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Item 7. Management’s Discussion and Analysis

2026-02-20 compared with 2025-02-28 · 232 added, 210 removed, 97 unchanged (82% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations is intended to assist the reader in the understanding and assessment of significant changes and trends related to our results of operations.

The discussion and analysis presented below refers to, and should be read in conjunction with, the consolidated financial statements and accompanying notes included in Item 8 of Part II of this Annual Report on Form 10-K.

Owens & Minor, Inc., along with its subsidiaries, is a global healthcare solutions company.

We report our business under two segments:

Products & Healthcare Services and Patient Direct.

The Products & Healthcare Services segment includes our U.S.

distribution division (Medical Distribution), including outsourced logistics and value-added services, and our 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).

Net (loss) per share was $(4.73) for the year ended December 31, 2024 as compared to net (loss) per share of $(0.54) for the year ended December 31, 2023.

Our financial results for the year ended December 31, 2024 as compared to the prior year were impacted by the following:

(1) a goodwill impairment charge of $307 million related to our Apria reporting unit, or a $3.97 negative impact per share (see Notes 1 and 5 in the Notes to Consolidated Financial Statements);

(2) the remeasurement of an uncertain tax position, including interest which resulted in a $19 million, or a $0.24 negative income tax charge per share (see Note 12 in the Notes to Consolidated Financial Statements);

(3) legal settlements of $17 million related primarily to compensation and wage and hour disputes and (4) incremental exit and realignment charges of $11 millio n primarily related to our 2023-2024 Operating Model Realignment Program and information technology (IT) strategic initiatives and (5) the decline in Products & Healthcare Services segment operating income, as described below.

These were partiall y offset by lower acquisition-related charges and intangible amortization of $14 million, lower interest expense of $14 million, and an increase in Patient Direct segment operating income as described below for the year ended December 31, 2024 as compared to the prior year.

Net (loss) per share was not impacted as compared to the prior year by foreign currency translation for the year ended December 31, 2024.

Products & Healthcare Services segment operating income was $53 million for the year ended December 31, 2024, compared to $58 million for the year ended December 31, 2023.

The decline for the year ended December 31, 2024 as compared to the prior year was primarily due to (1) increased teammate benefit costs of $15 million and (2) competitive pricing pressures, including glove pricing, partially offset by revenue growth of 3.1% and savings derived by our sourcing initiatives of $15 million.

Patient Direct segment operating income was $260 million for the year ended December 31, 2024, compared to $247 million for the year ended December 31, 2023.

The increase for the year ended December 31, 2024 as compared to the prior year was primarily due to (1) 5.0% net revenue growth, (2) cost savings from IT strategic initiatives of $16 million, and (3) a benefit of $5.4 million from an agreement with Philips Respironics (Philips) for previously recalled equipment , partially offset by increased teammate benefit costs of $26 million and unfavorable changes in revenue mix.

Segment operating incomes exclude adjustments noted in Note 16, “Segments”, in the Notes to Consolidated Financial Statements.

Sale of Products & Healthcare Services Business

On February 28, 2025, we announced that we were actively engaged in discussions regarding the potential sale of our Products & Healthcare Services business.

On October 7, 2025, we entered into an Equity Purchase Agreement (the Purchase Agreement) by and among the Company, Dominion Healthcare Acquisition Corporation, a Delaware

corporation (the Purchaser), and Dominion Healthcare Holdings, L.P., a Delaware limited partnership (Purchaser Parent) to sell the P&HS business, for an aggregate of $375 million in cash, subject to certain adjustments for cash, indebtedness, net working capital and transaction expenses.

On December 31, 2025, we completed the sale of the P&HS business pursuant to the Purchase Agreement.

We retained a 5% equity interest in the P&HS business.

In accordance with GAAP, the financial position and results of operations of the P&HS business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented.

With the exception of Note 3, the Notes to Consolidated Financial Statements reflect the continuing operations of Accendra Health, Inc.

unless otherwise noted.

See Note 3 in the Notes to Consolidated Financial Statements for additional information regarding discontinued operations.

Accendra Health, Inc.

(f/k/a Owens & Minor, Inc.) and subsidiaries (Accendra Health, we, us, our or the Company) is a leading nationwide provider of products, technology, and services that supports health beyond the hospital for millions of people each year.

As discussed later within Note 1 to Consolidated Financial Statements, our business activities comprise a single operating and reporting segment.

Net (loss) per share from continuing operations was $(1.34) for the year ended December 31, 2025 as compared to net (loss) per share from continuing operations of $(4.57) for the year ended December 31, 2024.

Our financial results for the year ended December 31, 2025 as compared to the prior year were favorably impacted by the following:

(1) no goodwill impairment charges for the year ended December 31, 2025 as compared to charges incurred for the year ended December 31, 2024 of $307 million, or a $3.97 negative impact per share (see Notes 1 and 5 in the Notes to Consolidated Financial Statements);

(2) revenue growth of $82 million;

(3) a reduction in exit and realignment charges of $28 million;

(4) the remeasurement of an uncertain tax position for the year ended December 31, 2024, including interest which resulted in a $19 million, or a $0.24 negative income tax charge per share (see Note 12 in the Notes to Consolidated Financial Statements);

that did not reoccur and (5) a $15 million reduction in selling, general and administrative expense.

These impacts were partially offset by (1) an $80 million transaction breakage fee incurred in connection with the termination of the Rotech acquisition;

(2) an increase in cost of net revenue of $73 million;

(3) an increase in intangible amortization of $33 million;

and (4) $18 million in transaction fees during the year ended December 31, 2025.

Net (loss) per share from continuing operations was $(4.57) for the year ended December 31, 2024 as compared to net income per share from continuing operations of $0.12 for the year ended December 31, 2023.

Our financial results for the year ended December 31, 2024 as compared to the prior year were unfavorably impacted by the following:

(1) a goodwill impairment charge incurred for the year ended December 31, 2024 of $307 million, or a $3.97 negative impact per share ;

(2) an $81 million increase in selling, general, and administrative expenses including legal settlements of $17 million related primarily to compensation and wage and hour disputes;

(3) a $64 million increase in cost of net revenue;

and (4) a $39 million increase in exit and realignment costs.

These unfavorable impacts were partially offset by (1) a $128 million increase in net revenue;

(2) a decrease in intangible amortization of $18 million;

and (3) a $9.2 million decrease in interest expense, net.

Refer to “Results of Operations” for further detail of quantitative and qualitative drivers of our results.

Potential Sale of Products & Healthcare Services Segment

On February 28, 2025, we announced that we are actively engaged in discussions regarding the potential sale of our Products & Healthcare Services segment.

There is no set timetable for the potential sale and there can be no assurance that we will complete a transaction.

Expected Acquisition of Rotech

On July 22, 2024, we entered into an Agreement and Plan of Merger to acquire Rotech for $1.36 billion in cash.

Given anticipated tax benefits of approximately $40 million from the transaction, the net purchase price is approximately $1.32 billion.

Rotech is a national leader in providing home medical equipment in the US.

The definitive agreement contains certain termination rights for the Company and Rotech.

In the event that we terminate the contract, we will be required to pay Rotech a termination fee of $70 million.

The transaction is subject to customary closing conditions, including expiration or termination of the applicable waiting period under the Hart Scott Rodino Act, and is expected to close in the first half of 2025.

We have fully committed financing in place and expect to use a combination of cash and incremental borrowings to fund the purchase price.

Philips Respironics Recall

In June 2021, one of Apria’s suppliers, Philips, announced a voluntary recall of its continuous and non-continuous ventilators (certain continuous positive airway pressure (CPAP), bilevel positive airway pressure and ventilator devices) related to polyurethane foam used in those devices, which the U.S.

Food and Drug Administration (FDA) identified as a Class I recall, the most serious category of recall (the June 2021 Recall).

In December 2022, Philips issued a subsequent voluntary recall related to deficiencies in repairs made to certain of the ventilators that had originally been recalled in June 2021 (together with the June 2021 recall, the Recall).

In April 2024, Philips entered into a consent decree enjoining Philips from making and distributing non-medically necessary CPAP, bilevel positive airway pressure and ventilator devices at any of its Sleep and Respiratory Care Business facilities until the FDA determines that Philips has complied with the remediation and compliance activities set forth in the consent decree.

We have incurred significant costs coordinating the Recall.

During the second quarter of 2024, we reached an agreement with Philips requiring Philips to pay us for recalled equipment returned to Philips.

During the year ended December 31, 2024, we received $18 million from Philips which was recorded in the ‘Other, net’ line item within investing activities of the consolidated statements of cash flows.

The corresponding benefit of $5.4 million on the returned equipment for the year ended December 31, 2024 is reflected in the ‘gain on sales and dispositions of property and equipment’ line item within operating activities of the consolidated statements of cash flows.

While we believe the Recall matter with Philips has now been materially resolved and that we have access to a sufficient supply of CPAP, bilevel positive airway pressure and ventilator devices from other suppliers to service our home healthcare patients’ needs, other supply chain disruptions (including any future impact of the Recall and subsequent consent decree on our business) may have a material adverse effect on our financial condition or results of operations, cash flows and liquidity.

Supplemental Financial Information

(in thousands, except ratios and per share data)

At or for the Years Ended December 31,

Summary of Operations:

Net (loss) income

Per Common Share:

Net (loss) income per share—basic

Net (loss) income per share—diluted

Stock price at year end

Summary of Financial Position:

Cash and cash equivalents

Selected Ratios:

Gross profit as a percent of revenue

Distribution, selling and administrative expenses as a percent of revenue

Operating (loss) income as a percent of revenue

Inventory days (2)

(1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2024, 2023 and 2022.

DSO in 2024 reflected the impact of the reduction in accounts receivable, net due to sales of accounts receivable under the Receivables Sale Program .

Excluding the impact of the Receivables Sale Program, DSO would have been 25.7 as of December 31, 2024.

DSO in 2023 reflected the impact of the reduction in accounts receivable, net due to sales of accounts receivable under the RPA .

Excluding the impact of the RPA, DSO would have been 24.8 as of December 31, 2023.

(2) Based on year end merchandise inventories and cost of goods sold for the fourth quarter ended December 31, 2024, 2023 and 2022.

The 2022 figure reflects a $92 million inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic.

Termination of Acquisition of Rotech

As previously disclosed, on July 22, 2024, we entered into an Agreement and Plan of Merger (the Merger Agreement) pursuant to which we agreed to acquire Rotech Healthcare Holdings Inc.

(Rotech) subject to the terms and conditions within the Merger Agreement.

On June 3, 2025, the Company, Rotech and Merger Sub mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement (the Termination Agreement).

In accordance with the terms of the Termination Agreement, on June 5, 2025, we made a cash payment to Rotech of $80 million.

Contract Termination with a Commercial Payor

A commercial Payor, with which we have multiple separately managed contracts, has terminated, or is in the process of terminating, certain of our contracts with them.

This termination resulted in minimal impacts to our operating income for the year ended December 31, 2025, as the transitions of agreements and services started late in the fourth quarter of 2025.

While such transitions of agreements and services are expected to continue throughout the first half of 2026, the specific timing of when these contracts will wind down is highly dependent on the Payor’s successor provider’s ability to successfully transition customers among other factors.

The terminated contracts reflected $322 million or 12% of our net revenue, including $231 million of capitation revenue, which represents nearly all of our capitation revenue, for the year ended December 31, 2025.

Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.

Discussions of year-to-year comparisons between 2023 and 2022 can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated by reference herein.

2024 compared to 2023

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Annual Report on Form 10-K discusses 2025, 2024 and 2023 items and year-to-year comparisons between 2025, 2024 and 2023.

2025 compared to 2024 and 2024 compared to 2023

For the Years Ended

(Dollars in thousands)

Products & Healthcare Services

Patient Direct

The increase in our Products & Healthcare Services segment net revenue for the year ended December 31, 2024 was driven by net revenue growth in the Medical Distribution division of 4.0%, driven by growth with existing customers, which was partially offset by a slight decline in our Global Products division, primarily driven by competitive pricing pressures, including glove pricing .

The increase in our Patient Direct segment net revenue for the year ended December 31, 2024 was driven primarily by growth across a number of product categories, including diabetes and sleep supplies.

Foreign currency translation had an unfavorable impact on net revenue of $3.5 million for the year ended December 31, 2024 as compared to the prior year.

Cost of goods sold.

Sleep therapy

Home respiratory therapy

The increase in our net revenue for the year ended December 31, 2025 was driven primarily by sales growth in several product categories, including sleep therapy, ostomy, and urology.

The growth in these categories includes the benefits from certain successful sales activities including our Sleep Journey Initiative .

This increase was partially offset by $11 million of benefits in the last half of 2024 associated with two settlement benefits related to two multi-year claims reprocessing matters.

For the Years Ended

(Dollars in thousands)

Cost of goods sold

The increase in cost of goods sold reflects the increased cost associated with net revenue growth of 3.6%, as compared to prior year, partially offset by cost reductions in our Global Products division, including $15 million of savings associated with sourcing initiatives .

We value a portion of Products & Healthcare Services inventory held in the U.S.

under the LIFO method.

Had inventory been valued under the first-in, first-out (FIFO) method, cost of goods sold as a percentage of net revenue would have been 1 basis point higher in 2024 and 2 basis points lower in 2023.

Foreign currency translation had a favorable impact on cost of goods sold of $2.5 million for the year ended December 31, 2024 as compared to the prior year.

Gross profit.

Sleep therapy

Home respiratory therapy

The increase in our net revenue for the year ended December 31, 2024 was driven primarily by sales growth in several product categories, including sleep therapy, diabetes, and wound care.

The growth in these categories includes the benefits from certain successful sales activities including our Sleep Journey Initiative .

Cost of net revenue.

For the Years Ended

(Dollars in thousands)

Cost of products sold

Patient service equipment depreciation

Cost of net revenue

As a % of net revenue

The increase in gross profit for the year ended December 31, 2024 was driven by the same factors impacting net revenue and cost of goods sold as compared to the prior year.

Foreign currency translation had an unfavorable impact on gross profit of $1.0 million for the year ended December 31, 2024 as compared to the prior year.

The increase in cost of net revenue reflects the increased cost associated with sales growth of 3.1% and manufacturer price increases, as compared to prior year.

For the Years Ended

(Dollars in thousands)

Cost of products sold

Patient service equipment depreciation

Cost of net revenue

As a % of net revenue

The increase in our cost of net revenue reflects the increased cost associated with sales growth of 5.0% and manufacturer price increases, as compared to prior year.

Operating expenses.

1 unchanged sentence

(Dollars in thousands)

Distribution, selling and administrative expenses

Selling, general and administrative expenses

As a % of net revenue

Goodwill impairment charges

Goodwill impairment charge

Transaction breakage fee

Acquisition-related charges and intangible amortization

Exit and realignment charges, net

Other operating expense (income), net

NM - Not meaningful

The increase in DS&A expenses was driven primarily by incremental costs to support the $367 million, or 3.6% net revenue growth, along with future revenue growth and an increase of $41 million in teammate benefit costs, partially offset by $18 million in expense savings from our IT strategic initiatives, $7.4 million of personnel cost savings related to 2023 organizational changes, and other productivity gains derived from operating efficiencies.

DS&A expenses also included a favorable impact from foreign currency translation of $0.9 million for the year ended December 31, 2024 as compared to the prior year.

The decrease in SG&A expenses for the year ended December 31, 2025 as compared to the prior year was driven primarily from a reduction in teammate benefit costs of $23 million and operating efficiencies in our revenue cycle and information technology, partially offset by inflationary increases and the cost to service the revenue growth of $82 million.

Goodwill impairment charge for the year ended December 31, 2024 reflected impairment recognized in our former Apria reporting unit during the quarter ended December 31, 2024 relating to a combination of factors occurring in the fourth quarter of 2024.

The majority of these factors are related to financial market changes inclusive of a decline in our stock price and rising interest rates.

Additionally, anticipated changes in pricing of a capitated contract also contributed to this charge.

Transaction breakage fee represents a cash payment to Rotech of $80 million made on June 5, 2025 for the termination of the Rotech acquisition.

Acquisition-related charges were $22 million for the years ended December 31, 2025 and 2024 related to the terminated acquisition of Rotech, which consisted primarily of legal and professional fees.

Intangible amortization was $74 million and $40 million for the years ended December 31, 2025 and 2024 and related primarily to intangible assets acquired in the Apria and Byram acquisitions.

The increase was due to the remaining useful life for an intangible asset being modified as of June 30, 2025 as a result of a notice of a contract termination with a commercial Payor.

See Note 5 in the Notes to Consolidated Financial Statements.

Exit and realignment charges, net were $18 million for the year ended December 31, 2025.

These charges included professional fees associated with strategic initiatives of $8.4 million, $6.8 million related to wind-down costs of Fusion5, severance associated with strategic realignments of $5.4 million, a $4.8 million gain on sale of patient service equipment in response to the contract termination with a commercial Payor and IT strategic initiatives and other of $1.5 million.

Exit and realignment charges, net were $47 million for the year ended December 31, 2024 which included professional fees associated with strategic initiatives of $36 million and IT strategic initiatives and other of $11 million.

For the Years Ended

(Dollars in thousands)

Selling, general and administrative expenses

As a % of net revenue

Goodwill impairment charge

Acquisition-related charges and intangible amortization

Exit and realignment charges, net

NM - Not meaningful

The increase in SG&A expenses was driven primarily by incremental costs to support the $128 million net revenue growth, along with future revenue growth, an increase in teammate incentive expense, excluding restricted stock, of $13 million.

Goodwill impairment charges relates to impairment recognized in the Apria reporting unit during the quarter ended December 31, 2024 relating to a combination of factors occurring in the fourth quarter of 2024.

The majority of these factors are related to financial market changes inclusive of a decline in Owens & Minor’s stock price and rising interest rates.

The majority of these factors are related to financial market changes inclusive of a decline in Accendra Health’s stock price and rising interest rates.

Additionally, anticipated changes in pricing of a capitated contract also contributed to this charge.

Acquisition-related charges were $22 million for the year ended December 31, 2024 as compared to $18 million for the year ended December, 31, 2023.

Acquisition-related charges in 2024 consisted of costs related to the expected acquisition of Rotech, which related primarily to legal and professional fees.

Acquisition charges in 2023 consisted primarily of costs related to the Apria Acquisition.

Intangible amortization was $65 million and $84 million for the years ended December 31, 2024 and 2023 and related primarily to intangible assets acquired in the Apria, Halyard, and Byram acquisitions.

Acquisition-related charges were $22 million for the year ended December 31, 2024 related to the terminated acquisition of Rotech, which consisted primarily of legal and professional fees.

Acquisition-related charges for the year ended December 31, 2023 were $17 million, consisting of costs related to the acquisition of Apria.

Intangible amortization was $40 million and $58 million for the years ended December 31, 2024 and 2023 and related primarily to intangible assets acquired in the Apria and Byram acquisitions.

The decline is related to certain intangible assets being fully amortized.

See Note 5 in the Notes to Consolidated Financial Statements.

Exit and realignment charges, net were $110 million and $99 million for the years ended December 31, 2024 and 2023.

Amounts in 2024 were primarily related to our (1) 2023-2024 Operating Model Realignment Program of $95 million, including professional fees, severance, and other costs to streamline functions and processes, (2) IT strategic initiatives such as converting certain divisions to a common IT system of $15 million, (3) other costs associated with strategic initiatives of $7.5 million, including lease exit costs and (4) $7.4 million gain on the sale of our corporate headquarters for the year ended December 31, 2024.

Amounts in 2023 were primarily related to our (1) 2023-2024 Operating Model Realignment Program of $82.9 million, including professional fees, severance, and other costs to streamline functions and processes, (2) IT strategic initiatives such as converting certain divisions to a common IT system of $9.2 million and, (3) other costs associated with strategic initiatives of $7.0 million, including lease exit costs.

The change in other operating expense (income), net for the year ended December 31, 2024 as compared to the prior year reflects $2.8 million higher losses on sales of accounts receivable under the RPA and Receivables Sale Program.

Other operating expense (income), net for the year ended December 31, 2024 reflected legal settlements of $17

million related primarily to compensation and hour wage disputes and a $5.4 million benefit for equipment returned to Philips, as described in the ‘Philips Respironics Recall’ section above.

During the year ended December 31, 2024, we incurred a favorable change of $6.0 million in foreign currency transaction gains and losses, net of derivative adjustments, as compared to the prior year.

Interest expense, net.

Exit and realignment charges, net were $7.3 million for the year ended December 31, 2023, which included professional fees associated with strategic initiatives of $2.1 million and IT strategic initiatives and other of $5.3 million.

Non-operating expenses

For the Years Ended

2 unchanged sentences

Effective interest rate

The decrease in interest expense was primarily due to lower average outstanding borrowings of $227 million, partially offset by an increase in the effective interest rate of 13 basis points.

Loss (gain) on extinguishment of debt.

For the Years Ended

(Dollars in thousands)

Loss (gain) on extinguishment of debt

Loss on extinguishment of debt for the year ended December 31, 2024 represents the loss associated with early retirement of indebtedness of $45 million for our Term Loan A.

Gain on extinguishment of debt for the year ended December 31, 2023 represented the gain associated with early retirement of indebtedness of $314 million.

Refer to Note 8 in the Notes to Consolidated Financial Statements for additional content related to the early retirement of indebtedness.

Transaction financing fees, net

Other expense, net

NM - Not meaningful

The decrease in interest expense was primarily due to lower average outstanding borrowings of $45 million and a decrease in the effective interest rate of 15 basis points, partially offset by a reduction in interest income of $6.4 million.

Transaction financing fees, net for the year ended December 31, 2025 consisted of debt financing fees associated with the terminated acquisition of Rotech, including $12 million of costs, net of income on the related cash held in escrow, on the financing issued in connection with the previously expected Rotech acquisition and $6.7 million in recognition of related previously deferred debt issuance costs.

Other expense, net for the years ended December 31, 2025 and 2024 includes interest cost and net actuarial losses related to our U.S.

retirement plan.

Other expense, net for the year ended December 31, 2024 also includes a $1.1 million loss on extinguishment of debt.

For the Years Ended

(Dollars in thousands)

Interest expense, net

Effective interest rate

Other expense, net

Other expense, net in 2024 and 2023 primarily represented interest cost and net actuarial losses related to our retirement plans.

The decrease in interest expense was primarily due to lower average outstanding borrowings of $227 million, partially offset by an increase in the effective interest rate of 13 basis points.

Other expense, net for the years ended December 31, 2024 and 2023 includes a $1.1 million loss on extinguishment of debt and a $3.5 million gain on extinguishment of debt, as well as interest cost and net actuarial losses related to our U.S.

retirement plan.

Income taxes.

1 unchanged sentence

(Dollars in thousands)

Income tax provision (benefit)

Income tax provision

Effective tax rate

The change in the effective tax rate for the year ended December 31, 2024 compared to 2023 resulted primarily from the pre-tax goodwill impairment charge of $307 million ($305 million net of tax) , related to the Apria reporting unit and a one-time income tax charge of $19 million, or a $0.24 negative impact per share, related to a recent decision associated with Notices of Proposed Adjustments (NOPA) that we received in 2020 and 2021.

The decision was communicated to us in late June 2024 and is related to past transfer pricing methodology, which is no longer employed.

The change in the effective tax rate for the year ended December 31, 2025 compared to 2024 resulted primarily from the pre-tax goodwill impairment charge of $307 million ($305 million net of tax) related to Apria and a one-time income tax charge of $19 million, or a $0.24 negative impact per share, related to a recent decision associated with Notices of Proposed Adjustments (NOPA) that we received in 2020 and 2021.

Both of these charges were incurred during the year ended December 31, 2024.

The change also includes the tax treatment associated with the $80 million transaction breakage fee incurred during the year ended December 31, 2025.

See Notes 5 and 12 in the Notes to Consolidated Financial Statements.

For the Years Ended

(Dollars in thousands)

Income tax provision

Effective tax rate

The change in the effective tax rate for the year ended December 31, 2024 compared to 2023 resulted primarily from the pre-tax goodwill impairment charge and the one-time income tax charge mentioned above for the year ended December 31, 2024.

Non-GAAP Financial Measures

The following financial measures, Adjusted EBITDA and Free Cash Flow (FCF), are not calculated in accordance with U.S.

generally accepted accounting principles (GAAP).

In general, non-GAAP measures exclude items and charges that (i) management does not believe reflect the Company’s core business and relate more to strategic, multi-year corporate activities;

or (ii) relate to activities or actions that may have occurred in multiple or prior periods without predictable trends.

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors.

However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not be considered substitutes for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.

We use Adjusted EBITDA, a financial measure that is not in accordance with GAAP, to analyze our financial results and as one of our incentive metrics and to provide an understanding of underlying operating results and trends by excluding items that are not closely related with ongoing operations.

We use FCF, a financial measure that is not in accordance with GAAP, to evaluate the capacity of our operations to generate free cash flow.

We utilize FCF as a performance metric.

The costs of the P&HS business that are classified as discontinued operations include only direct operating expenses.

Indirect costs, such as those related to corporate and shared services previously allocated to the P&HS business, do not meet the criteria for discontinued operations and are reported within continuing operations.

These costs (stranded costs) are reported within continuing operations and are included within Adjusted EBITDA.

The following tables present the reconciliations of loss from continuing operations, net of tax to Adjusted EBITDA and FCF for the years ended December 31, 2025 and 2024:

Years Ended December 31,

Loss from continuing operations, net of tax, as reported (GAAP)

Income tax provision

Interest expense, net

Acquisition-related charges and intangible amortization (1)

Transaction breakage fee (2)

Exit and realignment charges, net (3)

Transaction financing fees, net (4)

Litigation and related charges (5)

Goodwill impairment charge (6)

Other depreciation and amortization (7)

Stock compensation (8)

Adjusted EBITDA (non-GAAP)

Non-cash convert to sale write off expense (10)

Patient service equipment capital expenditures

Interest paid

Free cash flow (non-GAAP)

(1) Acquisition-related charges and intangible amortization for the years ended December 31, 2025 and 2024 include $22 million of acquisition-related costs related to the terminated acquisition of Rotech, which consisted primarily of legal and professional fees.

Acquisition-related charges and intangible amortization also include amortization of intangible assets established during acquisition method of accounting for business combinations.

Acquisition-related charges consist primarily of one-time costs related to acquisitions, including transaction costs necessary to consummate acquisitions, which consist of investment banking advisory fees and legal fees, director and officer tail insurance expense, as well as transition costs, such as severance and retention bonuses, IT integration costs and professional fees.

These amounts are highly dependent on the size and frequency of acquisitions and are being excluded to allow for a more consistent comparison with forecasted, current and historical results.

(2) Transaction breakage fee represents a cash payment to Rotech of $80 million made on June 5, 2025, for the termination of the Rotech Acquisition.

(3) During the year ended December 31, 2025 exit and realignment charges, net were $18 million.

These costs are not normal recurring, cash operating expenses necessary for the Company to operate its business on an ongoing basis.

(4) Transaction financing fees, net includes $12 million, net of income on the related cash held in escrow, on the financing issued in connection with the previously expected Rotech acquisition and $6.7 million in recognition of related previously deferred debt issuance costs.

(5) Litigation and related charges includes settlement costs and related charges of certain legal matters.

These costs do not occur in the ordinary course of our business and are inherently unpredictable in timing and amount.

(6) Goodwill impairment charge relates to a non-cash goodwill impairment charge recognized in the Apria reporting unit during the quarter ended December 31, 2024 resulting from a combination of factors, including fourth quarter 2024

market changes inclusive of a decline in the Company’s stock price and rising interest rates.

Additionally, anticipated changes in pricing of a capitated contract within the Apria division also contributed to this charge.

This is a non-cash charge and does not occur in the ordinary course of our business and is inherently unpredictable in timing and amount.

(7) Other depreciation and amortization relates to patient service equipment and other fixed assets, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges and intangible amortization.

(8) Stock compensation includes share-based compensation expense related to our share-based compensation plans, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges and intangible amortization.

For the year ended December 31, 2025 stock compensation includes a $4.0 million benefit associated with updated expected achievement for our performance share awards.

(9) For the years ended December 31, 2025 and 2024, other includes interest costs and net actuarial losses related to our frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S.).

(10) Non-cash convert to sale write off expense includes non-cash charges primarily for equipment converted from rental to sales.

This reflects the non-cash write-off of the remaining book value of patient service equipment at the time of sale.

The purchase of patient service equipment is captured within capital expenditures and is subsequently charged to our statements of operations through normal depreciation and this non-cash convert to sale write off expense.

Financial Condition, Liquidity and Capital Resources

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We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our Revolving Credit Agreement, or a combination thereof of approximately $7.7 million.

The majority of our cash and cash equivalents are held in cash depository accounts with major banks in North America, Europe, and Asia.

Changes in our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.

The majority of our cash and cash equivalents are held in cash depository accounts with major banks in the U.S.

Our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.

(Dollars in thousands)

Cash and cash equivalents

Accounts receivable, net

Merchandise inventories

Accounts receivable

Inventory days (2)

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(1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2025 and 2024.

DSO in 2025 reflected the impact of the reduction in accounts receivable, net due to sales of accounts receivable under the Amended Receivables Sale Program.

Excluding the impact of the Amended Receivables Sale Program, DSO would have been 29.8 as of December 31, 2025.

DSO in 2024 reflected the impact of the reduction in accounts receivable, net due to sales of accounts receivable under the Receivables Sale Program.

Excluding the impact of the Receivables Sale Program, DSO would have been 30.7 as of December 31, 2024.

DSO in 2023 reflected the impact of the reduction in accounts receivable, net due to sales of accounts receivable under the RPA.

Excluding the impact of the RPA, DSO would have been 24.8 as of December 31, 2023.

(2) Based on year end merchandise inventories and cost of goods sold for the fourth quarter ended December 31, 2024 and 2023.

(2) Based on year end inventories and cost of net revenue for the fourth quarter ended December 31, 2025 and 2024.

Liquidity and capital expenditures.

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Net cash provided by (used for):

Operating activities from continuing operations

Operating activities from discontinued operations

Operating activities

Investing activities from continuing operations

Investing activities from discontinued operations

Investing activities

Financing activities from continuing operations

Financing activities from discontinued operations

Financing activities

Effect of exchange rate changes

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash provided by operating activities for the year ended December 31, 2024 reflected positive cash generated by a net loss after the effects of reconciling non-cash adjustments.

Cash provided by operating activities was negatively impacted by unfavorable changes in working capital for the year ended December 31, 2024 and was positively impacted by changes in working capital for the year ended December 31, 2023.

For the year ended December 31, 2024, unfavorable changes in working capital were driven by an increase in accounts receivable, including a $54 million

reduction in accounts receivable that had been sold and removed from our consolidated balance sheets under the Receivables Sale Program and the RPA, partially offset by an increase in accounts payable.

For the year ended December 31, 2023, favorable changes in working capital were driven by the reduction in accounts receivable, net from the initial accounts receivable sold through the RPA and the significant reduction in inventory levels during the year ended December 31, 2023.

Cash used for investing activities in 2024 included capital expenditures of $228 million for patient service equipment and our strategic and operational efficiency initiatives, partially offset by $103 million in proceeds related to the sale and disposal of property and equipment, which included sales of patient service equipment and $34 million in gross proceeds related to the sale of our corporate headquarters, and $18 million included in the ‘Other, net’ line item for a settlement with Philips for returned equipment as described in the ‘Philips Respironics Recall’ section above.

Cash used for investing activities in 2023 included capital expenditures of $208 million for patient service equipment and our strategic and operational efficiency initiatives, partially offset by $72 million in proceeds primarily related to the sale of patient service equipment.

Cash used for financing activities in 2024 included repayments of debt of $244 million, including the $171 million paid to redeem the outstanding principal of the 4.375% senior notes due in 2024 (the 2024 Notes), unscheduled principal payments of $45 million on the Term Loan A facility (Term Loan A) and scheduled principal payments of $28 million on our Term Loan A and Term Loan B facility (Term Loan B).

We had no borrowings under our revolving credit facility on a net basis for 2024 and the activity under our amended Receivables Financing Agreement netted to no impact to our outstanding borrowings.

Cash used for financing activities in 2023 included repayments of debt of $321 million including $170 million of unscheduled and $15 million of scheduled principal payments on our Term Loan A and Term Loan B, $135 million of cash to repurchase $144 million aggregate principal of the 2024 Notes, the 4.500% senior unsecured notes due in 2029 (2029 Unsecured Notes) and the 6.625% senior notes due in 2030 (the 2030 Unsecured Notes) .

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash used for operating activities for the year ended December 31, 2025 reflected a net loss including the impact of the $80 million termination fee of the Rotech acquisition, $18 million in transaction financing fees, net for the Rotech acquisition financing, $22 million in legal settlement payments for two litigation matters, and favorable changes in working capital, including a $122 million reduction in continuing operations accounts receivable driven by a $120 million increase in accounts receivable that had been sold and removed from our consolidated balance sheets.

Cash used for operating activities for the year ended December 31, 2025 was also impacted by $256 million of unfavorable changes in discontinued operations operating cash flow, driven by net losses and unfavorable changes in discontinued operations working capital.

Cash provided by operating activities for the year ended December 31, 2024 reflected earnings from continuing operations, excluding non-cash charges such as the goodwill impairment charge and depreciation and amortization, as well as favorable changes in working capital.

Cash provided by operating activities for the year ended December 31, 2024 was also impacted by $18 million of favorable changes in discontinued operations operating cash flow, driven by operating earnings, partially offset by unfavorable changes in working capital.

Cash provided by operating activities for the year ended December 31, 2023 reflected earnings from continuing operations, excluding non-cash charges such as depreciation and amortization, as well as favorable changes in working capital.

Cash provided by operating activities for the year ended December 31, 2023 was also impacted by $404 million of favorable changes in discontinued operations operating cash flow, driven by operating earnings and positive changes in working capital.

Cash provided by investing activities in 2025 included $342 million in proceeds from the sale of the P&HS business, $18 million of cash sold, and $78 million in proceeds from the sale of patient service equipment, partially offset by continuing operations capital expenditures of $201 million for patient service equipment and our strategic and operational efficiency initiatives associated with other fixed assets and capitalized software.

Cash used for investing activities in 2025 also included $55 million of discontinued operations capital expenditures.

Cash used for investing activities in 2024 included continuing operations capital expenditures of $183 million primarily for patient service equipment, other fixed assets and capitalized software, partially offset by $70 million in proceeds from the sale of patient service equipment and $18 million included in the ‘other, net’ line item for settlement with Philips for returned equipment as described in the ‘Philips Respironics Recall’ section above.

Cash used for investing activities in 2024 also included $45 million of discontinued operations capital expenditures and $34 million in proceeds from the sale of our former corporate headquarters.

Cash used for investing activities in 2023 included continuing operations capital expenditures of $179 million primarily for patient service equipment, and our strategic and operational efficiency initiatives associated with other fixed assets and capitalized software, partially offset by $72 million in proceeds from the sale of patient service equipment.

Cash used for investing activities in 2023 also included $29 million of discontinued operations capital expenditures.

Cash provided by financing activities in 2025 included net borrowings of $204 million under our Revolving Credit Facility and $10 million used for share repurchases.

Cash used for financing activities in 2024 included repayments of debt of $244 million, including $171 million paid to redeem the 4.375% senior notes that were due in December 2024, and $45 million of unscheduled and $28 million of scheduled repayments on term loans.

Cash used for financing activities in 2023 included repayments of debt of $321 million, and $170 million of unscheduled and $15 million of scheduled repayments on term loans, $135 million of cash to repurchase $144 million aggregate principal of the 2024 Notes, the 4.500% senior unsecured notes due in 2029 (2029 Unsecured Notes) and the 6.625% senior notes due in 2030 (the 2030 Unsecured Notes).

We had no borrowings under our Revolving Credit Facility for 2024 and the activity under our amended Receivables Financing Agreement netted to no impact on our outstanding borrowings.

We had no borrowings under our revolving credit facility on a net basis for 2023 and made net repayments of $96 million under our amended Receivables Financing Agreement.

Payments for taxes related to the vesting of restricted stock awards were $8.1 million and $10 million during 2024 and 2023, which are included in Other, net.

Capital resources.

Our primary sources of liquidity include cash and cash equivalents, our Receivables Sale Program, our Revolving Credit Agreement and our Receivables Purchase Agreement (RPA).

On October 18, 2024, O&M Funding and Owens & Minor Medical, LLC., each a wholly-owned subsidiary of the Company, entered into a Receivables Purchase Agreement (the Receivables Sale Program) with persons from time to time, as Purchasers, PNC Bank, National Association, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $450 million are sold, on a limited-recourse basis, to the Purchasers in exchange for cash.

Our primary sources of liquidity include cash and cash equivalents, our Amended Receivables Sale Program and our Revolving Credit Agreement.

On October 18, 2024, we entered into a Receivables Purchase Agreement (the Receivables Sale Program) with persons from time to time, as Purchasers, PNC Bank, National Association, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $450 million are sold, on a limited-recourse basis, to the Purchasers in exchange for cash.

The Receivables Sale Program amends and restates in its entirety, the Receivables Financing Agreement.

Transactions under this agreement are accounted for as sales in accordance with ASC 860, Transfers and Servicing , with the sold receivables removed from our consolidated balance sheets.

Total accounts receivable sold under the Receivables Sale Program and net cash proceeds were $168 million during the year ended December 31, 2024.

We collected $98 million of the sold accounts receivable for the year ended December 31, 2024.

The losses on sales of accounts receivable are recorded in other operating expense (income), net in the consolidated statements of operations and were $1.9 million for the year ended December 31, 2024.

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.

Cash received from the sales 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 and net cash proceeds were $1.7 billion during the year ended December 31, 2024.

We collected $1.9 billion of the sold accounts receivable for the year ended December 31, 2024.

The losses on sales of accounts receivable are recorded in other operating expense (income), net in the consolidated statements of operations and were $11 million for the year ended December 31, 2024.

As a result of an amendment to the Receivables Financing Agreement during the fourth quarter of 2024, we do not expect to utilize the RPA in the future.

Total accounts receivable sold under the Receivables Sale Program and net cash proceeds were $325 million related to continuing operations during the year ended December 31, 2025.

We collected $330 million of the sold accounts receivable related to continuing operations for the year ended December 31, 2025.

The losses on sales of accounts receivable of continuing operations, inclusive of professional fees incurred to establish the agreement, recorded in selling, general, and administrative expenses in the consolidated statements of operations were $2.2 million for the year ended December 31, 2025.

In connection with the amendment to the Receivables Sale Program, as described below, any uncollected accounts receivable sold from were settled on December 31, 2025.

On December 31, 2025, we entered into an Amended & Restated Receivables Purchase Agreement (the Amended Receivables Sale Program) with persons from time to time party thereto, as Purchasers, PNC Bank, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $150 million are sold, on a limited-recourse basis, to the Purchasers in exchange for cash.

The Amended Receivables Sale Program amends and restates in its entirety, the Receivables Sale Program, dated as of October 18, 2024.

Total accounts receivable sold under the Amended Receivables Sale Program were $134 million.

As of December 31, 2025 there was a total of $134 million of uncollected accounts receivable sold and removed from our consolidated balance sheet under the Amended Receivables Sale Program.

The Revolving Credit Agreement provides a revolving borrowing capacity of $450 million.

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

At December 31, 2024, and December 31, 2023, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce revolver availability, of $31 million and $27 million, leaving $419 million and $423 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 U.S.

and Europe that were issued outside of the Revolving Credit Agreement for $2.9 million and $3.0 million as of December 31, 2024 and 2023.

The Revolving Credit Agreement, the Credit Agreement, the Receivables Sale Program, 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.

At December 31, 2025 we had $204 million in outstanding borrowings on our Revolving Credit Agreement.

December 31, 2024, our Revolving Credit Agreement was undrawn.

At December 31, 2025 and December 31, 2024, we had letters of credit, which reduce revolver availability, of $30 million and $31 million, leaving $217 million and $419 million available for borrowing.

The Revolving Credit Agreement, the Credit Agreement, the Amended Receivables Sale Program, 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 December 31, 2025.

On April 4, 2025, we completed the sale of $1.0 billion aggregate principal amount of 10.000% Senior Secured Notes due 2030 (the New Notes) in a private offering (the Offering) to persons reasonably believed to be “qualified institutional buyers” in the United States, as defined in Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and to certain non-U.S.

persons outside the United States in offshore transactions pursuant to Regulation S under the Securities Act.

The Offering was conducted in connection with the financing of the Company’s proposed acquisition of Rotech.

At the closing of the Offering, the gross proceeds were placed into a segregated escrow account where they were held for the benefit of the holders of the New Notes pending the consummation of the proposed acquisition of Rotech.

On June 3, 2025, the Company, Rotech and Merger Sub mutually agreed to terminate the Merger Agreement and entered into a mutual termination agreement (the Termination Agreement).

On June 10, 2025 (the Redemption Date), the New Notes were redeemed in full at a price equal to 100% of the aggregate principal amount of the New Notes, plus accrued and unpaid interest to, but excluding the Redemption Date.

We regularly evaluate market conditions, our liquidity profile and various financing alternatives to enhance our capital structure.

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We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.

On February 26, 2025, the Owens & Minor Board of Directors authorized a share repurchase program of up to $100 million over the next 24 months.

Under the program, Owens & Minor may repurchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions and 10b5-1 trading plans.

We believe cash generated by operating activities, including available cash proceeds from the Receivables Sale Program, available financing sources, and borrowings under the Revolving Credit Agreement, as well as cash on hand, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, debt repurchases, share repurchases and other cash requirements.

On February 26, 2025, our Board of Directors authorized a share repurchase program of up to $100 million over the next two years.

Under the program, we may repurchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions and 10b5-1 trading plans.

During the year ended December 31, 2025 we repurchased in open-market transactions and retired 2.0 million shares of our common stock for an aggregate of $10 million, or a weighted average price per share of $5.19.

We believe cash generated by operating activities, including available cash proceeds from the Amended Receivables Sale Program, available financing sources, and borrowings under the Revolving Credit Agreement, as well as cash on hand, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, debt repurchases, share repurchases and other cash requirements.

While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us or (iii) our cost of borrowing.

We earn a portion of our operating income in foreign jurisdictions outside the U.S.

Our cash and cash equivalents held by our foreign subsidiaries subject to repatriation totaled $22 million at December 31, 2024 and 2023.

As of December 31, 2024, we are permanently reinvested in our foreign subsidiaries.

Pillar 2 Global Minimum Tax

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The OECD continues to release additional guidance on how the Pillar Two rules should be interpreted and applied.

Law enactment by the OECD and various countries is currently being implemented and is expected to continue to take effect during 2025.

We are continuing to evaluate the impact of these proposed and enacted legislative changes as new

guidance becomes available and do not expect Pillar Two to have a material impact on our financial position, results of operations and cash flows.

We do not expect Pillar Two to have a material impact on our financial position, results of operations and cash flows.

Our business is affected by seasonality, which historically has resulted in higher sales volume during our third and fourth quarters, ending September 30 and December 31.

Contractual Obligations

On July 22, 2024, we entered into an Agreement and Plan of Merger to acquire Rotech for $1.36 billion in cash.

Given anticipated tax benefits of approximately $40 million from the transaction, the net purchase price is approximately $1.32 billion.

Rotech is a national leader in providing home medical equipment in the U.S.

The definitive agreement contains certain termination rights for the Company and Rotech.

In the event that we terminate the contract, we will be required to pay Rotech a termination fee of $70 million.

We have fully committed financing in place and expect to use a combination of cash and incremental borrowings to fund the purchase price.

As of December 31, 2024, other material cash requirements, including known contractual and other obligations, in the next twelve months were primarily comprised of $40 million in principal debt payments, $123 million in operating leases, $58 million in fixed interest payments on our outstanding senior notes, and $43 million associated with the NOPA matter, which includes $12 million of interest accrued on the matter through December 31, 2024.

Additionally, as of December 31, 2024, material cash requirements, including known contractual and other obligations, due beyond the next twelve months were primarily comprised of $1.8 billion in principal debt payments excluding finance leases, $225 million in fixed interest payments on our outstanding senior notes, $347 million in operating leases and $28 million in U.S.

As of December 31, 2025, other material cash requirements, including known contractual and other obligations and excluding anticipated voluntary prepayments of debt, in the next twelve months were primarily comprised of $49 million in operating leases, $58 million in fixed interest payments on our outstanding senior notes, and $35 million associated with the NOPA matter, which includes $11 million of interest accrued on the matter through December 31, 2025.

Additionally, as of December 31, 2025, material cash requirements, including known contractual and other obligations, due beyond the next twelve months were primarily comprised of $2.1 billion in principal debt payments, $167 million in fixed interest payments on our outstanding senior notes, $83 million in operating leases and $28 million in U.S.

retirement plan benefits, based on the same assumptions used to measure our year-end benefit obligation .

Due to the uncertainty of forecasting variable interest rate payments, interest payment amounts on our variable rate debt are excluded from the contractual obligations disclosed in this section.

See Note 6, “Leases”, Note 8, “Debt”, Note 10, “Retirement Plans”, Note 12, “Income Taxes”, and Note 15, “Commitments, Contingent Liabilities, and Legal Proceedings” in the Notes to Consolidated Financial Statements.

See Note 6, “Leases”, Note 8, “Debt”, Note 10, “Retirement Plan”, Note 12, “Income Taxes”, and Note 15, “Commitments, Contingent Liabilities, and Legal Proceedings” in the Notes to Consolidated Financial Statements.

Off-Balance Sheet Arrangements

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Because of the uncertainty inherent in such estimates, actual results may differ.

We believe our critical accounting estimates include accounting for goodwill valuation, revenue recognition, and inventory valuation.

Goodwill is evaluated for impairment annually, as of October 1, and if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less

than its carrying amount.

If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, or if elected to bypass the qualitative test, then a quantitative test is performed.

The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount.

Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or a component, one level below our operating segments, for which discrete financial information is available and where segment management regularly reviews the operating results of that reporting unit.

Our reporting units are:

Global Products, Medical Distribution (including Services and Outsourced Logistics), Apria, and Byram.

The Medical Distribution reporting unit does not have any goodwill as of December 31, 2024.

As of October 1, 2024, we performed our annual impairment test and there were no impairments of goodwill.

During the three months ended December 31, 2024, we experienced financial market changes inclusive of a decline in Owens & Minor’s stock price and an increase in the risk free interest rate resulting in an increase in the discount rate used for impairment analysis.

Additionally, anticipated changes in pricing of a capitated contract contributed to a reduction in projected future cash flows within our Apria reporting unit.

As a result of these factors during the three months ended December 31, 2024, we performed an interim quantitative goodwill impairment test.

The quantitative impairment review of goodwill requires the extensive use of accounting estimates and assumptions.

We determine the estimated fair value of our reporting units by using an equally weighted combination of the income-based approach and the market-based approach.

The income-based approach is dependent upon several significant assumptions and estimates regarding future period cash flows, including assumptions with respect to future sales growth and a terminal growth rate.

In addition, a weighted average cost of capital (WACC) is used to discount future estimated cash flows to their present values.

The WACC is based on externally observable data considering market participants’ cost of equity and debt, optimal capital structure and interest rates, as well as the risk and uncertainty with respect to the reporting unit and internally developed financial projections.

Under the market-based approach, significant estimates and assumptions also include the selection of appropriate guideline public companies whose stock is actively traded in public markets and the determination of appropriate valuation multiples to apply to the reporting unit.

In addition, we compared the aggregate of the reporting units’ estimated fair values to our market capitalization, as further corroboration of the reasonableness of our concluded fair values.

Although we believe our assumptions and estimates are reasonable and appropriate, any significant adverse changes in one or a combination of key assumptions, including, but not limited to, a further decrease in our market capitalization, an increase in the discount rate, inflationary pressures and our planned efforts to mitigate such impacts, disruptions in the supply chain, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform), a significant change in industry or economic trends, or the reporting unit specific factors described in the paragraphs below may materially affect the estimated fair-value of each reporting unit and potentially result in goodwill impairment.

We may be required to record a material charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill is determined, which could adversely affect our results of operations.

Our 2024 interim quantitative goodwill impairment test concluded that the fair value for our Apria reporting unit within our Patient Direct segment was below its carrying amount.

The amount by which the carrying value of the impaired reporting unit’s goodwill exceeded its fair value was $305 million ($307 million pre-tax), which was recognized as an impairment loss during the three months ended December 31, 2024.

Inclusive of the impairment recorded, the goodwill balance of this reporting unit was $944 million at December 31, 2024, or approximately 71% of the consolidated goodwill balance.

Adverse changes in one or a combination of significant assumptions, such as the factors described above, as well as, failure of the Apria reporting unit to meet expected earnings and cash flows, or unanticipated events and circumstances such as a loss of a contract with a large payor may materially affect the estimated fair value of the Apria reporting unit and potentially result in further goodwill impairment.

A decline in the terminal growth rate or an increase in the discount rate of approximately 100 basis points would have increased the impairment charge by approximately $25 million and approximately $45 million.

The estimated fair value of our Global Products reporting unit was substantially in excess of the carrying value.

For Global Products, adverse changes in one or a combination of significant assumptions, such as the factors described

above, as well as, failure of the Global Products reporting unit to meet expected earnings and cash flows, changes in assumptions about the duration and magnitude of increased supply chain expense, increases in commodities costs, or unanticipated events and circumstances such as pricing pressures and lower demand for certain product categories, including PPE, may materially affect the estimated fair value of the Global Products reporting unit and potentially result in goodwill impairment.

The estimated fair value of our Byram reporting unit was substantially in excess of the carrying value.

The impairment testing performed for 2023 and 2022 did not indicate any impairment of goodwill.

We believe our critical accounting estimates include accounting for revenue recognition.

Revenue Recognition.

Due to the nature of our industry and the reimbursement environment in which we operate, revenue recognition requires significant estimates and judgements.

Due to the nature of our industry and the reimbursement environment in which we operate, revenue recognition requires significant estimates and judgments.

We determine the transaction price based on contractually agreed-upon amounts or rates, adjusted for estimates of variable consideration including but not limited to rebates, discounts, performance guarantees, and implicit price concessions.

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If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known.

Merchandise inventories are valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S.

within our Products & Healthcare Services segment.

Cost of remaining inventories are determined using the FIFO or weighted-average cost method at the lower of cost or net realizable value.

We periodically evaluate whether inventory valuation allowance adjustments are required, which includes consideration of recent sales trends.

In our evaluation, we review for expired or obsolete inventory and slow-moving inventory.

We write down inventories which are considered excess and obsolete as a result of these assessments.

Shifts in market trends and conditions, as well as changes in customer preferences and behavior could affect the value of our inventories.

Non-cash LIFO charges to merchandise inventories valued at the lower of cost or market, with the approximate cost determined by the LIFO method for distribution inventories in the U.S.

within our Products & Healthcare Services segment, were $0.9 million, $2.4 million, and $5.4 million for the years ended December 31, 2024, 2023 and 2022.

Excess and obsolete inventory adjustments included in our Products & Healthcare Services segment were $12 million, $7.3 million and $17 million for the years ended December 31 2024, 2023, and 2022.

For the year ended December 31, 2022, we recorded a $92 million inventory valuation adjustment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic that was not allocated to the Products & Healthcare Services segment due to its one time nature and size.

Recent Accounting Pronouncements

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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-K

Item 7. Management’s Discussion and Analysis