ACCENDRA HEALTH INC/VA/ 10-K

Item 9A. Controls and Procedures Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2022. On the Acquisition Date, we completed the acquisition of 100% of Apria. As permitted by the Securities and Exchange Commission under the current year acquisition scope exception, we have excluded this acquisition, except for certain balances associated with acquisition accounting, from our 2022 assessment of the effectiveness of our internal control over financial reporting since it was not practical for management to conduct an assessment of internal control over financial reporting between the Acquisition Date and the date of management's assessment. Management’s Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, controls deemed effective now may become inadequate in the future because of changes in conditions, or because compliance with policies or procedures has deteriorated or been circumvented. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Based on management’s assessment and the COSO criteria, management believes that our internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. In reliance on guidance set forth in Question 3 of a “Frequently Asked Questions” interpretative release issued by the Staff of the SEC’s Office of the Chief Accountant and the Division of Corporation Finance in September 2004, as revised on September 24, 2007, regarding Securities Exchange Act Release No. 34-47986, Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, management determined that it would exclude Apria, Inc. (Apria), which was acquired on March 29, 2022, from the scope of the assessment of the effectiveness of our internal control over financial reporting. It was not practical for management to conduct an assessment of internal control over financial reporting in the period between the date the acquisition was completed and the date of management’s assessment. Except for goodwill and intangible assets recorded by the Company in connection with the purchase of Apria, management excluded Apria from its assessment of internal control over financial reporting. Excluding $1.5 billion of goodwill and intangible assets (see Note 3 and Note 7 of Notes to the Consolidated Financial Statements), this acquisition represented $496 million of assets and $937 million of revenues as of and for the year ended December 31, 2022, of our consolidated financial statements. Apria will be included in management’s assessment of internal control over financial reporting for the year ending December 31, 2023. The effectiveness of our internal control over financial reporting as of December 31, 2022, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their unqualified report which is included in this annual report. 42 /s/ Edward A. Pesicka Edward A. Pesicka, President, Chief Executive Officer & Director /s/ Alexander J. Bruni Alexander J. Bruni, Executive Vice President & Chief Financial Officer Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting during our last quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None. 43 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Owens & Minor, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Owens & Minor, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial statements. The Company acquired Apria, Inc. during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Apria, Inc.’s internal control over financial reporting associated with total assets of $496 million and total revenues of $937 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Apria, Inc. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 44 /s/ KPMG LLP Richmond, Virginia February 28, 2023 45 Part III Items 10-14. Information required by Items 10-14 can be found under Information about our Executive Officers under Part I of this Form 10-K and the registrant’s 2022 Proxy Statement pursuant to instructions G(3) of the General Instructions to Form 10-K. Because our common stock is listed on the New York Stock Exchange (NYSE), our Chief Executive Officer is required to make, and he has made, an annual certification to the NYSE stating that he was not aware of any violation of the corporate governance listing standards of the NYSE. Our Chief Executive Officer made his annual certification to that effect to the NYSE as of May 13, 2022. In addition, we have filed, as exhibits to this Annual Report on Form 10-K, the certifications of our principal executive officer and principal financial officer required under Sections 906 and 302 of the Sarbanes-Oxley Act of 2002 to be filed with the Securities and Exchange Commission regarding the quality of our public disclosure. 46 Part IV Item 15. Exhibits and Financial Statement Schedules a) The following documents are filed as part of this report: Page Consolidated Statements of Operations for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 48 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020 49 Consolidated Balance Sheets as of December 31, 202 2 and 202 1 50 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 51 Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 202 2 , 202 1 and 20 2 0 53 Notes to Consolidated Financial Statements 54 Report of Independent Registered Public Accounting Firm ( KPMG, LLP , Richmond, VA , Auditor Firm ID: 185 ) 82 b) Exhibits: See Index to Exhibits on page 84. 47 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year ended December 31, 2022 2021 2020 Net revenue $ 9,955,475 $ 9,785,315 $ 8,480,177 Cost of goods sold 8,129,124 8,272,086 7,199,343 Gross margin 1,826,351 1,513,229 1,280,834 Distribution, selling and administrative expenses 1,633,668 1,116,871 1,041,336 Acquisition-related and exit and realignment charges 55,022 34,076 37,752 Other operating income, net ( 5,252 ) ( 6,191 ) ( 2,372 ) Operating income 142,913 368,473 204,118 Interest expense, net 128,891 48,090 83,398 Loss on extinguishment of debt — 40,433 11,219 Other expense (income), net 3,131 3,196 ( 407 ) Income from continuing operations before income taxes 10,891 276,754 109,908 Income tax (benefit) provision ( 11,498 ) 55,165 21,834 Income from continuing operations 22,389 221,589 88,074 Loss from discontinued operations, net of tax — — ( 58,203 ) Net income $ 22,389 $ 221,589 $ 29,871 Basic income per common share: Income from continuing operations $ 0.30 $ 3.05 $ 1.39 Loss from discontinued operations — — ( 0.92 ) Net income $ 0.30 $ 3.05 $ 0.47 Diluted income per common share: Income from continuing operations $ 0.29 $ 2.94 $ 1.39 Loss from discontinued operations — — ( 0.92 ) Net income $ 0.29 $ 2.94 $ 0.47 See accompanying notes to consolidated financial statements. 48 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year ended December 31, 2022 2021 2020 Net income $ 22,389 $ 221,589 $ 29,871 Other comprehensive income (loss), net of tax: Currency translation adjustments ( 14,101 ) ( 25,976 ) 25,283 Change in unrecognized net periodic pension costs 7,396 3,850 ( 3,756 ) Change in gains and losses on derivative instruments 11,441 20,044 ( 7,329 ) Total other comprehensive income (loss), net of tax 4,736 ( 2,082 ) 14,198 Comprehensive income $ 27,125 $ 219,507 $ 44,069 See accompanying notes to consolidated financial statements. 49 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) December 31, 2022 2021 Assets Current assets Cash and cash equivalents $ 69,467 $ 55,712 Accounts receivable, net 763,497 681,564 Merchandise inventories 1,333,585 1,495,972 Other current assets 128,636 88,564 Total current assets 2,295,185 2,321,812 Property and equipment, net 578,269 317,235 Operating lease assets 280,665 194,006 Goodwill 1,636,705 390,185 Intangible assets, net 445,042 209,745 Other assets, net 150,417 103,568 Total assets $ 5,386,283 $ 3,536,551 Liabilities and equity Current liabilities Accounts payable $ 1,147,414 $ 1,001,959 Accrued payroll and related liabilities 93,296 115,858 Other current liabilities 325,756 226,204 Total current liabilities 1,566,466 1,344,021 Long-term debt, excluding current portion 2,482,968 947,540 Operating lease liabilities, excluding current portion 215,469 162,241 Deferred income taxes 60,833 35,310 Other liabilities 114,943 108,938 Total liabilities 4,440,679 2,598,050 Commitments and contingencies (Note 18) Equity Common stock, par value $ 2 per share; authorized— 200,000 shares; issued and outstanding— 76,279 shares and 75,433 shares as of December 31, 2022 and 2021 152,557 150,865 Paid-in capital 418,894 440,608 Retained earnings 410,008 387,619 Accumulated other comprehensive loss ( 35,855 ) ( 40,591 ) Total equity 945,604 938,501 Total liabilities and equity $ 5,386,283 $ 3,536,551 See accompanying notes to consolidated financial statements. 50 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2022 2021 2020 Operating activities: Net income $ 22,389 $ 221,589 $ 29,871 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 228,667 90,621 93,336 Share-based compensation expense 20,993 25,016 20,010 Impairment charges — — 8,724 Loss on divestiture — — 65,472 Loss on extinguishment of debt — 40,433 11,219 Deferred income tax (benefit) expense ( 26,361 ) ( 29,736 ) 15,564 Provision for losses on accounts receivable 3,315 21,158 11,292 Changes in operating lease right-of-use assets and lease liabilities 353 1,463 ( 1,676 ) Gain on sale and dispositions of property and equipment ( 26,260 ) — — Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 1,101 ( 2,201 ) ( 34,818 ) Merchandise inventories 166,559 ( 263,439 ) ( 85,154 ) Accounts payable 13,652 3,548 193,240 Net change in other assets and liabilities ( 91,544 ) 692 5,278 Other, net 12,142 15,033 6,865 Cash provided by operating activities 325,006 124,177 339,223 Investing activities: Acquisition, net of cash acquired ( 1,684,607 ) — — Proceeds from divestiture — — 133,000 Additions to property and equipment ( 158,090 ) ( 40,985 ) ( 50,424 ) Additions to computer software ( 8,492 ) ( 8,705 ) ( 8,769 ) Proceeds from sale of property and equipment 48,383 — — Other, net ( 1,670 ) ( 3,940 ) 6,266 Cash (used for) provided by investing activities ( 1,804,476 ) ( 53,630 ) 80,073 Financing activities: Proceeds from issuance of debt 1,691,000 574,900 155,100 Proceeds from issuance of common stock — — 189,971 Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program 30,000 ( 103,200 ) ( 74,700 ) Repayments of debt ( 4,500 ) ( 553,140 ) ( 617,271 ) Borrowings under amended accounts receivable securitization program 1,022,300 — — Repayments under amended accounts receivable securitization program ( 1,156,300 ) — — Financing costs paid ( 42,602 ) ( 13,912 ) ( 10,367 ) Cash dividends paid — ( 731 ) ( 648 ) Senior Notes make-whole premium paid — — ( 4,980 ) Payment for termination of interest rate swaps — ( 15,434 ) — Other, net ( 42,793 ) ( 17,961 ) ( 16,491 ) Cash provided by (used for) financing activities 1,497,105 ( 129,478 ) ( 379,386 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 3,485 ) ( 3,540 ) 9,909 Net increase (decrease) in cash, cash equivalents and restricted cash 14,150 ( 62,471 ) 49,819 51 Cash, cash equivalents and restricted cash at beginning of year 72,035 134,506 84,687 Cash, cash equivalents and restricted cash at end of year $ 86,185 $ 72,035 $ 134,506 Supplemental disclosure of cash flow information: Income taxes paid (received), net of refunds $ 33,973 $ 99,400 $ ( 17,455 ) Interest paid $ 107,022 $ 38,717 $ 89,961 Noncash investing activity: Unpaid purchases of property and equipment and software at end of period $ 67,852 $ — $ — See accompanying notes to consolidated financial statements. 52 OWENS & MINOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (in thousands, except per share data) Common Shares Outstanding Common Stock ($ 2 par value) Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity Balance, December 31, 2019 62,843 $ 125,686 $ 251,401 $ 137,774 $ ( 52,707 ) $ 462,154 Net income — — — 29,871 — 29,871 Other comprehensive income — — — — 14,198 14,198 Dividends declared ($ 0.01 per share) — — — ( 623 ) — ( 623 ) Issuance of common stock, net of issuance costs 9,746 19,493 170,478 — — 189,971 Share-based compensation expense, exercises and other 883 1,765 14,718 — — 16,483 Balance, December 31, 2020 73,472 146,944 436,597 167,022 ( 38,509 ) 712,054 Net income — — — 221,589 221,589 Other comprehensive loss — — — — ( 2,082 ) ( 2,082 ) Dividends declared ($ 0.01 per share) — — — ( 992 ) — ( 992 ) Share-based compensation expense, exercises and other 1,961 3,921 4,011 — — 7,932 Balance, December 31, 2021 75,433 150,865 440,608 387,619 ( 40,591 ) 938,501 Net income — — — 22,389 22,389 Other comprehensive income — — — — 4,736 4,736 Share-based compensation expense, exercises and other 846 1,692 ( 21,714 ) — — ( 20,022 ) Balance, December 31, 2022 76,279 $ 152,557 $ 418,894 $ 410,008 $ ( 35,855 ) $ 945,604 See accompanying notes to consolidated financial statements. 53 OWENS & MINOR, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (in thousands, except per share data, unless otherwise indicated) Note 1— Summary of Significant Accounting Policies Owens & Minor, Inc. 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 producing 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. Basis of Presentation and Consolidation. The consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls, in conformity with U.S generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations. The results of operations of businesses acquired by the Company are included as of the respective acquisition date. Our business has two distinct segments: Products & Healthcare Services and Patient Direct. Products & Healthcare Services provides distribution, outsourced logistics and value-added services, and manufactures and sources medical surgical products through our production and kitting operations. 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 in 2022, we have reported financial results using this two segment structure and have recast our prior year segment results on the same basis. Reclassifications. Certain prior year amounts have been reclassified to conform to the current year segment presentation. Use of Estimates. The preparation of the consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Significant estimates are used for, but are not limited to, the allowances for losses on accounts receivable, inventory valuation allowances, variable consideration, depreciation and amortization, goodwill valuation, valuation of intangible assets and other long-lived assets, estimated fair values of the net assets acquired in business combinations, self-insurance liabilities, tax liabilities, defined benefit obligations, share-based compensation and other contingencies. Actual results may differ from these estimates. Cash, Cash Equivalents and Restricted Cash. Cash, cash equivalents and restricted cash include cash and marketable securities with an original maturity or maturity at acquisition of three months or less. 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 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 December 31, 2022 and 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. December 31, 2022 December 31, 2021 Cash and cash equivalents $ 69,467 $ 55,712 Restricted cash included in Other assets, net 16,718 16,323 Total cash, cash equivalents and restricted cash $ 86,185 $ 72,035 Book overdrafts represent the amount of outstanding checks issued in excess of related bank balances and are included in accounts payable in our consolidated balance sheets, as they are similar to trade payables and are not subject to finance charges or interest. Changes in book overdrafts are classified as operating activities in our consolidated statements of cash flows. 54 Accounts Receivable, Net. Accounts receivable, net are recorded at net realizable value. In the Products & Healthcare Services segment, accounts receivable from customers are recorded at net realizable value of the invoiced amount and are reduced by any rebates due to the customer, which are estimated based on contractual terms or historical experience. We assess finance charges on overdue accounts receivable that are recognized as other operating income based on their estimated ultimate collectability. We have arrangements with certain customers under which they make deposits on account. Customer deposits in excess of outstanding receivable balances are classified as other current liabilities. Due to the nature of our industry and the reimbursement environment in which we operate, certain estimates are required to record total net revenues and accounts receivable at their net realizable values, including estimating variable consideration. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements, contractual terms, and the uncertainty of reimbursement amounts for certain services may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. We maintain valuation allowances based upon the expected collectability of accounts receivable. Our allowances include specific amounts for accounts that are likely to be uncollectible, such as customer bankruptcies and disputed amounts and general allowances for accounts that may become uncollectible. Allowances are estimated based on a number of factors, including industry trends, current economic conditions, creditworthiness of customers, age of the receivables, changes in customer payment patterns, and historical experience. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Merchandise Inventories. Merchandise inventories are valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S. within our Products & Healthcare Services segment. Cost of remaining inventories are determined using the first-in, first out (FIFO) or weighted-average cost method at the lower of cost or net realizable value. We periodically evaluate whether inventory valuation allowance adjustments are required, which includes consideration of recent sales trends. In our evaluation, we review for expired or obsolete inventory and slow-moving inventory. We write down inventories which are considered excess and obsolete as a result of these assessments. Shifts in market trends and conditions, as well as changes in customer preferences and behavior could affect the value of our inventories. Property and Equipment. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation 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 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 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. Leases. We enter into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from one to 10 years. Certain leases include renewal options, generally for one to five-year increments. The exercise of lease renewal options is at our sole discretion. We include options to renew (or terminate) in our lease term, and as part of our right-of-use assets and lease liabilities, when it is reasonably certain that we will exercise that option. We also lease some of our transportation and material handling equipment for terms generally ranging from three to 10 years. Leases with a term of 12 months or less are not recorded on the consolidated balance sheets; we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of right-of-use assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. We elected the practical expedient to not separate lease and non-lease components for our leases. Operating lease assets and liabilities are recognized at commencement date based on the present value of unpaid lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments. We use the implicit rate when readily determinable. The right-of-use assets also include adjustments for any lease payments made and lease incentives received. 55 Goodwill. We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. We evaluate goodwill for impairment annually, as of October 1, and whenever events occur or changes in circumstance indicate that the carrying amount of goodwill may not be recoverable. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. We determine the estimated fair value of our reporting units by using an income (discounted cash flow analysis) approach. The income approach is dependent upon several assumptions regarding future periods, including assumptions with respect to future sales growth and a terminal growth rate. In addition, a weighted average cost of capital (WACC) is used to discount future estimated cash flows to their present values. The WACC is based on externally observable data considering market participants’ cost of equity and debt, optimal capital structure and risk factors specific to our company. Intangible Assets. Intangible assets acquired through purchases or business combinations are stated at fair value at the acquisition date and net of accumulated amortization in the consolidated balance sheets. Intangible assets, consisting primarily of customer relationships, customer contracts, trademarks, and tradenames are amortized over their estimated useful lives. In determining the useful life of an intangible asset, we consider our historical experience in renewing or extending similar arrangements. Intangible assets are generally amortized over one to 15 years based on their pattern of economic benefit or on a straight-line basis. We suspend amortization on assets that are held for sale. Computer Software. We develop and purchase software for internal use. Software development costs incurred during the application development stage are capitalized. Once the software has been installed and tested, and is ready for use, additional costs incurred in connection with the software are expensed as incurred. We also develop software for external use. Our software as a service (SaaS) subscription revenue is generated from granting customers the right to use our software products and were not material to our consolidated financial statements for 2022, 2021 and 2020. Costs related to the research and development of software for external use are expensed as incurred until the technological feasibility of the product is established. After technological feasibility is established, costs are capitalized until the product is available for sale. Capitalized computer software costs are amortized over the estimated useful life of the software, usually between three and 10 years. Capitalized computer software costs are included in other assets, net, in the consolidated balance sheets. Unamortized software at December 31, 2022 and 2021 was $ 38.7 million and $ 34.0 million. Depreciation and amortization expense includes $ 14.0 million, $ 10.3 million, and $ 10.2 million of software amortization for the years ended December 31, 2022, 2021, and 2020. Long-Lived Assets. Long-lived assets, which include property and equipment, finite-lived intangible assets, right-of-use assets, and unamortized software costs, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable. We assess long-lived assets for potential impairment by comparing the carrying value of an asset, or group of related assets, to their estimated undiscounted future cash flows. We suspend depreciation and amortization on assets that are held for sale. Self-Insurance Liabilities. We are self-insured for certain teammate healthcare, workers’ compensation and automobile liability costs; however, we maintain insurance for individual losses exceeding certain limits. Liabilities are estimated for healthcare costs using current and historical claims data. Liabilities for workers’ compensation and automobile liability claims are estimated using historical claims data and loss development factors. If the underlying facts and circumstances of existing claims change or historical trends are not indicative of future trends, then we may be required to adjust the liability and related expense accordingly. Self-insurance liabilities are included in other current liabilities and other liabilities in the consolidated balance sheets and were $ 25.6 million and $ 11.2 million in total at December 31, 2022 and 2021. Revenue Recognition. Our revenue is primarily generated from sales contracts with customers. Revenue for sales of products, including equipment and supplies, is recorded when control of the promised goods is transferred. 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. In our Products & Healthcare Services segment, 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. 56 Our contracts sometime allow for forms of variable consideration including rebates, discounts, performance guarantees, and implicit price concessions. We estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer under the expected value method as part of determining the sales transaction price using contractual terms, historical experience, and other operating trends. The amount accrued for rebates and discounts due to customers was $ 86.9 million and $ 118 million at December 31, 2022 and 2021. 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 large government and commercial payors (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 $ 447 million in revenue related to equipment we rent to patients for the year ended December 31, 2022. Equipment rental revenue was not material in 2021 and 2020. See Note 20 for disaggregation of revenue by segment and geography as we believe that best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Cost of Goods Sold. Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor, bear the risk of general and physical inventory loss and carry all credit risk associated with sales. Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products business. We have contractual arrangements with certain suppliers that provide incentives, including cash discounts for prompt payment, operational efficiency and performance-based incentives. These incentives are recognized as a reduction in cost of goods sold as targets become probable of achievement. In situations where we act as an agent in a sales arrangement and do not bear a significant portion of these risks, primarily for our outsourced logistics business, there is no cost of goods sold and all costs to provide the service to the customer are recorded in distribution, selling and administrative expenses. Within our Patient Direct segment, patient equipment depreciation is classified in the Company’s consolidated statements of operations within cost of goods sold as the equipment is rented to patients as part of the Company’s primary operations. Depreciation expense for patient equipment was $ 88.7 million for the year ended December 31, 2022 and was not material for the years ended 2021 and 2020. As a result of different practices of categorizing costs and different business models throughout our industry, our gross margins may not necessarily be comparable to other companies in our industry. Inventory valuation allowance adjustments, including for excess and obsolete inventory, are recorded as a charge to cost of goods sold. Distribution, Selling and Administrative (DS&A) Expenses. DS&A expenses include shipping and handling costs, labor, depreciation other than for patient equipment, amortization and other costs for selling and administrative functions. Shipping and Handling. Shipping and handling costs are primarily included in DS&A expenses on the consolidated statements of operations and include costs to store, to move, and to prepare products for shipment, as well as costs to deliver products to customers. Shipping and handling costs totaled $ 581 million, $ 445 million, and $ 389 million for the years ended December 31, 2022, 2021, and 2020. Share-Based Compensation. We account for share-based payments to teammates at fair value and recognize the related expense in DS&A expenses over the service period for awards expected to vest. The fair value of nonvested performance shares is dependent upon our assessment of the probability of achievement of financial targets for the performance period. Derivative Financial Instruments. We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. We use forward contracts, which are agreements to buy or sell a quantity at a predetermined future date and at a predetermined rate or price. We do not enter into derivative financial instruments for trading purposes. 57 All derivatives are carried at fair value in our consolidated balance sheets. The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determine how we record the change in fair value of the derivative instrument in our consolidated financial statements. A derivative qualifies for hedge accounting if, at inception, we expect the derivative will be highly effective in offsetting the underlying hedged cash flows and we fulfill the hedge documentation standards at the time we enter into the derivative contract. We designate a hedge as a cash flow hedge, fair value hedge, or a net investment hedge based on the exposure we are hedging. For the effective portion of qualifying cash flow hedges, we record changes in fair value in other comprehensive income (OCI). We release the derivative’s gain or loss from OCI to match the timing of the underlying hedged items’ effect on earnings. We review the effectiveness of our hedging instruments quarterly, recognize current period hedge ineffectiveness immediately in earnings, and discontinue hedge accounting for any hedge that we no longer consider to be highly effective. We recognize changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings. The cash flow impacts of the derivative instruments are primarily included in our consolidated statements of cash flows as a component of operating or financing activities. Income Taxes. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided if it is more likely than not that a deferred tax asset will not be realized. When we have claimed tax benefits that may be challenged by a tax authority, an estimate of the effect of these uncertain tax positions is recorded. It is our policy to provide for uncertain tax positions and the related interest and penalties based upon an assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. To the extent that the tax outcome of these uncertain tax positions changes, based on our assessment, such changes in estimate may impact the income tax provision in the period in which such determination is made. We earn a portion of our operating income in foreign jurisdictions outside the United States. We are permanently reinvested in our foreign subsidiaries. Prior to September 30, 2022, we were not indefinitely reinvested in our subsidiary in Thailand. Due to our change of plans to reinvest the unremitted earnings in Thailand, we have released all withholding tax liabilities incurred in prior years. Our policy election for global intangible low-taxed income is that we will record such taxes as a current period expense once incurred and will follow the tax law ordering approach. Fair Value Measurements. Fair value is determined based on assumptions that a market participant would use in pricing an asset or liability. The assumptions used are in accordance with a three-tier hierarchy, defined by GAAP, that draws a distinction between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the use of present value and other valuation techniques in the determination of fair value (Level 3). The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued payroll and related liabilities reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The carrying amount of restricted cash also approximates fair value due to its nature. The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 10 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. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 13 for the fair value of derivatives. Our acquisitions may include contingent consideration as part of the purchase price. The fair value of contingent consideration is estimated as of the acquisition date and at the end of each subsequent reporting period based on the present value of the contingent payments to be made using a weighted probability of possible payments (Level 3). Subsequent changes in fair value are recorded as adjustments to acquisition-related and exit and realignment charges within the consolidated statements of operations. Acquisition-Related and Exit and Realignment Charges . We present costs incurred in connection with acquisitions in acquisition-related and exit and realignment charges in our consolidated statements of operations. Acquisition-related charges consist primarily of transaction costs incurred to perform due diligence and to analyze, negotiate and consummate an acquisition, costs to perform post-closing activities to establish the organizational structure, and costs to transition the acquired company’s information technology and other operations and administrative functions from the former owner. 58 Exit and realignment charges consist of costs associated with optimizing our operations which includes the consolidation of certain distribution centers, warehouses, our client engagement center and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment activities, which include reorganization costs, certain professional fees, costs to streamline administrative functions and processes, divestiture related costs, and other items. Costs associated with exit and realignment activities are recorded at their fair value when incurred. Liabilities are established at the cease-use date for remaining contractual obligations discounted using a credit-adjusted risk-free rate of interest. We evaluate these assumptions quarterly and adjust the liability accordingly. Severance benefits are recorded when payment is considered probable and reasonably estimable. The current portion of contractual termination costs are included in other current liabilities in our consolidated balance sheets, and the non-current portion is included in other liabilities, which were not material to our consolidated balance sheets as of December 31, 2022 and 2021. Income (Loss) Per Share. Basic and diluted income (loss) per share are calculated pursuant to the two-class method, under which unvested share-based payment awards containing non-forfeitable rights to dividends are participating securities. Diluted income per share reflects the potential dilution that could occur if restricted awards were exercised or converted into common stock. Foreign Currency Translation. Our foreign subsidiaries generally consider their local currency to be their functional currency. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars at period-end exchange rates and revenues, cost of goods sold and expenses are translated at average exchange rates during the period. Cumulative currency translation adjustments are included in accumulated other comprehensive income (loss) in shareholders’ equity. Gains and losses on intercompany foreign currency transactions that are long-term in nature and which we do not intend to settle in the foreseeable future are also recognized in other comprehensive income (loss) in shareholders’ equity. Realized gains and losses from foreign currency transactions are recorded in other operating income, net in the consolidated statements of operations and were not material to our consolidated results of operations in 2022, 2021, and 2020. Discontinued Operations . The Movianto business represented a component that met accounting requirements to be classified as discontinued operations through June 18, 2020 (the Divestiture Date). In accordance with GAAP, the financial position and results of operations of the Movianto business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. See Note 3 for additional information regarding discontinued operations. Business Combinations . We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The results of operations of the businesses acquired by the Company are included as of the respective acquisition date. Recent Accounting Pronouncements . During 2022, we adopted Accounting Standard Updates (ASU) issued by the Financial Accounting Standards Board (FASB). In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, Revenue from Contracts with Customers. At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. We adopted ASU 2021-08 prospectively, effective beginning January 1, 2022. Its adoption did not have a material impact on our consolidated financial statements. 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. The amendments are effective for fiscal years beginning after December 15, 2021. We adopted ASU 2021-10 effective beginning January 1, 2022. Its adoption did not have a material impact on our consolidated financial statements. Recently issued accounting pronouncements not yet adopted as of December 31, 2022: 59 On June 16, 2016, the FASB issued ASU No. 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. Early adoption is permitted. The adoption of ASU No. 2016-13 will not have a material impact on our consolidated financial statements and related disclosures. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief. These ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard. These ASUs will have the same effective date and transition requirements as ASU No. 2016-13. Note 2— Significant Risks and Uncertainties Many of our hospital customers in the U.S. are represented by group purchasing organizations (GPOs) that contract with us for services on behalf of the GPO members. GPOs representing a significant portion of our business are Vizient, Premier, Inc. (Premier) and Health Trust Purchasing Group (HPG). Members of these GPOs have incentives to purchase from their primary selected distributor; however, they operate independently and are free to negotiate directly with distributors and manufacturers. For 2022, net revenue from hospitals under contract with these GPOs represented the following approximate percentages of our consolidated net revenue: Vizient— 35 %; Premier— 19 %; and HPG— 12 %. In 2022, 2021 and 2020, no sales of products of any individual suppliers exceeded 10% of our consolidated net revenue. Note 3— Acquisitions and Discontinued Operations Acquisitions. 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, net of $ 144 million of cash acquired. The purchase was funded with a combination of debt and cash on hand. At the time of the Apria Acquisition, each share of Apria’s common stock was converted into the right to receive $ 37.50 in cash. Apria is a leading provider of integrated home healthcare equipment and related services in the United States. This business is reported as part of the Patient Direct segment. 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 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. 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: Current assets $ 142,136 $ 32 $ 142,168 Goodwill 1,267,079 ( 17,314 ) 1,249,765 Intangible assets 295,466 19,834 315,300 Other non-current assets 371,320 ( 17,083 ) 354,237 Total assets $ 2,076,001 $ ( 14,531 ) $ 2,061,470 Liabilities assumed: Current liabilities $ 241,266 $ 7,036 $ 248,302 Noncurrent liabilities 150,128 ( 21,567 ) 128,561 Total liabilities 391,394 ( 14,531 ) 376,863 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 . 60 Current assets acquired includes $ 91.3 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 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. Approximately $ 32 million of the goodwill is expected to be deductible for income tax purposes. The following table provides unaudited pro forma results of net revenue and net (loss) income for the year ended December 31, 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. Year Ended December 31, 2022 2021 Net revenue $ 10,232,588 $ 10,930,590 Net (loss) income $ ( 97,687 ) $ 286,466 Pro forma net loss of $ 97.7 million for the year ended December 31, 2022 includes pro forma adjustments for interest expense of $ 20.8 million and amortization of intangible assets of $ 10.5 million, which reflects the updated preliminary purchase price allocation. The pro forma net loss for the year ended December 31, 2022 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 year ended December 31, 2022 were $ 937 million and $ 3.3 million, respectively. Discontinued Operations. 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. We concluded that the Movianto business met the criteria for discontinued operations as of December 31, 2019 and through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met. Movianto was previously reported in the Global Solutions segment and would have been reported within Products & Healthcare Services under our current segment structure. Accordingly, the results of operations from the Movianto business were reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the year ended December 31, 2020. The following table summarizes the financial results of our discontinued operations: Year ended December 31, 2022 2021 2020 Net revenue $ — $ — $ 226,759 Cost of goods sold — — 53,923 Gross margin — — 172,836 Distribution, selling, and administrative expenses — — 157,512 Loss on divestiture — — 65,472 Acquisition-related and exit and realignment charges — — 4,825 Other operating income, net — — ( 388 ) Operating loss — — ( 54,585 ) Interest expense, net — — 3,144 Loss from discontinued operations before income taxes — — ( 57,729 ) Income tax provision from discontinued operations — — 474 Loss from discontinued operations, net of taxes $ — $ — $ ( 58,203 ) We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No. 2016-02 Leases (Topic 842) , for the year ended December 31, 2020. All revenue and expense included in discontinued operations during the year ended December 31, 2020 related to activity through the Divestiture Date. No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date. 61 We had no assets and liabilities associated with the discontinued Movianto business reflected on the consolidated balance sheet as of December 31, 2022 and 2021. The following table provides operating and investing cash flow information for our discontinued operations: Year ended December 31, 2022 2021 2020 Operating activities: Loss on divestiture $ — $ — $ 65,472 Investing activities: Capital expenditures $ — $ — $ ( 3,027 ) Note 4— Accounts Receivable, Net Allowances for losses on accounts receivable of $ 9.1 million and $ 18.0 million have been applied as reductions of accounts receivable at December 31, 2022 and 2021. Note 5— Merchandise Inventories At December 31, 2022 and 2021 we had net inventory of $ 1.3 billion and $ 1.5 billion, of which $ 840 million and $ 835 million were valued under LIFO. If LIFO inventories had been valued on a current cost or FIFO basis, they would have been greater by $ 231 million and $ 225 million as of December 31, 2022 and 2021. At December 31, 2022 and 2021, included in our inventory was $ 84.4 million and $ 99.5 million in raw materials, $ 73.7 million and $ 73.8 million in work in process and the remainder was finished goods. For the year ended December 31, 2022, primarily due to demand declines and builds in excess personal protective equipment (PPE), the Company increased its estimate of inventory valuation allowances. This change in estimate contributed to a $ 92.3 million (approximately $ 69.6 million, net of tax) valuation adjustment, or an approximate $ 0.93 and $ 0.91 impact per basic and diluted common share. At December 31, 2022 and 2021 we had inventory valuation allowances of $ 128 million and $ 25.4 million. 62 Note 6— Property and Equipment, Net Property and equipment, net, consists of the following: December 31, 2022 2021 Land and land improvements $ 22,849 $ 22,994 Buildings and leasehold improvements 197,228 171,268 Machinery and equipment 470,071 431,836 Patient service equipment 324,007 — Construction in progress 14,400 25,637 Property and equipment, gross 1,028,555 651,735 Accumulated depreciation and amortization ( 450,286 ) ( 334,500 ) Property and equipment, net $ 578,269 $ 317,235 Depreciation and amortization expense for property and equipment and assets under finance leases was $ 136 million, $ 40.5 million, and $ 41.5 million for the years ended December 31, 2022, 2021, and 2020. Note 7— Goodwill and Intangible Assets, Net In connection with our new segment structure, which began in the first quarter of 2022, goodwill is now reported as part of Products & Healthcare Services or Patient Direct. There was no change to our underlying reporting units as part of that segment change and therefore no reallocation of goodwill. As of October 1, 2022, we performed our annual impairment test and concluded that there were no impairments of goodwill. In December 2021, we closed on an acquisition of a small kitting business, the impact of which was immaterial to our financial results. The following table summarizes the changes in the carrying amount of goodwill through December 31, 2022: Patient Direct Products & Healthcare Services Consolidated Net carrying amount of goodwill, December 31, 2020 $ 283,905 $ 110,181 $ 394,086 Currency translation adjustments — ( 6,717 ) ( 6,717 ) Acquisition 2,816 2,816 Net carrying amount of goodwill, December 31, 2021 283,905 106,280 390,185 Currency translation adjustments — ( 2,713 ) ( 2,713 ) Acquisition 1,249,765 ( 532 ) 1,249,233 Net carrying amount of goodwill, December 31, 2022 $ 1,533,670 $ 103,035 $ 1,636,705 Intangible assets at December 31, 2022 and 2021 were as follows: 2022 2021 Customer Relationships Tradenames Other Intangibles Customer Relationships Tradenames Other Intangibles Gross intangible assets $ 447,107 $ 202,000 $ 73,181 $ 275,526 $ 90,000 $ 43,189 Accumulated amortization ( 197,540 ) ( 50,094 ) ( 29,612 ) ( 146,168 ) ( 33,242 ) ( 19,560 ) Net intangible assets $ 249,567 $ 151,906 $ 43,569 $ 129,358 $ 56,758 $ 23,629 Weighted average useful life 13 years 10 years 6 years 10 years 11 years 8 years At December 31, 2022 and 2021, $ 308 million and $ 45.7 million in net intangible assets were held in the Patient Direct segment and $ 137 million and $ 164 million were held in the Products & Healthcare Services segment. Amortization expense for intangible assets was $ 78.8 million for 2022, $ 39.8 million for 2021 and $ 41.5 million for 2020. Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $ 83.2 million for 2023, $ 65.3 million for 2024, $ 55.2 million for 2025, $ 53.7 million for 2026, and $ 46.9 million for 2027. 63 Note 8— Leases The components of lease expense were as follows: Years ended December 31, Classification 2022 2021 2020 Operating lease cost DS&A Expenses $ 81,520 $ 59,397 $ 53,675 Finance lease cost: Amortization of lease assets DS&A Expenses 2,755 1,098 963 Interest on lease liabilities Interest expense, net 1,516 1,255 1,283 Total finance lease cost 4,271 2,353 2,246 Short-term lease cost DS&A Expenses, Cost of goods sold 4,129 871 1,081 Variable lease cost DS&A Expenses, Cost of goods sold 35,431 17,491 15,611 Total lease cost $ 125,351 $ 80,112 $ 72,613 Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for our leased facilities and patient services equipment which are paid as incurred. Supplemental balance sheet information is as follows: As of December 31, Classification 2022 2021 Assets: Operating lease assets Operating lease assets $ 280,665 $ 194,006 Finance lease assets Property and equipment, net 10,194 8,896 Total lease assets $ 290,859 $ 202,902 Liabilities: Current Operating Other current liabilities $ 76,805 $ 41,817 Finance Other current liabilities 2,531 2,037 Noncurrent Operating Operating lease liabilities, excluding current portion 215,469 162,241 Finance Long-term debt, excluding current portion 11,877 11,314 Total lease liabilities $ 306,682 $ 217,409 The gross value recorded under finance leases was $ 21.5 million and $ 20.6 million with associated accumulated depreciation of $ 11.3 million and $ 11.7 million as of December 31, 2022 and 2021. Operating lease assets include $ 88.6 million in right-of-use assets and $ 91.9 million of operating lease liabilities associated with Apria as of December 31, 2022. 64 Other information related to leases was as follows: Years ended December 31, 2022 2021 2020 Supplemental cash flow information Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating and finance leases $ 81,821 $ 59,192 $ 54,541 Financing cash flows from finance leases $ 2,850 $ 1,199 $ 879 Right-of-use assets obtained in exchange for new operating and finance lease liabilities $ 75,188 $ 96,988 $ 41,616 Weighted average remaining lease term (years) Operating leases 4.3 4.9 5.2 Finance leases 5.2 6.4 7.9 Weighted average discount rate Operating leases 6.9 % 8.8 % 11.8 % Finance leases 9.9 % 10.8 % 12.3 % Maturities of lease liabilities as of December 31, 2022 were as follows: Operating Leases (1) Finance Leases Total 2023 $ 100,499 $ 3,557 $ 104,056 2024 88,461 3,505 91,966 2025 66,821 3,452 70,273 2026 46,418 2,578 48,996 2027 28,806 2,229 31,035 Thereafter 31,394 2,544 33,938 Total lease payments 362,399 17,865 380,264 Less: Interest ( 70,125 ) ( 3,457 ) ( 73,582 ) Present value of lease liabilities $ 292,274 $ 14,408 $ 306,682 (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 9— Exit and Realignment Costs We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution centers, warehouses, our client engagement center and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment which include reorganization costs, certain professional fees, costs to streamline administrative functions and processes, divestiture related costs, and other items. Exit and realignment charges by segment for the years ended December 31, 2022, 2021 and 2020 were as follows: Year ended December 31, 2022 2021 2020 Products & Healthcare Services $ 6,414 $ 28,760 $ 25,622 Patient Direct 483 2,349 310 Total exit and realignment charges $ 6,897 $ 31,109 $ 25,932 65 The following table summarizes the activity related to exit and realignment cost accruals through December 31, 2022: Total Accrued exit and realignment charges, December 31, 2019 $ 8,162 Provision for exit and realignment activities: Severance 5,623 Information system restructuring costs 2,119 Lease obligations 1,051 Other 6,519 Cash payments ( 20,328 ) Accrued exit and realignment charges, December 31, 2020 3,146 Provision for exit and realignment activities: Severance 9,191 Information system restructuring costs 4,752 Lease obligations 440 Other 5,564 Cash payments ( 14,787 ) Accrued exit and realignment charges, December 31, 2021 8,306 Provision for exit and realignment activities: Severance 2,018 Other 4,147 Cash payments ( 13,502 ) Accrued exit and realignment charges, December 31, 2022 $ 969 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 year ended December 31, 2022, which related to an increase in reserves associated with certain retained assets of Fusion5. We also incurred $ 11.2 million of costs that were expensed as incurred for the year ended December 31, 2021, which primarily includes $ 9.6 million of wind-down costs related to Fusion5. We also incurred $ 10.6 million of costs that were expensed as incurred for the year ended December 31, 2020, including $ 4.9 million in impairment charges related to our client engagement center right-of-use asset, $ 3.7 million in loss on the sale of certain disposed assets and $ 2.0 million in other asset charges. Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 48.1 million, $ 3.0 million and $ 11.8 million for the years ended December 31, 2022, 2021 and 2020. Acquisition-related charges in 2022 and 2021 consisted primarily of costs related to the Apria transaction. Acquisition-related charges in 2020 consisted primarily of transition costs for the Halyard acquisition. 66 Note 10— Debt Debt consists of the following: 2022 2021 December 31, Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value 4.375 % Senior Notes, due December 2024 $ 245,510 $ 237,772 $ 245,086 $ 263,263 Receivables Securitization Program 93,142 96,000 197,026 200,000 Term Loan A 490,816 485,000 — — 4.500 % Senior Notes, due March 2029 492,762 396,625 491,656 515,225 Term Loan B 576,587 597,733 — — 6.625 % Senior Notes, due April 2030 585,180 516,060 — — Finance leases and other 16,877 16,877 15,809 15,809 Total debt 2,500,874 2,346,067 949,577 994,297 Less current maturities ( 17,906 ) ( 17,906 ) ( 2,037 ) ( 2,037 ) Long-term debt $ 2,482,968 $ 2,328,161 $ 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. 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. On March 29, 2022, we entered into an amendment to our Receivables Financing Agreement. The amended Receivables Financing Agreement has a maximum borrowing capacity of $ 450 million. The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement). Under the Receivables Financing Agreement, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Financing Agreement matures in March 2025. At December 31, 2022 and 2021, we had borrowings of $ 96.0 million and $ 200 million outstanding under our Receivables Financing Agreement. At December 31, 2022 and 2021, we had maximum revolving borrowing capacity of $ 354 million and $ 100 million available under our Receivable Financing Agreement. 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 (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 December 31, 2022, we had no borrowings and letters of credit of $ 27.9 million outstanding 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 December 31, 2022 and 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 December 31, 2022 and 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 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 Term Loan A will mature in March 2027 and the Term Loan B will mature in March 2029. 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). The 2029 Unsecured Notes were sold at 100 % of the principal amount with an effective yield of 4.500 %. We may redeem all or part of 67 the 2029 Unsecured Notes prior to March 31, 2024, at a price equal to 100 % of the principal amount of the 2029 Unsecured Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium, as described in the Indenture dated March 10, 2021 (the Indenture). On or after March 31, 2024, we may redeem all or part of the 2029 Unsecured Notes at the applicable redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. 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 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 %. 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 Indenture dated March 29, 2022 (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 are effectively subordinated to any of our secured indebtedness, including indebtedness under our credit agreements. 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. The Revolving Credit Agreement, the Credit Agreement, Receivables Financing Agreement, 2024 Notes, 2029 Unsecured Notes, and 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the applicable 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 December 31, 2022. As of December 31, 2022, scheduled future principal payments of debt, excluding finance leases and other, were as follows: Year 2023 $ 15,375 2024 273,855 2025 136,375 2026 43,500 2027 402,875 2028 6,000 2029 1,059,500 2030 600,000 Of the $ 274 million due in 2024, $ 254 million is due in December 2024. Current maturities at December 31, 2022 include $ 9.4 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 11— Share-Based Compensation We maintain a share-based compensation plan (the Plan) that is administered by the Our People & Culture Committee of the Board of Directors. The Plan allows us to award or grant to officers, directors and teammates incentive, non-qualified and deferred compensation stock options, stock appreciation rights (SARs), performance stock units and performance shares (collectively Performance Stock Awards (PSAs)), restricted stock units and restricted stock (collectively Restricted Stock Awards (RSAs)) and unrestricted stock. We use authorized and unissued common shares for grants of RSAs, SARs, PSAs or 68 for stock option exercises. At December 31, 2022, approximately 5.1 million common shares were available for issuance under the Plan. RSAs under the Plan generally vest over one , three or five years . PSAs under the Plan are issuable as restricted stock or common shares upon meeting performance goals and generally have a total performance and vesting period of three years . We recognize the fair value of stock-based compensation awards, which is based upon the market price of the underlying common stock at the grant date, on a straight-line basis over the estimated requisite service period. RSAs are earned based on service conditions and PSAs are earned based on service conditions, performance conditions, market conditions, or any combination of these. The fair value of PSAs as of the date of grant is estimated assuming that performance goals will be achieved at target levels. If such goals are not probable of being met, or are probable of being met at different levels, recognized compensation cost is adjusted to reflect the change in estimated fair value. Total share-based compensation expense for December 31, 2022, 2021 and 2020 was $ 21.0 million, $ 25.0 million and $ 19.7 million with recognized tax benefits of $ 5.5 million, $ 6.5 million and $ 5.1 million. Unrecognized compensation cost related to nonvested RSAs, net of estimated forfeitures, was $ 27.8 million at December 31, 2022. This amount is expected to be recognized over a weighted-average period of 2.0 years, based on the maximum remaining vesting period required under the awards. Unrecognized compensation cost related to nonvested PSAs as of December 31, 2022 was $ 4.2 million and will be recognized primarily in 2023 and 2024 if the related performance targets are met. The following table summarizes the activity and value of nonvested RSAs and PSAs for the years ended December 31, 2022, 2021 and 2020: 2022 2021 2020 Number of Shares Weighted Average Grant-date Fair Value Per Share Number of Shares Weighted Average Grant-date Fair Value Per Share Number of Shares Weighted Average Grant-date Fair Value Per Share Nonvested awards at beginning of year 4,325 $ 11.57 4,816 $ 7.64 4,515 $ 9.69 Granted 2,745 19.10 2,758 14.10 2,289 7.29 Vested ( 2,667 ) 8.11 ( 1,801 ) 9.33 ( 1,487 ) 11.94 Forfeited ( 1,626 ) 11.25 ( 1,448 ) 6.10 ( 501 ) 7.69 Nonvested awards at end of year 2,777 22.52 4,325 11.57 4,816 7.64 The total fair value of RSAs and PSAs vesting during the years ended December 31, 2022, 2021 and 2020 was $ 21.6 million, $ 16.8 million and $ 17.8 million. 69 Note 12— Retirement Plans Savings and Retirement Plans. We maintain a voluntary 401(k) savings and retirement plans covering substantially all full-time and certain part-time teammates in the United States who have met eligibility requirements. We match a certain percentage of each teammates’ contribution. These plans also provide for discretionary contributions by us for all eligible teammates, subject to certain limits, and discretionary profit-sharing contributions. We may increase or decrease our contributions at our discretion, on a prospective basis. We incurred $ 14.0 million, $ 23.2 million and $ 21.6 million of expense related to these plans in 2022, 2021 and 2020. We also maintain defined contribution plans in some countries outside of the United States in which we operate. Expenses related to these plans were not material in 2022, 2021 and 2020. U.S. Retirement Plans. We have a frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S. Retirement Plan). The following table sets forth the U.S. Retirement Plan’s financial status and the amounts recognized in our consolidated balance sheets: December 31, 2022 2021 Change in benefit obligation Benefit obligation, beginning of year $ 50,244 $ 57,384 Interest cost 1,176 1,080 Actuarial gain ( 8,359 ) ( 4,462 ) Benefits paid ( 3,720 ) ( 3,758 ) Benefit obligation, end of year $ 39,341 $ 50,244 Change in plan assets Fair value of plan assets, beginning of year $ — $ — Employer contribution 3,720 3,758 Benefits paid ( 3,720 ) ( 3,758 ) Fair value of plan assets, end of year $ — $ — Funded status, end of year $ ( 39,341 ) $ ( 50,244 ) Amounts recognized in the consolidated balance sheets Other current liabilities $ ( 3,604 ) $ ( 3,649 ) Other liabilities ( 35,737 ) ( 46,595 ) Accumulated other comprehensive loss 10,550 19,831 Net amount recognized $ ( 28,791 ) $ ( 30,413 ) Accumulated benefit obligation $ 39,341 $ 50,244 Weighted average assumptions used to determine benefit obligation Discount rate 4.87 % 2.43 % Rate of increase in compensation levels N/A N/A Plan benefit obligations of the U.S. Retirement Plan were measured as of December 31, 2022 and 2021. Plan benefit obligations are determined using assumptions developed at the measurement date. The weighted average discount rate, which is used to calculate the present value of plan liabilities, is an estimate of the interest rate at which the plan liabilities could be effectively settled at the measurement date. When estimating the discount rate, we review yields available on high-quality, fixed-income debt instruments and use a yield curve model from which the discount rate is derived by applying the projected benefit payments under the plan to points on a published yield curve. 70 The components of net periodic benefit cost for the U.S. Retirement Plan were as follows: Year ended December 31, 2022 2021 2020 Interest cost $ 1,176 $ 1,080 $ 1,420 Recognized net actuarial loss 923 1,199 872 Net periodic benefit cost $ 2,099 $ 2,279 $ 2,292 Weighted average assumptions used to determine net periodic benefit cost Discount rate 2.43 % 1.95 % 2.75 % Rate of increase in future compensation levels N/A N/A N/A Amounts recognized for the U.S. Retirement Plan as a component of accumulated other comprehensive loss as of the end of the year that have not been recognized as a component of the net periodic benefit cost are presented in the following table. We expect to recognize approximately $ 0.4 million of the net actuarial loss reported in the following table as of December 31, 2022, as a component of net periodic benefit cost during 2023. Year ended December 31, 2022 2021 Net actuarial loss $ ( 10,550 ) $ ( 19,831 ) Deferred tax benefit 4,964 9,571 Amounts included in accumulated other comprehensive loss, net of tax $ ( 5,586 ) $ ( 10,260 ) As of December 31, 2022, the expected benefit payments required for each of the next five years and the five-year period thereafter for the U.S. Retirement Plan were as follows: Year 2023 $ 3,561 2024 3,349 2025 3,142 2026 2,924 2027 2,728 2028-2032 10,697 International Retirement Plans. Certain of our foreign subsidiaries have defined benefit pension plans covering substantially all of their respective teammates. As of December 31, 2022 and 2021, the accumulated benefit obligation under these plans was $ 11.8 million and $ 12.3 million. We recorded $ 3.6 million, $ 3.6 million and $ 2.3 million in net periodic benefit cost in other expense (income), net for the years ended December 31, 2022, 2021 and 2020. Note 13— Derivatives We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. 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. 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 December 31, 2022: 71 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, net $ 15,461 Other liabilities $ — Economic (non-designated) hedges Foreign currency contracts $ 58,321 January 2023 Other current assets $ 440 Other current liabilities $ 42 The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2021: Derivative Assets Derivative Liabilities Notional Amount Maturity Date Classification Fair Value Classification Fair Value Cash flow hedges Foreign currency contracts $ 9,700 January 2022 Other current assets $ 81 Other current liabilities $ — In March 2021, we terminated $ 300 million in notional value of interest rate swaps concurrent with the debt financing transaction. The 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 year ended December 31, 2021. The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 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 Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Interest rate swaps $ 14,814 Interest expense, net $ ( 128,891 ) $ ( 647 ) The amount of ineffectiveness associated with these contracts was immaterial for the periods presented. The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2021: Amount of Loss 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 Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income 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. 72 The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2020: Amount of Loss Recognized in Other Comprehensive 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 Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income Interest rate swaps $ ( 19,741 ) Interest expense, net $ ( 83,398 ) $ ( 9,232 ) The amount of ineffectiveness associated with these contracts was immaterial for the periods presented. For the years ended December 31, 2022, 2021 and 2020 we recognized a loss of $ 0.9 million, $ 2.3 million and $ 0.7 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) expense, net for our foreign exchange contracts. Note 14— Income Taxes The components of income from continuing operations before income taxes consist of the following: Year ended December 31, 2022 2021 2020 Income from continuing operations before income taxes: U.S. $ ( 17,650 ) $ 231,424 $ 80,632 Foreign 28,541 45,330 29,276 Income from continuing operations before income taxes $ 10,891 $ 276,754 $ 109,908 The income tax provision (benefit) consists of the following: Year ended December 31, 2022 2021 2020 Current tax provision (benefit): Federal $ 1,090 $ 54,087 $ ( 4,430 ) State 5,125 15,961 6,527 Foreign 8,648 14,853 4,172 Total current tax provision 14,863 84,901 6,269 Deferred tax provision (benefit): Federal ( 8,671 ) ( 22,046 ) 16,512 State ( 5,395 ) ( 4,175 ) ( 1,132 ) Foreign ( 12,295 ) ( 3,515 ) 185 Total deferred tax provision (benefit) ( 26,361 ) ( 29,736 ) 15,565 Total income tax (benefit) provision $ ( 11,498 ) $ 55,165 $ 21,834 73 A reconciliation of the federal statutory rate to our effective income tax rate is shown below: Year ended December 31, 2022 2021 2020 Federal statutory rate 21.0 % 21.0 % 21.0 % Increases (decreases) in the rate resulting from: Net capital loss on divestiture — % ( 1.0 ) % ( 24.8 ) % Tax reform — % ( 1.2 ) % ( 11.4 ) % Unrecognized tax benefits 10.2 % 0.1 % 5.0 % State income taxes, net of federal income tax impact ( 7.1 ) % 3.1 % 3.2 % Research and development credit ( 29.9 ) % ( 0.8 ) % ( 2.9 ) % Foreign income taxes 0.5 % 0.3 % 0.7 % Valuation allowance — % 1.1 % 27.1 % Restricted stock vestings ( 57.3 ) % ( 2.1 ) % 1.0 % Nondeductible compensation 28.9 % 1.0 % — % Foreign repatriation change (Thailand) ( 96.3 ) % — % — % Non-deductible transaction costs 19.5 % — % — % Foreign derived intangible income (FDII) — % ( 3.2 ) % — % Global intangible low-taxed income 5.0 % — % — % Other ( 0.1 ) % 1.6 % 1.0 % Effective income tax rate ( 105.6 ) % 19.9 % 19.9 % 74 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below: December 31, 2022 2021 Deferred tax assets: Employee benefit plans $ 27,923 $ 40,121 Accrued liabilities not currently deductible 15,640 24,659 Finance charges 2,143 2,019 Lease liabilities 80,300 57,056 Allowance for losses on accounts receivable 6,703 3,370 Net operating loss carryforwards 55,992 4,985 Capital loss carryover 30,034 30,323 Interest limitation 19,890 206 R&D Capitalized Costs 14,017 — Other 7,982 4,694 Total deferred tax assets 260,624 167,433 Less: valuation allowances ( 35,253 ) ( 34,706 ) Net deferred tax assets 225,371 132,727 Deferred tax liabilities: Merchandise inventories 18,904 32,261 Goodwill 4,151 2,759 Property and equipment 86,451 32,607 Right-of-use assets 75,623 52,755 Computer software 5,532 8,068 Derivatives 4,020 — Insurance ( 20 ) 1,040 Intangible assets 81,068 21,953 Withholding tax liabilities — 7,072 Other 826 101 Total deferred tax liabilities 276,555 158,616 Net deferred tax liability $ ( 51,184 ) $ ( 25,889 ) The valuation allowances relate to deferred tax assets for U.S. federal and state capital loss carryforwards and net operating loss carryforwards in various state jurisdictions. The U.S. capital loss carryforward, which has a full valuation allowance, has an expiration date of five years. As of December 31, 2022, federal net operating losses of approximately $ 190.6 million are available to offset future federal taxable income. The entire $ 190.6 million of net operating losses have an unlimited carryforward period and will not expire. The capital loss and net operating loss carryforwards in various state jurisdictions have various expiration dates ranging from five years to an unlimited carryforward period. Based on management’s judgment using available evidence about historical and expected future taxable earnings, management believes it is more likely than not that we will realize the benefit of the existing deferred tax assets, net of valuation allowances, at December 31, 2022. Cash payments for income taxes, including interest, for 2022, 2021 and 2020 were $ 38.1 million, $ 102 million and $ 15.4 million. Cash tax refunds received for 2022, 2021 and 2020 were $ 4.2 million, $ 2.5 million and $ 32.8 million. 75 A summary of the changes in the liability for unrecognized tax benefits from the beginning to the end of the reporting period is as follows: 2022 2021 Unrecognized tax benefits at January 1, $ 21,385 $ 20,770 Increases for positions taken during current period 1,016 858 Increases for positions taken during prior periods 325 2,422 Lapse of statute of limitations ( 227 ) ( 2,665 ) Unrecognized tax benefits at December 31, $ 22,499 $ 21,385 Included in the liability for unrecognized tax benefits at December 31, 2022 and 2021, were $ 2.7 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. These tax positions are temporary differences which do not impact the annual effective tax rate under deferred tax accounting. Any change in the deductibility period of these tax positions would impact the timing of cash payments to taxing jurisdictions. Unrecognized tax benefits of $ 19.8 million and $ 18.7 million at December 31, 2022 and 2021 would impact our effective tax rate if recognized and the remaining would not impact our effective tax rate. We recognize accrued interest and penalties related to unrecognized tax benefits. Accrued interest at December 31, 2022 and 2021 was $ 3.9 million and $ 2.9 million. The amounts recognized in interest expense for the years ended December 31, 2022, 2021 and 2020 were $ 1.0 million, $ 0.3 million and $ 1.3 million. There were no penalties accrued at December 31, 2022, 2021 and 2020 or recognized in 2022, 2021 and 2020. 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. On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns. Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United States by our domestic subsidiaries. Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date. We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies, including those available under the U.S. - Ireland Income Tax Treaty to alleviate double taxation. 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. 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. We file income tax returns in the U.S. federal and various state and foreign jurisdictions. Our U.S. federal income tax returns for the years 2015 through 2021 are subject to examination. Our income tax returns for U.S. state and local jurisdictions are generally open for the years 2019 through 2021; however, certain returns may be subject to examination for differing periods. The former owners are contractually obligated to indemnify us for all income tax liabilities incurred by Byram entities prior to its acquisition on August 1, 2017, and for all income tax liabilities incurred by the Halyard foreign entities located in Thailand, Mexico, and Honduras prior to its acquisition on April 30, 2018 . 76 Note 15— Net Income per Common Share The following table summarizes the calculation of net income per share attributable to common shareholders for the years ended December 31, 2022, 2021 and 2020: Year ended December 31, 2022 2021 2020 Income from continuing operations, net of tax $ 22,389 $ 221,589 $ 88,074 Loss from discontinued operations, net of tax — — ( 58,203 ) Net income $ 22,389 $ 221,589 $ 29,871 Weighted average shares outstanding - basic 74,496 72,744 63,368 Dilutive shares 1,721 2,742 144 Weighted average shares outstanding - diluted 76,217 75,486 63,512 Basic income (loss) per common share: Income from continuing operations $ 0.30 $ 3.05 $ 1.39 Loss from discontinued operations — — ( 0.92 ) Net income $ 0.30 $ 3.05 $ 0.47 Diluted income (loss) per common share: Income from continuing operations $ 0.29 $ 2.94 $ 1.39 Loss from discontinued operations — — ( 0.92 ) Net income $ 0.29 $ 2.94 $ 0.47 Note 16— Shareholders’ Equity In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an ag gregate offering price of up to $ 50.0 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of December 31, 2022, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program. On October 6, 2020, we completed a follow-on equity offering wherein we sold an aggregate of 8,475,000 shares of our common stock at an offering price of $ 20.50 , resulting in net proceeds to us of approximately $ 165 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions. Pursuant to the underwriting agreement, we granted the underwriters an option to purchase up to an additional 1,271,250 shares of our common stock, which the underwriters exercised in full. Inclusive of this exercised option, net proceeds to us were approximately $ 190 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions. We used the proceeds from the follow-on equity offering to repay the remaining $ 109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $ 51.7 million of our Term Loan A-2 at par on October 15, 2020, and to repay $ 30.0 million of borrowings under the revolving credit facility. 77 Note 17— Accumulated Other Comprehensive Loss The following tables show the changes in accumulated other comprehensive loss by component for the years ended December 31, 2022, 2021 and 2020: 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 8,359 ( 14,101 ) 14,814 9,072 Income tax ( 1,646 ) — ( 3,851 ) ( 5,497 ) Other comprehensive income (loss) before reclassifications, net of tax 6,713 ( 14,101 ) 10,963 3,575 Amounts reclassified from accumulated other comprehensive loss 923 — 647 1,570 Income tax ( 240 ) — ( 169 ) ( 409 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 683 — 478 1,161 Other comprehensive income (loss) 7,396 ( 14,101 ) 11,441 4,736 Accumulated other comprehensive loss, December 31, 2022 $ ( 7,201 ) $ ( 40,095 ) $ 11,441 $ ( 35,855 ) Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, December 31, 2020 $ ( 18,447 ) $ ( 18 ) $ ( 20,044 ) $ ( 38,509 ) Other comprehensive income (loss) before reclassifications 4,462 ( 25,976 ) 2,426 ( 19,088 ) Income tax ( 1,428 ) — ( 611 ) ( 2,039 ) Other comprehensive income (loss) before reclassifications, net of tax 3,034 ( 25,976 ) 1,815 ( 21,127 ) Amounts reclassified from accumulated other comprehensive loss 1,199 — 25,518 26,717 Income tax ( 383 ) — ( 7,289 ) ( 7,672 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 816 — 18,229 19,045 Other comprehensive income (loss) 3,850 ( 25,976 ) 20,044 ( 2,082 ) Accumulated other comprehensive loss, December 31, 2021 $ ( 14,597 ) $ ( 25,994 ) $ — $ ( 40,591 ) Retirement Plans Currency Translation Adjustments Derivatives Total Accumulated other comprehensive loss, December 31, 2019 $ ( 14,691 ) $ ( 25,301 ) $ ( 12,715 ) $ ( 52,707 ) Other comprehensive income (loss) before reclassifications ( 6,632 ) 9,703 ( 19,741 ) ( 16,670 ) Income tax 1,945 — 5,789 7,734 Other comprehensive income (loss) before reclassifications, net of tax ( 4,687 ) 9,703 ( 13,952 ) ( 8,936 ) Amounts reclassified from accumulated other comprehensive loss 1,297 15,580 9,232 26,109 Income tax ( 366 ) — ( 2,609 ) ( 2,975 ) Amounts reclassified from accumulated other comprehensive loss, net of tax 931 15,580 6,623 23,134 Other comprehensive income (loss) ( 3,756 ) 25,283 ( 7,329 ) 14,198 Accumulated other comprehensive loss, December 31, 2020 $ ( 18,447 ) $ ( 18 ) $ ( 20,044 ) $ ( 38,509 ) 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 (income), net. 78 Note 18— Commitments and Contingencies We have a contractual commitment to outsource information technology operations, including the management and operation of our information technology systems and distributed services processing, as well as application support, development and enhancement services. This agreement expires in July 2025, with two optional, consecutive one-year extensions. The commitment is cancellable with 90 days' notice and payment of a termination fee based upon the remaining period left under the agreement. We pay scheduled fees under the agreement, which can vary based on changes in the level of support required. Assuming no early termination of the contract, our estimated remaining annual obligations under this agreement are $ 32.6 million in 2023, $ 32.1 million in 2024, and $ 15.9 million in 2025. Note 19— Legal Proceedings We are party to various legal claims that are ordinary and incidental to our business, including ones related to commercial disputes, employment, workers’ compensation, product liability, regulatory and other matters. We maintain insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. We establish reserves from time to time based upon periodic assessment of the potential outcomes of pending matters. Based on current knowledge and the advice of counsel, we believe that the accrual as of December 31, 2022 for currently pending matters considered probable of loss, which is not material, is sufficient. In addition, we believe that other currently pending matters are not reasonably possible to result in a material loss, as payment of the amounts claimed is remote, the claims are immaterial, individually and in the aggregate, or the claims are expected to be adequately covered by insurance, subject to policy limits, applicable deductibles, exclusions, and insurer solvency. Note 20— Segment Information We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance. We report our business under two segments: Products & Healthcare Services and Patient Direct. The Products & Healthcare Services segment includes our United States distribution business (Medical Distribution), outsourced logistics and value-added services business, and our Global Products business which manufactures and sources medical surgical products through our production and kitting operations. The Patient Direct segment includes our home healthcare businesses (Byram and Apria). We evaluate the performance of our segments based on their operating income excluding intangible amortization, acquisition-related, exit and realignment charges, along with other adjustments, that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis. Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading and not meaningful. 79 The following tables present financial information by segment: Year ended December 31, 2022 2021 2020 Net revenue: Products & Healthcare Services $ 7,898,397 $ 8,825,646 $ 7,662,429 Patient Direct 2,057,078 959,669 817,748 Consolidated net revenue $ 9,955,475 $ 9,785,315 $ 8,480,177 Operating income: Products & Healthcare Services $ 175,309 $ 384,390 $ 215,698 Patient Direct 193,748 57,966 67,662 Intangible amortization ( 78,847 ) ( 39,807 ) ( 41,490 ) Acquisition-related and exit and realignment charges ( 55,022 ) ( 34,076 ) ( 37,752 ) Inventory valuation adjustment (1) ( 92,275 ) — — Consolidated operating income $ 142,913 $ 368,473 $ 204,118 Depreciation and amortization: Products & Healthcare Services $ 77,539 $ 75,548 $ 77,131 Patient Direct 151,128 15,073 16,205 Consolidated depreciation and amortization $ 228,667 $ 90,621 $ 93,336 Capital expenditures: Products & Healthcare Services $ 49,824 $ 48,282 $ 55,110 Patient Direct 116,758 1,408 1,056 Discontinued operations — — 3,027 Consolidated capital expenditures $ 166,582 $ 49,690 $ 59,193 (1) Relates to an inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic. December 31, 2022 2021 Total assets: Products & Healthcare Services $ 2,809,600 $ 3,012,303 Patient Direct 2,507,216 468,536 Segment assets 5,316,816 3,480,839 Cash and cash equivalents 69,467 55,712 Consolidated total assets $ 5,386,283 $ 3,536,551 The following tables present information by geographic area. Net revenues were attributed to geographic areas based on the locations from which we ship products or provide services. Year ended December 31, 2022 2021 2020 Net revenue: United States $ 9,526,037 $ 9,250,331 $ 8,130,411 International 429,438 534,984 349,766 Consolidated net revenue $ 9,955,475 $ 9,785,315 $ 8,480,177 80 December 31, 2022 2021 Long-lived assets: United States $ 1,226,108 $ 641,630 International 116,524 113,363 Consolidated long-lived assets $ 1,342,632 $ 754,993 81 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Owens & Minor, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Owens & Minor, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Evaluation of fair value of acquired intangible assets As discussed in Note 3 to the consolidated financial statements, on March 29, 2022 the Company completed the acquisition of 100% of Apria, Inc., which was accounted for using the acquisition method of accounting. The Company recorded intangible assets with an acquisition-date fair value of $315 million, which included certain trade names and payor and capitated relationships intangible assets. The fair value of intangible assets acquired have been estimated based on various valuation methods, including the income approach. We identified the evaluation of the acquisition-date fair values of certain trade names and payor and capitated relationships intangible assets as a critical audit matter. A higher degree of auditor judgment was required to evaluate certain projected revenues used in the valuation models to determine the fair value of these intangible assets. 82 The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the projected revenues. We performed sensitivity analyses over the projected revenues to assess the impact of changes in those assumptions on the Company’s determination of fair value. We assessed management’s projected revenues by comparing them to historical revenue trends. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the projected revenues by comparing them to the projected revenues of a set of comparable companies and other market data. Estimates of variable consideration on equipment and supplies sales and estimated adjustments on equipment rental revenues As discussed in Note 1 to the consolidated financial statements, within the Company’s Patient Direct segment, revenues are recognized under fee-for-service arrangements for equipment rented to patients and sales of equipment, supplies and other items sold to patients. The Company’s Patient Direct segment net revenue was $2,057 million for the year ended December 31, 2022. 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. The Company determines the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration on equipment and supplies sales and estimated adjustments to record revenue at an amount probable of being collected for equipment rental revenues. The Company uses contractual agreements, historical experience, and other operating trends to determine the estimates of variable consideration on equipment and supplies sales and estimated adjustments on equipment rental revenues. We identified the evaluation of the estimates of variable consideration on equipment and supplies sales and estimated adjustments on equipment rental revenues as a critical audit matter. A higher degree of auditor judgment was required to evaluate the relevance and reliability of the historical experience and other operating trends. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s estimate of variable consideration on certain equipment and supplies sales. We assessed the relevance and reliability of the Company’s historical experience on net revenues recorded during the current year by selecting certain historical payments and comparing them to underlying support. We assessed management’s ability to estimate by comparing previous estimates to actual results and current estimates. We also compared current operating trends to the current year estimates. /s/ KPMG LLP We have served as the Company’s auditor since 1987. Richmond, Virginia February 28, 2023 83 Index to Exhibits 2.1 Purchase Agreement, dated as of October 31, 2017, by and among Halyard Health, Inc., the other sellers party thereto and Owens & Minor, Inc. (incorporated herein by reference to our Current Report on Form 8-K/A, Exhibit 2.1, dated November 1, 2017) ** 2.2 Amended and Restated Purchase Agreement, dated as of April 30, 2018, by and among Halyard Health, Inc., the other sellers party thereto and Owens & Minor, Inc. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 2.1, dated May 1, 2018) 2.3 Purchase Agreement, dated as of April 6, 2020 by and among EHDH Holding Group and Owens & Minor, Inc. (incorporated herein by reference to our Current Report on Form 8-K/A Exhibit 2.1, dated January 16, 2020)** 2.4 Agreement and Plan of Merger, dated as of January 7, 2022, by and among the Company, Apria and Merger Sub (incorporated herein by reference to the Company's Current Report on For 8-K, Exhibit 2.01, dated January 10, 2022) 3.1 Amended and Restated Articles of Incorporation of Owens & Minor, Inc. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 3.1, dated July 29, 2008) 3.2 Amended and Restated Bylaws of the Company effective October 28 , 2022 (incorporated herein by reference to the our Quarterly Report on Form 10-Q , Exhibit 3.1, date d November 2 , 2022) 4.1 Indenture, dated September 16, 2014, by and among Owens & Minor, Inc., Owens and Minor Distribution, Inc., Owens & Minor Medical, Inc. and U.S. Bank National Association, as trustee (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated September 17, 2014) 4.2 First Supplemental Indenture, dated September 16, 2014, by and among Owens & Minor, Inc., Owens and Minor Distribution, Inc., Owens & Minor Medical, Inc. and U.S. Bank National Association, as trustee (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.2, dated September 17, 2014) 4.3 Form of Global Note for the 3.875% Senior Notes due 2021 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit A of Exhibit 4.2, dated September 17, 2014) 4.4 Form of Global Note for the 4.375% Senior Notes due 2024 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit B of Exhibit 4.2, dated September 17, 2014) 4.5 Third Supplemental Indenture, dated as of April 30, 2018, by and among Owens & Minor, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated May 4, 2018) 4.6 Fourth Supplemental Indenture, dated as of February 12, 2019, among Owens & Minor, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.1, dated February 19, 2019) 4.7 Indenture, dated March 10, 2021, among Owens & Minor, Inc., the guarantors named therein and Regions Bank, as Trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.1, dated March 11, 2021) 4.8 Form of Global Note for the 4.500% Senior Notes due 2029 (included as Exhibit A to Exhibit 4.1 hereto) (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.2, dated March 11, 2021) 4.9 Sixth Supplemental Indenture, dated as of March 10, 2021, by and among Owens & Minor, Inc., the guarantors signatory thereto and U.S. Bank National Association, as trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.3, dated March 11, 2021). 4.10 Indenture dated March 29, 2022 by and among the Company, the guarantors named therein and Regions Bank, as trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.1, dated March 29, 2022) 4.11 Form of Global Note for the 6.625% Senior Notes due 2030 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.2, dated March 29, 2022) 84 4.12 Seventh Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.3, dated March 29, 2022) 4.13 First Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and Regions Bank, as trustee, to the Indenture dated as of March 10, 2021 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.4, dated March 29, 2022) 4.14 First Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and Regions Bank, as trustee, to the Indenture dated of March 29, 2022 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.5, dated March 29, 2022) 4.15 Description of Securities - filed herewith 10.1 Form of Director Restricted Stock Agreement under the 2015 Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.3, for the quarter ended March 31, 2016)* 10.2 Form of Owens & Minor, Inc. Restricted Stock Agreement under the 2018 Stock Incentive Plan effective February 28, 2019 (incorporated herein by reference to our Current report on 8-K, Exhibit 10.1, dated March 1, 2019)* 10.3 Owens & Minor, Inc. Directors’ Deferred Compensation Plan, as amended and restated effective January 1, 2005 (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.3, for the quarter ended September 30, 2008)* 10.4 Form of Owens & Minor, Inc. Executive Severance Agreement effective January 1, 2011 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.10, for the year ended December 31, 2010)* 10.5 Form of Owens & Minor, Inc. Executive Change in Control Severance Agreement between Owens & Minor, Inc. and Edward A. Pesicka effective March 4, 2019 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 25, 2019)* 10.6 Form of Owens & Minor, Inc. Executive Change in Control Severance Agreement effective October 25, 2018 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.7, for the year ended December 31, 2018) * 10.7 Owens & Minor, Inc. Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2005 (“SERP”) (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended September 30, 2008)* 10.8 Resolutions of the Board of Directors of the Company amending the SERP (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.12, for the year ended December 31, 2011)* 10.9 Amendment effective March 1, 2016 of the Company’s SERP (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.6, for the quarter ended March 31, 2016)* 10.10 Amendment effective March 1, 2016 of Exhibit II of the Company’s SERP (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.7, for the quarter ended March 31, 2016)* 10.11 Owens & Minor, Inc. Amended and Restated Management Equity Ownership Program and Stock Ownership Rewards Program (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.15, for the year ended December 31, 2009)* 10.12 Amendment to MEOP effective January 1, 2014 (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.10, for the year ended December 31, 2013)* 10.13 Owens & Minor, Inc. Executive Deferred Compensation and Retirement Plan effective January 1, 2013 (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2013)* 10.14 Form of Owens & Minor, Inc. Restricted Stock Agreement under the 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.2, for the quarter ended March 31, 2016)* 85 10.15 Form of Owens & Minor, Inc. Restricted Stock Unit Agreement under the Company’s 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2016)* 10.16 Form of Owens & Minor Director Restricted Stock Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 9, 2018) * 10.17 Form of Owens & Minor Restricted Stock Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 9, 2018) * 10.18 Form of Owens & Minor Restricted Stock Unit Agreement under the Company’s 2018 Stock Incentive Plan (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.3, dated May 9, 2018) * 10.19 Form of 2016 Performance Share Award Agreement under the 2015 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.4, for the quarter ended March 31, 2016)* 10.20 Form of Owens & Minor, Inc. 2019 Performance Share Award Agreement under the 2018 Stock Incentive Plan (incorporated herein by reference to our Current report on 8-K, Exhibit 10.2, dated March 1, 2019)* 10.21 Form of Owens & Minor, Inc. 2020 Performance Share Award Agreement under the 2018 Stock Incentive Plan (incorporated herein by reference to our Current report on 8-K, Exhibit 10.2, dated May 1, 2020)* 10.22 Owens & Minor, Inc. Officer Severance Policy dated May 7, 2018 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.4, dated May 9, 2018)* 10.23 Policy on Recoupment of Executive Incentive Compensation (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.36, for the year ended December 31, 2009)* 10.24 Owens & Minor, Inc. 2015 Stock Incentive Plan (incorporated herein by reference to our Registration Statement on Form S-8, Registration Number 333-203826)* 10.25 Owens & Minor, Inc. 2018 Stock Incentive Plan (incorporated herein by reference to our Registration Statement on Form S-8, Registration number 333-224787)* 10.26 Credit Agreement dated as of June 5, 2012 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc. (as Borrowers), Owens & Minor, Inc. and certain of its domestic subsidiaries (as Guarantors), Wells Fargo Bank, N.A. (as Administrative Agent), JPMorgan Chase Bank, N.A. (as Syndication Agent) and a syndicate of banks as specified on the signature pages thereof (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated June 8, 2012) 10.27 First Amendment dated as of September 17, 2014 by and among Owens & Minor Distribution, Inc. and Owens & Minor Medical, Inc. ( as Borrowers), Owens & Minor, Inc. and certain of its domestic subsidiaries (as Guarantors) and Wells Fargo Bank, N.A. ( as Administrative Agent), to the Credit Agreement dated as of June 5, 2012 by and among the Borrowers, the Guarantors, a syndicate of financial institutions party thereto, the Administrative Agent, and the other agents party thereto (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated September 18, 2014) 10.28 Interest Purchase Agreement, dated as of May 2, 2017, by and among Owens & Minor, Inc., Barista Acquisition I, LLC, Barista Acquisition II, LLC , Mediq B.V. , Mediq International B.V. and Mediq USA Holdings (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2017) 10.29 Owens & Minor, Inc. 2017 Teammate Stock Purchase Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 22, 2017 (File No. 001-09810))* 10.30 Credit Agreement, dated as of July 27, 2017, by and among Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC, and Barista Acquisition II, LLC, (the “Borrowers”), Owens & Minor, Inc. and certain of its domestic subsidiaries (together, the “Guarantors), Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Wells Fargo Bank, N.A. (the “Administrative Agent”), a syndicate of financial institutions party thereto, and the other agents party thereto (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated July 28, 2017) 86 10.31 Restated Guaranty Agreement, dated as of the February 12, 2019, by and among Owens & Minor, Inc., the other Guarantors party thereto and Bank of America, N.A., as administrative agent for the Pro Rata Facilities and the Term B Facility (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2019) 10.32 Security and Pledge Agreement, dated as of April 30, 2018, by and among Owens & Minor, Inc., O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Bank of America, N.A., U.S. Bank National Association, and the other secured parties thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 4, 2018) 10.33 First Amendment to Credit Agreement, dated as of March 29, 2018, by and among Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC, and Barista Acquisition II, LLC, as Borrowers, Owens & Minor, Inc. and certain of its domestic subsidiaries, as Guarantors, the banks party thereto and Wells Fargo Bank, N.A., as Administrative Agent for the banks party thereto (incorporated herein by reference to our Current Report on Form 8-K/A, Exhibit 10.1, dated April 18, 2018) 10.34 Second Amendment to Credit Agreement, dated as of April 30, 2018, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Wells Fargo Bank, N.A., as administrative agent for certain of the credit facilities, Bank of America, N.A., as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 4, 2018) 10.35 Third Amendment to Credit Agreement, dated as of May 9, 2018, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Wells Fargo Bank, N.A., as administrative agent for certain of the credit facilities, Bank of America, N.A., as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Form 10-Q, Exhibit 10.9, dated May 10, 2018) 10.36 Fourth Amendment to Credit Agreement, dated as of February 12, 2019, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Bank of America, N.A., as administrative agent for certain of the credit facilities and as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2019) 10.37 Amendment to the Owens & Minor, Inc. 2018 Stock Incentive Plan (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated May 10, 2019* 10.38 Owens & Minor, Inc. Directors’ Deferred Compensation Plan, as Amended and Restated Effective May 10, 2019 ((Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated May 10, 2019* 10.39 Fifth Amendment to Credit Agreement, dated as of February 13, 2020, by and among O&M Halyard, Inc., Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC and Barista Acquisition II, LLC, Owens & Minor, Inc. and each other domestic subsidiary of the Company party thereto from time to time, Bank of America, N.A., as administrative agent for certain of the credit facilities and as collateral agent and administrative agent for the term B facility, and the other agents party thereto. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 18, 2020) 10.40 Receivables Financing Agreement, dated as of February 19, 2020, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated February 19, 2020) 10.41 Purchase and Sale Agreement, dated as of February 19, 2020, by and among Owens & Minor Distribution, Inc., as the originator, Owens & Minor Medical, Inc., as servicer, and O&M Funding LLC, as buyer. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.2, dated February 19, 2020) 10.42 Performance Guaranty of Owens & Minor, Inc., dated as of February 19, 2020 in favor of PNC Bank, National Association. (Incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.3, dated February 19, 2020) 10.43 Amendment No. 2 to the Owens & Minor, Inc. 2018 Stock Incentive Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed March 19, 2020. (File No. 001-09810))* 87 10.44 First Amendment to the Receivables Financing Agreement, dated as of May 19, 2020, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended June 30, 2020) 10.45 Second Amendment to the Receivables Financing Agreement, dated as of July 1, 2020, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.2, for the quarter ended June 30, 2020) 10.46 Form of Restricted Stock Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated February 26, 2021)* 10.47 Form of Restricted Stock Unit Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.2, dated February 26, 2021)* 10.48 Form of 2021 Performance Stock Unit Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.3, dated February 26, 2021)* 10.49 Credit Agreement, dated as of March 10, 2021, by and among Owens & Minor, Inc, and certain subsidiaries of Owens & Minor, Inc, as borrowers, Bank of America, N.A., as an administrative agent and collateral agent, and a syndicate of financial institutions, as lenders (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated March 11, 2021) 10.50 Third Amendment to Receivables Financing Agreement, dated as of March 10, 2021, by and among Owens & Minor Medical, Inc., as the initial servicer, O&M Funding LLC, as borrower, the lenders from time to time party thereto, PNC Bank, National Association, as administrative agent, and PNC Capital Markets LLC, as structuring agent (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.2, dated March 11, 2021) 10.51 Amendment to Purchase and Sale Agreement, dated as of March 10, 2021, by and among Owens & Minor Distribution, Inc., as the originator, Owens & Minor Medical, Inc., as servicer, and O&M Funding LLC, as buyer (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.3, dated March 11, 2021). 10.52 Owens & Minor, Inc. 2021 Teammate Stock Purchase Plan (incorporated by reference to Appendix C to the Company’s definitive Proxy Statement filed March 19, 2020 (File No. 001-09810))* 10.53 Agreement of Resignation, Appointment, and Acceptance, dated as September 10, 2021, by and among Owens & Minor, Inc., U.S. Bank National Association, as Prior Trustee, and Regions Bank, as Successor Trustee(incorporated herein by reference to our Form 10-Q, Exhibit 10.1, dated November 3, 2021) 10.54 Form of Owens & Minor, Inc. Restricted Stock Agreement under the Company's 2018 Stock Incentive Plan (incorporated herein by reference to our Form 10-Q, Exhibit 10.2, dated November 3, 2021)* 10.55 Form of Owens & Minor, Inc. Restricted Stock Unit Award Agreement under the Company's 2018 Stock Incentive Plan (incorporated herein by reference to our Form 10-Q, Exhibit 10.3, dated November 3, 2021)* 10.56 Amendment No. 1 to Credit Agreement, among Owens & Minor Distribution, Inc., Owens & Minor Medical, Inc., Barista Acquisition I, LLC, Barista Acquisition II, LLC, O&M Halyard, Inc., Byram Healthcare Centers, Inc., Owens & Minor, Inc., and Bank Of America (incorporated herein by reference to our Form 10-K, Exhibit 10.56, dated February 23, 2022) 10.57 Executive Separation Agreement and General Release, dated as of January 9, 2022, by and between Christopher Lowery and Owens & Minor Medical, Inc. (incorporated herein by reference to our Form 10-K, Exhibit 10.57, dated February 23, 2022)*,** 10.58 Form of Restricted Stock Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated March 1, 2022)** 10.59 Form of Restricted Stock Unit Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.2, dated March 1, 2022)** 88 10.60 Form of 2022 Performance Stock Unit Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.3, dated March 1, 2022)** 10.61 Credit Agreement dated as of March 29, 2022, by and among the Company, certain subsidiaries of the Company party thereto, as borrowers, JPMorgan Chase Bank, N.A., as an administrative agent and collateral agent, and a syndicate of financial institutions, as lenders (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated March 29, 2022)** 10.62 Fourth Amendment to Receivables Financing Agreement, dated as of March 29, 2022, by and among O&M Funding LLC, as borrower, Owens & Minor Medical, Inc., as initial servicer, the lenders party thereto, and PNC Bank, National Association, as administrative agent (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.2, dated March 29, 2022)** 10.63 Joinder to Credit Agreement, Amendment No. 2 to Credit Agreement, Amendment No. 1 to Security Agreement and Amendment No. 1 to Guaranty, dated as of March 29, 2022, by and among the Company and certain subsidiaries of the Company, as borrowers, the guarantors and lenders thereto and Bank of America, N.A., as administrative agent and collateral agent, L/C issuer and swing line lender (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.6, for the quarter ended March 31, 2022) 10.64 Amendment No. 3 to the Owens & Minor, Inc. 2018 Stock Incentive Plan (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.6, for the quarter ended March 31, 2022)** 10.65 Executive Separation Agreement and General Release, dated as of October 12, 2022, by and between Jeffrey T. Jochims and Owens & Minor, Inc. (incorporated herein by reference to our Form 10-Q, Exhibit 10.2, dated November 2, 2022) ** 11.1 Calculation of Net Income (Loss) per Common Share. Information related to this item is in Part II, Item 8, Notes to Consolidated Financial Statements, Note 15-Net Income (Loss) per Common Share 21.1 Subsidiaries of Registrant 22.1 List of Guarantor Subsidiaries 22.2 List of Subsidiaries Pledged as Collateral 23.1 Consent of KPMG LLP, independent registered public accounting firm 31.1 Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 89 * Management contract or compensatory plan or arrangement. ** Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We hereby undertake to furnish copies of such omitted materials supplementally upon request by the SEC. Item 16. Form 10-K Summary None. 90 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 28th day of February, 2023. OWENS & MINOR, INC. /s/ Edward A. Pesicka Edward A. Pesicka President, Chief Executive Officer & Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 28th day of February, 2023: /s/ Edward A. Pesicka /s/ Robert J. Henkel Edward A. Pesicka Robert J. Henkel President, Chief Executive Officer & Director Director /s/ Alexander J. Bruni /s/ Rita F. Johnson-Mills Alexander J. Bruni Rita F. Johnson-Mills Executive Vice President & Chief Financial Officer Director /s/ Michael W. Lowry /s/ Stephen W. Klemash Michael W. Lowry Stephen W. Klemash Senior Vice President, Corporate Controller & Chief Accounting Officer Director /s/ Mark A. Beck /s/ Teresa L. Kline Mark A. Beck Teresa L. Kline Chair of the Board of Directors Director /s/ Gwendolyn M. Bingham /s/ Carissa L. Rollins Gwendolyn M. Bingham Carissa L. Rollins Director Director /s/ Kenneth Gardner-Smith Kenneth Gardner-Smith Director 91