What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-20 compared with 2023-02-28 · 470 added, 504 removed, 898 unchanged (52% of the section changed)

1 unchanged sentence

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.

We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.

Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.

On the Acquisition Date, we completed the acquisition of 100% of Apria.

As permitted by the Securities and Exchange Commission under the current year acquisition scope exception, we have excluded this acquisition, except for certain balances associated with acquisition accounting, from our 2022 assessment of the effectiveness of our internal control over financial reporting since it was not practical for management to conduct an assessment of internal control over financial reporting between the Acquisition Date and the date of management's assessment.

Management’s Report on Internal Control over Financial Reporting

6 unchanged sentences

Based on management’s assessment and the COSO criteria, management believes that our internal control over financial reporting was effective as of December 31, 2023 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

In reliance on guidance set forth in Question 3 of a “Frequently Asked Questions” interpretative release issued by the Staff of the SEC’s Office of the Chief Accountant and the Division of Corporation Finance in September 2004, as revised on September 24, 2007, regarding Securities Exchange Act Release No.

34-47986, Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, management determined that it would exclude Apria, Inc.

(Apria), which was acquired on March 29, 2022, from the scope of the assessment of the effectiveness of our internal control over financial reporting.

It was not practical for management to conduct an assessment of internal control over financial reporting in the period between the date the acquisition was completed and the date of management’s assessment.

Except for goodwill and intangible assets recorded by the Company in connection with the purchase of Apria, management excluded Apria from its assessment of internal control over financial reporting.

Excluding $1.5 billion of goodwill and intangible assets (see Note 3 and Note 7 of Notes to the Consolidated Financial Statements), this acquisition represented $496 million of assets and $937 million of revenues as of and for the year ended December 31, 2022, of our consolidated financial statements.

Apria will be included in management’s assessment of internal control over financial reporting for the year ending December 31, 2023.

The effectiveness of our internal control over financial reporting as of December 31, 2023, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their unqualified report which is included in this annual report.

4 unchanged sentences

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting during our last quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Beginning with the first quarter of 2023, management’s evaluation and conclusion as to the effectiveness of the design and operation of our disclosure controls and procedures as of and for the period covered by this report includes the evaluation of the internal control over financial reporting of Apria, Inc.

There were no other changes in our internal control over financial reporting that occurred during the period of this report that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information

During the three months ended December 31, 2023, none of our directors or officers informed us of the adoption or termination of a trading plan intended to satisfy Rule 10b5-1(c).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

6 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Apria, Inc.

during 2022, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022, Apria, Inc.’s internal control over financial reporting associated with total assets of $496 million and total revenues of $937 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2022.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Apria, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

14 unchanged sentences

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Richmond, Virginia

5 unchanged sentences

Exhibits and Financial Statement Schedules

a) The following documents are filed as part of this report:

The following documents are filed as part of this report:

Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Balance Sheets as of December 31, 2023 and 2022

8 unchanged sentences

(in thousands, except per share data)

Year ended December 31, 2022 2021 2020

Net revenue $ 9,955,475 $ 9,785,315 $ 8,480,177

Years Ended December 31,

Cost of goods sold

Gross margin 1,826,351 1,513,229 1,280,834

Distribution, selling and administrative expenses

Acquisition-related and exit and realignment charges 55,022 34,076 37,752

Other operating income, net ( 5,252 ) ( 6,191 ) ( 2,372 )

Acquisition-related charges and intangible amortization

Exit and realignment charges

Other operating expense (income), net

Operating income

Interest expense, net

Loss on extinguishment of debt — 40,433 11,219

Other expense (income), net 3,131 3,196 ( 407 )

Income from continuing operations before income taxes 10,891 276,754 109,908

(Gain) loss on extinguishment of debt

Other expense, net

(Loss) income before income taxes

Income tax (benefit) provision

Income from continuing operations 22,389 221,589 88,074

Loss from discontinued operations, net of tax — — ( 58,203 )

Net income $ 22,389 $ 221,589 $ 29,871

Basic income per common share:

Income from continuing operations $ 0.30 $ 3.05 $ 1.39

Loss from discontinued operations — — ( 0.92 )

Net income $ 0.30 $ 3.05 $ 0.47

Diluted income per common share:

Income from continuing operations $ 0.29 $ 2.94 $ 1.39

Loss from discontinued operations — — ( 0.92 )

Net income $ 0.29 $ 2.94 $ 0.47

Net (loss) income

Net (loss) income per common share:

See accompanying notes to consolidated financial statements.

1 unchanged sentence

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

Year ended December 31, 2022 2021 2020

Net income $ 22,389 $ 221,589 $ 29,871

Years Ended December 31,

Net (loss) income

Other comprehensive income (loss) net of tax:

3 unchanged sentences

Total other comprehensive income (loss), net of tax

Comprehensive income $ 27,125 $ 219,507 $ 44,069

Comprehensive (loss) income

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(in thousands, except per share data)

December 31, 2022 2021

Current assets

6 unchanged sentences

Operating lease assets

Goodwill 1,636,705 390,185

Intangible assets, net

Other assets, net

Total assets $ 5,386,283 $ 3,536,551

Liabilities and equity

2 unchanged sentences

Accrued payroll and related liabilities

Current portion of long-term debt

Other current liabilities

2 unchanged sentences

Operating lease liabilities, excluding current portion

Deferred income taxes 60,833 35,310

Deferred income taxes, net

Other liabilities

Total liabilities

Commitments and contingencies (Note 18)

Commitments and contingencies

Common stock, par value $ 2 per share;

authorized - 200,000 shares;

issued and outstanding— 76,279 shares and 75,433 shares as of December 31, 2022 and 2021

152,557 150,865

issued and outstanding - 76,546 shares and 76,279 shares as of December 31, 2023 and December 31, 2022

Paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Total equity 945,604 938,501

Total liabilities and equity

4 unchanged sentences

(in thousands)

Year Ended December 31, 2022 2021 2020

Years Ended December 31,

Operating activities:

Net income $ 22,389 $ 221,589 $ 29,871

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

Net (loss) income

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

Depreciation and amortization

Share-based compensation expense

Impairment charges — — 8,724

Loss on divestiture — — 65,472

Loss on extinguishment of debt — 40,433 11,219

Deferred income tax (benefit) expense ( 26,361 ) ( 29,736 ) 15,564

Provision for losses on accounts receivable 3,315 21,158 11,292

(Gain) loss on extinguishment of debt

Deferred income tax benefit

(Benefit) provision for losses on accounts receivable

Changes in operating lease right-of-use assets and lease liabilities

5 unchanged sentences

Net change in other assets and liabilities

Other, net 12,142 15,033 6,865

Cash provided by operating activities

1 unchanged sentence

Acquisition, net of cash acquired

Proceeds from divestiture — — 133,000

( 1,684,607 )

Additions to property and equipment

1 unchanged sentence

Proceeds from sale of property and equipment

Other, net ( 1,670 ) ( 3,940 ) 6,266

Cash (used for) provided by investing activities ( 1,804,476 ) ( 53,630 ) 80,073

Cash used for investing activities

( 1,804,476 )

Financing activities:

Proceeds from issuance of debt 1,691,000 574,900 155,100

Proceeds from issuance of common stock — — 189,971

Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program 30,000 ( 103,200 ) ( 74,700 )

Borrowings under amended Receivables Financing Agreement

Repayments under amended Receivables Financing Agreement

( 1,156,300 )

Repayments of debt

Borrowings under amended accounts receivable securitization program 1,022,300 — —

Repayments under amended accounts receivable securitization program ( 1,156,300 ) — —

Proceeds from issuance of debt

Borrowings (repayments) under revolving credit facility, net and Receivables Financing Agreement

Financing costs paid

Cash dividends paid

Senior Notes make-whole premium paid — — ( 4,980 )

Payment for termination of interest rate swaps

Other, net ( 42,793 ) ( 17,961 ) ( 16,491 )

Cash provided by (used for) financing activities 1,497,105 ( 129,478 ) ( 379,386 )

Cash (used for) provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash 14,150 ( 62,471 ) 49,819

Cash, cash equivalents and restricted cash at beginning of year 72,035 134,506 84,687

Cash, cash equivalents and restricted cash at end of year

$ 86,185 $ 72,035 $ 134,506

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of cash flow information:

Income taxes paid (received), net of refunds $ 33,973 $ 99,400 $ ( 17,455 )

Income taxes (received) paid, net

Interest paid

Noncash investing activity:

Unpaid purchases of property and equipment and software at end of period $ 67,852 $ — $ —

Unpaid purchases of property and equipment and computer software at end of period

See accompanying notes to consolidated financial statements .

4 unchanged sentences

Common Shares

Outstanding Common Stock

($ 2 par value)

Capital Retained

Earnings Accumulated

Comprehensive

Loss Total Equity

( $ 2 par value)

Balance, December 31, 2020

Net income — — — 29,871 — 29,871

Other comprehensive income — — — — 14,198 14,198

Other comprehensive loss

Dividends declared ($ 0.01 per share)

— — — ( 623 ) — ( 623 )

Issuance of common stock, net of issuance costs 9,746 19,493 170,478 — — 189,971

Share-based compensation expense, exercises and other

Balance, December 31, 2021

Net income — — — 221,589 221,589

Other comprehensive loss — — — — ( 2,082 ) ( 2,082 )

Dividends declared ($ 0.01 per share)

— — — ( 992 ) — ( 992 )

Other comprehensive income

Share-based compensation expense, exercises and other

Balance, December 31, 2022

Net income — — — 22,389 22,389

Other comprehensive income

12 unchanged sentences

The consolidated financial statements include the accounts of Owens & Minor, Inc.

and the subsidiaries it controls, in conformity with U.S generally accepted accounting principles (GAAP).

and the subsidiaries it controls and contain all adjustments necessary to conform with U.S.

generally accepted accounting principles (GAAP).

All significant intercompany accounts and transactions have been eliminated.

Unless otherwise indicated, information in these notes to consolidated financial statements relates to continuing operations.

The results of operations of businesses acquired by the Company are included as of the respective acquisition date.

Our business has two distinct segments:

We report our business under two distinct segments:

Products & Healthcare Services and Patient Direct.

Products & Healthcare Services provides distribution, outsourced logistics and value-added services, and manufactures and sources medical surgical products through our production and kitting operations.

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

Beginning in 2022, we have reported financial results using this two segment structure and have recast our prior year segment results on the same basis.

The Products & Healthcare Services segment includes our United States (U.S.) distribution division (Medical Distribution), including 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.

Certain prior year amounts have been reclassified to conform to the current year segment presentation.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates.

The preparation of the consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures.

The preparation of consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures.

Significant estimates are used for, but are not limited to, the allowances for losses on accounts receivable, inventory valuation allowances, variable consideration, depreciation and amortization, goodwill valuation, valuation of intangible assets and other long-lived assets, estimated fair values of the net assets acquired in business combinations, self-insurance liabilities, tax liabilities, defined benefit obligations, share-based compensation and other contingencies.

1 unchanged sentence

Cash, Cash Equivalents and Restricted Cash.

Cash, cash equivalents and restricted cash include cash and marketable securities with an original maturity or maturity at acquisition of three months or less.

Cash, cash equivalents and restricted cash includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less.

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

1 unchanged sentence

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

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

Restricted cash as of December 31, 2023 and 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 December 31, 2023 also includes $ 13.5 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.

December 31, 2022 December 31, 2021

December 31, 2023

December 31, 2022

Cash and cash equivalents

Restricted cash included in Other current assets

Restricted cash included in Other assets, net

8 unchanged sentences

Customer deposits in excess of outstanding receivable balances are classified as other current liabilities.

Due to the nature of our industry and the reimbursement environment in which we operate, certain estimates are required to record total net revenues and accounts receivable at their net realizable values, including estimating variable consideration.

Due to the nature of our industry and the reimbursement environment in which we operate in the Patient Direct segment, certain estimates are required to record total net revenues and accounts receivable at their net realizable values, including estimating variable consideration.

Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.

5 unchanged sentences

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Allowances for losses on accounts receivable of $ 7.9 million and $ 9.1 million have been applied as reductions of accounts receivable at December 31, 2023 and 2022.

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 December 31, 2023, there were a total of $ 124 million of uncollected accounts receivable that had been sold or removed from our consolidated balance sheet.

We account for these transactions as sales with the sold receivables removed from our consolidated balance sheets.

Under the RPA, we provide certain servicing and collection actions on behalf of the Purchaser;

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

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

Proceeds from the sales 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 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 $ 1.4 billion during the year ended December 31, 2023.

We collected $ 1.3 billion of the sold accounts receivable for the year ended December 31, 2023.

The losses on sales of accounts receivable are recorded

in other operating expense (income), net in the consolidated statements of operations and were $ 10.6 million for the year ended December 31, 2023.

Merchandise Inventories.

6 unchanged sentences

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

Property and Equipment.

Property and Equipment, net.

Property and equipment are stated at cost less accumulated depreciation and amortization.

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

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

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

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

3 unchanged sentences

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

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

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

We enter into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from one to 10 years.

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

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

We enter into non-cancelable agreements to lease most of our office and warehouse facilities with remaining terms generally ranging from one to nine years.

Certain leases include renewal options, generally for one to five-year increments.

15 unchanged sentences

Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

We evaluate goodwill for impairment annually, as of October 1, and whenever events occur or changes in circumstance indicate that the carrying amount of goodwill may not be recoverable.

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

We evaluate goodwill 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, then a quantitative test is performed.

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

We determine the estimated fair value of our reporting units by using an income (discounted cash flow analysis) approach.

The income approach is dependent upon several assumptions regarding future periods, including assumptions with respect to future sales growth and a terminal growth rate.

As of October 1, 2023, due to changes in our long-term financial plan assumptions, we elected to bypass the qualitative test and performed a quantitative goodwill impairment test for all reporting units with goodwill.

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 risk factors specific to our company.

Intangible Assets.

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.

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 failure to meet our business plans or expected earnings and cash flows, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain expense, commodities costs or inflationary pressures and our planned efforts to mitigate such impacts, disruptions in the supply chain, estimated demand and selling prices for PPE or other products, an increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends, may affect the accuracy or validity of such estimates and may 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.

No impairment of goodwill was recorded for the years ended December 31, 2023, 2022, and 2021.

Intangible Assets, net.

Intangible assets acquired through purchases or business combinations are stated at fair value at the acquisition date and net of accumulated amortization in the consolidated balance sheets.

8 unchanged sentences

We also develop software for external use.

Our software as a service (SaaS) subscription revenue is generated from granting customers the right to use our software products and were not material to our consolidated financial statements for 2022, 2021 and 2020.

Costs related to the research and development of software for external use are expensed as incurred until the technological feasibility of the product is established.

After technological feasibility is established, costs are capitalized until the product is available for sale.

Capitalized computer software costs are amortized over the estimated useful life of the software, usually between three and 10 years.

5 unchanged sentences

We assess long-lived assets for potential impairment by comparing the carrying value of an asset, or group of related assets, to their estimated undiscounted future cash flows.

No material impairments of long-lived assets were recorded for the years ended December 31, 2023, 2022, and 2021.

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

3 unchanged sentences

Liabilities are estimated for healthcare costs using current and historical claims data.

Liabilities for workers’ compensation and automobile liability claims are estimated using historical claims data and loss development factors.

Liabilities for workers’ compensation and

automobile liability claims are estimated using historical claims data and loss development factors.

If the underlying facts and circumstances of existing claims change or historical trends are not indicative of future trends, then we may be required to adjust the liability and related expense accordingly.

9 unchanged sentences

We estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer under the expected value method as part of determining the sales transaction price using contractual terms, historical experience, and other operating trends.

The amount accrued for rebates and discounts due to customers was $ 86.9 million and $ 118 million at December 31, 2022 and 2021.

The amounts accrued for rebates due to customers, which are recorded in accounts receivable, net, were $ 81.3 million and $ 86.9 million at December 31, 2023 and 2022.

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

3 unchanged sentences

Revenue that is generated from equipment that we rent to patients is primarily recognized over the noncancelable rental period, typically one month, and commences on delivery of the equipment to the patients.

Revenues are recorded at amounts estimated to be received under reimbursement arrangements with large government and commercial payors (Payors), including private insurers, prepaid health plans, Medicare, Medicaid and patients.

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

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

We recorded $ 447 million in revenue related to equipment we rent to patients for the year ended December 31, 2022.

Equipment rental revenue was not material in 2021 and 2020.

We recorded $ 617 million and $ 447 million in revenue related to equipment we rent to patients for the years ended December 31, 2023 and 2022.

Equipment rental revenue was no t material in 2021.

See Note 17 for disaggregation of revenue by segment and geography as we believe that best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

1 unchanged sentence

Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor, bear the risk of general and physical inventory loss and carry all credit risk associated with sales.

Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products business.

Cost of goods sold also includes direct and certain indirect labor, material and overhead costs, including depreciation expense, associated with our Global Products division.

We have contractual arrangements with certain suppliers that provide incentives, including cash discounts for prompt payment, operational efficiency and performance-based incentives.

1 unchanged sentence

In situations where we act as an agent in a sales arrangement and do not bear a significant portion of these risks, primarily for our outsourced logistics business, there is no cost of goods sold and all costs to provide the service to the customer are recorded in distribution, selling and administrative expenses.

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

Depreciation expense for patient equipment was $ 88.7 million for the year ended December 31, 2022 and was not material for the years ended 2021 and 2020.

Within our Patient Direct segment, patient service equipment depreciation and the net book value of dispositions are classified in the Company’s consolidated statements of operations within cost of goods sold as the equipment is rented to patients as part of the Company’s primary operations.

Depreciation expense for patient service equipment was $ 138 million and $ 88.7 million for the years ended December 31, 2023 and 2022.

Equipment depreciation was no t material for the year ended 2021.

The net book value of patient service equipment dispositions were $ 36.3 million and $ 22.1 million for the years ended December 31, 2023 and 2022.

We did no t incur material dispositions during the year ended December 31, 2021.

As a result of different practices of categorizing costs and different business models throughout our industry, our gross margins may not necessarily be comparable to other companies in our industry.

1 unchanged sentence

Distribution, Selling and Administrative (DS&A) Expenses.

DS&A expenses include shipping and handling costs, labor, depreciation other than for patient equipment, amortization and other costs for selling and administrative functions.

DS&A expenses include shipping and handling costs, labor, certain depreciation and amortization, certain research and development costs and other costs for selling and administrative functions.

We incurred research and development costs, primarily included in DS&A expenses on the consolidated statement of operations, of $ 13.2 million, $ 11.8 million, and $ 12.1 million for the years ended 2023, 2022 and 2021.

Shipping and Handling.

Shipping and handling costs are primarily included in DS&A expenses on the consolidated statements of operations and include costs to store, to move, and to prepare products for shipment, as well as costs to deliver products to customers.

Shipping and handling costs are primarily included in DS&A expenses in the consolidated statements of operations and include costs to store, to move, and to prepare products for shipment, as well as costs to deliver products to customers.

Shipping and handling costs totaled $ 641 million, $ 581 million, and $ 445 million for the years ended December 31, 2023, 2022, and 2021.

Share-Based Compensation.

We account for share-based payments to teammates at fair value and recognize the related expense in DS&A expenses over the service period for awards expected to vest.

We account for share-based payments to teammates at fair value and recognize the related expense primarily in DS&A expenses over the service period for awards expected to vest.

The fair value of nonvested performance shares is dependent upon our assessment of the probability of achievement of financial targets for the performance period.

11 unchanged sentences

We recognize changes in fair value for derivatives not designated as hedges or those not qualifying for hedge accounting in current period earnings.

The cash flow impacts of the derivative instruments are primarily included in our consolidated statements of cash flows as a component of operating or financing activities.

The cash flow impacts of the derivative instruments are included in our consolidated statements of cash flows as a component of operating or financing activities.

Income Taxes.

1 unchanged sentence

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable

income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

3 unchanged sentences

To the extent that the tax outcome of these uncertain tax positions changes, based on our assessment, such changes in estimate may impact the income tax provision in the period in which such determination is made.

We earn a portion of our operating income in foreign jurisdictions outside the United States.

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

We are permanently reinvested in our foreign subsidiaries.

Prior to September 30, 2022, we were not indefinitely reinvested in our subsidiary in Thailand.

Due to our change of plans to reinvest the unremitted earnings in Thailand, we have released all withholding tax liabilities incurred in prior years.

Our policy election for global intangible low-taxed income is that we will record such taxes as a current period expense once incurred and will follow the tax law ordering approach.

2 unchanged sentences

The assumptions used are in accordance with a three-tier hierarchy, defined by GAAP, that draws a distinction between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the use of present value and other valuation techniques in the determination of fair value (Level 3).

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued payroll and related liabilities reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments.

The carrying amount of restricted cash also approximates fair value due to its nature.

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued payroll and related liabilities reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments.

The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2).

5 unchanged sentences

The fair value of contingent consideration is estimated as of the acquisition date and at the end of each subsequent reporting period based on the present value of the contingent payments to be made using a weighted probability of possible payments (Level 3).

Subsequent changes in fair value are recorded as adjustments to acquisition-related and exit and realignment charges within the consolidated statements of operations.

Acquisition-Related and Exit and Realignment Charges .

We present costs incurred in connection with acquisitions in acquisition-related and exit and realignment charges in our consolidated statements of operations.

Acquisition-related charges consist primarily of transaction costs incurred to perform due diligence and to analyze, negotiate and consummate an acquisition, costs to perform post-closing activities to establish the organizational structure, and costs to transition the acquired company’s information technology and other operations and administrative functions from the former owner.

Exit and realignment charges consist of costs associated with optimizing our operations which includes the consolidation of certain distribution centers, warehouses, our client engagement center and IT restructuring charges.

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

Subsequent changes in fair value are recorded as adjustments to acquisition-related charges and intangible amortization within the consolidated statements of operations.

Acquisition-Related Charges and Intangible Amortization .

Acquisition-related charges consist primarily of one-time costs related to the Apria Acquisition, including transaction costs necessary to consummate the acquisition, which consisted of investment banking advisory fees and legal fees, director and officer tail insurance expense, severance and retention bonuses, and professional fees.

Acquisition-related charges and intangible amortization also includes transition expenses and costs to integrate personnel, systems and processes along with amortization of intangible assets established during acquisition method of accounting for business combinations.

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

Exit and Realignment Charges .

Exit and realignment charges consist of costs associated with optimizing our operations which includes the consolidation of certain production facilities, distribution centers, warehouses, administrative offices and IT strategic initiatives, divestiture related costs and other strategic actions.

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

Costs associated with exit and realignment activities are recorded at their fair value when incurred.

1 unchanged sentence

We evaluate these assumptions quarterly and adjust the liability accordingly.

Severance benefits are recorded when payment is considered probable and reasonably estimable.

The current portion of contractual termination costs are included in other current liabilities in our consolidated balance sheets, and the non-current portion is included in other liabilities, which were not material to our consolidated balance sheets as of December 31, 2022 and 2021.

Income (Loss) Per Share.

Basic and diluted income (loss) per share are calculated pursuant to the two-class method, under which unvested share-based payment awards containing non-forfeitable rights to dividends are participating securities.

Severance benefits are generally recorded when payment is considered probable and reasonably

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

Net (Loss) Income Per Share.

Basic and diluted net (loss) income per share are calculated pursuant to the two-class method, under which unvested share-based payment awards containing non-forfeitable rights to dividends are participating securities.

Diluted income per share reflects the potential dilution that could occur if restricted awards were exercised or converted into common stock.

3 unchanged sentences

dollars at period-end exchange rates and revenues, cost of goods sold and expenses are translated at average exchange rates during the period.

Cumulative currency translation adjustments are included in accumulated other comprehensive income (loss) in shareholders’ equity.

Cumulative currency translation adjustments are included in accumulated other comprehensive loss in shareholders’ equity.

Gains and losses on intercompany foreign currency transactions that are long-term in nature and which we do not intend to settle in the foreseeable future are also recognized in other comprehensive income (loss) in shareholders’ equity.

Realized gains and losses from foreign currency transactions are recorded in other operating income, net in the consolidated statements of operations and were not material to our consolidated results of operations in 2022, 2021, and 2020.

Discontinued Operations .

The Movianto business represented a component that met accounting requirements to be classified as discontinued operations through June 18, 2020 (the Divestiture Date).

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

With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc.

See Note 3 for additional information regarding discontinued operations.

Realized gains and losses from foreign currency transactions are recorded in other operating expense (income), net in the consolidated statements of operations and were not material to our consolidated results of operations in 2023, 2022, and 2021.

Business Combinations .

2 unchanged sentences

The results of operations of the businesses acquired by the Company are included as of the respective acquisition date.

Recent Accounting Pronouncements .

During 2022, we adopted Accounting Standard Updates (ASU) issued by the Financial Accounting Standards Board (FASB).

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, Revenue from Contracts with Customers.

At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract.

Before the update such amounts were recognized by the acquiring company at fair value.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued.

We adopted ASU 2021-08 prospectively, effective beginning January 1, 2022.

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

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance, which requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.

The amendments are effective for fiscal years beginning after December 15, 2021.

We adopted ASU 2021-10 effective beginning January 1, 2022.

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

Recently issued accounting pronouncements not yet adopted as of December 31, 2022:

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

Recently Adopted Accounting Pronouncements .

In June 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-13 Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings.

This standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted.

The adoption of ASU No.

2016-13 will not have a material impact on our consolidated financial statements and related disclosures.

Subsequent to the issuance of ASU No.

2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU No.

2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief.

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

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

Instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard.

These ASUs will have the same effective date and transition requirements as ASU No.

We adopted ASU No.

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted .

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which will require disclosure of additional detailed information about a reportable segment’s expenses, including significant segment expenses regularly provided to the Chief Operating Decision Maker (CODM), the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment’s profit or loss.

This ASU will be effective for us in annual periods beginning after December 15, 2023 and interim periods within annual years beginning after December 15, 2024.

The amendments in this ASU must be applied on a retrospective basis to all prior periods presented in the financial statements and early adoption is permitted.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, financial condition and cash flows.

In December 2023, the FASB Issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which will require additional annual income tax disclosures, including disclosure of reconciling items by jurisdiction and nature to the extent those items exceed a specified threshold.

In addition, this ASU will require disclosure of income taxes paid, net of refunds received disaggregated by federal, state, and foreign and by jurisdiction if the amount is more than 5% of total income tax payments, net of refunds received.

The amendments in this ASU are effective for us in annual periods beginning after December 15, 2024.

The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted.

We expect this ASU to only impact our disclosures with no impacts to our results of operations, financial condition and cash flows.

Note 2—Significant Risks and Uncertainties

10 unchanged sentences

In 2023, 2022 and 2021, no sales of products of any individual suppliers exceeded 10% of our consolidated net revenue.

Note 3— Acquisitions and Discontinued Operations

Acquisitions.

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

(Apria) pursuant to the Agreement and Plan of Merger (Apria Acquisition) dated January 7, 2022, in exchange for approximately $ 1.7 billion, net of $ 144 million of cash acquired.

Note 3—Acquisition

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

(Apria) pursuant to the Agreement and Plan of Merger dated January 7, 2022, in exchange for approximately $ 1.7 billion, net of $ 144 million of cash acquired.

The purchase was funded with a combination of debt and cash on hand.

At the time of the Apria Acquisition, each share of Apria’s common stock was converted into the right to receive $ 37.50 in cash.

Apria is a leading provider of integrated home healthcare equipment and related services in the United States.

This business is reported as part of the Patient Direct segment.

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

The fair value and useful lives of tangible and intangible assets acquired have been estimated based on various valuation methods, including the income and cost approach, using several significant unobservable inputs including, but not limited to projected cash flows and a discount rate.

Apria is a leading provider of integrated home healthcare equipment and related services in the U.S.

This division is reported as part of the Patient Direct segment.

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

The fair value and useful lives of tangible and intangible assets acquired were determine based on various valuation methods, including the income and cost approach, using several significant unobservable inputs including, but not limited to projected cash flows and a discount rate.

These inputs are considered Level 3 inputs.

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

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

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

as of Acquisition Date

Assets acquired:

Current assets

Goodwill 1,267,079 ( 17,314 ) 1,249,765

Intangible assets

Other non-current assets

Total assets $ 2,076,001 $ ( 14,531 ) $ 2,061,470

Liabilities assumed:

3 unchanged sentences

Fair value of net assets acquired, net of cash

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

Current assets acquired includes $ 91.3 million in fair value of receivables, which reflects the approximate amount contractually owed.

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

Current assets acquired include $ 88.7 million in fair value of receivables, which reflects the approximate amount contractually owed.

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

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

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

The following table provides unaudited pro forma results of net revenue and net (loss) income for the year ended December 31, 2022 and 2021 as if Apria was acquired on January 1, 2021.

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

Year Ended December 31,

Net revenue $ 10,232,588 $ 10,930,590

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 year ended December 31, 2022 and 2021 as if Apria was acquired on January 1, 2021, 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.

Years Ended December 31,

Net (loss) income

Pro forma net loss of $ 97.7 million for the year ended December 31, 2022 includes pro forma adjustments for interest expense of $ 20.8 million and amortization of intangible assets of $ 10.5 million, which reflects the updated preliminary purchase price allocation.

The pro forma net loss for the year ended December 31, 2022 also includes $ 39.4 million in seller transaction expenses and stock compensation expense associated with $ 108 million owed to the holders of Apria stock awards in connection with the Apria Acquisition.

Revenue and net loss of Apria since the Acquisition Date included in the consolidated statement of operations for the year ended December 31, 2022 were $ 937 million and $ 3.3 million, respectively.

Discontinued Operations.

On June 18, 2020, we completed the divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $ 133 million.

We concluded that the Movianto business met the criteria for discontinued operations as of December 31, 2019 and through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met.

Movianto was previously reported in the Global Solutions segment and would have been reported within Products & Healthcare Services under our current segment structure.

Accordingly, the results of operations from the Movianto business were reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the year ended December 31, 2020.

The following table summarizes the financial results of our discontinued operations:

Year ended December 31, 2022 2021 2020

Net revenue $ — $ — $ 226,759

Cost of goods sold — — 53,923

Gross margin — — 172,836

Distribution, selling, and administrative expenses — — 157,512

Loss on divestiture — — 65,472

Acquisition-related and exit and realignment charges — — 4,825

Other operating income, net — — ( 388 )

Operating loss — — ( 54,585 )

Interest expense, net — — 3,144

Loss from discontinued operations before income taxes — — ( 57,729 )

Income tax provision from discontinued operations — — 474

Loss from discontinued operations, net of taxes $ — $ — $ ( 58,203 )

We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No.

2016-02 Leases (Topic 842) , for the year ended December 31, 2020.

All revenue and expense included in discontinued operations during the year ended December 31, 2020 related to activity through the Divestiture Date.

No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date.

We had no assets and liabilities associated with the discontinued Movianto business reflected on the consolidated balance sheet as of December 31, 2022 and 2021.

The following table provides operating and investing cash flow information for our discontinued operations:

Year ended December 31, 2022 2021 2020

Operating activities:

Loss on divestiture $ — $ — $ 65,472

Investing activities:

Capital expenditures $ — $ — $ ( 3,027 )

Note 4— Accounts Receivable, Net

Allowances for losses on accounts receivable of $ 9.1 million and $ 18.0 million have been applied as reductions of accounts receivable at December 31, 2022 and 2021.

Acquisition-related charges within acquisition-related charges and intangible amortization presented in our consolidated statements of operations were $ 17.5 million, $ 48.1 million, and $ 3.0 million for the years ended December 31, 2023, 2022, and 2021.

These amounts are excluded from our segments’ operating income.

Note 4—Merchandise Inventories

At December 31, 2022 and 2021 we had net inventory of $ 1.3 billion and $ 1.5 billion, of which $ 840 million and $ 835 million were valued under LIFO.

At December 31, 2023 and 2022 we had net inventory of $ 1.1 billion and $ 1.3 billion, of which $ 718 million and $ 840 million were valued under LIFO, all of which relates to inventory in our Products & Healthcare Services segment.

If LIFO inventories had been valued on a current cost or FIFO basis, they would have been greater by $ 233 million and $ 231 million as of December 31, 2023 and 2022.

At December 31, 2023 and 2022, included in our inventory was $ 75.7 million and $ 84.4 million in raw materials, $ 61.5 million and $ 73.7 million in work in process and the remainder was finished goods.

For the year ended December 31, 2022, primarily due to demand declines and builds in excess personal protective equipment (PPE), the Company increased its estimate of inventory valuation allowances.

For the year ended December 31, 2022, primarily due to demand declines and builds in excess personal protective equipment (PPE), we increased our estimate of inventory valuation allowances.

This change in estimate contributed to a $ 92.3 million (approximately $ 69.6 million, net of tax) valuation adjustment, or an approximate $ 0.93 and $ 0.91 impact per basic and diluted common share.

For the year ended December 31, 2023, our inventory valuation allowances declined primarily due to inventory reductions, including excess PPE previously reserved.

At December 31, 2023 and 2022 we had inventory valuation allowances of $ 78.2 million and $ 128 million.

1 unchanged sentence

Property and equipment, net, consists of the following:

December 31, 2022 2021

Land and land improvements

8 unchanged sentences

Note 6—Goodwill and Intangible Assets, Net

In connection with our new segment structure, which began in the first quarter of 2022, goodwill is now reported as part of Products & Healthcare Services or Patient Direct.

There was no change to our underlying reporting units as part of that segment change and therefore no reallocation of goodwill.

As of October 1, 2022, we performed our annual impairment test and concluded that there were no impairments of goodwill.

In December 2021, we closed on an acquisition of a small kitting business, the impact of which was immaterial to our financial results.

The following table summarizes the changes in the carrying amount of goodwill through December 31, 2023:

Patient Direct Products & Healthcare Services Consolidated

Patient Direct

Net carrying amount of goodwill, December 31, 2021

Currency translation adjustments

Acquisition 2,816 2,816

Net carrying amount of goodwill, December 31, 2021 283,905 106,280 390,185

Carrying amount of goodwill, December 31, 2022

Acquisition adjustment

Currency translation adjustments

Acquisition 1,249,765 ( 532 ) 1,249,233

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

Carrying amount of goodwill, December 31, 2023

As of October 1, 2023, due to changes in our long-term financial plan assumptions, we elected to bypass the qualitative test and a quantitative goodwill impairment test was performed to compare the estimated fair value for all reporting units with goodwill to the respective carrying amount.

No impairment of goodwill was recorded for the years ended December 31, 2023, 2022, and 2021.

Intangible assets at December 31, 2023 and 2022 were as follows:

Relationships Tradenames Other

Intangibles Customer

Relationships Tradenames Other

Relationships

Gross intangible assets

1 unchanged sentence

Net intangible assets

Weighted average useful life 13 years 10 years 6 years 10 years 11 years 8 years

Weighted average useful life

At December 31, 2023 and 2022, $ 250 million and $ 308 million in net intangible assets were held in the Patient Direct segment and $ 112 million and $ 137 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 83.5 million for 2023, $ 78.8 million for 2022 and $ 39.8 million for 2021.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $ 83.2 million for 2023, $ 65.3 million for 2024, $ 55.2 million for 2025, $ 53.7 million for 2026, and $ 46.9 million for 2027.

As of December 31, 2023, based on the carrying value of intangible assets subject to amortization, estimated future amortization expense is as follows:

Total future amortization

Note 7—Leases

2 unchanged sentences

Classification

Operating lease cost DS&A Expenses $ 81,520 $ 59,397 $ 53,675

Operating lease cost

DS&A Expenses

Finance lease cost:

Amortization of lease assets DS&A Expenses 2,755 1,098 963

Interest on lease liabilities Interest expense, net 1,516 1,255 1,283

Amortization of lease assets

DS&A Expenses

Interest on lease liabilities

Interest expense, net

Total finance lease cost

Short-term lease cost DS&A Expenses, Cost of goods sold 4,129 871 1,081

Variable lease cost DS&A Expenses, Cost of goods sold 35,431 17,491 15,611

Short-term lease cost

DS&A Expenses, Cost of goods sold

Variable lease cost

DS&A Expenses, Cost of goods sold

Total lease cost

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

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

Supplemental balance sheet information is as follows:

1 unchanged sentence

Classification

Operating lease assets Operating lease assets $ 280,665 $ 194,006

Finance lease assets Property and equipment, net 10,194 8,896

Operating lease assets

Finance lease assets

Property and equipment, net

Total lease assets

Operating Other current liabilities $ 76,805 $ 41,817

Finance Other current liabilities 2,531 2,037

Operating Operating lease liabilities, excluding current portion 215,469 162,241

Finance Long-term debt, excluding current portion 11,877 11,314

Other current liabilities

Current portion of long-term debt

Operating lease liabilities, excluding current portion

Long-term debt, excluding current portion

Total lease liabilities

The gross value recorded under finance leases was $ 22.2 million and $ 21.5 million with associated accumulated depreciation of $ 13.7 million and $ 11.3 million as of December 31, 2023 and 2022.

Operating lease assets include $ 88.6 million in right-of-use assets and $ 91.9 million of operating lease liabilities associated with Apria as of December 31, 2022.

Other information related to leases was as follows:

Years Ended December 31,

2022 2021 2020

Supplemental cash flow information

11 unchanged sentences

Operating Leases

Finance Leases Total

2023 $ 100,499 $ 3,557 $ 104,056

2024 88,461 3,505 91,966

2025 66,821 3,452 70,273

2026 46,418 2,578 48,996

2027 28,806 2,229 31,035

Thereafter 31,394 2,544 33,938

Finance Leases

Total lease payments

Interest ( 70,125 ) ( 3,457 ) ( 73,582 )

Present value of lease liabilities

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

Note 8—Exit and Realignment Costs

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution centers, warehouses, our client engagement center and IT restructuring charges.

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

Exit and realignment charges by segment for the years ended December 31, 2022, 2021 and 2020 were as follows:

Year ended December 31, 2022 2021 2020

Products & Healthcare Services $ 6,414 $ 28,760 $ 25,622

Patient Direct 483 2,349 310

Total exit and realignment charges $ 6,897 $ 31,109 $ 25,932

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

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

Exit and realignment charges were $ 99.1 million, $ 6.9 million and $ 31.1 million for the years ended December 31, 2023, 2022 and 2021.

These amounts are excluded from our segments’ operating income.

We have incurred $ 92.2 million in charges under our Operating Model Realignment Program and IT strategic initiatives for the year ended December 31, 2023, which are included in the total exit and realignment charges above.

expect to incur material future costs relating to our Operating Model Realignment Program and IT strategic initiatives, which we are not able to reasonably estimate.

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

1 unchanged sentence

Provision for exit and realignment activities:

Severance 5,623

Information system restructuring costs

3 unchanged sentences

Provision for exit and realignment activities:

Severance 9,191

Information system restructuring costs 4,752

Lease obligations 440

Cash payments

1 unchanged sentence

Provision for exit and realignment activities:

Severance 2,018

Professional fees

Vendor contract and lease termination costs

IT strategic initiatives

Cash payments

Accrued exit and realignment charges, December 31, 2023

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 0.7 million of costs that were expensed as incurred for the year ended December 31, 2022, which related to an increase in reserves associated with certain retained assets of Fusion5.

We also incurred $ 11.2 million of costs that were expensed as incurred for the year ended December 31, 2021, which primarily includes $ 9.6 million of wind-down costs related to Fusion5.

We also incurred $ 10.6 million of costs that were expensed as incurred for the year ended December 31, 2020, including $ 4.9 million in impairment charges related to our client engagement center right-of-use asset, $ 3.7 million in loss on the sale of certain disposed assets and $ 2.0 million in other asset charges.

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $ 48.1 million, $ 3.0 million and $ 11.8 million for the years ended December 31, 2022, 2021 and 2020.

Acquisition-related charges in 2022 and 2021 consisted primarily of costs related to the Apria transaction.

Acquisition-related charges in 2020 consisted primarily of transition costs for the Halyard acquisition.

Note 10— Debt

In addition to the exit and realignment accruals in the preceding table, we also incurred $ 3.4 million of costs that were expensed as incurred for the year ended December 31, 2023, which primarily related to charges associated with a lease termination and wind-down costs related to Fusion5.

We also incurred $ 0.7 million and $ 11.2 million of costs that were expensed as incurred for the years ended December 31, 2022 and 2021, which primarily included wind-down costs related to Fusion5.

Debt consists of the following:

December 31, Carrying

Amount Estimated

Fair Value Carrying

Amount Estimated

4.375 % Senior Notes, due December 2024

$ 245,510 $ 237,772 $ 245,086 $ 263,263

Receivables Securitization Program

Term Loan A 490,816 485,000 — —

4.500 % Senior Notes, due March 2029

492,762 396,625 491,656 515,225

Term Loan B 576,587 597,733 — —

6.625 % Senior Notes, due April 2030

585,180 516,060 — —

Finance leases and other

Total debt 2,500,874 2,346,067 949,577 994,297

Less current maturities

Long-term debt

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

We have $ 171 million of 4.375 % senior notes due in December 2024 (the 2024 Notes), with interest payable semi-annually.

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

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

We used $ 73.5 million of cash to repurchase $ 74.7 million aggregate principal of the 2024 Notes during 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.

On March 29, 2022, we entered into an amendment to our Receivables Financing Agreement.

The amended Receivables Financing Agreement has a maximum borrowing capacity of $ 450 million.

The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement).

Under the Receivables Financing Agreement, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC.

The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement, as further amended by the Fifth Amendment to the Receivables Financing Agreement).

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

The Receivables Financing Agreement matures in March 2025.

At December 31, 2022 and 2021, we had borrowings of $ 96.0 million and $ 200 million outstanding under our Receivables Financing Agreement.

At December 31, 2022 and 2021, we had maximum revolving borrowing capacity of $ 354 million and $ 100 million available under our Receivable Financing Agreement.

On March 29, 2022, we entered into an amendment to our revolving credit agreement, dated as of March 10, 2021 with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (Revolving Credit Agreement).

The amendment (i) increased the aggregate revolving credit commitments under the Revolving Credit Agreement by $ 150 million, to an aggregate amount of $ 450 million and (ii) replaced the Eurocurrency Rate with the Adjusted Term SOFR Rate (each as defined in the Revolving Credit Agreement).

The Revolving Credit Agreement matures in March 2027.

At December 31, 2022, we had no borrowings and letters of credit of $ 27.9 million outstanding under our Revolving Credit Agreement.

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

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

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

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

At December 31, 2023 and 2022, we had maximum revolving borrowing capacity of $ 450 million and $ 354 million available under our 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).

The interest rate on the Term Loan A is based on either the Term SOFR or the Base Rate plus an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable pricing to the Borrowers (each as defined in the Credit Agreement).

The interest rate on the Term Loan A is based on the sum of either Term SOFR or the Base Rate and an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable pricing to the Borrowers (each as defined in the Credit Agreement).

The interest rate on the Term Loan B is based on either the Term SOFR or the Base Rate plus an Applicable Rate.

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

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

In addition to our scheduled principal payments of $ 9.4 million on the Term Loan A and $ 6.0 million on the Term Loan B, we made unscheduled principal payments of $ 97.5 million on Term Loan A and $ 72.5 million on Term Loan B during 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).

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

We may redeem all or part of

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).

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.

We may also redeem up to 40 % of the aggregate principal amount of the 2029 Unsecured Notes at any time prior to March 31, 2024, at a redemption price equal to 104.5 % with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

On March 29, 2022, we completed the sale of $ 600 million in aggregate principal amount of our 6.625 % senior notes due in April 2030 (the 2030 Unsecured Notes), with interest payable semi-annually.

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

On March 29, 2022, we issued $ 600 million of 6.625 % senior unsecured notes due in April 2030 (the 2030 Unsecured Notes), with interest payable semi-annually.

The 2030 Unsecured Notes were sold at 100 % of the principal amount with an effective yield of 6.625 %.

We may redeem all or part of the 2030 Unsecured Notes, prior to April 1, 2025, at a price equal to 100 % of the principal amount of the 2030 Unsecured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a “make-whole” premium, as described in the Indenture dated March 29, 2022 (the New Indenture).

We may redeem all or part of the 2030 Unsecured Notes, prior to April 1, 2025, at a price equal to 100 % of the principal amount of the 2030 Unsecured Notes to be redeemed, plus accrued and

unpaid interest, if any, to, but excluding, the redemption date, plus a “make-whole” premium, as described in the Indenture dated March 29, 2022 (the New Indenture).

From and after April 1, 2025, we may redeem all or part of the 2030 Unsecured Notes at the applicable redemption prices described in the New Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

We may also redeem up to 40 % of the aggregate principal amount of 2030 Unsecured Notes at any time prior to April 1, 2025, at a redemption price equal to 106.625 % with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

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

On March 29, 2022, we entered into a Security Agreement Supplement pursuant to which the Security and Pledge Agreement (the Security Agreement), dated March 10, 2021 was supplemented to grant collateral on behalf of the holders of the 2024 Notes, and the parties secured under the credit agreements (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Grantors (as defined in the Security Agreement) in the Grantors’ present and future subsidiaries, subject to certain customary exceptions, and (b) all present and future personal property and assets of the Grantors, subject to certain exceptions.

The Revolving Credit Agreement, the Credit Agreement, Receivables Financing Agreement, 2024 Notes, 2029 Unsecured Notes, and 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements.

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 2023.

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

The Revolving Credit Agreement matures in March 2027.

At December 31, 2023 and 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 U.S.

and Europe that were issued outside of the Revolving Credit Agreement for $ 3.0 million and $ 2.3 million as of December 31, 2023 and 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.

1 unchanged sentence

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

2023 $ 15,375

2029 1,059,500

Of the $ 199 million due in 2024, $ 179 million is due in December 2024.

Current maturities at December 31, 2022 include $ 9.4 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 2.5 million in current portion of finance leases.

Current maturities at December 31, 2023 include $ 171 million in principal payments on our 2024 Notes, $ 21.9 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 10—Share-Based Compensation

We maintain a share-based compensation plan (the Plan) that is administered by the Our People & Culture Committee of the Board of Directors.

The Plan allows us to award or grant to officers, directors and teammates incentive, non-qualified and deferred compensation stock options, stock appreciation rights (SARs), performance stock units and performance shares (collectively Performance Stock Awards (PSAs)), restricted stock units and restricted stock (collectively Restricted Stock Awards (RSAs)) and unrestricted stock.

We use authorized and unissued common shares for grants of RSAs, SARs, PSAs or

for stock option exercises.

(collectively Restricted Stock Awards (RSAs)) and unrestricted stock.

We use authorized and unissued common shares for grants of RSAs, SARs, PSAs or for stock option exercises.

At December 31, 2023, approximately 3.6 million common shares were available for issuance under the Plan.

8 unchanged sentences

This amount is expected to be recognized over a weighted-average period of 2.0 years, based on the maximum remaining vesting period required under the awards.

Unrecognized compensation cost related to nonvested PSAs as of December 31, 2022 was $ 4.2 million and will be recognized primarily in 2023 and 2024 if the related performance targets are met.

Unrecognized compensation cost related to nonvested PSAs as of December 31, 2023 was $ 0.9 million and will be recognized primarily in 2024 and 2025 if the related performance targets are met at the current level expected.

The following table summarizes the activity and value of nonvested RSAs and PSAs for the years ended December 31, 2023, 2022 and 2021:

2022 2021 2020

Shares Weighted

Grant-date Fair

Per Share Number of

Shares Weighted

Grant-date Fair

Per Share Number of

Shares Weighted

Grant-date Fair

Nonvested awards at beginning of year

Granted 2,745 19.10 2,758 14.10 2,289 7.29

Vested ( 2,667 ) 8.11 ( 1,801 ) 9.33 ( 1,487 ) 11.94

Forfeited ( 1,626 ) 11.25 ( 1,448 ) 6.10 ( 501 ) 7.69

Nonvested awards at end of year

2 unchanged sentences

Savings and Retirement Plans.

We maintain a voluntary 401(k) savings and retirement plans covering substantially all full-time and certain part-time teammates in the United States who have met eligibility requirements.

We maintain a voluntary 401(k) savings and retirement plans covering substantially all full-time and certain part-time teammates in the U.S.

who have met eligibility requirements.

We match a certain percentage of each teammates’ contribution.

2 unchanged sentences

We incurred $ 15.0 million, $ 14.0 million and $ 23.2 million of expense related to these plans in 2023, 2022 and 2021.

We also maintain defined contribution plans in some countries outside of the United States in which we operate.

We also maintain defined contribution plans in some countries outside of the U.S.

in which we operate.

Expenses related to these plans were not material in 2023, 2022 and 2021.

Retirement Plans.

We have a frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S.

We have a frozen noncontributory, unfunded retirement plan for certain retirees in the U.S.

Retirement Plan).

1 unchanged sentence

Retirement Plan’s financial status and the amounts recognized in our consolidated balance sheets:

December 31, 2022 2021

Change in benefit obligation

18 unchanged sentences

Discount rate

Rate of increase in compensation levels N/A N/A

Rate of increase in compensation levels

Plan benefit obligations of the U.S.

5 unchanged sentences

Retirement Plan were as follows:

Year ended December 31, 2022 2021 2020

Years Ended December 31,

Interest cost

3 unchanged sentences

Discount rate

Rate of increase in future compensation levels N/A N/A N/A

Rate of increase in future compensation levels

Amounts recognized for the U.S.

Retirement Plan as a component of accumulated other comprehensive loss as of the end of the year that have not been recognized as a component of the net periodic benefit cost are presented in the following table.

Retirement Plan as a component of accumulated other comprehensive loss as of the end of the year that have not been recognized as a component of the net periodic benefit cost are presented in the

following table.

We expect to recognize approximately $ 0.2 million of the net actuarial loss reported in the following table as of December 31, 2023, as a component of net periodic benefit cost during 2024.

Year ended December 31, 2022 2021

Years Ended December 31,

Net actuarial loss

1 unchanged sentence

Amounts included in accumulated other comprehensive loss, net of tax

As of December 31, 2022, the expected benefit payments required for each of the next five years and the five-year period thereafter for the U.S.

As of December 31, 2023, the expected benefit payments required, based on the same assumptions used to measure our year-end benefit obligation, for each of the next five years and the five-year period thereafter for the U.S.

Retirement Plan were as follows:

2028-2032 10,697

International Retirement Plans.

1 unchanged sentence

As of December 31, 2023 and 2022, the accumulated benefit obligation under these plans was $ 15.5 million and $ 11.8 million.

We recorded $ 3.6 million, $ 3.6 million and $ 2.3 million in net periodic benefit cost in other expense (income), net for the years ended December 31, 2022, 2021 and 2020.

We recorded $ 4.3 million, $ 3.6 million and $ 3.6 million in net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021.

Note 12—Derivatives

We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks.

We do not enter into derivative financial instruments for trading purposes.

We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting.

2 unchanged sentences

We pay interest on our Credit Agreement which fluctuates based on changes in our benchmark interest rates.

In order to mitigate the risk of increases in benchmark rates, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount.

The interest rate swaps were designated as cash flow hedges.

Cash flows related to the interest rate swap agreement are included in interest expense.

In order to mitigate the risk of increases in benchmark rates on our term loans, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount.

The interest rate swap was designated as a cash flow hedge.

Cash flows related to the interest rate swap agreement are included in interest expense, net.

We determine the fair value of our foreign currency derivatives and interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data.

4 unchanged sentences

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

Derivative Assets Derivative Liabilities

Notional Amount Maturity Date Classification Fair Value Classification Fair Value

Cash flow hedges

Interest rate swaps $ 400,000 March 2027 Other assets, net $ 15,461 Other liabilities $ —

Derivative Assets

Derivative Liabilities

Maturity Date

Classification

Cash flow hedge

Interest rate swap

Other assets, net

Other liabilities

Economic (non-designated) hedges

Foreign currency contracts $ 58,321 January 2023 Other current assets $ 440 Other current liabilities $ 42

Foreign currency contracts

Other current assets

Other current liabilities

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

Derivative Assets Derivative Liabilities

Notional Amount Maturity Date Classification Fair Value Classification Fair Value

Cash flow hedges

Foreign currency contracts $ 9,700 January 2022 Other current assets $ 81 Other current liabilities $ —

Derivative Assets

Derivative Liabilities

Maturity Date

Classification

Cash flow hedge

Interest rate swap

Other assets, net

Other liabilities

Economic (non-designated) hedges

Foreign currency contracts

Other current assets

Other current liabilities

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

Based on contractual terms, the notional amount will decrease in increments of $ 50.0 million on the last business day of March of each year until the maturity date.

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

The balance of the fair value adjustments of $ 25.1 million, which related to these terminated interest rate swaps, within accumulated other comprehensive loss was reclassified to loss on extinguishment of debt within our consolidated statements of operations for the year ended December 31, 2021.

The balance of the fair value adjustments of $ 25.1 million, which related to these terminated interest rate swaps, within accumulated other comprehensive loss was reclassified to (gain) loss on extinguishment of debt within our consolidated statements of operations for the year ended December 31, 2021.

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

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

Interest rate swaps $ 14,814 Interest expense, net $ ( 128,891 ) $ ( 647 )

Amount of Gain

Location of Gain

Total Amount of Expense

Amount of Gain/

Recognized in

Reclassified from

Line Items Presented in the

(Loss) Reclassified

Accumulated Other

Consolidated Statement of

from Accumulated

Comprehensive

Comprehensive Loss

Operations in Which the

Other Comprehensive

(Loss) Income

Effects are Recorded

Loss into Income

Interest rate swaps

Interest expense, net

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

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2022:

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

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

Amount of Gain

Location of Gain

Total Amount of Expense

Recognized in

Reclassified from

Line Items Presented in the

Reclassified from

Accumulated Other

Consolidated Statement of

Accumulated Other

Comprehensive

Comprehensive Loss

Operations in Which the

Comprehensive Loss

Effects are Recorded

Interest rate swaps

Interest expense, net

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

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the year ended December 31, 2021:

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

Interest rate swaps $ ( 19,741 ) Interest expense, net $ ( 83,398 ) $ ( 9,232 )

Amount of Gain

Location of Gain

Total Amount of Expense

Recognized in

Reclassified from

Line Items Presented in the

Reclassified from

Accumulated Other

Consolidated Statement of

Accumulated Other

Comprehensive

Comprehensive Loss

Operations in Which the

Comprehensive Loss

Effects are Recorded

Interest rate swaps

(Gain) loss on extinguishment of debt

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

For the years ended December 31, 2023, 2022 and 2021 we recognized a loss of $ 0.3 million, $ 0.9 million and $ 2.3 million, associated with our economic (non-designated) foreign currency contracts.

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

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 13—Income Taxes

The components of income from continuing operations before income taxes consist of the following:

Year ended December 31, 2022 2021 2020

Income from continuing operations before income taxes:

$ ( 17,650 ) $ 231,424 $ 80,632

Foreign 28,541 45,330 29,276

Income from continuing operations before income taxes $ 10,891 $ 276,754 $ 109,908

The components of net (loss) income before income taxes consist of the following:

Years Ended December 31,

Net (loss) income before income taxes:

Net (loss) income before income taxes

The income tax provision (benefit) consists of the following:

Year ended December 31, 2022 2021 2020

Current tax provision (benefit):

Federal $ 1,090 $ 54,087 $ ( 4,430 )

State 5,125 15,961 6,527

Foreign 8,648 14,853 4,172

Years Ended December 31,

Current tax provision:

Total current tax provision

Deferred tax provision (benefit):

Federal ( 8,671 ) ( 22,046 ) 16,512

State ( 5,395 ) ( 4,175 ) ( 1,132 )

Foreign ( 12,295 ) ( 3,515 ) 185

Total deferred tax provision (benefit) ( 26,361 ) ( 29,736 ) 15,565

Total income tax (benefit) provision $ ( 11,498 ) $ 55,165 $ 21,834

Deferred tax benefit:

Total deferred tax benefit

Total income tax benefit

A reconciliation of the federal statutory rate to our effective income tax rate is shown below:

Year ended December 31, 2022 2021 2020

Years Ended December 31,

Federal statutory rate

1 unchanged sentence

Net capital loss on divestiture

Tax reform — % ( 1.2 ) % ( 11.4 ) %

Unrecognized tax benefits

4 unchanged sentences

Restricted stock vestings

Nondeductible Interest

Nondeductible compensation

3 unchanged sentences

Global intangible low-taxed income

Other ( 0.1 ) % 1.6 % 1.0 %

Effective income tax rate

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

December 31, 2022 2021

Deferred tax assets:

8 unchanged sentences

R&D capitalized costs

Other 7,982 4,694

Total deferred tax assets

3 unchanged sentences

Merchandise inventories

Goodwill 4,151 2,759

Property and equipment 86,451 32,607

Property, equipment and computer software

Right-of-use assets

Computer software 5,532 8,068

Derivatives 4,020 —

Insurance ( 20 ) 1,040

Intangible assets

Withholding tax liabilities — 7,072

Other 826 101

Total deferred tax liabilities

25 unchanged sentences

On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns.

Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United States by our domestic subsidiaries.

Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date.

in connection with our sourcing of products by our foreign subsidiaries for sale in the U.S.

by our domestic subsidiaries.

Our amount of taxable income in the U.S.

is based on our transfer pricing methodology, which has been consistently applied for all years subject to the NOPAs.

We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies, including those available under the U.S.

10 unchanged sentences

The former owners are contractually obligated to indemnify us for all income tax liabilities incurred by Byram entities prior to its acquisition on August 1, 2017, and for all income tax liabilities incurred by the Halyard foreign entities located in Thailand, Mexico, and Honduras prior to its acquisition on April 30, 2018 .

Note 15— Net Income per Common Share

The following table summarizes the calculation of net income per share attributable to common shareholders for the years ended December 31, 2022, 2021 and 2020:

Year ended December 31, 2022 2021 2020

Income from continuing operations, net of tax $ 22,389 $ 221,589 $ 88,074

Loss from discontinued operations, net of tax — — ( 58,203 )

Net income $ 22,389 $ 221,589 $ 29,871

Note 14—Net (Loss) Income per Common Share

The following summarizes the calculation of net (loss) income per common share attributable to common shareholders for the years ended December 31, 2023, 2022 and 2021:

(in thousands, except per share data)

Years Ended December 31,

Net (loss) income

Weighted average shares outstanding - basic

1 unchanged sentence

Weighted average shares outstanding - diluted

Basic income (loss) per common share:

Income from continuing operations $ 0.30 $ 3.05 $ 1.39

Loss from discontinued operations — — ( 0.92 )

Net income $ 0.30 $ 3.05 $ 0.47

Diluted income (loss) per common share:

Income from continuing operations $ 0.29 $ 2.94 $ 1.39

Loss from discontinued operations — — ( 0.92 )

Net income $ 0.29 $ 2.94 $ 0.47

Note 16— Shareholders’ Equity

In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an ag gregate offering price of up to $ 50.0 million.

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

As of December 31, 2022, no shares were issued and $ 50.0 million of common stock remained available under the at-the-market equity financing program.

On October 6, 2020, we completed a follow-on equity offering wherein we sold an aggregate of 8,475,000 shares of our common stock at an offering price of $ 20.50 , resulting in net proceeds to us of approximately $ 165 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.

Pursuant to the underwriting agreement, we granted the underwriters an option to purchase up to an additional 1,271,250 shares of our common stock, which the underwriters exercised in full.

Inclusive of this exercised option, net proceeds to us were approximately $ 190 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.

We used the proceeds from the follow-on equity offering to repay the remaining $ 109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $ 51.7 million of our Term Loan A-2 at par on October 15, 2020, and to repay $ 30.0 million of borrowings under the revolving credit facility.

Note 17— Accumulated Other Comprehensive Loss

The following tables show the changes in accumulated other comprehensive loss by component for the years ended December 31, 2022, 2021 and 2020:

Retirement Plans Currency Translation Adjustments Derivatives Total

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

Other comprehensive income (loss) before reclassifications 8,359 ( 14,101 ) 14,814 9,072

Income tax ( 1,646 ) — ( 3,851 ) ( 5,497 )

Other comprehensive income (loss) before reclassifications, net of tax 6,713 ( 14,101 ) 10,963 3,575

Amounts reclassified from accumulated other comprehensive loss 923 — 647 1,570

Income tax ( 240 ) — ( 169 ) ( 409 )

Amounts reclassified from accumulated other comprehensive loss, net of tax 683 — 478 1,161

Net (loss) income per common share:

Share-based awards for the year ended December 31, 2023, of approximately 1.6 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Note 15—Accumulated Other Comprehensive (Loss) Income

The following tables show the changes in accumulated other comprehensive (loss) income by component for the years ended December 31, 2023, 2022 and 2021:

Accumulated other comprehensive (loss) income, December 31, 2022

Other comprehensive income before reclassifications

Other comprehensive income before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive income (loss)

Amounts reclassified from accumulated other comprehensive income (loss), net of tax

Other comprehensive income (loss)

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

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive (loss) income, December 31, 2023

Accumulated other comprehensive loss, December 31, 2021

Other comprehensive income (loss) before reclassifications

Income tax ( 1,428 ) — ( 611 ) ( 2,039 )

Other comprehensive income (loss) before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive loss

Income tax ( 383 ) — ( 7,289 ) ( 7,672 )

Amounts reclassified from accumulated other comprehensive loss, net of tax

Other comprehensive income (loss)

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

Retirement Plans Currency Translation Adjustments Derivatives Total

Accumulated other comprehensive income (loss), December 31, 2022

Accumulated other comprehensive loss, December 31, 2020

Other comprehensive income (loss) before reclassifications

Income tax 1,945 — 5,789 7,734

Other comprehensive income (loss) before reclassifications, net of tax

Amounts reclassified from accumulated other comprehensive loss

Income tax ( 366 ) — ( 2,609 ) ( 2,975 )

Amounts reclassified from accumulated other comprehensive loss, net of tax

1 unchanged sentence

Accumulated other comprehensive loss, December 31, 2021

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

Note 18— Commitments and Contingencies

We have a contractual commitment to outsource information technology operations, including the management and operation of our information technology systems and distributed services processing, as well as application support, development and enhancement services.

This agreement expires in July 2025, with two optional, consecutive one-year extensions.

The commitment is cancellable with 90 days' notice and payment of a termination fee based upon the remaining period left under the agreement.

We pay scheduled fees under the agreement, which can vary based on changes in the level of support required.

Assuming no early termination of the contract, our estimated remaining annual obligations under this agreement are $ 32.6 million in 2023, $ 32.1 million in 2024, and $ 15.9 million in 2025.

Note 19— Legal Proceedings

We are party to various legal claims that are ordinary and incidental to our business, including ones related to commercial disputes, employment, workers’ compensation, product liability, regulatory and other matters.

We maintain insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency.

We establish reserves from time to time based upon periodic assessment of the potential outcomes of pending matters.

Based on current knowledge and the advice of counsel, we believe that the accrual as of December 31, 2022 for currently pending matters considered probable of loss, which is not material, is sufficient.

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

Note 16— Commitments, Contingent Liabilities, and Legal Proceedings

O&M Halyard N95 Mask FDA Release

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

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

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

Our investigation determined that a limited number of lots were potentially implicated by the results of the NIOSH particulate filtration testing on model No.

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.

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

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

Regulatory bodies in other non-U.S.

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

The FDA updated its recommendation on April 21, 2023, to permit use of the model No.

46727 of Halyard N95 respirators when fluid resistance is not required.

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

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.

While the FDA recommendation did not materially affect our results of operations for 2023, there is a risk that these matters and any other safety concerns could have a material adverse effect on our results of operations, financial condition, or cash flows, including as a result of a significant volume of customer product returns and/or recall of products, implementation of corrective action plans, and/or other costly remedial actions in the U.S.

and elsewhere.

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

government investigations and enforcement actions by the FDA or other U.S.

or international regulators or governmental entities;

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

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

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

Other Litigation

We maintain insurance coverage for cybersecurity, employment, product liability, workers’ compensation and other

personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency.

From time to time, we establish estimated liabilities based upon periodic assessment of the potential outcomes of pending matters.

Based on current knowledge and the advice of counsel, we believe that the liability recorded on the consolidated balance sheet as of December 31, 2023 for currently pending matters considered probable of loss, 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.

3 unchanged sentences

Products & Healthcare Services and Patient Direct.

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

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

We evaluate the performance of our segments based on their operating income excluding intangible amortization, acquisition-related, exit and realignment charges, along with other adjustments, that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis.

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

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

We evaluate the performance of our segments based on their operating income excluding acquisition-related charges and intangible amortization and exit and realignment charges, along with other adjustments, that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis.

Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading and not meaningful.

The following tables present financial information by segment:

Year ended December 31, 2022 2021 2020

Years Ended December 31,

Products & Healthcare Services

4 unchanged sentences

Patient Direct

Intangible amortization ( 78,847 ) ( 39,807 ) ( 41,490 )

Acquisition-related and exit and realignment charges ( 55,022 ) ( 34,076 ) ( 37,752 )

Acquisition-related charges and intangible amortization

Exit and realignment charges

Inventory valuation adjustment (1)

( 92,275 ) — —

Consolidated operating income

3 unchanged sentences

Consolidated depreciation and amortization

Share-based compensation:

Products & Healthcare Services

Patient Direct

Consolidated share-based compensation

Capital expenditures:

1 unchanged sentence

Patient Direct

Discontinued operations — — 3,027

Consolidated capital expenditures

(1) Relates to an inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic.

December 31, 2022 2021

(2) Other share-based compensation expense is captured within exit and realignment charges or acquisition-related charges for the years ended December 31 2023, 2022 and 2021.

Total assets:

6 unchanged sentences

Net revenues were attributed to geographic areas based on the locations from which we ship products or provide services.

Year ended December 31, 2022 2021 2020

Years Ended December 31,

United States

1 unchanged sentence

Consolidated net revenue

December 31, 2022 2021

Long-lived assets:

7 unchanged sentences

We have audited the accompanying consolidated balance sheets of Owens & Minor, Inc.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive (loss) income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

16 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of fair value of acquired intangible assets

As discussed in Note 3 to the consolidated financial statements, on March 29, 2022 the Company completed the acquisition of 100% of Apria, Inc., which was accounted for using the acquisition method of accounting.

The Company recorded intangible assets with an acquisition-date fair value of $315 million, which included certain trade names and payor and capitated relationships intangible assets.

The fair value of intangible assets acquired have been estimated based on various valuation methods, including the income approach.

We identified the evaluation of the acquisition-date fair values of certain trade names and payor and capitated relationships intangible assets as a critical audit matter.

A higher degree of auditor judgment was required to evaluate certain projected revenues used in the valuation models to determine the fair value of these intangible assets.

Evaluation of the goodwill impairment analysis for the Global Products reporting unit

As discussed in Note 6 to the consolidated financial statements, the goodwill balance as of December 31, 2023 was $1,639 million, of which $104 million related to the Products & Healthcare Services reportable segment, all of which related to the Global Products reporting unit.

As discussed in Note 1, the Company performs goodwill impairment testing on an annual basis 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.

This involves estimating the fair value of the reporting units using an equally weighted combination of the income-based approach and the market-based approach.

The Company determined that the fair value of the reporting unit was in excess of the carrying amount and, therefore, did not record any goodwill impairment for this reporting unit.

We identified the evaluation of the goodwill impairment analysis for the Global Products reporting unit as a critical audit matter.

Evaluating the estimated fair value of the reporting unit involved a high degree of subjective auditor judgment due to the fact that the estimated fair value of the Global Products reporting unit exceeded its carrying amount by less than 10%, indicating a higher risk that the goodwill may be impaired.

We performed sensitivity analyses as a risk assessment procedure over assumptions used to estimate the fair value of the Global Products reporting unit and determined certain projected revenues represented a key assumption.

As a result, certain projected revenues used within the goodwill impairment analysis were challenging to evaluate as changes to those assumptions could have had a significant effect on the Company’s assessment of the impairment of goodwill for the Global Products reporting unit.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the development of the projected revenues.

We performed sensitivity analyses over the projected revenues to assess the impact of changes in those assumptions on the Company’s determination of fair value.

We assessed management’s projected revenues by comparing them to historical revenue trends.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the projected revenues by comparing them to the projected revenues of a set of comparable companies and other market data.

We evaluated the design and tested the operating effectiveness of internal controls related to the Company’s goodwill impairment assessment process for the Global Products reporting unit.

This included controls related to the development of certain projected revenues.

We evaluated the Company’s forecasted revenue growth rates for the Global Products reporting unit by comparing the growth assumptions to forecasted growth rates in the Company’s budget plans and comparing the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating projected revenues by comparing them to the projected revenues of a set of comparable companies and other market data.

Estimates of variable consideration on equipment and supplies sales and estimated adjustments on equipment rental revenues

21 unchanged sentences

(incorporated herein by reference to our Current Report on Form 8-K/A Exhibit 2.1, dated January 16, 2020)**

2.4 Agreement and Plan of Merger, dated as of January 7, 2022, by and among the Company, Apria and Merger Sub (incorporated herein by reference to the Company's Current Report on For 8-K, Exhibit 2.01, dated January 10, 2022)

Agreement and Plan of Merger, dated as of January 7, 2022, by and among the Company, Apria and Merger Sub (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 2.01, dated January 10, 2022)

Amended and Restated Articles of Incorporation of Owens & Minor, Inc.

(incorporated herein by reference to our Current Report on Form 8-K, Exhibit 3.1, dated July 29, 2008)

3.2 Amended and Restated Bylaws of the Company effective October 28 , 2022 (incorporated herein by reference to the our Quarterly Report on Form 10-Q , Exhibit 3.1, date d November 2 , 2022)

Amended and Restated Bylaws of the Company effective October 28, 2022 (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 3.1, dated November 2, 2022)

Indenture, dated September 16, 2014, by and among Owens & Minor, Inc., Owens and Minor Distribution, Inc., Owens & Minor Medical, Inc.

2 unchanged sentences

Bank National Association, as trustee (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 4.2, dated September 17, 2014)

4.3 Form of Global Note for the 3.875% Senior Notes due 2021 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit A of Exhibit 4.2, dated September 17, 2014)

Form of Global Note for the 4.375% Senior Notes due 2024 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit B of Exhibit 4.2, dated September 17, 2014)

6 unchanged sentences

Indenture, dated March 10, 2021, among Owens & Minor, Inc., the guarantors named therein and Regions Bank, as Trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.1, dated March 11, 2021)

4.8 Form of Global Note for the 4.500% Senior Notes due 2029 (included as Exhibit A to Exhibit 4.1 hereto) (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.2, dated March 11, 2021)

Form of Global Note for the 4.500% Senior Notes due 2029 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.2, dated March 11, 2021)

Sixth Supplemental Indenture, dated as of March 10, 2021, by and among Owens & Minor, Inc., the guarantors signatory thereto and U.S.

44 unchanged sentences

Officer Severance Policy dated May 7, 2018 (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.4, dated May 9, 2018)*

10.23 Policy on Recoupment of Executive Incentive Compensation (incorporated herein by reference to our Annual Report on Form 10-K, Exhibit 10.36, for the year ended December 31, 2009)*

Owens & Minor, Inc.

13 unchanged sentences

( as Administrative Agent), to the Credit Agreement dated as of June 5, 2012 by and among the Borrowers, the Guarantors, a syndicate of financial institutions party thereto, the Administrative Agent, and the other agents party thereto (incorporated herein by reference to our Current Report on Form 8-K, Exhibit 10.1, dated September 18, 2014)

10.28 Interest Purchase Agreement, dated as of May 2, 2017, by and among Owens & Minor, Inc., Barista Acquisition I, LLC, Barista Acquisition II, LLC , Mediq B.V.

, Mediq International B.V.

Interest Purchase Agreement, dated as of May 2, 2017, by and among Owens & Minor, Inc., Barista Acquisition I, LLC, Barista Acquisition II, LLC, Mediq B.V., Mediq International B.V.

and Mediq USA Holdings (incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2017)

70 unchanged sentences

(incorporated herein by reference to our Form 10-Q, Exhibit 10.2, dated November 2, 2022) **

11.1 Calculation of Net Income (Loss) per Common Share.

Information related to this item is in Part II, Item 8, Notes to Consolidated Financial Statements, Note 15-Net Income (Loss) per Common Share

Fifth Amendment to the Receivables Financing Agreement, dated March 14, 2023 by and among O&M Funding LLC, as borrower, Owens & Minor Medical, Inc.

as initial servicer, Regions Bank, Capital One Bank, and Bank of America, N.A., as lenders, and PNC Bank, National Association, as lender and administrative agent.

(incorporated herein by reference to our Quarterly Report on Form 10-Q, Exhibit 10.1, for the quarter ended March 31, 2023)

Form of Employee Restricted Stock Unit Grant Notice and Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.1, dated May 10, 2023) *

Form of Non-Employee Director Restricted Stock Unit Grant Notice and Award Agreement (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 10.2, dated May 10, 2023) *

Owens & Minor, Inc.

2023 Omnibus Incentive Plan (incorporated herein by reference to Annex A to Owns & Minor, Inc.’s definitive Proxy Statement filed on March 29, 2023)*

Calculation of Net (Loss) Income per Common Share.

Information related to this item is in Part II, Item 8, Notes to Consolidated Financial Statements, Note 14 - Net (Loss) Income per Common Share

Subsidiaries of Registrant

8 unchanged sentences

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

Owens & Minor, Inc.

Policy on Recoupment of Executive Incentive Compensation

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

9 unchanged sentences

/s/ Edward A.

Pesicka /s/ Robert J.

Pesicka Robert J.

President, Chief Executive Officer & Director Director

/s/ Robert J.

President, Chief Executive Officer & Director

/s/ Alexander J.

Bruni /s/ Rita F.

Johnson-Mills

Bruni Rita F.

Johnson-Mills

1 unchanged sentence

/s/ Michael W.

Lowry /s/ Stephen W.

Lowry Stephen W.

Senior Vice President, Corporate Controller & Chief Accounting Officer Director

Beck /s/ Teresa L.

Beck Teresa L.

Chair of the Board of Directors Director

/s/ Stephen W.

Senior Vice President, Corporate Controller & Chief

Accounting Officer

/s/ Teresa L.

Chair of the Board of Directors

/s/ Gwendolyn M.

Bingham /s/ Carissa L.

Bingham Carissa L.

Director Director

/s/ Carissa L.

/s/ Kenneth Gardner-Smith

1 unchanged sentence

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 9A. Controls and Procedures