What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-02 · 176 added, 355 removed, 331 unchanged (62% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2023 2022

3 unchanged sentences

Distribution, selling and administrative expenses 448,722 269,471

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

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

Acquisition-related charges and intangible amortization 22,188 42,135

Exit and realignment charges 15,674 1,682

Other operating expense (income), net 916 ( 899 )

Operating income 9,807 61,059

Interest expense, net 42,198 12,019

Loss on extinguishment of debt — — — 40,433

Other expense, net 1,387 783

Income before income taxes 19,595 50,504 106,318 226,838

Income tax provision 7,098 6,375 25,937 47,224

Net income $ 12,497 $ 44,129 $ 80,381 $ 179,614

Net income per common share:

(Loss) income before income taxes ( 33,778 ) 48,257

Income tax (benefit) provision ( 9,360 ) 8,978

Net (loss) income $ ( 24,418 ) $ 39,279

Net (loss) income per common share:

Basic $ ( 0.32 ) $ 0.53

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and Subsidiaries

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022

Net income $ 12,497 $ 44,129 $ 80,381 $ 179,614

Net (loss) income $ ( 24,418 ) $ 39,279

Other comprehensive income (loss) net of tax:

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Change in gains and losses on derivative instruments ( 3,377 ) —

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

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

Total other comprehensive income (loss), net of tax 1,594 ( 598 )

Comprehensive (loss) income $ ( 22,824 ) $ 38,681

See accompanying notes to consolidated financial statements.

2 unchanged sentences

Consolidated Balance Sheets

September 30, December 31,

March 31, December 31,

(in thousands, except per share data) 2023 2022

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Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2023 2022

Operating activities:

Net income $ 80,381 $ 179,614

Adjustments to reconcile net income to cash provided by operating activities:

Net (loss) income $ ( 24,418 ) $ 39,279

Adjustments to reconcile net (loss) income to cash provided by operating activities:

Depreciation and amortization 70,926 24,125

Share-based compensation expense 6,463 5,403

(Benefit) provision for losses on accounts receivable ( 521 ) 5,628

Loss on extinguishment of debt 564 —

Provision for losses on accounts receivable 5,289 19,270

Deferred income tax expense (benefit) 2,991 ( 18,286 )

Deferred income tax benefit ( 591 ) ( 69 )

Changes in operating lease right-of-use assets and lease liabilities ( 225 ) ( 462 )

Gain on sale and dispositions of property and equipment ( 8,269 ) —

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable 5,240 ( 12,919 )

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Proceeds from sale of property and equipment 17,306 3

Other, net ( 1,670 ) —

Cash used for investing activities ( 34,184 ) ( 1,587,236 )

Financing activities:

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

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

Borrowings under amended Receivables Financing Agreement 232,100 —

Repayments under amended Receivables Financing Agreement ( 328,100 ) —

Repayments of debt ( 26,500 ) —

Borrowings under amended accounts receivable securitization program 697,700 —

Repayments under amended accounts receivable securitization program ( 770,700 ) —

Proceeds from issuance of debt — 1,691,000

Borrowings under revolving credit facility, net and Receivable Financing Agreement — 41,700

Financing costs paid — ( 33,744 )

Cash dividends paid — ( 548 )

Payment for termination of interest rate swaps

Other, net ( 4,989 ) ( 34,762 )

Cash provided by (used for) financing activities 1,560,585 ( 117,222 )

Cash (used for) provided by financing activities ( 127,489 ) 1,664,194

Effect of exchange rate changes on cash, cash equivalents and restricted cash 284 ( 669 )

Net increase (decrease) in cash, cash equivalents and restricted cash 21,173 ( 78,424 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 2,991 ) 155,988

Cash, cash equivalents and restricted cash at beginning of period 86,185 72,035

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Balance, December 31, 2022 76,279 $ 152,557 $ 418,894 $ 410,008 $ ( 35,855 ) $ 945,604

Net income 39,279 39,279

Other comprehensive loss ( 598 ) ( 598 )

Share-based compensation expense, exercises and other 653 1,307 ( 30,867 ) ( 29,560 )

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

Net income 28,604 28,604

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

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

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

Net income 12,497 12,497

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

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

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

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

Net income 69,589 69,589

Net loss — — — ( 24,418 ) — ( 24,418 )

Other comprehensive income — — — — 1,594 1,594

Dividends declared ($ 0.0025 per share)

( 434 ) ( 434 )

Share-based compensation expense, exercises and other ( 83 ) ( 166 ) 1,786 — — 1,620

Balance, March 31, 2023 76,196 $ 152,391 $ 420,680 $ 385,590 $ ( 34,261 ) $ 924,400

Net income 65,896 65,896

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

Dividends declared ($ 0.0025 per share)

( 187 ) ( 187 )

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

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

Balance, December 31, 2021 75,433 $ 150,865 $ 440,608 $ 387,619 $ ( 40,591 ) $ 938,501

Net income — — — 39,279 — 39,279

Other comprehensive loss — — — — ( 598 ) ( 598 )

Dividends declared ($ 0.0025 per share)

( 183 ) ( 183 )

Share-based compensation expense, exercises and other 653 1,307 ( 30,867 ) — — ( 29,560 )

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

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

See accompanying notes to consolidated financial statements.

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

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

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

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

Refer to Note 3 for additional details.

Reclassifications

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

Restricted cash as of March 31, 2023 and December 31, 2022 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.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 66,840 $ 69,467

Restricted cash included in Other current assets 16,354 —

Restricted cash included in Other assets, net — 16,718

Total cash, cash equivalents, and restricted cash $ 83,194 $ 86,185

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation.

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

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

Straight-line and accelerated methods of depreciation are used for income tax purposes.

Normal maintenance and repairs are expensed as incurred, and renovations and

betterments are capitalized.

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

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

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

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

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

Revenue Recognition

Our revenue is primarily generated from sales contracts with customers.

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

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

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

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

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

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

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

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

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

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

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

Rental Revenue

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.

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

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

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

Equipment rental revenue was not material in the prior year.

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

We recorded $ 172 million in revenue related to equipment we rent to patients for the three months ended March 31, 2023.

Equipment rental revenue was not m aterial for the three months ended March 31, 2022 .

Note 2— Fair Value

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.

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See Note 8 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 charges and intangible amortization within the consolidated statements of operations.

Note 3— Acquisition

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.

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

(Apria) pursuant to the Agreement and Plan of Merger 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.

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

These inputs are considered Level 3 inputs.

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

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

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

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

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

As of March 31, 2023, the allocation of purchase price to assets and liabilities acquired is finalized.

Fair Value as of Acquisition Date

Assets acquired:

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

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

Current assets acquired includes $ 88.7 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.

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

Approximately $ 32 million of the goodwill is expected to be deductible for income tax purposes.

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

Approximately $ 33 million of the goodwill is deductible for income tax purposes.

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

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

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

2022 2021 2022 2021

Three Months Ended March 31, 2022

Net revenue $ 2,684,065

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

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

Net loss $ ( 78,861 )

Pro forma net loss of $ 78.9 million for the three months ended March 31, 2022 includes pro forma adjustments for interest expense of $ 15.4 million, net of tax, and amortization of intangible assets of $ 8.9 million, net of tax.

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

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

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

Acquisition-related charges within acquisition-related charges and intangible amortization presented in our consolidated statements of operations were $ 1.3 million and $ 31.9 million for the three months ended March 31, 2023 and 2022, which consisted primarily of costs related to the Apria Acquisition.

Note 4— Goodwill and Intangible Assets

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.

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

Products & Healthcare Services Patient Direct Consolidated

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through March 31, 2023:

Patient Direct Products & Healthcare Services Consolidated

Carrying amount of goodwill, December 31, 2022 $ 1,533,670 $ 103,035 $ 1,636,705

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

Acquisition adjustment 1,582 — 1,582

Currency translation adjustments — 846 846

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

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

September 30, 2022 December 31, 2021

Carrying amount of goodwill, March 31, 2023 $ 1,535,252 $ 103,881 $ 1,639,133

Intangible assets subject to amortization at March 31, 2023 and December 31, 2022 were as follows:

March 31, 2023 December 31, 2022

Relationships Tradenames Other

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Weighted average useful life 13 years 10 years 6 years 13 years 10 years 6 years

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

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

At September 30, 2022, customer relationships, tradenames, and other intangibles include preliminary estimated fair values of assets acquired as part of the Apria Acquisition.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is approximately $ 22 million for the remainder of 2022, $ 82 million for 2023, $ 65 million for 2024, $ 55 million for 2025, $ 54 million for 2026 and $ 47 million for 2027.

At March 31, 2023 and December 31, 2022, $ 294 million and $ 308 million in net intangible assets were held in the Patient Direct segment and $ 131 million and $ 137 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 20.9 million and $ 10.3 million for the three months ended March 31, 2023 and 2022.

As of March 31, 2023, based on the current carrying value of intangible assets subject to amortization, estimated amortization expense, were as follows:

2023 (remainder) $ 62,336

Note 5— 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 and outsourced logistics centers, administrative offices and warehouses, our client engagement center and IT restructuring charges.

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Products & Healthcare Services $ 1,983 $ 5,091 $ 4,396 $ 18,933

Patient Direct — 1,289 483 2,034

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

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

These charges also include costs associated with our operating model realignment program, which include professional fees, severance and costs to streamline functions and processes.

Exit and realignment charges for the three months ended March 31, 2023 and 2022 were $ 15.7 million and $ 1.7 million.

These amounts are excluded from our segments operating income.

We expect material additional costs in 2023 associated with the operating model realignment program and information technology strategic initiatives.

The following table summarizes the activity related to exit and realignment cost accruals through March 31, 2023 and 2022:

Accrued exit and realignment costs, December 31, 2022 $ 969

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Severance 4,127

Professional fees 9,012

Cash payments ( 5,546 )

Accrued exit and realignment costs, March 31, 2023 $ 11,097

Provision for exit and realignment activities:

Severance 246

Cash payments ( 3,477 )

Accrued exit and realignment costs, June 30, 2022 822

Provision for exit and realignment activities:

Cash payments ( 1,693 )

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

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

Provision for exit and realignment activities:

Information system restructuring costs 1,029

Lease obligations 347

Severance 811

Cash payments ( 6,903 )

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

Provision for exit and realignment activities:

Information system restructuring costs 1,611

Lease obligations ( 126 )

Cash payments ( 2,302 )

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

Provision for exit and realignment activities:

Information system restructuring costs 1,506

Lease obligations 107

Cash payments ( 4,199 )

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

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

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

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

There were no acquisition-related charges included within acquisition-related and exit and realignment charges presented in our consolidated statements of operations for the three and nine months ended September 30, 2021.

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

Debt consists of the following:

September 30, 2022 December 31, 2021

Debt, net of unamortized deferred financing costs, consists of the following:

March 31, 2023 December 31, 2022

Amount Estimated

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Amount Estimated

Receivables securitization program $ 153,823 $ 157,000 $ 197,026 $ 200,000

4.375 % Senior Notes, due December 2024

$ 245,585 $ 237,466 $ 245,510 $ 237,772

Receivables Securitization Program — — 93,142 96,000

Term Loan A 476,612 474,694 490,816 485,000

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Long-term debt $ 2,362,453 $ 2,201,691 $ 2,482,968 $ 2,328,161

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

On March 29, 2022, we entered into an amendment to our accounts receivable securitization program (the 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, as further amended by the Fifth Amendment to the Receivables Financing Agreement).

Under the Receivables Financing Agreement, certain of our accounts receivable balances are sold to our wholly owned special purpose entity, O&M Funding LLC.

The Receivables Financing Agreement matures in March 2025.

We had no borrowings at March 31, 2023 and $ 96.0 million outstanding at December 31, 2022 under our Receivables Financing Agreement.

At March 31, 2023 and December 31, 2022, we had maximum revolving borrowing capacity of $ 450 million and $ 354 million under our Receivables 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 March 31, 2023 and December 31, 2022, our Revolving Credit Agreement was undrawn and we had letters of credit, which reduce Revolver availability, totaling $ 27.9 million leaving $ 422 million available for borrowing.

We also had letters of credit and bank guarantees, which supports certain leased facilities as well as other normal business activities in the United States and Europe that were issued outside of the Revolving Credit Agreement for $ 2.0 million and $ 2.3 million as of March 31, 2023 and December 31, 2022.

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 the sum of either Term SOFR or the Base Rate and 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 addition to our scheduled principal payment of $ 1.5 million on the Term Loan B, we made unscheduled principal payments of $ 10 million on Term Loan B and $ 15 million on Term Loan A during the three months ended March 31, 2023 .

We have $ 246 million of 4.375 % senior notes due in December 2024 (the 2024 Notes), with interest payable semi-annually.

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

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

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

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.

In March 2021, we issued $ 500 million of 4.500 % senior unsecured notes due in March 2029 (the 2029 Unsecured Notes), with interest payable semi-annually (the Notes Offering).

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

6 unchanged sentences

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.

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.

The Revolving Credit Agreement matures in March 2027.

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

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

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

We also had letters of credit and bank guarantees, which were issued outside of the Revolving Credit Agreement for $ 2.3 million and $ 2.2 million as of September 30, 2022 and December 31, 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.

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

Pursuant to the amended Receivables Financing Agreement, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $ 450 million outstanding at any time.

The interest rate under the Receivables 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.

The Revolving Credit Agreement, Term Loan A, Term Loan B, 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 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 September 30, 2022.

As of September 30, 2022, scheduled future principal payments of debt, excluding finance leases and other, were $ 1.5 million in 2022, $ 15.4 million in 2023, $ 274 million in 2024, of which $ 254 million is due in December 2024, $ 197 million in 2025, $ 43.5 million in 2026, $ 403 million in 2027, $ 6.0 million in 2028, $ 1.1 billion in 2029, and $ 600 million in 2030.

Current maturities at September 30, 2022 include $ 6.3 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B and $ 2.5 million in current portion of finance leases.

We may also redeem up to 40 % of the aggregate principal amount of the 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 the 2030 Unsecured Notes are subordinated to any of our secured indebtedness, including indebtedness under our credit agreements.

The Revolving Credit Agreement, the Credit Agreement, the Receivables Financing Agreement, the 2024 Notes, the 2029 Unsecured Notes, and the 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 March 31, 2023.

As of March 31, 2023, scheduled future principal payments of debt, excluding finance leases and other, were as follows:

2023 (remainder) $ 13,875

2029 1,049,500

Of the $ 274 million due in 2024, $ 254 million is due in December 2024.

Current maturities at March 31, 2023 include $ 12.5 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 2.6 million in current portion of finance leases.

Note 7— Retirement Plans

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Retirement Plan).

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

As of March 31, 2023 and December 31, 2022, the accumulated benefit obligation of the U.S.

Retirement Plan was $ 38.9 million and $ 39.3 million.

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

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

The components of net periodic benefit cost for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Service cost $ 441 $ 633

17 unchanged sentences

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 September 30, 2022:

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of March 31, 2023:

Derivative Assets Derivative Liabilities

3 unchanged sentences

Economic (non-designated) hedges

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

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

The remaining balance of the fair value adjustments of $ 25.1 million, which related to these

terminated interest rate swaps, within Accumulated other comprehensive loss was reclassified to Loss on extinguishment of debt within our consolidated statements of operations for the nine months ended September 30, 2021.

Foreign currency contracts $ 70,473 April 2023 Other current assets $ 5 Other current liabilities $ 66

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

1 unchanged sentence

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 effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 30, 2022:

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

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

The notional amount of the interest rate swaps represents the amount in effect at the end of the period.

Based on contractual terms, the notional amount will decrease in increments of $ 50 million in March of each year until the maturity date.

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three months ended March 31, 2023:

Amount of (Loss) Recognized in Other Comprehensive Income (Loss) Location of Gain 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 Reclassified from Accumulated Other Comprehensive Loss into Income (Loss)

Interest rate swaps $ ( 2,387 ) Interest expense, net $ ( 42,198 ) $ 2,176

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

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

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

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

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

For the three and nine months ended September 30, 2021 we recognized losses of $ 0.9 million and $ 2.5 million associated with our economic (non-designated) foreign currency contracts.

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

Note 9— Leases

The components of lease expense were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

Classification 2022 2021 2022 2021

Operating lease cost DS&A Expenses $ 24,231 $ 15,307 $ 64,832 $ 44,098

Finance lease cost:

Amortization of lease assets DS&A Expenses 318 254 944 675

Interest on lease liabilities Interest expense, net 304 315 915 916

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

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

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

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

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

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

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

Supplemental balance sheet information is as follows:

Classification September 30, 2022 December 31, 2021

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

Finance lease assets Property and equipment, net 10,754 8,896

Total lease assets $ 286,587 $ 202,902

Operating Other current liabilities $ 72,990 $ 41,817

Finance Other current liabilities 2,470 2,037

Operating Operating lease liabilities, excluding current portion 215,022 162,241

Finance Long-term debt, excluding current portion 13,023 11,314

Total lease liabilities $ 303,505 $ 217,409

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

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

Other information related to leases was as follows:

Nine Months Ended

September 30,

Supplemental cash flow information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating and finance leases $ 63,488 $ 43,687

Financing cash flows from finance leases $ 1,115 $ 726

Right-of-use assets obtained in exchange for new operating and finance lease liabilities $ 64,325 $ 76,960

Weighted average remaining lease term (years)

Operating leases 4.3 5.2

Finance leases 5.9 6.9

Weighted average discount rate

Operating leases 6.9 % 8.6 %

Finance leases 10.8 % 11.0 %

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

Operating Leases (1)

Finance Leases Total

2022 $ 24,060 $ 675 $ 24,735

2023 93,913 2,693 96,606

2024 80,267 2,641 82,908

2025 58,612 2,588 61,200

2026 41,058 2,506 43,564

Thereafter 49,224 4,774 53,998

Total lease payments 347,134 15,877 363,011

Interest ( 59,122 ) ( 384 ) ( 59,506 )

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

(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.

For the three months ended March 31, 2023 and 2022, we recognized no gain (loss) and a loss of $ 0.1 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 expense (income), net for our foreign exchange contracts.

Note 9— Income Taxes

The effective tax rate was 36.2 % and 24.4 % for the three and nine months ended September 30, 2022, compared to 12.6 % and 20.8 % in the same periods of 2021.

The change in these rates resulted primarily from the mixture of income and losses in jurisdictions in which we operate, as well as the utilization of foreign tax benefits in the three and nine months ended September 30, 2021.

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

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

The effective tax rate was 27.7 % for the three months ended March 31, 2023, compared to 18.6 % in the same quarter of 2022.

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

The liability for unrecognized tax benefits was $ 22.6 million at March 31, 2023 and $ 22.5 million at December 31, 2022.

Included in the liability at March 31, 2023 and December 31, 2022 were $ 2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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

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

We believe that we have adequately reserved for this matter and that the final adjudication of

this matter will not have a material impact on our consolidated financial position, results of operations or cash flows.

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

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

Note 11— Net Income per Common Share

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

Note 10— Net (Loss) Income per Common Share

The following summarizes the calculation of net (loss) income per common share attributable to common shareholders for the three months ended March 31, 2023 and 2022:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2023 2022

Net income $ 12,497 $ 44,129 $ 80,381 $ 179,614

Net (loss) income $ ( 24,418 ) $ 39,279

Weighted average shares outstanding - basic 75,177 73,643

1 unchanged sentence

Weighted average shares outstanding - diluted 75,177 76,019

Net income per common share:

Net (loss) income per common share:

Basic $ ( 0.32 ) $ 0.53

Diluted $ ( 0.32 ) $ 0.52

Share-based awards for the three months ended March 31, 2023 of approximately 1.7 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Note 11— Shareholders' Equity

1 unchanged sentence

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

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

Note 13— Accumulated Other Comprehensive Loss

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

As of March 31, 2023, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program.

Note 12— Accumulated Other Comprehensive (Loss) Income

The following table shows the changes in accumulated other comprehensive (loss) income by component for the three months ended March 31, 2023 and 2022:

Retirement Plans Currency

Adjustments Derivatives Total

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

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

Accumulated other comprehensive (loss) income, December 31, 2022 $ ( 7,201 ) $ ( 40,095 ) $ 11,441 $ ( 35,855 )

Other comprehensive income (loss) before reclassifications — 5,118 ( 2,387 ) 2,731

Income tax — — 621 621

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

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

Other comprehensive income (loss) before reclassifications, net of tax — 5,118 ( 1,766 ) 3,352

Amounts reclassified from accumulated other comprehensive income (loss) 123 — ( 2,176 ) ( 2,053 )

Income tax ( 270 ) — 565 295

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

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

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

Amounts reclassified from accumulated other comprehensive income (loss), net of tax ( 147 ) — ( 1,611 ) ( 1,758 )

Other comprehensive (loss) income ( 147 ) 5,118 ( 3,377 ) 1,594

Accumulated other comprehensive (loss) income, March 31, 2023 $ ( 7,348 ) $ ( 34,977 ) $ 8,064 $ ( 34,261 )

Retirement Plans Currency Translation Adjustments Derivatives Total

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

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

Other comprehensive loss before reclassifications — ( 787 ) — ( 787 )

5 unchanged sentences

Other comprehensive income (loss) 189 ( 787 ) — ( 598 )

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

Retirement Plans Currency Translation Adjustments Derivatives Total

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

Other comprehensive (loss) income before reclassifications — ( 39,604 ) 14,197 ( 25,407 )

Income tax — — ( 3,691 ) ( 3,691 )

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

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

Income tax ( 235 ) — ( 501 ) ( 736 )

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

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

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

Retirement Plans Currency Translation Adjustments Derivatives Total

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

Other comprehensive (loss) income before reclassifications — ( 26,724 ) 2,426 ( 24,298 )

Income tax — — ( 611 ) ( 611 )

Other comprehensive (loss) income before reclassifications, net of tax — ( 26,724 ) 1,815 ( 24,909 )

Amounts reclassified from accumulated other comprehensive loss 704 — 25,518 26,222

Income tax ( 152 ) — ( 7,289 ) ( 7,441 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 552 — 18,229 18,781

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

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

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

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

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

Note 13— Segment Information

4 unchanged sentences

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 and acquisition-related and exit and realignment charges 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.

We evaluate the performance of our segments based on their operating income excluding acquisition-related charges and intangible amortization and 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.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Products & Healthcare Services $ 1,915,489 $ 2,134,041

4 unchanged sentences

Patient Direct 45,849 15,793

Intangible amortization ( 14,302 ) ( 10,025 ) ( 55,459 ) ( 30,077 )

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

Acquisition-related charges and intangible amortization ( 22,188 ) ( 42,135 )

Exit and realignment charges ( 15,674 ) ( 1,682 )

Consolidated operating income $ 9,807 $ 61,059

7 unchanged sentences

Consolidated capital expenditures $ 51,490 $ 10,961

September 30,

2022 December 31, 2021

March 31, 2023 December 31, 2022

Total assets:

5 unchanged sentences

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

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

2022 2021 2022 2021

Three Months Ended March 31,

United States $ 2,452,936 $ 2,262,019

2 unchanged sentences

Note 14— Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No.

In June 2016, the FASB issued Accounting Standards Update (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.

We are still evaluating the impact the adoption of ASU No.

2016-13 will have on our consolidated financial statements and related disclosures;

however, we do not expect this to have a material impact.

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.

2016-13, the FASB issued various ASUs related to Credit Losses, Measurement of Credit Losses on Financial Instruments.

These ASUs do not change the core principle of the guidance in ASU No.

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.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments are effective for all entities as of March 12, 2020 through December 31, 2022.

Our material debt agreements no longer reference LIBOR as a benchmark rate.

The transition did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU No.

2020-10, Codification Improvements, to improve consistency by amending the FASB Accounting Standards Codification (the Codification) to include all disclosure guidance in the appropriate disclosure sections.

This ASU also clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology.

The amendments in this ASU do not change GAAP and, therefore, are not expected to result in a significant change in practice.

We adopted ASU No.

2020-10 effective beginning January 1, 2021.

Its adoption did not have a material impact on our consolidated financial statements.

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.

We adopted ASU No.

2021-10 effective beginning January 1, 2022.

Its adoption did not have a material impact on our consolidated financial statements.

2016-13 and subsequent amendments beginning January 1, 2023.

The adoption did not have a material impact on our consolidated financial statements and related disclosures.

Note 15— Legal Proceedings

O&M Halyard N95 Mask FDA Release

On April 5, 2023 we received a communication from the National Institute for Occupational Safety & Health (NIOSH) that products from one lot of a model (No.

46827) of surgical N95 respirator manufactured by O&M Halyard did not pass laboratory tests for fluid resistance and for filtration efficiency, and that products from one lot of another model (No.

46727) did not pass fluid resistance testing, but did pass filtration efficiency testing.

At present, our investigation has determined that there are a limited number of lots potentially implicated by the results of the NIOSH particulate filtration testing on model 46827.

The vast majority of the products in those lots remain in our possession and under our control, and those lots that had products that did reach the market have passed internal follow-up testing.

On April 12, 2023, the FDA recommended that consumers, health care providers, and facilities not use the two models (model numbers 46827 and 46727) of O&M Halyard surgical N95 respirators due to fluid resistance.

In addition, the FDA also recommended against using certain of our surgical, procedure and pediatric face masks when fluid resistance is required.

On or about that date, we voluntarily stopped the sale in the U.S.

of the above-referenced surgical N95 respirators and similar models pending our investigation of the performance issues identified by the FDA and NIOSH.

Regulatory bodies in other non-U.S.

markets where we sell our facial protection products have inquired about the relevance of the FDA notification to products sold in their countries.

The FDA updated its recommendation on April 21, 2023, to permit use of the model 46727 of Halyard N95 respirators when fluid resistance is not required.

These items are included in our Products & Healthcare Services segment.

We are thoroughly investigating the matters identified by the FDA and NIOSH, and we are performing product retesting as we work closely with government agencies to resolve these matters.

We are unable to reasonably estimate the amount of any possible loss or range of possible losses or predict the ultimate outcome of these matters.

However, there is a risk that these matters and any other safety concerns could have a material adverse effect on our results of operations, financial condition, or cash flows, including as a result of a significant volume of customer product returns and/or recall of products, implementation of corrective action plans, and/or other costly remedial actions in the US and elsewhere.

In addition, these matters could potentially have other negative impacts including:

government investigations and enforcement actions by the FDA or other US or international regulators or governmental entities;

the suspension or revocation of the authority to produce, distribute or sell products, and other sanctions;

losses due to patient claims, including product liability claims and lawsuits;

and customer claims related to their direct costs arising from supply disruption.

Other Litigation

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 March 31, 2023 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.

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

What changed 10-Q

Item 1. Financial Statements