What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-03 · 92 added, 95 removed, 207 unchanged (47% 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 and six months ended June 30, 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 nine months ended September 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 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.

Income from continuing operations per diluted share was $0.58 and $2.38 for the three and nine months ended September 30, 2021 as compared to $0.76 and $0.61 for the three and nine months ended September 30, 2020.

Global Solutions segment operating income was $20.4 million and $47.7 million for the three and nine months ended September 30, 2021, compared to $11.0 million and $8.5 million for the three and nine months ended September 30, 2020.

These increases were a

result of strong revenue growth, leveraging our fixed costs, and operating efficiencies.

Global Products segment operating income was $51.3 million and $310 million for the three and nine months ended September 30, 2021, compared to $89.9 million and $160 million for the three and nine months ended September 30, 2020.

The decrease for the three months ended September 30, 2021 was primarily the result of the timing of glove cost pass-through, accelerating inflationary pressures, including commodities, transportation, and labor, partially offset by revenue growth.

The increase for the nine months ended September 30, 2021 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 rising transportation costs, compared to the prior year.

COVID-19 Update

We are closely monitoring the impact of the 2019 novel coronavirus (COVID-19) on all aspects of our business, including how it impacts our customers, teammates, suppliers, vendors and distribution channels.

We are closely monitoring the impact of the 2019 novel coronavirus (COVID-19), including the related Delta variant, on all aspects of our business, including how it impacts our customers, teammates, suppliers, vendors and distribution channels.

We have taken actions to protect our teammates while maintaining business continuity as we respond to the needs from this global pandemic.

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 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.

We have expanded our PPE production operations and have taken measures to increase and improve our production such as retooling existing equipment, installing and optimizing new production lines and ramping up our new non-woven fabric machinery.

Revenue for the nine months ended September 30, 2021 of $7.3 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 for the nine months ended September 30, 2021 also benefited from improved productivity and increased manufacturing output related to PPE, favorable product mix and operating efficiencies.

In 2020, we expanded our PPE production operations and have taken measures to increase and improve our production such as retooling existing equipment, installing and optimizing new production lines and ramping up our new non-woven fabric machinery.

We expect that we will continue servicing our customers' needs related to the heightened demand for our PPE as a result of various factors, including the implementation of new regulations and healthcare protocols calling for increased use of PPE, healthcare professional preference for medical grade PPE, stockpile PPE demand and the creation of new channels for PPE demand in healthcare, non-healthcare and international markets.

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

Through September 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.

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Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Net revenue $ 2,502,175 $ 2,187,928 $ 314,247 14.4 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Net revenue $ 7,318,169 $ 6,118,340 $ 1,199,829 19.6 %

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.

The change in net revenue for the three and nine months ended September 30, 2021 reflected our market share gains, the effective response to the ongoing recovery of elective procedures, higher sales of surgical & infection prevention (S&IP) products, 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 $1.8 million and $23.5 million for the three and nine months ended September 30, 2021 as compared to the prior year.

Cost of goods sold.

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

Cost of goods sold $ 2,173,336 $ 1,843,589 $ 329,747 17.9 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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

Cost of goods sold compared to prior year reflects changes in sales activity, including sales mix.

Cost of goods sold compared to prior year reflects changes in sales activity, including sales mix, and accelerating inflationary pressures.

Gross margin.

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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As a % of net revenue 13.14 % 15.74 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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As a % of net revenue 16.01 % 14.42 %

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.

Gross margin decrease in the three months ended September 30, 2021 was driven by the timing of glove cost pass-through and accelerating inflationary pressures, partially offset by revenue growth.

Gross margin increase in the nine months ended September 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 accelerating inflationary pressures.

currency translation had an unfavorable impact on gross margin of $6.2 million and $0.8 million for the three and nine months ended September 30, 2021 as compared to the prior year.

Operating expenses.

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Acquisition-related and exit and realignment charges $ 6,380 $ 6,382 $ (2) — %

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

Six Months Ended

June 30, Change

Other operating income, net $ (2,873) $ (134) $ (2,739) (2,044.0) %

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Acquisition-related and exit and realignment charges $ 20,967 $ 18,500 $ 2,467 13.3 %

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

Other operating income, net $ (5,016) $ (3,020) $ (1,996) (66.1) %

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, 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.

Overall DS&A expenses were affected by revenue growth, changes in incentive compensation, teammate benefits, accelerating inflationary pressures, and operational efficiencies for the three and nine months ended September 30, 2021.

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

DS&A expenses also included an unfavorable impact for foreign currency translation of $0.1 million and $2.3 million for the three and nine months ended September 30, 2021.

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations of $6.4 million and $21.0 million for the three and nine months ended September 30, 2021 consisted primarily of wind-down costs related to Fusion5, leadership reorganization costs, IT restructuring charges, and other costs related to the reorganization of the U.S.

Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $0.8 million and $8.9 million for the three and nine months ended September 30, 2020, which consisted primarily of transition costs for the Halyard acquisition.

Exit and realignment charges were $5.6 million and $9.6 million for the three and nine months ended September 30, 2020 and consisted primarily of severance from reduction in force, post divestiture costs related to the Movianto business, and other costs related to the reorganization of the U.S.

commercial, operations and executive teams.

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.

The change in other operating income, net for the three and nine months ended September 30, 2021 includes the impact of higher foreign currency transaction gains as compared to the prior year.

Interest expense, net .

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Effective interest rate 4.17 % 5.64 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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Effective interest rate 4.72 % 6.35 %

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.

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

See Note 6 in Notes to Consolidated Financial Statements.

(Gain) loss on extinguishment of debt.

Loss on extinguishment of debt.

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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

Six Months Ended

June 30, Change

Loss on extinguishment of debt $ — $ 308 $ (308) (100.0) %

Nine Months Ended

September 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.

Loss on extinguishment of debt $ 40,433 $ 2,580 $ 37,853 1,467.2 %

Loss on extinguishment of debt for the nine months ended September 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.

(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.

Loss on extinguishment of debt for the three and nine months ended September 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

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

Other expense (income), net $ 799 $ 785 $ 14 1.8 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

Other expense (income), net $ 2,397 $ (1,193) $ 3,590 300.9 %

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.

Other expense (income), net for the three and nine months ended September 30, 2021 and 2020 represents interest cost and net actuarial losses related to our retirement plans.

Other expense (income), net for the nine months ended September 30, 2020 includes a gain from the surrender of company-owned life insurance policies.

Income taxes.

Three Months Ended

June 30, Change

September 30, Change

(Dollars in thousands) 2021 2020 $ %

Income tax provision (benefit) $ 18,420 $ 4,982 $ 13,438 269.7 %

Income tax provision $ 6,375 $ 7,404 $ (1,029) (13.9) %

Effective tax rate 12.6 % 13.8 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(Dollars in thousands) 2021 2020 $ %

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

Income tax provision $ 47,224 $ 3,863 $ 43,361 1,122.5 %

Effective tax rate 20.8 % 9.4 %

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.

The change in the effective tax rate for the three and nine months ended September 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 and in the third quarter of 2021 associated with the 2017 Tax Cuts and Jobs 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.

June 30, 2021 December 31, 2020 Change

September 30, 2021 December 31, 2020 Change

(Dollars in thousands) $ %

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Accounts payable $ 1,118,753 $ 1,000,186 $ 118,567 11.9 %

(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

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

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

Liquidity and capital expenditures.

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:

The following table summarizes our consolidated statements of cash flows for the nine months ended September 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 $ (78,424) $ 142,792

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 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.

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

Cash used for investing activities in the first nine months of 2021 and 2020 included capital expenditures of $32.6 million and $26.4 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 nine months of 2020 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 nine months of 2021 included dividend payments of $0.5 million and net repayments of $90.9 million under our revolving credit facility, compared to $0.5 million and $108 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 nine months of 2021, compared to $150 million related to the Accounts Receivable Securitization Program for the first nine months of 2020.

Financing activities also included repayments of $553 million for the first nine months of 2021 on our term loans, 2021 and 2024 Notes, and Accounts Receivable Securitization Program, compared to $270 million in the same period of 2020 on our term loans and 2021 and 2024 Notes.

We used $83.3 million of cash to repurchase $87.9 million aggregate principal amount of the 2021 and 2024 Notes during the first nine months of 2020.

We also paid $13.9 million in financing costs in the first nine months of 2021 , 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 nine months of 2021.

Payments for taxes related to the vesting of restricted stock awards were $19.3 million and $3.6 million for the first nine months of 2021 and 2020, which are included in Other, net.

Capital resources .

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The Credit Agreement matures in March 2026.

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.

At September 30, 2021 and December 31, 2020, we had borrowings of $12.3 million and $103 million, and letters of credit of $9.4 million and $13.9 million outstanding under our credit agreements.

At September 30, 2021 and December 31, 2020, we had $278 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 September 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.

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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 June 30, 2021.

We were in compliance with our debt covenants at September 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 June 30, 2021 no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.

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

The third quarter dividend of $0.0025 per share was paid in September 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 $28.9 million and $72.0 million at June 30, 2021 and December 31, 2020.

Our cash and cash equivalents held by our foreign subsidiaries totaled $28.7 million and $72.0 million at September 30, 2021 and December 31, 2020.

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 June 30, 2021.

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

Summarized Consolidated Statement of Operations - Guarantor Group Nine Months Ended September 30, 2021

(Dollars in thousands)

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Net income 158,735

(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

(1) Includes $297 million in sales to non-guarantor subsidiaries for the nine months ended September 30, 2021.

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

(Dollars in thousands)

Total current assets $ 1,428,986 $ 1,559,248

Intercompany receivable 376,421 399,484

Total assets 2,950,802 2,943,125

Current liabilities 1,456,508 1,374,800

Intercompany payable 102,877 89,040

Total liabilities 2,500,939 2,465,894

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Summarized financial information of the Collateral Group is as follows:

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

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

(Dollars in thousands)

Total current assets $ 1,517,670 $ 1,651,460

Intercompany receivable — 158,651

Total assets 2,703,556 2,851,226

Current liabilities 1,422,746 1,356,024

Intercompany payable 22,063 486,491

Total liabilities 2,498,158 2,480,953

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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 period ended on June 30, 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, 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;

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 vaccine and other mandates, temporary production and distribution center and office closures due to reduced workforces or government vaccine and other 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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• other factors detailed from time to time in the reports we file with the SEC, including those described in “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, our Form 10-Q for the three months ended March 31, 2021, and our Form 10-Q for the three and six months ended June 30, 2021.

We undertake no obligation to update or revise any forward-looking statements, except as required by applicable law.

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