What changed in this filing

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Item 1. Business

2022-02-23 compared with 2021-02-24 · 80 added, 48 removed, 163 unchanged (44% of the section changed)

Owens & Minor, Inc.

and subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a leading global healthcare solutions company with integrated technologies, products and services aligned to deliver significant and sustained value for healthcare providers, manufacturers and directly to patients across the continuum of care.

Our teammates serve healthcare industry customers in over 70 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.

and subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home.

Our teammates serve healthcare industry customers in approximately 70 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.

The description of our business should be read in conjunction with the consolidated financial statements and supplementary data included in this Form 10-K.

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Through organic growth and acquisitions over many years, we significantly expanded and strengthened our company, achieving international scale in the healthcare market.

Today, we have distribution, production, customer service and sales facilities located across Asia, Europe, Latin America and the United States.

On June 18, 2020, we completed the previously announced divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million.

Today, we have distribution, production, storage, customer service and sales facilities located across Asia, Australia, Europe, Latin America and the United States.

On June 18, 2020, we completed the divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million.

See Note 3, “Discontinued Operations,” of the Notes to Consolidated Financial Statements included in this annual report for further information.

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

On January 7, 2022, we entered into an Agreement and Plan of Merger to acquire Apria, Inc.

(Apria) for $37.50 in cash per share of common stock, representing an equity value of approximately $1.45 billion, as well as the assumption of debt and cash for a total transaction value of approximately $1.6 billion.

Apria is a provider of integrated home healthcare equipment and related services in the United States.

The Agreement and Plan of Merger contains certain termination rights for the Company and Apria.

In the event that Apria terminates the contract for a superior proposal, Apria will be required to pay the Company a termination fee of $42.0 million.

The transaction, which has been approved by the board of directors of both companies, is subject to customary closing conditions, including the Hart Scott Rodino Act and other regulatory approvals and the approval of Apria’s stockholders, and is expected to close during the first half of 2022.

Global Solutions

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Program incentives can be earned on a monthly, quarterly or annual basis.

We operate a network of 46 distribution centers located throughout the continental United States, which are strategically located to efficiently serve our provider and manufacturer customers.

We operate a network of 44 distribution centers located throughout the United States, which are strategically located to efficiently serve our provider and manufacturer customers.

A significant investment in information technology supports our business including warehouse management systems, customer service and ordering functions, demand forecasting programs, electronic commerce, data warehousing, decision support and supply-chain management.

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We also customize delivery schedules according to customers’ needs to increase their efficiency in receiving and storing products.

We have deployed low-unit-of-measure automated picking modules in our larger distribution centers to maximize efficiency, and our distribution center teammates use voice-pick technology to enhance speed and accuracy in performing certain warehousing processes.

We use low-unit-of-measure automated picking modules in our larger distribution centers to maximize efficiency, and our distribution center teammates use voice-pick technology to enhance speed and accuracy in performing certain warehousing processes.

We partner with a third party company to deliver most supplies in the United States.

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As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative expenses, rather than with the cost of the product, which is a component of cost of goods sold.

Byram Healthcare (Byram or Home Healthcare) expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies.

Byram specializes in various patient care product lines including diabetes, ostomy, wound care, urology, incontinence and other.

We receive payments for products sold through Byram from managed care plans, the U.S.

Patient Direct expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies.

Patient Direct specializes in various patient care product lines including diabetes, ostomy, wound care, urology, incontinence and other.

We receive payments for products sold through Patient Direct from managed care plans, the U.S.

federal government under the Medicare program, state governments under their respective Medicaid or similar programs, private insurers and directly from patients.

Byram has a nationwide sales force, focusing on managed care and key referral sources, six centers of excellence aligned with specific product categories, and a nationwide network to optimize shipping distance and time.

Patient Direct has a nationwide sales force, focusing on managed care and key referral sources, six centers of excellence aligned with specific product categories, and a nationwide network to optimize shipping distance and time.

Certain assets, liabilities and contracts of Fusion5 were sold on December 31, 2020.

The sold assets and liabilities are not included in our consolidated balance sheet at December 31, 2020.

This business did not qualify as discontinued operations and, accordingly, its financial results were included in income from continuing operations during 2020.

The sold assets and liabilities were not included in our consolidated balance sheet at December 31, 2020.

This business did not qualify as discontinued operations and, accordingly, its financial results were included in income from continuing operations during 2020 and 2021.

Global Products

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These customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals.

In addition to contracting with healthcare providers at the Integrated Delivery Network (IDN) level and through GPOs, we also contract with other types of healthcare providers including surgery centers, physicians’ practices and smaller networks of hospitals that have joined together to negotiate terms.

In addition to contracting directly with healthcare providers at the Integrated Delivery Network (IDN) level, we also contract with GPOs as well as other types of healthcare providers including surgery centers, physicians’ practices and smaller networks of hospitals that have joined together to negotiate terms.

We have contracts to provide distribution services to the members of a number of national GPOs, including Vizient, Premier, Inc.

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Premier 2021 5 years 22%

HPG 2017 4 years 15%

2021 8 months 15%

(1) The HPG contract was extended through April 2022.

We expect this contract to be extended on a longer-term basis in early 2022.

We have our own independent relationships with most of our hospital customers through separate contractual commitments that may or may not be based upon the terms of our agreement with the GPO.

As a result, the termination or expiration of an agreement with a particular GPO would not necessarily mean that we would lose the members of such GPO as our customers.

Through our Patient Direct business, we also provide delivery of disposable medical supplies sold directly to patients and home health agencies.

Our suppliers represent the largest and most influential healthcare manufacturers in the industry.

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We continually work to refine our processes to optimize inventory and collect accounts receivable.

We actively monitor inventory for obsolescence and use inventory turnover and other operational metrics to measure our performance in managing inventory.

We actively monitor inventory for obsolescence and use inventory days and other operational metrics to measure our performance in managing inventory.

We are focused in our efforts to optimize inventory and continually consolidate products and collaborate with suppliers on inventory productivity initiatives.

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Global Solutions competitors include two major nationwide manufacturers who also provide distribution services, Cardinal Health, Inc.

and privately-held Medline Industries, Inc.

In addition, we compete with a number of regional and local distributors, companies that distribute products to patient's homes and customer self-distribution models.

and Medline Industries, Inc.

In addition, we compete with a number of regional and local distributors, companies that distribute products to patients' homes and customer self-distribution models.

Major outsourced logistics competitors serving healthcare manufacturers in the United States include United Parcel Service and FedEx Corporation.

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In the United States, several of our distribution partners and GPOs are also competitors or are increasingly seeking to compete with us by direct sourcing their own products.

In developing and emerging markets, we compete against reusable products, or low usage of infection prevention products, due in large part to limited awareness and education on infection prevention practices and products.

We compete against reusable products, or low usage of infection prevention products, due in large part to limited awareness and education on infection prevention practices and products.

The highly competitive environment requires us to seek out technological innovations and to market our products effectively.

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We distribute products bearing the well-known “Halyard” brand.

Other well-known registered trademarks we use include Aero Blue, Quick Check, Smart-Fold, One Step, Purple, Purple Nitrile, and Purple Nitrile-Xtra.

Other well-known registered trademarks we use include:

Aero Blue, Quick Check, Smart-Fold, One Step, Purple, Purple Nitrile, Purple Nitrile-Xtra, Lavender, Sterling, and Safeskin.

We consider the patents and trademarks which we own and the trademarks under which we sell certain of our products, as a whole, to be material to our business.

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Foreign Corrupt Practices Act and the United Kingdom Bribery Act, which provide guidance on corporate interactions with government officials) as well as laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the United States.

Administration, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

We must also comply with laws and regulations, including those governing operations, storage, transportation, manufacturing, sales, safety and security standards for each of our manufacturing and distribution centers, of the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.

We are subject to numerous federal, state and local laws directed at regulating reimbursement of our products and services under various government programs and preventing fraud and abuse.

We maintain certain safeguards intended to reduce the likelihood that we will engage in conduct or enter into arrangements in violation of these restrictions.

Legal department personnel review and approve written contracts, such as agreements with physicians, subject to these laws.

Notwithstanding these measures, violations of these laws and regulations may still occur, which could subject us to civil and criminal enforcement actions;

licensure revocation, suspension, or non-renewal;

severe fines and penalties;

the repayment of amounts previously paid to us;

and even the termination of our ability to provide services under certain government programs such as Medicare and Medicaid.

Our operations outside the U.S.

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Any reduction in the amount of reimburse ments received by our customers could harm our business by reducing their selection of our products, their ability to pay and the prices they are willing to pay.

Governments in the U.S.

and abroad are considering new or expanded laws to address climate change.

Such laws may include limitations on greenhouse gas (“GHG”) emissions, mandates that companies implement processes to monitor and disclose climate-related matters, additional taxes or offset charges on specified energy sources, and other requirements.

Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions.

New or expanded climate-related laws could impose substantial costs on us.

Until the timing and extent of climate-related laws are clarified, we cannot predict their potential effect on our capital expenditures or our results of operations.

Compliance with these laws and regulations is costly and materially affects our business.

Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to market newly developed and existing products.

Among other effects, healthcare regulations substantially increase the time, difficulty and costs incurred in obtaining and maintaining approval to

market newly developed and existing products.

We believe we are in material compliance with all statutes and regulations applicable to our operations.

Human Capital Resources

Employee Overview

Teammate Overview

At Owens & Minor, teammates are at the heart of everything that we do.

Through their creativity, talent and hard work, our teammates allow Owens & Minor to offer exceptional products and services and provide the force that propels our mission to empower our customers to advance healthcare.

Thus, Owens & Minor is committed to providing a culture and benefits necessary to attract and retain top talent.

Owens & Minor also is committed to creating an environment that allows our teammates to perform at a high level, emphasizes a culture of safety and is conducive to professional and personal growth.

At the end of 2020, Owens & Minor employed approximately 6,300 full- and part-time teammates in the U.S.

Through their creativity, talent and hard work, our teammates allow us to offer exceptional products and services and provide the force that propels our mission to empower our customers to advance healthcare.

Thus, we are committed to providing a culture and benefits necessary to attract and retain top talent.

We are also committed to creating an environment that allows our teammates to perform at a high level, emphasizes a culture of safety and is conducive to professional and personal growth.

At the end of 2021, we employed approximately 6,900 full- and part-time teammates in the U.S.

and 10,400 teammates outside of the U.S.

None of Owens & Minor’s domestic teammates are represented by a labor union or subject to a collective bargaining agreement (“CBA”), but most of our teammates outside the U.S.

None of our domestic teammates are represented by a labor union or subject to a collective bargaining agreement (“CBA”), but certain teammates outside the U.S.

(OUS) are represented and covered by a CBA.

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We seek to attract and retain top talent for these critical roles by offering competitive base and incentive compensation packages (and in certain instances share-based compensation and retention incentives), attractive benefits and opportunities for advancement and rewarding careers.

We periodically review and adjust, if needed, our teammates’ total compensation (including salaries, annual cash incentive compensation, other cash and equity incentives, and benefits) to ensure that our offerings are competitive within the industry and consistent with Company performance.

We have also implemented enterprise-wide talent development and succession planning programs designed to identify future and/or replacement candidates for key positions.

In addition to compensation, we promote numerous charitable, philanthropic, and social awareness programs that not only support the communities we serve, but also provide experiences for teammates to promote a collaborative and rewarding work environment.

In order to take advantage of available opportunities and successfully implement our long-term strategy, Owens & Minor understands that we must be able to employ, train and retain the necessary skilled personnel.

To that end, Owens & Minor supports and utilizes various training and educational initiatives, and we have developed Company-wide and project-specific employee training and educational programs.

Key programs focus on employee safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and employee engagement.

At Owens & Minor,

we believe that diversity, inclusion and teammate engagement are integral to our vision, strategy and business success, and we pride ourselves on sustaining a culture that respects teammates and values concern for others.

In order to take advantage of available opportunities and successfully implement our long-term strategy, we understand that we must be able to employ, train and retain the necessary skilled personnel.

To that end, we support and utilize various training and educational initiatives, and we have developed Company-wide and project-specific teammate training and educational programs.

Key programs focus on teammate safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and teammate engagement.

At Owens & Minor, we believe that diversity, inclusion, and teammate engagement are integral to our vision, strategy and business success, and we pride ourselves on sustaining a culture that respects teammates and values concern for others.

We believe that fostering an environment that values diversity, inclusion and ethical conduct creates an organization that is able to embrace, leverage and respect differences among our teammates, customers and the communities where we live, work and serve.

As a result, we created Teammate Resource Groups (TRGs) that provide resources and support for underrepresented identity groups to improve innovation, promote belonging, increase team alignment, and boost engagement.

Our current TRGs include Black Heritage, Outreach, Mentorship and Enrichment, Asian Pacific Islanders Rising to Excellence, Hispanic Organization for Leadership and Achievement, LGBTQ+, Military and Veteran, Women Empowerment Network, and Women in Tech.

In addition, we continue to expand our diversity and inclusion journey by conducting voice forums in an effort to celebrate different cultures.

We also believe that our teammates are the face of Owens & Minor, and we expect every teammate to model our shared values and commitment to ethical business practices set forth in our Code of Honor.

We believe that our efforts to create an environment that is conducive to our values and teammate success have been rewarded, as Owens & Minor continues to enjoy high levels of teammate engagement, satisfaction and retention.

In 2021, we established the Owens & Minor Foundation, which is dedicated to further our commitment towards impactful investments to charitable and civic organizations in the communities we serve and will focus primarily in the three areas of environment, healthcare, diversity and inclusion.

We believe that our efforts to create an environment that is conducive to our values and teammate success have been rewarded.

Our values reflect our commitment to our customers, our teammates, the environment and the communities where we live and work.

They embody “IDEAL” behavior — Integrity, Development, Excellence, Accountability and Listening.

All our teammates are responsible for embodying these values every day.

We also hold our teammates to a high standard of performance, and we regularly evaluate teammates’ productivity against current requirements, future demand expectations and historical trends.

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Our Board of Directors’ Role in Human Capital Resource Management

Our Board of Directors believes that human capital management, and the ability to attract, retain and develop key talent, is an essential component of Owens & Minor’s continued growth and success.

Our Board also believes that effective human capital management is vital to maintaining a culture that reflects Owens & Minor’s core values and our shared commitment to excellence and ethical business practices.

Management regularly reports to the Compensation and Benefits Committee of the Board of Directors on human capital management topics, including corporate culture, diversity and inclusion, teammate development and compensation and benefits.

From time to time, Owens & Minor also conducts teammate engagement surveys to solicit feedback, and reports to the Board on findings developed through these surveys.

The Compensation and Benefits Committee has oversight of talent retention and development, including succession planning, and the Board of Directors provides input on important decisions in each of these areas.

Employee Benefits

The Compensation and Benefits Committee believes employee benefits are an essential component of a competitive total compensation package.

Owens & Minor’s benefits programs are designed to attract and retain our top talent, and include medical, health and dental insurance, long-term disability insurance, accidental death and disability insurance, travel and accident insurance, and our 401(k) Savings and Retirement Plan.

As part of the 401(k) Savings and Retirement Plan, Owens & Minor generally matches 100 percent of the first 4 percent of compensation contributed by a teammate into the 401(k) Savings and Retirement Plan, subject to the Internal Revenue Code and our 401(k) Savings and Retirement Plan limits.

Additionally, Owens & Minor may make a discretionary contribution (subject to certain limitations as defined in the 401(k) Savings and Retirement Plan document) to each participant employed on the last day of the plan year who has worked at least 1,000 hours during the year.

Lastly, Owens & Minor may also make a profit sharing contribution to the 401(k) Savings and Retirement Plan, at the discretion of the Board of Directors.

Our Board of Directors believes that human capital management, and the ability to attract, retain and develop key talent, is an essential component of our continued growth and success.

Our Board also believes that effective human capital

management is vital to maintaining a culture that reflects our core values and our shared commitment to excellence and ethical business practices.

Management regularly reports to the Our People & Culture Committee (previously the Compensation and Benefits Committee) of the Board of Directors on human capital management topics, including corporate culture, diversity and inclusion, teammate development and compensation and benefits.

From time to time, we also conduct teammate engagement surveys to solicit feedback, and provide reports to the Board on findings developed through these surveys.

The Our People & Culture Committee has oversight of talent retention and development, including succession planning, and the Board of Directors provides input on important decisions in each of these areas.

Teammate Benefits

The Our People & Culture Committee believes teammate benefits are an essential component of a competitive total compensation package.

Our benefits programs are designed to attract and retain our top talent, and include medical, health and dental insurance, long-term disability insurance, accidental death and disability insurance, life insurance, travel and accident insurance, and our 401(k) Savings and Retirement Plan.

As part of the 401(k) Savings and Retirement Plan, we generally match 100 percent of the first 4 percent of compensation contributed by a teammate into the 401(k) Savings and Retirement Plan, subject to the Internal Revenue Code and our 401(k) Savings and Retirement Plan limits.

Additionally, we may make a discretionary contribution (subject to certain limitations as defined in the 401(k) Savings and Retirement Plan document) to each participant employed on the last day of the plan year who has worked at least 1,000 hours during the year.

Lastly, we may also make a profit sharing contribution to the 401(k) Savings and Retirement Plan, at the discretion of the Board of Directors.

We expensed discretionary contributions of 3% in 2021, 2% in 2020, and none in 2019 of eligible annual earnings.

COVID-19 Response

In response to the COVID-19 pandemic experienced in 2020, Owens & Minor implemented health and safety protocols to protect our teammates and customers.

In response to the COVID-19 pandemic, we implemented health and safety protocols to protect our teammates and customers.

These protocols meet or exceed health and safety standards required by federal, state and local government agencies, and are based on guidance from the Centers for Disease Control and Prevention and other public health authorities.

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• Training teammates on proper use of PPE, social distancing, and other mitigation efforts;

• Implementing temperature scans and quarantine protocols;

• Providing paid time off for teammates to receive COVID-19 vaccinations;

• Significantly increased remote work and virtual interactions among teammates and with customers;

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

What changed 10-K

Item 1. Business