period of 2020.

We also had proceeds from borrowings of $575 million related to the 2029 Unsecured Notes and Accounts Receivable Securitization Program for the first six months of 2021, compared to $150 million related to the Accounts Receivable Securitization Program for the first six months of 2020.

Financing activities also included repayments of $523 million for the first six months of 2021 compared to $258 million in the same period of 2020 on our term loans and 2021 and 2024 Notes.

We used $83.2 million of cash to repurchase $87.8 million aggregate principal amount of the 2021 and 2024 Notes during the first six months of 2020.

We also paid $12.9 million in financing costs, as compared to $10.4 million in financing costs for the same period of 2020.

In addition, we paid $15.4 million to terminate the remaining $300 million in notional value of interest rate swaps during the first three months of 2021.

In addition, we paid $15.4 million to terminate the remaining $300 million in notional value of interest rate swaps during the first six months of 2021.

Payments for taxes related to the vesting of restricted stock awards were $19.1 million and $3.1 million for the first six months of 2021 and 2020, which are included in Other, net.

Capital resources .

1 unchanged sentence

The Credit Agreement provides a revolving borrowing capacity of $300 million.

The interest rate on our revolving credit facility is based on a spread over either the Eurocurrency Rate or the Base Rate (each as defined in the Credit Agreement) .

The interest rate on our revolving credit facility is based on a spread over a benchmark rate (as described in the Credit Agreement) .

The Credit Agreement matures in March 2026.

At March 31, 2021 and December 31, 2020, we had borrowings of $6.7 million and $103 million, and letters of credit of $11.4 million and $13.9 million outstanding under our credit agreements.

At March 31, 2021 and December 31, 2020, we had $282 million and $283 million, available for borrowing.

We also had letters of credit and bank guarantees outstanding for $1.9 million and $1.6 million as of March 31, 2021 and December 31, 2020, 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 entered into a Security and Pledge Agreement (the Security Agreement), dated March 10, 2021, pursuant to which we granted collateral on behalf of 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 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.

At June 30, 2021 and December 31, 2020, we had borrowings of $33.3 million and $103 million, and letters of credit of $11.4 million and $13.9 million outstanding under our credit agreements.

At June 30, 2021 and December 31, 2020, we had $255 million and $283 million, available for borrowing.

We also had letters of credit and bank guarantees outstanding for $2.2 million and $1.6 million as of June 30, 2021 and December 31, 2020, 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 outside of the revolving credit facility.

We entered into a Security and Pledge Agreement (the Security Agreement), dated March 10, 2021, pursuant to which we granted collateral on behalf of 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, subject to certain customary exceptions, and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions.

On March 10, 2021, we entered into an amendment to our accounts receivable securitization program (the Receivables Securitization Program).

Pursuant to the amended Receivables Securitization Program, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $450 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) or successor rate.

The interest rate under the Receivables Securitization Program is based on a spread over a benchmark rate (as described in the Third Amendment to the Receivables Financing Agreement).

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

The Receivables Securitization Program matures in March 2024.

The Credit Agreement, Receivables Securitization Program, 2024 Notes and 2029 Unsecured 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 March 31, 2021.

We were in compliance with our debt covenants at June 30, 2021.

In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 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 March 31, 2021 no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.

As of June 30, 2021 no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.

We regularly evaluate market conditions, our liquidity profile and various financing alternatives to enhance our capital structure.

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We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.

The first quarter dividend of $0.0025 per share was paid in March 2021.

The second quarter dividend of $0.0025 per share was paid in June 2021.

The payment of future dividends remains within the discretion of the Board of Directors and will depend upon our results of operations, financial condition, capital requirements, current and future limitations under our Credit Agreement and other factors.

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We earn a portion of our operating income in foreign jurisdictions outside the United States.

Our cash and cash equivalents held by our foreign subsidiaries totaled $37.7 million and $72.0 million at March 31, 2021 and December 31, 2020.

Our cash and cash equivalents held by our foreign subsidiaries totaled $28.9 million and $72.0 million at June 30, 2021 and December 31, 2020.

We continue to remain permanently reinvested in our foreign subsidiaries, with the exception of a subsidiary in Thailand.

have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of March 31, 2021.

We have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of June 30, 2021.

As such, we have recorded withholding tax liabilities that would be incurred upon future distribution to the U.S.

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Summarized financial information of the Guarantor Group is as follows:

Summarized Consolidated Statement of Operations - Guarantor Group Three months ended March 31, 2021

Summarized Consolidated Statement of Operations - Guarantor Group Six Months Ended June 30, 2021

(Dollars in thousands)

4 unchanged sentences

Net income 116,200

(1) Includes $78.2 million in sales to non-guarantor subsidiaries for the three months ended March 31, 2021.

Summarized Consolidated Balance Sheet - Guarantor Group March 31, 2021 December 31, 2020

(1) Includes $215 million in sales to non-guarantor subsidiaries for the six months ended June 30, 2021.

Summarized Consolidated Balance Sheets - Guarantor Group June 30, 2021 December 31, 2020

(Dollars in thousands)

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Summarized financial information of the Collateral Group is as follows:

Summarized Consolidated Balance Sheet - Collateral Group March 31, 2021 December 31, 2020

Summarized Consolidated Balance Sheets - Collateral Group June 30, 2021 December 31, 2020

(Dollars in thousands)

7 unchanged sentences

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 14 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the quarterly period ended on March 31, 2021.

Forward-looking Statements

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• our ability to achieve revenue and operating income goals may be affected by:

COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, and any worsening of the pandemic or future pandemics, related governmental responses, a decrease in revenue ultimately resulting in less cash flow, longer duration in receivables collection, the need to expedite payments to important suppliers may grow, shifts in demand away from certain products we manufacture and distribute, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government mandates, temporary production and distribution center and office closures due to reduced workforces or government mandates, availability of raw materials, potential resulting labor negotiations or disputes, changes in the types and numbers of businesses that compete with us, including non-traditional competitors, and the aggressiveness of that competition, impacts of the pandemic or future pandemics on other third parties with whom we conduct business, the healthcare industry, and the broader business environment, and trends in elective surgeries and other healthcare spending not directly associated with COVID-19;

COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, and any worsening of the pandemic, including through any new variant strains of the underlying virus, or future pandemics, related governmental responses, the effectiveness, availability, and public acceptance of vaccines, a decrease in revenue ultimately resulting in less cash flow, longer duration in receivables collection, the need to expedite payments to important suppliers may grow, shifts in demand away from certain products we manufacture and distribute, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government mandates, temporary production and distribution center and office closures due to reduced workforces or government mandates, availability of raw materials, potential resulting labor negotiations or disputes, changes in the types and numbers of businesses that compete with us, including non-traditional competitors, and the aggressiveness of that competition, impacts of the pandemic or future pandemics on other third parties with whom we conduct business, the healthcare industry, and the broader business environment, and trends in elective surgeries and other healthcare spending not directly associated with COVID-19;

• competitive pressures in the marketplace, including intense pricing pressure;

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis