Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis describes results of operations and material changes in the financial condition of Owens & Minor, Inc. and its subsidiaries since December 31, 2020. Trends of a material nature are discussed to the extent known and considered relevant. This discussion should be read in conjunction with the consolidated financial statements, related notes thereto, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
Owens & Minor, Inc., along with its subsidiaries, (we, us, or our) is a leading global healthcare solutions company. On June 18, 2020 (the Divestiture Date), we completed the divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin, Ireland office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million. The Divestiture provides us with a greater ability to focus on and invest in our di fferentiated products, services and U.S. 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 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 $0.58 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
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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), 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 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.
In March 2020, under the Defense Production Act (DPA), we were awarded a contract with the U.S. Department of Health and Human Services to produce N-95 respirator masks in an effort to replenish the Strategic National Stockpile. In April 2020, also under the DPA, the U.S. 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 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. 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.
Results of Operations
Net revenue.
Three Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Global Solutions $ 2,022,919 $ 1,865,182 $ 157,737 8.5 %
Global Products 679,067 473,797 205,270 43.3 %
Inter-segment (199,811) (151,051) (48,760) (32.3) %
Net revenue $ 2,502,175 $ 2,187,928 $ 314,247 14.4 %
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Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Global Solutions $ 5,850,007 $ 5,261,415 $ 588,592 11.2 %
Global Products 2,026,385 1,235,391 790,994 64.0 %
Inter-segment (558,223) (378,466) (179,757) (47.5) %
Net revenue $ 7,318,169 $ 6,118,340 $ 1,199,829 19.6 %
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
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Cost of goods sold $ 2,173,336 $ 1,843,589 $ 329,747 17.9 %
Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Cost of goods sold $ 6,146,511 $ 5,236,035 $ 910,476 17.4 %
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 segment. 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, and accelerating inflationary pressures.
Gross margin.
Three Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Gross margin $ 328,839 $ 344,339 $ (15,500) (4.5) %
As a % of net revenue 13.14 % 15.74 %
Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Gross margin $ 1,171,658 $ 882,305 $ 289,353 32.8 %
As a % of net revenue 16.01 % 14.42 %
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. Foreign
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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
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Distribution, selling and administrative expenses $ 262,457 $ 262,538 $ (81) — %
As a % of net revenue 10.49 % 12.00 %
Acquisition-related and exit and realignment charges $ 6,380 $ 6,382 $ (2) — %
Other operating income, net $ (2,873) $ (134) $ (2,739) (2,044.0) %
Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Distribution, selling and administrative expenses $ 849,255 $ 758,320 $ 90,935 12.0 %
As a % of net revenue 11.60 % 12.39 %
Acquisition-related and exit and realignment charges $ 20,967 $ 18,500 $ 2,467 13.3 %
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, 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. operations. 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 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
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Interest expense, net $ 11,572 $ 20,975 $ (9,403) (44.8) %
Effective interest rate 4.17 % 5.64 %
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Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Interest expense, net $ 36,784 $ 65,923 $ (29,139) (44.2) %
Effective interest rate 4.72 % 6.35 %
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.
Loss on extinguishment of debt.
Three Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Loss on extinguishment of debt $ — $ 308 $ (308) (100.0) %
Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
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. 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
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Other expense (income), net $ 799 $ 785 $ 14 1.8 %
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 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
September 30, Change
(Dollars in thousands) 2021 2020 $ %
Income tax provision $ 6,375 $ 7,404 $ (1,029) (13.9) %
Effective tax rate 12.6 % 13.8 %
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Nine Months Ended
September 30, Change
(Dollars in thousands) 2021 2020 $ %
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 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
Financial condition . We monitor operating working capital through days sales outstanding (DSO) and merchandise inventory days. We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our revolving credit facility or Receivables Securitization Program, or a combination thereof of approximately $27 million.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in the United States, Europe, and Asia. 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.
September 30, 2021 December 31, 2020 Change
(Dollars in thousands) $ %
Cash and cash equivalents $ 39,759 $ 83,058 $ (43,299) (52.1) %
Accounts receivable, net of allowances $ 759,744 $ 700,792 $ 58,952 8.4 %
Consolidated DSO (1)
27.3 26.0
Merchandise inventories $ 1,514,387 $ 1,233,751 $ 280,636 22.7 %
Inventory days (2)
64.1 57.8
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 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 nine months ended September 30, 2021 and 2020, which relates to continuing operations and discontinued operations:
(Dollars in thousands) 2021 2020
Net cash provided by (used for):
Operating activities $ 73,836 $ 268,196
Investing activities (32,584) 112,830
Financing activities (117,222) (244,955)
Effect of exchange rate changes (2,454) 6,721
Net (decrease) increase in cash, cash equivalents and restricted cash $ (78,424) $ 142,792
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.
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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 . Our sources of liquidity include cash and cash equivalents, a revolving credit facility under our Credit Agreement with Bank of America, N.A, as an administrative agent and collateral agent, and a syndicate of financial institutions, as lenders (the Credit Agreement), and the Receivables Securitization Program. 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 a benchmark rate (as described in the Credit Agreement) . The Credit Agreement matures in March 2026.
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.
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 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 any of the related agreements. 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 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 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. From time to time, we may enter into transactions to repay, repurchase or redeem our outstanding indebtedness (including by means of open market purchases, privately negotiated repurchases, tender or exchange offers and/or repayments or redemptions pursuant to the debt’s terms). Our ability to consummate any such transaction will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.
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 believe available financing sources, including cash generated by operating activities and borrowings under the Credit Agreement and Receivables Securitization Program, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, payments of quarterly cash dividends, debt repurchases and other cash requirements. While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us or (iii) our cost of borrowing.
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 $28.7 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 September 30, 2021. 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.
Guarantor and Collateral Group Summarized Financial Information
We are providing the following information in compliance with Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and Rule 13-02 of Regulation S-X, of with respect to our 2024 Notes. See Note 6 of the accompanying consolidated financial statements for additional information regarding the terms of the 2024 Notes.
The following tables present summarized financial information for Owens & Minor, Inc. and the guarantors of Owens & Minor, Inc.’s 2024 Notes (together, "the Guarantor Group"), on a combined basis with intercompany balances and transactions between entities in the Guarantor Group eliminated. The guarantor subsidiaries are 100% owned by Owens & Minor, Inc. Separate financial statements of the guarantor subsidiaries are not presented because the guarantees by our guarantor subsidiaries are full and unconditional, as well as joint and several.
Summarized financial information of the Guarantor Group is as follows:
Summarized Consolidated Statement of Operations - Guarantor Group Nine Months Ended September 30, 2021
(Dollars in thousands)
Net revenue (1)
$ 7,197,318
Gross margin 1,086,054
Operating income 265,888
Income from continuing operations, net of tax 158,735
Net income 158,735
(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
Total assets 2,950,802 2,943,125
Current liabilities 1,456,508 1,374,800
Total liabilities 2,500,939 2,465,894
The following tables present summarized financial information for Owens & Minor, Inc. and the subsidiaries of Owens & Minor, Inc.’s 2024 Notes pledged that constitute a substantial portion of collateral (together, "the Collateral Group"), on a combined basis with intercompany balances and transactions between entities in the Collateral Group eliminated. The pledged subsidiaries are 100% owned by Owens & Minor, Inc. No trading market for the subsidiaries included in the Collateral Group exists.
Summarized financial information of the Collateral Group is as follows:
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Summarized Consolidated Balance Sheets - Collateral Group September 30, 2021 December 31, 2020
(Dollars in thousands)
Total current assets $ 1,517,670 $ 1,651,460
Total assets 2,703,556 2,851,226
Current liabilities 1,422,746 1,356,024
Total liabilities 2,498,158 2,480,953
The results of operations of the Collateral Group are not materially different from the corresponding amounts presented in our consolidated statements of operations.
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 September 30, 2021.
Forward-looking Statements
Certain statements in this discussion constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including, but not limited to:
• 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 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;
• our ability to retain existing and attract new customers in a market characterized by significant customer consolidation and intense cost-containment initiatives;
• our dependence on sales to certain customers or the loss or material reduction in purchases by key customers;
• our dependence on distribution of product of certain suppliers;
• our ability to successfully identify, manage or integrate acquisitions;
• our ability to successfully manage our international operations, including risks associated with changes in international trade regulations, foreign currency volatility, changes in regulatory conditions, deteriorating economic conditions, adverse tax consequences, and other risks of operating in international markets;
• uncertainties related to and our ability to adapt to changes in government regulations, including healthcare laws and regulations;
• risks arising from possible violations of legal, regulatory or licensing requirements of the markets in which we operate;
• uncertainties related to general economic, regulatory and business conditions;
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• our ability to successfully implement our strategic initiatives;
• the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;
• the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;
• our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;
• the ability of customers and suppliers to meet financial commitments due to us;
• changes in manufacturer preferences between direct sales and wholesale distribution;
• changing trends in customer profiles and ordering patterns and our ability to meet customer demand for additional value-added services;
• our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;
• our ability to meet performance targets specified by customer contracts under contractual commitments;
• availability of and our ability to access special inventory buying opportunities;
• the ability of business partners and financial institutions to perform their contractual responsibilities;
• our ability to continue to obtain financing, obtain financing at reasonable rates and to manage financing costs and interest rate risk, and our ability to refinance, extend or repay our substantial indebtedness;
• the risk that information systems are interrupted or damaged or fail for any extended period of time, that new information systems are not successfully implemented or integrated, or that there is a data security breach in our information systems;
• the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived assets;
• our ability to timely or adequately respond to technological advances in the medical supply industry;
• the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims;
• adverse changes in U.S. and foreign tax laws and the outcome of outstanding tax contingencies and legislative and tax proposals;
• our ability to successfully implement the expense reduction and productivity and efficiency initiatives;
• our ability to continue to comply with the terms and conditions of Byram Healthcare’s Corporate Integrity Agreement; and
• 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, 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.