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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 184 added, 94 removed, 467 unchanged (37% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2022 2021 2022 2021

4 unchanged sentences

Acquisition-related and exit and realignment charges 7,602 8,624 41,150 14,587

Other operating income, net ( 899 ) ( 2,605 )

Other operating (income) expense, net ( 2,995 ) 464 ( 3,894 ) ( 2,141 )

Operating income 75,085 96,884 136,144 243,577

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

Net income $ 28,604 $ 65,896 $ 67,884 $ 135,486

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Currency translation adjustments ( 18,831 ) ( 2,448 ) ( 19,618 ) ( 14,710 )

1 unchanged sentence

Change in gains and losses on derivative instruments 2,764 — 2,764 20,044

Total other comprehensive (loss) income, net of tax ( 598 ) 7,903

Total other comprehensive income (loss), net of tax ( 15,770 ) ( 2,412 ) ( 16,368 ) 5,491

Comprehensive income $ 12,834 $ 63,484 $ 51,516 $ 140,977

3 unchanged sentences

Consolidated Balance Sheets

March 31, December 31,

June 30, December 31,

(in thousands, except per share data) 2022 2021

38 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

6 unchanged sentences

Provision for losses on accounts receivable 4,512 15,777

Deferred income tax benefit ( 69 ) ( 5,865 )

Deferred income tax expense (benefit) 1,601 ( 11,293 )

Changes in operating lease right-of-use assets and lease liabilities 606 826

Loss on sale and dispositions of property and equipment 226 —

Changes in operating assets and liabilities:

9 unchanged sentences

Additions to computer software ( 3,463 ) ( 4,051 )

Proceeds from sale of property and equipment 5,846 22

Other, net ( 839 ) —

2 unchanged sentences

Proceeds from issuance of debt 1,691,000 500,000

Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program 41,700 ( 21,600 )

Borrowings under revolving credit facility, net and accounts receivable securitization program 30,000 5,000

Repayments of debt ( 1,500 ) ( 523,140 )

Borrowings under amended accounts receivable securitization program 347,800 —

Repayments under amended accounts receivable securitization program ( 402,800 ) —

Financing costs paid ( 41,479 ) ( 12,868 )

10 unchanged sentences

Interest paid $ 32,417 $ 17,768

Noncash investing activity:

Unpaid purchases of property and equipment at end of period $ 56,429 $ —

See accompanying notes to consolidated financial statements.

13 unchanged sentences

Balance, March 31, 2022 76,086 152,172 409,741 426,898 ( 41,189 ) 947,622

Net income 28,604 28,604

Other comprehensive loss ( 15,770 ) ( 15,770 )

Share-based compensation expense, exercises and other 85 171 ( 1,968 ) ( 1,797 )

Balance, June 30, 2022 76,171 $ 152,343 $ 407,773 $ 455,502 $ ( 56,959 ) $ 958,659

Balance, December 31, 2020 73,472 $ 146,944 $ 436,597 $ 167,022 $ ( 38,509 ) $ 712,054

5 unchanged sentences

Balance, March 31, 2021 75,100 150,200 430,490 236,177 ( 30,606 ) 786,261

Net income 65,896 65,896

Other comprehensive loss ( 2,412 ) ( 2,412 )

Dividends declared ($ 0.0025 per share)

( 187 ) ( 187 )

Share-based compensation expense, exercises and other 295 591 ( 2,130 ) ( 1,539 )

Balance, June 30, 2021 75,395 $ 150,791 $ 428,360 $ 301,886 $ ( 33,018 ) $ 848,019

See accompanying notes to consolidated financial statements.

28 unchanged sentences

Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash.

Restricted cash included in Other assets, net as of March 31, 2022 and December 31, 2021 primarily represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5.

Restricted cash included in Other assets, net as of June 30, 2022 and December 31, 2021 primarily represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of those same amounts presented in the accompanying consolidated statements of cash flows.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 56,406 $ 55,712

1 unchanged sentence

Total cash, cash equivalents, and restricted cash $ 73,029 $ 72,035

Patient Equipment

Patient equipment, which is included within property and equipment, net, is stated at cost less depreciation and reserves for non-recoverable and obsolete patient equipment.

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation.

Depreciation and amortization expense for financial reporting purposes is computed on a straight-line method over the estimated useful lives of the assets or, for capital leases and leasehold improvements, over the term of the lease, if shorter.

In general, the estimated useful lives for computing depreciation and amortization are three to 15 years for machinery and equipment, five to 40 years for buildings, one to 10 years for patient equipment, and up to 15 years for leasehold and land improvements.

Straight-line and accelerated methods of

depreciation are used for income tax purposes.

Normal maintenance and repairs are expensed as incurred, and renovations and betterments are capitalized.

We suspend depreciation and amortization on assets that are held for sale.

In addition, we record capital-related government grants earned as reductions to the cost of property and equipment;

and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of our consolidated statements of cash flows.

Patient equipment consists of medical equipment rented to patients on a month-to-month basis.

Patient equipment is generally placed for rent;

however, it could also be sold to customers.

Once the rented equipment is returned to us, the patient equipment is assessed and repaired as necessary.

Patient equipment is typically leased to subsequent patients if its condition is suitable.

Patient equipment depreciation is classified in our consolidated statements of operations within cost of goods sold as the equipment is rented to patients as part of our primary operations within the Patient Direct segment.

Revenue Recognition

Our revenue is primarily generated from sales contracts with customers.

Under most of our distribution and product sales arrangements, our performance obligations are limited to delivery of products to a customer upon receipt of a purchase order.

For these arrangements, we recognize revenue at the point in time when shipment is completed, as control passes to the customer upon product receipt.

Revenue for activity-based fees and other services is recognized over time as activities are performed.

Depending on the specific contractual provisions and nature of the performance obligation, revenue from services may be recognized on a straight-line basis over the term of the service, on a proportional performance model, based on level of effort, or when final deliverables have been provided.

Our contracts sometimes allow for forms of variable consideration including rebates, discounts, performance guarantees, and implicit price concessions.

In these cases, we estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer.

Rebates and customer discounts are estimated based on contractual terms or historical experience and we maintain an accrual for rebates or discounts that have been earned but are unpaid.

When we have implicit price concessions, we determine the variable consideration under the expected value method as part of determining the sales transaction price using historical reimbursement experience, historical sales returns, and other operating trends.

In most cases, we record revenue gross, as we are the primary obligor.

When we act as an agent in a sales arrangement and do not bear a significant portion of inventory risks, primarily for our outsourced logistics business, we record revenue net of product cost.

Sales taxes collected from customers and remitted to governmental authorities are excluded from revenues.

Within our Patient Direct segment, revenues are recognized under fee-for-service arrangements for equipment we rent to patients and sales of equipment, supplies and other items we sell to patients.

Revenue that is generated from equipment that we rent to patients is primarily recognized over the noncancelable rental period, typically one month, and commences on delivery of the equipment to the patients.

Revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, Medicare, Medicaid and patients.

Rental revenue, less estimated adjustments, is recognized as earned on a straight-line basis over the noncancellable lease term.

We recorded $ 144 million and $ 151 million in revenue related to equipment we rent to patients for the three and six months ended June 30, 2022.

Equipment rental revenue was not material in the prior year.

Note 2— Fair Value

3 unchanged sentences

See Note 6 for the fair value of debt.

The fair value of our derivative contracts are determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities.

The fair value of our derivative contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities.

Observable Level 2 inputs are used to determine the present value of expected future cash flows.

2 unchanged sentences

On March 29, 2022 (the Acquisition Date), we completed the acquisition of 100 % of Apria, Inc.

(Apria) pursuant to the Agreement and Plan of Merger (Apria Acquisition) dated January 7, 2022, in exchange for approximately $ 1.7 billion, including $ 108 million owed to holders of Apria stock awards as of March 31, 2022 that was paid in April 2022, net of $ 144 million of cash acquired.

(Apria) pursuant to the Agreement and Plan of Merger (Apria Acquisition) dated January 7, 2022, in exchange for approximately $ 1.7 billion, net of $ 144 million of cash acquired.

The purchase was funded with a combination of debt and cash on hand.

5 unchanged sentences

The allocation of purchase price to assets and liabilities acquired is not yet complete, as valuations of tangible and intangible assets and liabilities are still in process.

Preliminary Fair Value Currently Estimated as of Acquisition Date

Preliminary Fair Value Originally Estimated as of Acquisition Date (1)

Differences Between Prior and the Current Periods Preliminary Fair Value Estimate Preliminary Fair Value Currently Estimated as of Acquisition Date

Assets acquired:

9 unchanged sentences

Fair value of net assets acquired, net of cash $ 1,684,607 $ — $ 1,684,607

(1) As previously reported in our first quarter 2022 Form 10-Q .

Current assets acquired includes $ 89.3 million in fair value of receivables, which reflects the approximate amount contractually owed.

1 unchanged sentence

Goodwill of $ 1.3 billion, which we assigned to our Patient Direct segment, consists largely of expected opportunities to expand into new markets and further develop a presence in the home healthcare business.

No ne of the goodwill recognized is expected to be deductible for income tax purposes.

The following table provides pro forma results of net revenue and net (loss) income for the three months ended March 31, 2022 and 2021 as if Apria was acquired on January 1, 2021.

None of the goodwill recognized is expected to be deductible for income tax purposes.

The following table provides pro forma results of net revenue and net (loss) income for the three and six months ended June 30, 2022 and 2021 as if Apria was acquired on January 1, 2021.

The pro forma results below are not necessarily indicative of the results that would have been if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net revenue $ 2,500,015 $ 2,775,739 $ 5,184,080 $ 5,377,547

Net (loss) income $ ( 90,182 ) $ 74,133

Pro forma net loss of $ 90.2 million for the three months ended March 31, 2022 includes pro forma adjustments for interest expense of $ 20.8 million and amortization of intangible assets of $ 20.3 million.

Net income (loss) $ 28,604 $ 86,472 $ ( 61,578 ) $ 160,606

Pro forma net loss of $ 61.6 million for the six months ended June 30, 2022 includes pro forma adjustments for interest expense of $ 20.8 million and amortization of intangible assets of $ 20.3 million.

The pro forma net loss also includes $ 39.4 million in seller transaction expenses and stock compensation expense associated with $ 108 million owed to the holders of Apria stock awards in connection with the Apria Acquisition.

The amount of revenue and net income of Apria since the Acquisition Date included in the consolidated statement of operations for the three months ended March 31, 2022 have not been separately disclosed, as the effects were not material to our consolidated financial statements.

Revenue and net loss of Apria since the Acquisition Date included in the consolidated statement of operations for the six months ended June 30, 2022 were $ 310 million and $ 30.3 million, respectively.

Note 4— Goodwill and Intangible Assets

1 unchanged sentence

There was no change to our underlying reporting units as part of that segment change and therefore no reallocation of goodwill.

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through March 31, 2022:

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through June 30, 2022:

Products & Healthcare Services Patient Direct Consolidated

2 unchanged sentences

Currency translation adjustments ( 3,764 ) — ( 3,764 )

Carrying amount of goodwill, March 31, 2022 $ 106,175 $ 1,550,984 $ 1,657,159

Intangible assets subject to amortization at March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022 December 31, 2021

Carrying amount of goodwill, June 30, 2022 $ 102,516 $ 1,553,792 $ 1,656,308

Intangible assets subject to amortization at June 30, 2022 and December 31, 2021 were as follows:

June 30, 2022 December 31, 2021

Relationships Tradenames Other

5 unchanged sentences

Weighted average useful life 10 years 11 years 5 years 10 years 11 years 8 years

At March 31, 2022 and December 31, 2021, $ 158 million and $ 164 million in net intangible assets were held in the Products & Healthcare Services segment and $ 337 million and $ 45.7 million were held in the Patient Direct segment.

Amortization expense for intangible assets was $ 10.3 million and $ 10.0 million for the three months ended March 31, 2022 and 2021.

At March 31, 2022, other intangibles includes preliminary estimated fair values of payor relationships, customer list and other intangible assets acquired as part of the Apria Acquisition.

At June 30, 2022 and December 31, 2021, $ 150 million and $ 164 million in net intangible assets were held in the Products & Healthcare Services segment and $ 313 million and $ 45.7 million were held in the Patient Direct segment.

Amortization expense for intangible assets was $ 30.9 million and $ 10.0 million for the three months ended June 30, 2022 and 2021 and $ 41.2 million and $ 20.1 million for the six months ended June 30, 2022 and 2021.

At June 30, 2022, other intangibles includes preliminary estimated fair values of payor relationships, customer list and other intangible assets acquired as part of the Apria Acquisition.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is approximately $ 63 million for the remainder of 2022, $ 126 million for 2023, $ 67 million for 2024, $ 42 million for 2025, $ 41 million for 2026 and $ 38 million for 2027.

1 unchanged sentence

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses, our client engagement center and IT restructuring charges.

These charges also include costs associated with our strategic organizational

realignment which include leadership reorganization costs, certain professional fees, and costs to streamline administrative functions and processes and divestiture related costs.

Exit and realignment charges by segment for the three months ended March 31, 2022 and 2021 were as follows:

These charges also include costs associated with our strategic organizational realignment which include leadership reorganization costs, certain professional fees, costs to streamline administrative functions and processes and divestiture related costs.

Exit and realignment charges by segment for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Products & Healthcare Services $ 1,214 $ 7,879 $ 2,413 $ 13,842

1 unchanged sentence

Total exit and realignment charges $ 1,214 $ 8,624 $ 2,896 $ 14,587

The following table summarizes the activity related to exit and realignment cost accruals through March 31, 2022 and 2021:

The following table summarizes the activity related to exit and realignment cost accruals through June 30, 2022 and 2021:

Accrued exit and realignment costs, December 31, 2021 $ 8,306

3 unchanged sentences

Accrued exit and realignment costs, March 31, 2022 3,085

Provision for exit and realignment activities:

Severance 246

Cash payments ( 3,477 )

Accrued exit and realignment costs, June 30, 2022 $ 822

Accrued exit and realignment costs, December 31, 2020 $ 3,146

4 unchanged sentences

Accrued exit and realignment costs, March 31, 2021 2,388

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 3.8 million of costs that were expensed as incurred for the three months ended March 31, 2021, including $ 3.2 million related to an increase in reserves associated with certain retained assets of Fusion5, $ 0.5 million in impairment charges related to our client engagement center, and $ 0.1 million in other asset charges.

Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $ 31.9 million for the three months ended March 31, 2022, which consisted primarily of costs related to the Apria acquisition.

There were no acquisition-related charges included within acquisition-related and exit and realignment charges presented in our consolidated statements of operations for the three months ended March 31, 2021.

We expect material additional costs in 2022 for activities that were initiated through March 31, 2022.

Provision for exit and realignment activities:

Information system restructuring costs 1,611

Lease obligations ( 126 )

Cash payments ( 2,302 )

Accrued exit and realignment costs, June 30, 2021 $ 2,560

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 6.2 million and $ 10.0 million of costs that were expensed as incurred for the three and six months ended June 30, 2021, which primarily includes $ 4.9 million and $ 8.0 million related to an increase in reserves associated with certain retained assets of Fusion5 for the three and six months ended June 30, 2021.

Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $ 6.4 million and $ 38.3 million for the three and six months ended June 30, 2022, which consisted primarily of costs related to the Apria acquisition.

We do not expect material additional costs in 2022 for activities that were initiated through June 30, 2022.

Debt consists of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Amount Estimated

4 unchanged sentences

245,361 241,739 245,086 263,263

Revolver 11,700 11,700 — —

Term Loan A 489,789 500,000 — —

16 unchanged sentences

We may also redeem up to 40 % of the aggregate principal amount of the 2029 Unsecured Notes at any time prior to March 31, 2024, at a redemption price equal to 104.5 % with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

On March 29, 2022, we completed the sale of $ 600 million in aggregate principal amount of our 6.625 % senior notes due 2030 (the 2030 Unsecured Notes), with interest payable semi-annually.

On March 29, 2022, we completed the sale of $ 600 million in aggregate principal amount of our 6.625 % senior notes due in 2030 (the 2030 Unsecured Notes), with interest payable semi-annually.

The 2030 Unsecured Notes were sold at 100 % of the principal amount with an effective yield of 6.625 %.

We may redeem all or part of the 2030 Unsecured Notes, prior to April 1, 2025, at a price equal to 100 % of the principal amount of the 2030 Unsecured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a “make-whole” premium, as described in the New Indenture.

From and after April 1, 2025, we may redeem all or part of the 2030 Unsecured Notes at the applicable redemption prices described in the New Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

We may also redeem up to 40 % of the aggregate principal amount of 2030 Unsecured Notes at any time prior to April 1, 2025, at a redemption price equal to 106.625 % with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The 2029 Unsecured Notes and 2030 Unsecured Notes will be effectively subordinated to any of our secured indebtedness, including indebtedness under the credit agreements.

The 2029 Unsecured Notes and 2030 Unsecured Notes are effectively subordinated to any of our secured indebtedness, including indebtedness under our credit agreements.

On March 29, 2022, we entered into a term loan credit agreement with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (the Credit Agreement) that provides for two new credit facilities (i) a $ 500 million Term Loan A facility (the Term Loan A), and (ii) a $ 600 million Term Loan B facility (the Term Loan B).

The interest rate on the Term Loan A is based on either the Term SOFR or the Base Rate plus an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable

pricing to the Borrowers (each as defined in the Credit Agreement).

The interest rate on the Term Loan B is based on either the Term SOFR or the Base Rate plus an Applicable Rate.

The interest rate on the Term Loan B is based on either the

Term SOFR or the Base Rate plus an Applicable Rate.

The Term Loan A will mature in March 2027 and the Term Loan B will mature in March 2029.

On March 29, 2022, we entered into an amendment to our revolving credit agreement, dated as of March 10, 2021 with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (Revolving Credit Agreement).

The amendment will (i) increase the aggregate revolving credit commitments under the Revolving Credit Agreement by $ 150 million, to an aggregate amount of $ 450 million and (ii) replace the Eurocurrency Rate with the Adjusted Term SOFR Rate (each as defined in the Revolving Credit Agreement).

The amendment (i) increased the aggregate revolving credit commitments under the Revolving Credit Agreement by $ 150 million, to an aggregate amount of $ 450 million and (ii) replaced the Eurocurrency Rate with the Adjusted Term SOFR Rate (each as defined in the Revolving Credit Agreement).

The Revolving Credit Agreement matures in March 2027.

At March 31, 2022, we had borrowings of $ 11.7 million and letters of credit of $ 28.0 million under our revolving credit facility.

At December 31, 2021, we had no borrowings and letters of credit of $ 9.4 million outstanding under our revolving credit facilities.

At March 31, 2022 and December 31, 2021, we had $ 410 million and $ 291 million available for borrowing.

We also had letters of credit and bank guarantees, which were issued outside of the Revolving Credit Facility for $ 2.1 million and $ 2.2 million as of March 31, 2022 and December 31, 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.

We entered into a Security and Pledge Agreement (the Security Agreement), dated March 10, 2021 and amended March 29, 2022, pursuant to which we granted collateral on behalf of the holders of the 2024 Notes, and the parties secured under the credit agreements (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.

At June 30, 2022, we had no borrowings and letters of credit of $ 28.0 million under our revolving credit facility.

At December 31, 2021, we had no borrowings and letters of credit of $ 9.4 million outstanding under our revolving credit facility.

At June 30, 2022 and December 31, 2021, we had $ 422 million and $ 291 million available for borrowing under our revolving credit facility.

We also had letters of credit and bank guarantees, which were issued outside of the revolving credit facility for $ 2.1 million and $ 2.2 million as of June 30, 2022 and December 31, 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.

On March 29, 2022, we entered into a Security Agreement Supplement pursuant to which the Security and Pledge Agreement (the Security Agreement), dated March 10, 2021 was supplemented to grant collateral on behalf of the holders of the 2024 Notes, and the parties secured under the credit agreements (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Grantors (as defined in the Security Agreement) in the Grantors’ present and future subsidiaries, subject to certain customary exceptions, and (b) all present and future personal property and assets of the Grantors, subject to certain exceptions.

On March 29, 2022, we entered into an amendment to our accounts receivable securitization program (the Receivables Financing Agreement).

5 unchanged sentences

The terms of the credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture.

We were in compliance with our debt covenants at March 31, 2022.

As of March 31, 2022, scheduled future principal payments of debt, excluding finance leases and other, were $ 4.5 million in 2022, $ 15.4 million in 2023, $ 274 million in 2024, $ 270 million in 2025, $ 43.5 million due in 2026, $ 415 million in 2027, $ 6.0 million due in 2028, $ 1.1 billion in 2029, and $ 600 million in 2030.

Current maturities at March 31, 2022 include $ 6.0 million in principal payments on our Term Loan B and $ 2.2 million in current portion of finance leases.

We were in compliance with our debt covenants at June 30, 2022.

As of June 30, 2022, scheduled future principal payments of debt, excluding finance leases and other, were $ 3.0 million in 2022, $ 15.4 million in 2023, $ 274 million in 2024, $ 215 million in 2025, $ 43.5 million in 2026, $ 403 million in 2027, $ 6.0 million in 2028, $ 1.1 billion in 2029, and $ 600 million in 2030.

Current maturities at June 30, 2022 include $ 3.1 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B and $ 1.7 million in current portion of finance leases.

Note 7— Retirement Plans

1 unchanged sentence

Retirement Plan).

As of March 31, 2022 and December 31, 2021, the accumulated benefit obligation of the U.S.

As of June 30, 2022 and December 31, 2021, the accumulated benefit obligation of the U.S.

Retirement Plan was $ 49.0 million and $ 50.2 million.

Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective teammates.

The components of net periodic benefit cost for the three months ended March 31, 2022 and 2021 were as follows:

The components of net periodic benefit cost for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Service cost $ 617 $ 709 $ 1,250 $ 1,413

8 unchanged sentences

The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

We determine the fair value of our foreign currency derivatives based on observable market-based inputs or unobservable inputs that are corroborated by market data.

We pay interest on our Credit Agreement which fluctuates based on changes in our benchmark interest rates.

In order to mitigate the risk of increases in benchmark rates, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount.

The interest rate swaps were designated as cash flow hedges.

Cash flows related to the interest rate swap agreement are included in interest expense.

We determine the fair value of our foreign currency derivatives and interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data.

We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure.

2 unchanged sentences

We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.

In April 2022, in order to mitigate the risk of increases in benchmark rates, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of March 31, 2022:

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of June 30, 2022:

Derivative Assets Derivative Liabilities

Notional Amount Maturity Date Classification Fair Value Classification Fair Value

Cash flow hedges

Interest rate swaps $ 400,000 March 2027 Other assets $ 3,736 Other liabilities $ —

Economic (non-designated) hedges

Foreign currency contracts $ 20,000 April 2022 Other current assets $ 127 Other current liabilities $ —

Foreign currency contracts $ 61,077 July 2022 Other current assets $ 5 Other current liabilities $ 227

In March 2021, we terminated the remaining $ 300 million in notional value of interest rate swaps concurrent with the debt financing transaction.

The remaining balance of the fair value adjustments of $ 25.1 million, which related to these terminated interest rate swaps, within Accumulated other comprehensive loss was reclassified to Loss on extinguishment of debt within our consolidated statements of operations for the three months ended March 31, 2021.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2021:

3 unchanged sentences

Foreign currency contracts $ 9,700 January 2022 Other current assets $ 81 Other current liabilities $ —

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three months ended March 31, 2021:

Amount of Gain Recognized in Other Comprehensive Income Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and six months ended June 30, 2022:

Amount of Gain Recognized in Other Comprehensive Income (Loss) Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income

Three months ended June 30, 2022 Six months ended June 30, 2022 Three months ended June 30, 2022 Six months ended June 30, 2022 Three months ended June 30, 2022 Six months ended June 30, 2022

Interest rate swaps $ 2,044 $ 2,044 Interest expense, net $ ( 35,839 ) $ ( 47,858 ) $ ( 1,692 ) $ ( 1,692 )

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and six months ended June 30, 2021:

Three months ended June 30, 2021 Six months ended June 30, 2021 Three months ended June 30, 2021 Six months ended June 30, 2021 Three months ended June 30, 2021 Six months ended June 30, 2021

Interest rate swaps $ — $ 2,426 Loss on extinguishment of debt $ — $ ( 40,433 ) $ — $ ( 25,518 )

The amount of ineffectiveness associated with these contracts was immaterial for the period presented.

For the three months ended March 31, 2022 and 2021, we recognized losses of $ 0.1 million and $ 1.0 million associated with our economic (non-designated) foreign currency contracts.

The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

For the three and six months ended June 30, 2022 we recognized losses of $ 1.3 million and $ 1.4 million associated with our economic (non-designated) foreign currency contracts.

For the three and six months ended June 30, 2021 we recognized losses of $ 0.6 million and $ 1.6 million associated with our economic (non-designated) foreign currency contracts.

We recorded the change in fair value of derivative instruments and the remeasurement adjustment of the foreign currency denominated asset or liability in other operating income, net for our foreign exchange contracts.

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Three Months Ended

June 30, Six Months Ended

Classification 2022 2021 2022 2021

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Supplemental balance sheet information is as follows:

Classification March 31,

Classification June 30,

2022 December 31, 2021

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Total lease liabilities $ 303,274 $ 217,409

The gross value recorded under finance leases was $ 20.7 million and $ 20.6 million with associated accumulated amortization of $ 12.0 million and $ 11.7 million as of March 31, 2022 and December 31, 2021.

Operating lease assets include $ 69.1 million in right-of-use assets and $ 70.3 million of operating lease liabilities acquired as a result of the Apria Acquisition, as of March 31, 2022.

The gross value recorded under finance leases was $ 17.9 million and $ 20.6 million with associated accumulated amortization of $ 9.4 million and $ 11.7 million as of June 30, 2022 and December 31, 2021.

Operating lease assets include $ 77.8 million in right-of-use assets and $ 79.6 million of operating lease liabilities associated with Apria as of June 30, 2022.

Other information related to leases was as follows:

Three Months Ended March 31,

Six Months Ended

Supplemental cash flow information

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Finance leases 10.8 % 12.4 %

Maturities of lease liabilities as of March 31, 2022 were as follows:

Maturities of lease liabilities as of June 30, 2022 were as follows:

Operating Leases Finance Leases Total

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Present value of lease liabilities $ 290,154 $ 13,120 $ 303,274

As of June 30, 2022, we had an estimated net $ 50 million cancellable commitment, which includes a potential lease, associated with a future site of a center of excellence for medical supplies and logistics in Morgantown, West Virginia.

Note 10— Income Taxes

The effective tax rate was 18.6 % for the three months ended March 31 2022, compared to 24.4 % in the same quarter of 2021.

The change in these rates resulted primarily from the mixture of income and losses in jurisdictions in which we operate and the incremental income tax benefit associated with the vesting of restricted stock recorded in the first quarter of 2022.

The liability for unrecognized tax benefits was $ 21.6 million at March 31, 2022 and $ 21.4 million at December 31, 2021.

Included in the liability at March 31, 2022 and December 31, 2021 were $ 2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The effective tax rate was 25.6 % and 21.7 % for the three and six months ended June 30, 2022, compared to 21.8 % and 23.2 % in the same periods of 2021.

The change in these rates resulted primarily from the mixture of income and losses in jurisdictions in which we operate, offset by the incremental income tax benefit associated with the vesting of restricted stock recorded in the six months ended June 30, 2022.

The liability for unrecognized tax benefits was $ 21.7 million at June 30, 2022 and $ 21.4 million at December 31, 2021.

Included in the liability at June 30, 2022 and December 31, 2021 were $ 2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (IRS) regarding our 2015 and 2016 consolidated income tax returns.

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We believe that we have adequately reserved for this matter and that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows.

However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax,

interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows.

However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows.

Note 11— Net Income per Common Share

The following summarizes the calculation of net income per common share attributable to common shareholders for the three months ended March 31, 2022 and 2021:

The following summarizes the calculation of net income per common share attributable to common shareholders for the three and six months ended June 30, 2022 and 2021:

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2022 2021 2022 2021

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We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes.

As of March 31, 2022, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program.

As of June 30, 2022, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program.

Note 13— Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss by component for the three months ended March 31, 2022 and 2021:

The following table shows the changes in accumulated other comprehensive loss by component for the three and six months ended June 30, 2022 and 2021:

Retirement Plans Currency

Adjustments Derivatives Total

Accumulated other comprehensive loss, December 31, 2021 $ ( 14,597 ) $ ( 25,994 ) $ — $ ( 40,591 )

Accumulated other comprehensive loss, March 31, 2022 $ ( 14,408 ) $ ( 26,781 ) $ — $ ( 41,189 )

Other comprehensive (loss) income before reclassifications — ( 18,831 ) 2,044 ( 16,787 )

Income tax — — ( 532 ) ( 532 )

Other comprehensive (loss) income before reclassifications, net of tax — ( 18,831 ) 1,512 ( 17,319 )

Amounts reclassified from accumulated other comprehensive loss 386 — 1,692 2,078

Income tax ( 89 ) — ( 440 ) ( 529 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 297 — 1,252 1,549

Other comprehensive (loss) income 297 ( 18,831 ) 2,764 ( 15,770 )

Accumulated other comprehensive (loss) gain, June 30, 2022 $ ( 14,111 ) $ ( 45,612 ) $ 2,764 $ ( 56,959 )

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive loss, March 31, 2021 $ ( 18,326 ) $ ( 12,280 ) $ — $ ( 30,606 )

Other comprehensive loss before reclassifications — ( 2,448 ) — ( 2,448 )

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Other comprehensive income (loss) 36 ( 2,448 ) — ( 2,412 )

Accumulated other comprehensive loss, March 31, 2022 $ ( 14,408 ) $ ( 26,781 ) $ — $ ( 41,189 )

Accumulated other comprehensive loss, June 30, 2021 $ ( 18,290 ) $ ( 14,728 ) $ — $ ( 33,018 )

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive loss, December 31, 2021 $ ( 14,597 ) $ ( 25,994 ) $ — $ ( 40,591 )

Other comprehensive income (loss) before reclassifications — ( 12,262 ) 2,426 ( 9,836 )

Other comprehensive (loss) income before reclassifications — ( 19,618 ) 2,044 ( 17,574 )

Income tax — — ( 532 ) ( 532 )

Other comprehensive income (loss) before reclassifications, net of tax — ( 12,262 ) 1,815 ( 10,447 )

Other comprehensive (loss) income before reclassifications, net of tax — ( 19,618 ) 1,512 ( 18,106 )

Amounts reclassified from accumulated other comprehensive loss 635 — 1,692 2,327

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Amounts reclassified from accumulated other comprehensive loss, net of tax 486 — 1,252 1,738

Other comprehensive (loss) income 486 ( 19,618 ) 2,764 ( 16,368 )

Accumulated other comprehensive (loss) gain, June 30, 2022 $ ( 14,111 ) $ ( 45,612 ) $ 2,764 $ ( 56,959 )

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive loss, December 31, 2020 $ ( 18,447 ) $ ( 18 ) $ ( 20,044 ) $ ( 38,509 )

Other comprehensive (loss) income before reclassifications — ( 14,710 ) 2,426 ( 12,284 )

Income tax — — ( 611 ) ( 611 )

Other comprehensive (loss) income before reclassifications, net of tax — ( 14,710 ) 1,815 ( 12,895 )

Amounts reclassified from accumulated other comprehensive loss 204 — 25,518 25,722

Income tax ( 47 ) — ( 7,289 ) ( 7,336 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 157 — 18,229 18,386

Other comprehensive income (loss) 157 ( 14,710 ) 20,044 5,491

Accumulated other comprehensive loss, March 31, 2021 $ ( 18,326 ) $ ( 12,280 ) $ — $ ( 30,606 )

Accumulated other comprehensive loss, June 30, 2021 $ ( 18,290 ) $ ( 14,728 ) $ — $ ( 33,018 )

We include amounts reclassified out of accumulated other comprehensive loss related to defined benefit pension plans as a component of net periodic pension cost recorded in Other expense, net.

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Products & Healthcare Services $ 1,927,388 $ 2,255,820 $ 4,061,429 $ 4,365,265

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Consolidated capital expenditures $ 54,738 $ 12,058 $ 65,699 $ 18,681

March 31, 2022 December 31, 2021

2022 December 31, 2021

Total assets:

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Consolidated total assets $ 5,555,278 $ 3,536,551

The following table presents net revenue by geographic area, which were attributed based on the location from which we ship products or provide services.

Three Months Ended March 31,

The following table presents net revenue by geographic area, which were attributed based on the location from which

we ship products or provide services.

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

United States $ 2,376,573 $ 2,336,673 $ 4,638,592 $ 4,519,428

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2016-13 Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings.

This standard will be effective for fiscal years

beginning after December 15, 2022, including interim periods within those fiscal years.

This standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

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In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business

Entities about Government Assistance, which requires certain annual disclosures about transactions with a government that are

accounted for by applying a grant or contribution accounting model by analogy.

Disclosures by Business Entities about Government Assistance, which requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

We adopted ASU No.

2 unchanged sentences

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 1. Financial Statements