What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-03 · 140 added, 105 removed, 546 unchanged (31% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

4 unchanged sentences

Acquisition-related and exit and realignment charges 8,898 6,380 50,048 20,967

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

Other operating income, net ( 1,125 ) ( 2,873 ) ( 5,020 ) ( 5,016 )

Operating income 60,247 62,875 196,392 306,452

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

Change in gains and losses on derivative instruments 9,167 — 11,931 20,044

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

Total other comprehensive (loss), net of tax ( 10,531 ) ( 11,619 ) ( 26,899 ) ( 6,128 )

Comprehensive income $ 1,966 $ 32,510 $ 53,482 $ 173,486

3 unchanged sentences

Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(in thousands, except per share data) 2022 2021

38 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2022 2021

8 unchanged sentences

Changes in operating lease right-of-use assets and lease liabilities 922 1,190

Loss on sale and dispositions of property and equipment 226 —

Gain on sale and dispositions of property and equipment ( 17,002 ) —

Changes in operating assets and liabilities:

14 unchanged sentences

Proceeds from issuance of debt 1,691,000 574,900

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

Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program 30,000 ( 90,900 )

Repayments of debt ( 3,000 ) ( 553,140 )

14 unchanged sentences

Noncash investing activity:

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

Unpaid purchases of property and equipment and software at end of period $ 63,158 $ —

See accompanying notes to consolidated financial statements.

17 unchanged sentences

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

Net income 12,497 12,497

Other comprehensive loss ( 10,531 ) ( 10,531 )

Share-based compensation expense, exercises and other 46 91 6,121 6,212

Balance, September 30, 2022 76,217 $ 152,434 $ 413,894 $ 467,999 $ ( 67,490 ) $ 966,837

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

11 unchanged sentences

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

Net income 44,129 44,129

Other comprehensive loss ( 11,619 ) ( 11,619 )

Dividends declared ($ 0.0025 per share)

( 183 ) ( 183 )

Share-based compensation expense, exercises and other 34 67 6,592 6,659

Balance, September 30, 2021 75,429 $ 150,858 $ 434,952 $ 345,832 $ ( 44,637 ) $ 887,005

See accompanying notes to consolidated financial statements.

10 unchanged sentences

The results of operations for interim periods are not necessarily indicative of the results expected for the full year.

To better reflect how we go to market as well as certain changes to the leadership team, organizational structure, budgeting and financial reporting processes which drive changes to segment reporting, we have organized our business into two distinct segments:

Our business has two distinct segments:

Products & Healthcare Services and Patient Direct.

1 unchanged sentence

Patient Direct expands our business along the continuum of care through delivery of disposable medical supplies sold directly to patients and home health agencies and is a leading provider of integrated home healthcare equipment and related services in the United States.

Beginning with the quarter ended March 31, 2022, we now report financial results using this two segment structure and have recast prior year segment results on the same basis.

Beginning with the quarter ended March 31, 2022, we have reported financial results using this two segment structure and have recast our prior year segment results on the same basis.

On March 29, 2022, we completed the acquisition of 100 % of Apria, Inc.

9 unchanged sentences

Cash, cash equivalents and restricted cash are stated at cost.

Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in the United States, Europe, and Asia.

Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in North America, Europe, and Asia.

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 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.

Restricted cash included in Other assets, net as of September 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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Cash and cash equivalents $ 76,770 $ 55,712

5 unchanged sentences

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.

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.

20 unchanged sentences

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.

We recorded $ 148 million and $ 299 million in revenue related to equipment we rent to patients for the three and nine months ended September 30, 2022.

Equipment rental revenue was not material in the prior year.

15 unchanged sentences

The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed recognized as of the Acquisition Date.

The fair value and useful lives of tangible and intangible assets acquired have been estimated based on a review of publicly available data for transactions involving companies deemed comparable to the Company.

The fair value and useful lives of tangible and intangible assets acquired have been

estimated based on various valuation methods, including the income and cost approach, using several significant unobservable inputs including, but not limited to projected cash flows and a discount rate.

These inputs are considered Level 3 inputs.

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.

The updated preliminary purchase price allocation resulted in an approximate $ 8.3 million reduction in intangible amortization expense during the three months ended September 30, 2022 that would have been recognized in previous periods if the adjustment to provisional amounts were recognized as of the Acquisition Date.

This reduction resulted from a reallocation of intangible assets value to those with longer useful lives as compared to the purchase price allocation originally estimated as of the Acquisition Date.

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

13 unchanged sentences

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

We are amortizing the preliminary fair value of acquired intangible assets, primarily customer contracts, trade names and payor and capitated relationships, over their estimated weighted average useful lives of two to 15 years.

We are amortizing the preliminary fair value of acquired intangible assets, primarily customer relationships, including payor and capitated relationships, and trade names over their estimated weighted average useful lives of one to 15 years.

Goodwill of $ 1.2 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.

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.

Approximately $ 32 million of the goodwill 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 nine months ended September 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 June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

1 unchanged sentence

Net income (loss) $ 12,497 $ 66,935 $ ( 39,696 ) $ 227,540

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.

Pro forma net loss of $ 39.7 million for the nine months ended September 30, 2022 includes pro forma adjustments for interest expense of $ 20.8 million and amortization of intangible assets of $ 10.9 million, which reflects the updated preliminary purchase price allocation.

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.

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.

Revenue and net income of Apria since the Acquisition Date for the three months ended September 30, 2022 included in the consolidated statement of operations were $ 310 million and $ 0.7 million, respectively.

Revenue and net loss of Apria since the Acquisition Date included in the consolidated statement of operations for the nine months ended September 30, 2022 were $ 620 million and $ 38.4 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 June 30, 2022:

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

Products & Healthcare Services Patient Direct Consolidated

Carrying amount of goodwill, December 31, 2021 $ 106,280 $ 283,905 $ 390,185

Acquisition — 1,269,887 1,269,887

Acquisitions ( 532 ) 1,249,478 1,248,946

Currency translation adjustments ( 7,795 ) — ( 7,795 )

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

Carrying amount of goodwill, September 30, 2022 $ 97,953 $ 1,533,383 $ 1,631,336

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

September 30, 2022 December 31, 2021

Relationships Tradenames Other

5 unchanged sentences

Weighted average useful life 12 years 10 years 7 years 10 years 11 years 8 years

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.

At September 30, 2022 and December 31, 2021, $ 142 million and $ 164 million in net intangible assets were held in the Products & Healthcare Services segment and $ 322 million and $ 45.7 million were held in the Patient Direct segment.

Amortization expense for intangible assets was $ 14.3 million and $ 10.0 million for the three months ended September 30, 2022 and 2021 and $ 55.5 million and $ 30.1 million for the nine months ended September 30, 2022 and 2021.

At September 30, 2022, customer relationships, tradenames, and other intangibles include preliminary estimated fair values of 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 $ 22 million for the remainder of 2022, $ 82 million for 2023, $ 65 million for 2024, $ 55 million for 2025, $ 54 million for 2026 and $ 47 million for 2027.

2 unchanged sentences

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:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

2 unchanged sentences

Total exit and realignment charges $ 1,983 $ 6,380 $ 4,879 $ 20,967

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

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

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

7 unchanged sentences

Accrued exit and realignment costs, June 30, 2022 822

Provision for exit and realignment activities:

Cash payments ( 1,693 )

Accrued exit and realignment costs, September 30, 2022 $ 380

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

9 unchanged sentences

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.

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 and six months ended June 30, 2021.

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

Provision for exit and realignment activities:

Information system restructuring costs 1,506

Lease obligations 107

Cash payments ( 4,199 )

Accrued exit and realignment costs, September 30, 2021 $ 3,116

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 0.7 million of costs that were expensed as incurred for the three and nine months ended September 30, 2022, which related to an increase in reserves associated with certain retained assets of Fusion5.

We incurred $ 1.6 million and $ 11.6 million of costs that were expensed as incurred for the three and nine months ended September 30, 2021, which primarily includes $ 1.5 million and $ 9.6 million of wind-down costs related to Fusion5 for the three and nine months ended September 30, 2021.

Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $ 6.9 million and $ 45.2 million for the three and nine months ended September 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 September 30, 2022.

Debt consists of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Amount Estimated

8 unchanged sentences

Term Loan B 577,062 585,806 — —

6.625 % Senior Notes, due March 2030

6.625 % Senior Notes, due April 2030

584,934 526,968 — —

3 unchanged sentences

Long-term debt $ 2,547,059 $ 2,406,865 $ 947,540 $ 992,260

We have $ 246 million, excluding deferred financing costs and third party fees, of 4.375 % senior notes due in 2024 (the 2024 Notes), with interest payable semi-annually.

We have $ 246 million, excluding deferred financing costs and third party fees, of 4.375 % senior notes due in December 2024 (the 2024 Notes), with interest payable semi-annually.

The 2024 Notes were sold at 99.6 % of the principal amount with an effective yield of 4.422 %.

We have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100 % of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate (as defined) plus 30 basis points.

In March 2021, we issued $ 500 million, excluding deferred financing costs and third party fees, of 4.500 % senior unsecured notes due in 2029 (the 2029 Unsecured Notes), with interest payable semi-annually (the Notes Offering).

In March 2021, we issued $ 500 million, excluding deferred financing costs and third party fees, of 4.500 % senior unsecured notes due in March 2029 (the 2029 Unsecured Notes), with interest payable semi-annually (the Notes Offering).

The 2029 Unsecured Notes were sold at 100 % of the principal amount with an effective yield of 4.500 %.

2 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 in 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 April 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 %.

5 unchanged sentences

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.

2 unchanged sentences

The Revolving Credit Agreement matures in March 2027.

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.

At September 30, 2022, we had no borrowings and letters of credit of $ 27.9 million under our Revolving Credit Agreement.

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

At September 30, 2022 and December 31, 2021, we had $ 422 million and $ 291 million available for borrowing under our Revolving Credit Agreement.

We also had letters of credit and bank guarantees, which were issued outside of the Revolving Credit Agreement for $ 2.3 million and $ 2.2 million as of September 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.

6 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 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.

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

As of September 30, 2022, scheduled future principal payments of debt, excluding finance leases and other, were $ 1.5 million in 2022, $ 15.4 million in 2023, $ 274 million in 2024, of which $ 254 million is due in December 2024, $ 197 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 September 30, 2022 include $ 6.3 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B and $ 2.5 million in current portion of finance leases.

Note 7— Retirement Plans

1 unchanged sentence

Retirement Plan).

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

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

Retirement Plan was $ 48.3 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 and six months ended June 30, 2022 and 2021 were as follows:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

15 unchanged sentences

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.

All derivatives are carried at fair value in our consolidated balance sheets in other current assets and other current liabilities.

All derivatives are carried at fair value in our consolidated balance sheets.

We consider the risk of counterparty default to be minimal.

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

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

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

Derivative Assets Derivative Liabilities

1 unchanged sentence

Cash flow hedges

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

Interest rate swaps $ 400,000 March 2027 Other assets, net $ 16,123 Other liabilities $ —

Economic (non-designated) hedges

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

Foreign currency contracts $ 54,062 October 2022 Other current assets $ 97 Other current liabilities $ 273

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 six months ended June 30, 2021.

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 nine months ended September 30, 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 and six months ended June 30, 2022:

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 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

Three months ended September 30, 2022 Nine months ended September 30, 2022 Three months ended September 30, 2022 Nine months ended September 30, 2022 Three months ended September 30, 2022 Nine months ended September 30, 2022

Interest rate swaps $ 12,153 $ 14,197 Interest expense, net $ 39,869 $ 87,727 $ ( 234 ) $ ( 1,926 )

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:

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 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

Three months ended September 30, 2021 Nine months ended September 30, 2021 Three months ended September 30, 2021 Nine months ended September 30, 2021 Three months ended September 30, 2021 Nine months ended September 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 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.

For the three and nine months ended September 30, 2022 we recognized losses of $ 1.8 million and $ 3.2 million associated with our economic (non-designated) foreign currency contracts.

For the three and nine months ended September 30, 2021 we recognized losses of $ 0.9 million and $ 2.5 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.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Classification 2022 2021 2022 2021

4 unchanged sentences

Total finance lease cost 622 569 1,859 1,591

Short-term lease cost DS&A Expenses 1,039 225 1,155 483

Variable lease cost DS&A Expenses 9,299 4,343 14,028 8,660

Short-term lease cost DS&A Expenses, Cost of goods sold 1,207 225 2,363 708

Variable lease cost DS&A Expenses, Cost of goods sold 10,390 4,349 24,418 13,009

Total lease cost $ 36,450 $ 20,450 $ 93,472 $ 59,406

Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities which are paid as incurred.

Variable lease cost consists of taxes, insurance, and common area or other maintenance costs for our leased facilities and patient services equipment which are paid as incurred.

Variable lease cost also includes expense associated with patient services equipment, which is based on equipment usage or a percentage of net revenues collected for specific products.

Patient equipment lease expense is recorded in cost of goods sold in the consolidated statement of operations.

Supplemental balance sheet information is as follows:

Classification June 30,

2022 December 31, 2021

Classification September 30, 2022 December 31, 2021

Operating lease assets Operating lease assets $ 275,833 $ 194,006

6 unchanged sentences

Total lease liabilities $ 303,505 $ 217,409

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.

The gross value recorded under finance leases was $ 20.0 million and $ 20.6 million with associated accumulated depreciation of $ 9.2 million and $ 11.7 million as of September 30, 2022 and December 31, 2021.

Operating lease assets include $ 83.6 million in right-of-use assets and $ 86.8 million of operating lease liabilities associated with Apria as of September 30, 2022.

Other information related to leases was as follows:

Six Months Ended

Nine Months Ended

September 30,

Supplemental cash flow information

9 unchanged sentences

Finance leases 10.8 % 11.0 %

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

Operating Leases Finance Leases Total

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

Operating Leases (1)

Finance Leases Total

2022 $ 24,060 $ 675 $ 24,735

7 unchanged sentences

Present value of lease liabilities $ 288,012 $ 15,493 $ 303,505

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.

(1) Operating lease payments exclude $ 40.2 million of legally binding lease payments for the Morgantown, West Virginia center of excellence for medical supplies and logistics lease signed, but not yet commenced.

Note 10— Income Taxes

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.

The effective tax rate was 36.2 % and 24.4 % for the three and nine months ended September 30, 2022, compared to 12.6 % and 20.8 % 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, as well as the utilization of foreign tax benefits in the three and nine months ended September 30, 2021.

The liability for unrecognized tax benefits was $ 22.1 million at September 30, 2022 and $ 21.4 million at December 31, 2021.

Included in the liability at September 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.

5 unchanged sentences

We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves.

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.

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.

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 and six months ended June 30, 2022 and 2021:

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

9 unchanged sentences

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

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

As of September 30, 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 and six months ended June 30, 2022 and 2021:

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

Retirement Plans Currency

Adjustments Derivatives Total

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

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

Other comprehensive (loss) income before reclassifications — ( 19,986 ) 12,153 ( 7,833 )

1 unchanged sentence

Other comprehensive (loss) income before reclassifications, net of tax — ( 19,986 ) 8,994 ( 10,992 )

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

Amounts reclassified from accumulated other comprehensive (loss) income 374 — 234 608

Income tax ( 86 ) — ( 61 ) ( 147 )

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 )

Amounts reclassified from accumulated other comprehensive (loss) income, net of tax 288 — 173 461

Other comprehensive income (loss) 288 ( 19,986 ) 9,167 ( 10,531 )

Accumulated other comprehensive (loss) gain, September 30, 2022 $ ( 13,823 ) $ ( 65,598 ) $ 11,931 $ ( 67,490 )

Retirement Plans Currency Translation Adjustments Derivatives Total

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 )

Other comprehensive loss before reclassifications — ( 12,014 ) — ( 12,014 )

5 unchanged sentences

Other comprehensive income (loss) 395 ( 12,014 ) — ( 11,619 )

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

Accumulated other comprehensive loss, September 30, 2021 $ ( 17,895 ) $ ( 26,742 ) $ — $ ( 44,637 )

Retirement Plans Currency Translation Adjustments Derivatives Total

3 unchanged sentences

Other comprehensive (loss) income before reclassifications, net of tax — ( 39,604 ) 10,506 ( 29,098 )

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

Amounts reclassified from accumulated other comprehensive (loss) income 1,009 — 1,926 2,935

Income tax ( 235 ) — ( 501 ) ( 736 )

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 )

Amounts reclassified from accumulated other comprehensive (loss) income, net of tax 774 — 1,425 2,199

Other comprehensive income (loss) 774 ( 39,604 ) 11,931 ( 26,899 )

Accumulated other comprehensive (loss) gain, September 30, 2022 $ ( 13,823 ) $ ( 65,598 ) $ 11,931 $ ( 67,490 )

Retirement Plans Currency Translation Adjustments Derivatives Total

7 unchanged sentences

Other comprehensive income (loss) 552 ( 26,724 ) 20,044 ( 6,128 )

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

Accumulated other comprehensive loss, September 30, 2021 $ ( 17,895 ) $ ( 26,742 ) $ — $ ( 44,637 )

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.

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

16 unchanged sentences

Consolidated capital expenditures $ 49,449 $ 13,944 $ 115,148 $ 32,625

September 30,

2022 December 31, 2021

5 unchanged sentences

Consolidated total assets $ 5,538,582 $ 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 June 30, Six Months Ended June 30,

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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

46 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