What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 141 added, 92 removed, 483 unchanged (33% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2023 2022 2023 2022

8 unchanged sentences

Interest expense, net 38,127 39,869 121,053 87,727

Other expense, net 1,072 783 2,458 1,565

Other (income) expense, net ( 3,302 ) 783 ( 843 ) 2,347

(Loss) income before income taxes ( 10,984 ) 19,595 ( 75,723 ) 106,318

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

10 unchanged sentences

Consolidated Balance Sheets

June 30, December 31,

September 30, December 31,

(in thousands, except per share data) 2023 2022

22 unchanged sentences

225,208 215,469

Deferred income taxes 55,354 60,833

Deferred income taxes, net 45,616 60,833

Other liabilities 120,596 114,943

3 unchanged sentences

authorized - 200,000 shares;

issued and outstanding - 76,440 shares and 76,279 shares as of June 30, 2023 and December 31, 2022

issued and outstanding - 76,499 shares and 76,279 shares as of September 30, 2023 and December 31, 2022

152,997 152,557

8 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended

September 30,

(in thousands) 2023 2022

5 unchanged sentences

(Benefit) provision for losses on accounts receivable ( 487 ) 5,289

Loss on extinguishment of debt 843 —

Gain on extinguishment of debt ( 4,379 ) —

Deferred income tax (benefit) provision ( 16,315 ) 2,991

Changes in operating lease right-of-use assets and lease liabilities ( 1,517 ) 922

(Gain) loss on sale and dispositions of property and equipment ( 18,563 ) 226

Gain on sale and dispositions of property and equipment ( 26,462 ) ( 17,002 )

Changes in operating assets and liabilities, net of acquisitions:

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Balance, June 30, 2023 76,440 152,880 421,993 357,349 ( 35,993 ) 896,229

Net loss — — — ( 6,426 ) — ( 6,426 )

Other comprehensive loss — — — — ( 8,962 ) ( 8,962 )

Share-based compensation expense, exercises and other 59 117 5,902 — — 6,019

Balance, September 30, 2023 76,499 $ 152,997 $ 427,895 $ 350,923 $ ( 44,955 ) $ 886,860

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

7 unchanged sentences

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

Net income — — — 12,497 — 12,497

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

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

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

See accompanying notes to consolidated financial statements.

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

Our business has two distinct segments:

We report our business under two 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.

The Products & Healthcare Services segment includes our United States distribution division (Medical Distribution), outsourced logistics and value-added services, and Global Products division which manufactures and sources medical surgical products through our production and kitting operations.

The Patient Direct segment includes our home healthcare divisions (Byram and Apria).

Reclassifications

8 unchanged sentences

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

Restricted cash as of June 30, 2023 and December 31, 2022 primarily represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services in conjunction with the Bundled Payments for Care Improvement initiatives related to wind-down costs of Fusion5.

Restricted cash as of June 30, 2023 also includes $ 6.4 million of cash deposits received subject to limitations on use until remitted to a third-party financial institution (the Purchaser), pursuant to the Master Receivables Purchase Agreement (RPA).

Restricted cash as of September 30, 2023 and December 31, 2022 includes cash held in an escrow account as required by the Centers for Medicare & Medicaid Services in conjunction with the Bundled Payments for Care Improvement initiatives related to wind-down costs of Fusion5.

Restricted cash as of September 30, 2023 also includes $ 18.6 million of cash deposits received subject to limitations on use until remitted to a third-party financial institution (the Purchaser), pursuant to the Master Receivables Purchase Agreement (RPA).

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 215,191 $ 69,467

6 unchanged sentences

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

We recorded $ 175 million and $ 144 million for the three months ended June 30, 2023 and 2022 and $ 346 million and $ 151 million for the six months ended June 30, 2023 and 2022 in revenue related to equipment we rent to patients .

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

We recorded $ 158 million and $ 148 million for the three months ended September 30, 2023 and 2022 and $ 504 million and $ 299 million for the nine months ended September 30, 2023 and 2022 in revenue related to equipment we rent to patients .

Sales of Accounts Receivable

On March 14, 2023, we entered into the RPA, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $ 200 million are sold, on a limited-recourse basis, to the Purchaser in exchange for cash.

As of June 30, 2023 there were a total of $ 115 million of uncollected accounts receivable, that had been sold and removed from our consolidated balance sheet.

As of September 30, 2023, there were a total of $ 89.1 million of uncollected accounts receivable that had been sold and removed from our consolidated balance sheet.

We account for these transactions as sales in accordance with ASC 860, Transfers and Servicing, with the sold receivables removed from our consolidated balance sheets.

1 unchanged sentence

however, we do not maintain any beneficial interest in the accounts receivable sold.

Proceeds from the sale of accounts receivable are recorded as an increase to cash and cash equivalents and a reduction to accounts receivable, net of allowances in the consolidated balance sheets.

Cash received from the sale of accounts receivable is reflected as cash provided by operating activities in the consolidated statements of cash flows.

Total accounts receivable sold under the RPA were $ 412 million for the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2023, we received net cash proceeds of $ 409 million from the sale of accounts receivable under the RPA and collected $ 297 million of the sold accounts receivable.

The losses on sale of accounts receivable, inclusive of professional fees incurred to establish the agreement, recorded in other operating expense (income), net in the consolidated statements of operations were $ 2.9 million and $ 3.6 million for the three and six months ended June 30, 2023.

The RPA is separate and distinct from the accounts receivable securitization program (the Receivables Financing Agreement) .

Proceeds from the sale of accounts receivable are recorded as an increase to cash and cash equivalents and a reduction to accounts receivable, net of allowances in the consolidated balance sheets.

Cash received from the sale of accounts receivable, net of payments made to the Purchaser, is reflected in the change in accounts receivable within cash provided by operating activities in the consolidated statements of cash flows.

Total accounts receivable sold under the RPA were $ 482 million and $ 894 million for the three and nine months ended September 30, 2023.

During the three and nine months ended September 30, 2023, we received net cash proceeds of $ 478 million and $ 888 million from the sale of accounts receivable under the RPA and collected $ 508 million and $ 805 million of the sold accounts receivable.

The losses on sale of accounts receivable are recorded in other operating expense (income), net in the consolidated statements of operations were $ 3.5 million and $ 7.1 million for the three and nine months ended September 30, 2023.

Note 2— Fair Value

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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 and six months ended June 30, 2022 as if Apria was acquired on January 1, 2022, based on the final purchase price allocation.

The following table provides pro forma results of net revenue and net loss for the three and nine months ended September 30, 2022 as if Apria was acquired on January 1, 2022, based on the final purchase price allocation.

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

Three Months Ended June 30, 2022 Six Months Ended June 30, 2022

Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022

Net revenue $ 2,497,401 $ 7,681,481

Net income (loss) $ 6,422 $ ( 38,031 )

Pro forma net income of $ 34.4 million for the three months ended June 30, 2022 includes a pro forma adjustment for amortization of intangible assets, net of tax of ($ 5.8 ) million.

Pro forma net loss of $ 44.5 million for the six months ended June 30, 2022 includes pro forma adjustments for interest expense of $ 15.4 million, net of tax and amortization of intangible assets, net of tax of $ 3.1 million.

Pro forma net income of $ 6.4 million for the three months ended September 30, 2022 includes a pro forma adjustment for amortization of intangible assets of $ 6.1 million, net of tax.

Pro forma net loss of $ 38.0 million for the nine months ended September 30, 2022 includes pro forma adjustments for interest expense of $ 15.4 million, net of tax and amortization of intangible assets of $ 9.1 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.

Acquisition-related charges within acquisition-related charges and intangible amortization presented in our consolidated statements of operations were $ 1.3 million and $ 6.4 million for the three months ended June 30, 2023 and 2022 and $ 2.5 million and $ 38.3 million for the six months ended June 30, 2023 and 2022.

Acquisition-related charges within acquisition-related charges and intangible amortization presented in our consolidated statements of operations were $ 9.4 million and $ 6.9 million for the three months ended September 30, 2023 and 2022 and $ 11.9 million and $ 45.2 million for the nine months ended September 30, 2023 and 2022.

Note 4— Goodwill and Intangible Assets

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through June 30, 2023:

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through September 30, 2023:

Patient Direct Products & Healthcare Services Consolidated

2 unchanged sentences

Currency translation adjustments — ( 3,277 ) ( 3,277 )

Carrying amount of goodwill, June 30, 2023 $ 1,535,252 $ 101,897 $ 1,637,149

Intangible assets subject to amortization at June 30, 2023 and December 31, 2022 were as follows:

June 30, 2023 December 31, 2022

Carrying amount of goodwill, September 30, 2023

$ 1,535,252 $ 99,758 $ 1,635,010

As compared to the date of the most recent annual goodwill impairment test performed as of October 1, 2022, the fair value of our Global Products and Apria reporting units have been adversely impacted by unfavorable industry and macroeconomic conditions, including higher interest rates, inflation, pricing pressures and lower demand for certain product categories.

Adverse changes in these and other factors could result in future goodwill impairment.

Intangible assets subject to amortization at September 30, 2023 and December 31, 2022 were as follows:

September 30, 2023 December 31, 2022

Relationships Tradenames Other

5 unchanged sentences

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

At June 30, 2023 and December 31, 2022, $ 279 million and $ 308 million in net intangible assets were held in the Patient Direct segment and $ 124 million and $ 137 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 20.9 million and $ 30.9 million for the three months ended June 30, 2023 and 2022 and $ 41.8 million and $ 41.2 million for the six months ended June 30, 2023 and 2022.

As of June 30, 2023, based on the current carrying value of intangible assets subject to amortization, estimated amortization expense were as follows:

At September 30, 2023 and December 31, 2022, $ 265 million and $ 308 million in net intangible assets were held in the Patient Direct segment and $ 117 million and $ 137 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 20.8 million and $ 14.3 million for the three months ended September 30, 2023 and 2022 and $ 62.7 million and $ 55.5 million for the nine months ended September 30, 2023 and 2022.

As of September 30, 2023, based on the current carrying value of intangible assets subject to amortization, estimated amortization expense were as follows:

2023 (remainder) $ 20,456

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 facilities and IT restructuring charges.

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain facilities, IT restructuring charges, and other strategic actions.

These charges also include costs associated with our Operating Model Realignment Program, which include professional fees, severance and other costs to streamline functions and processes.

Exit and realignment charges were $ 29.0 million and $ 1.2 million for the three months ended June 30, 2023 and 2022 and $ 44.6 million and $ 2.9 million for six months ended June 30, 2023 and 2022.

Exit and realignment charges were $ 30.2 million and $ 2.0 million for the three months ended September 30, 2023 and 2022 and $ 74.8 million and $ 4.9 million for the nine months ended September 30, 2023 and 2022.

These amounts are excluded from our segments' operating income.

We expect material additional costs in 2023 associated with the Operating Model Realignment Program and IT restructuring charges.

The following table summarizes the activity related to exit and realignment cost accruals through June 30, 2023 and 2022:

We have incurred $ 27.8 million and $ 70.6 million in charges under our Operating Model Realignment Program and IT restructuring charges for the three and nine months ended September 30, 2023, which are included in the total exit and realignment charges above.

We expect to incur additional material costs relating to our Operating Model Realignment Program and IT restructuring charges, which we are not able to reasonably estimate.

The following table summarizes the activity related to exit and realignment cost accruals through September 30, 2023 and 2022:

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

11 unchanged sentences

Accrued exit and realignment costs, June 30, 2023 19,864

Provision for exit and realignment activities:

Severance 2,361

Professional fees 16,800

Vendor contract and lease termination costs 4,300

Cash payments ( 26,311 )

Accrued exit and realignment costs, September 30, 2023 $ 22,434

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

7 unchanged sentences

Accrued exit and realignment costs, June 30, 2022 822

Provision for exit and realignment activities:

Cash payments ( 1,693 )

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

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 1.3 million of costs that were expensed as incurred for the three and nine months ended September 30, 2023, which primarily related to charges associated with a lease termination.

We 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.

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amount Estimated

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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.

We used $ 72.7 million of cash to repurchase $ 73.8 million aggregate principal of the 2024 Notes during the first nine months of 2023.

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.

4 unchanged sentences

The Receivables Financing Agreement matures in March 2025.

We had no borrowings at June 30, 2023 and $ 96.0 million outstanding at December 31, 2022 under our Receivables Financing Agreement.

At June 30, 2023 and December 31, 2022, we had maximum revolving borrowing capacity of $ 450 million and $ 354 million under our Receivables Financing Agreement.

We had no borrowings at September 30, 2023 and $ 96.0 million outstanding at December 31, 2022 under our amended Receivables Financing Agreement.

At September 30, 2023 and December 31, 2022, we had maximum revolving borrowing capacity of $ 450 million and $ 354 million under our amended Receivables Financing Agreement.

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).

2 unchanged sentences

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 payments of $ 3.1 million on the Term Loan A and $ 3.0 million on the Term Loan B, we made unscheduled principal payments of $ 35 million on Term Loan A and $ 30 million on Term Loan B during the six months ended June 30, 2023.

In addition to our scheduled principal payments of $ 6.3 million on the Term Loan A and $ 4.5 million on the Term Loan B, we made unscheduled principal payments of $ 72.5 million on Term Loan A and $ 52.5 million on Term Loan B during the nine months ended September 30, 2023.

On March 10, 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).

1 unchanged sentence

We may redeem all or part of 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.

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.

We used $ 18.2 million of cash to repurchase $ 21.3 million aggregate principal of the 2029 Unsecured Notes during the first nine months of 2023.

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.

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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.

We used $ 43.5 million of cash to repurchase $ 47.8 million aggregate principal of the 2030 Unsecured Notes during the first nine months of 2023.

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

2 unchanged sentences

The Revolving Credit Agreement matures in March 2027.

At June 30, 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 support 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 $ 2.1 million and $ 2.3 million as of June 30, 2023 and December 31, 2022.

At September 30, 2023 and December 31, 2022, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce revolver availability, totaling $ 27.4 million and $ 27.9 million, leaving $ 423 million and $ 422 million available for borrowing.

We also had letters of credit and bank guarantees which support 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 $ 2.9 million and $ 2.3 million as of September 30, 2023 and December 31, 2022.

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 June 30, 2023.

As of June 30, 2023, scheduled future principal payments of debt, excluding finance leases and other, were as follows:

We were in compliance with our debt covenants at September 30, 2023.

As of September 30, 2023, scheduled future principal payments of debt, excluding finance leases and other, were as follows:

2023 (remainder) $ 4,625

2029 1,028,845

Of the $ 200 million due in 2024, $ 180 million is due in December 2024.

Current maturities at June 30, 2023 include $ 15.6 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 2.8 million in current portion of finance leases.

Current maturities at September 30, 2023 include $ 18.8 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 7.7 million in current portion of finance leases and other.

Note 7— Retirement Plans

1 unchanged sentence

Retirement Plan).

As of June 30, 2023 and December 31, 2022, the accumulated benefit obligation of the U.S.

As of September 30, 2023 and December 31, 2022, the accumulated benefit obligation of the U.S.

Retirement Plan was $ 38.2 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 six months ended June 30, 2023 and 2022 were as follows:

The components of net periodic benefit cost for the three and nine months ended September 30, 2023 and 2022 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of June 30, 2023:

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of September 30, 2023:

Derivative Assets Derivative Liabilities

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Economic (non-designated) hedges

Foreign currency contracts $ 76,916 July - August 2023 Other current assets $ 269 Other current liabilities $ 2

Foreign currency contracts $ 78,161 October 2023 Other current assets $ 86 Other current liabilities $ 25

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

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Based on contractual terms, the notional amount will decrease in increments of $ 50 million on the last business day of 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 and six months ended June 30, 2023:

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, 2023:

Amount of Gain 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

Three months ended June 30, 2023 Six months ended June 30, 2023 Three months ended June 30, 2023 Six months ended June 30, 2023 Three months ended June 30, 2023 Six months ended June 30, 2023

Three months ended September 30, 2023

Nine months ended September 30, 2023

Three months ended September 30, 2023

Nine months ended September 30, 2023

Three months ended September 30, 2023

Nine months ended September 30, 2023

Interest rate swaps $ 3,621 $ 8,026 Interest expense, net $ ( 38,127 ) $ ( 121,053 ) $ 2,569 $ 7,080

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

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

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

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

Three months ended September 30, 2022

Nine months ended September 30, 2022

Three months ended September 30, 2022

Nine months ended September 30, 2022

Three months ended September 30, 2022

Nine months ended September 30, 2022

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

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

For the three and six months ended June 30, 2023, we recognized a loss of $ 0.9 million associated with our economic (non-designated) foreign currency contracts.

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

For the three and nine months ended September 30, 2023, we recognized losses of $ 2.4 million and $ 3.3 million associated with our economic (non-designated) foreign currency contracts.

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

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 8.8 % and 18.7 % for the three and six months ended June 30, 2023, compared to 25.6 % and 21.7 % in the same periods of 2022.

The change in these rates resulted primarily from changes in income and losses.

The liability for unrecognized tax benefits was $ 22.7 million at June 30, 2023 and $ 22.5 million at December 31, 2022.

Included in the liability at June 30, 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.

The effective tax rate was 41.5 % and 22.0 % for the three and nine months ended September 30, 2023, compared to 36.2 % and 24.4 % in the same periods of 2022.

The change in these rates resulted primarily from changes in income and losses as well as the incremental income tax benefit recorded for foreign derived intangible income (FDII) in the three and nine months ended September 30, 2023.

The liability for unrecognized tax benefits was $ 22.8 million at September 30, 2023 and $ 22.5 million at December 31, 2022.

Included in the liability at September 30, 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.

8 unchanged sentences

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 and six months ended June 30, 2023 and 2022:

The following summarizes the calculation of net (loss) income per common share attributable to common shareholders for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2023 2022 2023 2022

6 unchanged sentences

Diluted $ ( 0.08 ) $ 0.16 $ ( 0.78 ) $ 1.05

Share-based awards for the three and six months ended June 30, 2023 of approximately 1.8 million and 1.7 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Share-based awards for the three and nine months ended September 30, 2023 of approximately 1.5 million and 1.6 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Note 11— Accumulated Other Comprehensive (Loss) Income

The following table shows the changes in accumulated other comprehensive (loss) income by component for the three and six months ended June 30, 2023 and 2022:

The following table shows the changes in accumulated other comprehensive (loss) income by component for the three and nine months ended September 30, 2023 and 2022:

Retirement Plans Currency

Adjustments Derivatives Total

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

Accumulated other comprehensive (loss) income, June 30, 2023 $ ( 7,212 ) $ ( 40,144 ) $ 11,363 $ ( 35,993 )

Other comprehensive (loss) income before reclassifications — ( 9,891 ) 3,621 ( 6,270 )

1 unchanged sentence

Other comprehensive (loss) income before reclassifications, net of tax — ( 9,891 ) 2,680 ( 7,211 )

Amounts reclassified from accumulated other comprehensive income (loss) 123 — ( 2,335 ) ( 2,212 )

Amounts reclassified from accumulated other comprehensive (loss) income 124 — ( 2,569 ) ( 2,445 )

Income tax 28 — 666 694

Amounts reclassified from accumulated other comprehensive income (loss), net of tax 136 — ( 1,727 ) ( 1,591 )

Amounts reclassified from accumulated other comprehensive (loss) income, net of tax 152 — ( 1,903 ) ( 1,751 )

Other comprehensive income (loss) 152 ( 9,891 ) 777 ( 8,962 )

Accumulated other comprehensive (loss) income, June 30, 2023 $ ( 7,212 ) $ ( 40,144 ) $ 11,363 $ ( 35,993 )

Accumulated other comprehensive (loss) income, September 30, 2023 $ ( 7,060 ) $ ( 50,035 ) $ 12,140 $ ( 44,955 )

Retirement Plans Currency Translation Adjustments Derivatives Total

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

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

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

1 unchanged sentence

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

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

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

Income tax ( 86 ) — ( 61 ) ( 147 )

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

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

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

Retirement Plans Currency

4 unchanged sentences

Other comprehensive (loss) income before reclassifications, net of tax — ( 9,940 ) 5,940 ( 4,000 )

Amounts reclassified from accumulated other comprehensive income (loss) 246 — ( 4,511 ) ( 4,265 )

Amounts reclassified from accumulated other comprehensive (loss) income 370 — ( 7,080 ) ( 6,710 )

Income tax ( 229 ) — 1,839 1,610

Amounts reclassified from accumulated other comprehensive income (loss), net of tax ( 11 ) — ( 3,338 ) ( 3,349 )

Other comprehensive loss ( 11 ) ( 49 ) ( 78 ) ( 138 )

Accumulated other comprehensive (loss) income, June 30, 2023 $ ( 7,212 ) $ ( 40,144 ) $ 11,363 $ ( 35,993 )

Amounts reclassified from accumulated other comprehensive (loss) income, net of tax 141 — ( 5,241 ) ( 5,100 )

Other comprehensive income (loss) 141 ( 9,940 ) 699 ( 9,100 )

Accumulated other comprehensive (loss) income, September 30, 2023 $ ( 7,060 ) $ ( 50,035 ) $ 12,140 $ ( 44,955 )

Retirement Plans Currency

7 unchanged sentences

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

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

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

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

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

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.

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

16 unchanged sentences

Consolidated capital expenditures $ 50,588 $ 49,449 $ 151,567 $ 115,148

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Total assets:

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

17 unchanged sentences

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.

Our investigation determined that a limited number of lots were potentially implicated by the results of the NIOSH particulate filtration testing on model 46827, and that the vast majority of the products in those lots remained in our possession and under our control.

Those lots have been segregated for disposal.

We also determined that a limited quantity of products from one lot did reach the market.

Although products from that lot passed internal and external follow-up testing for filtration efficiency, we initiated a voluntary recall of the lot on August 9, 2023 out of an abundance of caution.

O&M Halyard has confirmed to NIOSH that the particle filtration issue was isolated to the identified lots.

On April 12, 2023, the U.S.

Food and Drug Administration (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 concerns about fluid resistance performance.

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

5 unchanged sentences

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.

On September 29, 2023, the FDA updated its previous recommendation to consumers, health care providers and facilities regarding the above-referenced models of O&M Halyard surgical N95 respirators based on extensive testing and performance data provided by O&M Halyard.

Specifically, the FDA stated that both O&M Halyard respirator models could be used according to the product labeling for respiratory and fluid barrier protection to the wearer (excluding the one lot of products that O&M Halyard voluntarily recalled on August 9, 2023).

Following the FDA’s update, we published a user notice on our website announcing the resumption of sales and shipments of O&M Halyard surgical N95 respirators, noting that the data provided to the FDA and NIOSH demonstrated that our products provide the levels of particle filtration and fluid resistance for which they are rated.

NIOSH reviewed and concurred with the facts set forth in our user notice published on September 29, 2023.

We will continue to work with the FDA and NIOSH following the resolution of this matter to ensure that O&M Halyard products comply with regulatory requirements.

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.

9 unchanged sentences

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 June 30, 2023 for currently pending matters considered probable of loss, which is not material, is sufficient.

Based on current knowledge and the advice of counsel, we believe that the accrual as of September 30, 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.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements