What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 199 added, 92 removed, 360 unchanged (45% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands, except per share data)

8 unchanged sentences

Loss before income taxes

Income tax benefit

Income tax provision (benefit)

Net loss per common share:

4 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

3 unchanged sentences

Change in gains and losses on derivative instruments

Total other comprehensive (loss) income, net of tax

Total other comprehensive loss, net of tax

Comprehensive loss

29 unchanged sentences

authorized - 200,000 shares;

issued and outstanding - 76,449 shares and 76,546 shares

issued and outstanding - 77,048 shares and 76,546 shares as of June 30, 2024 and December 31, 2023

Paid-in capital

6 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

13 unchanged sentences

Net change in other assets and liabilities

Cash (used for) provided by operating activities

Cash provided by operating activities

Investing activities:

7 unchanged sentences

Repayments of term loans

Cash provided by (used for) financing activities

Cash used for financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

1 unchanged sentence

Supplemental disclosure of cash flow information:

Income taxes paid, net

Income taxes paid (received), net

Interest paid

11 unchanged sentences

Balance, March 31, 2024

Other comprehensive loss

Share-based compensation expense, exercises and other

Balance, June 30, 2024

Balance, December 31, 2022

2 unchanged sentences

Balance, March 31, 2023

Other comprehensive loss

Share-based compensation expense, exercises and other

Balance, June 30, 2023

See accompanying notes to consolidated financial statements.

12 unchanged sentences

Products & Healthcare Services and Patient Direct.

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

The Products & Healthcare Services segment includes our Medical Distribution division, which includes our U.S.

distribution business, along with our outsourced logistics and value-added services businesses, 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).

Reclassifications

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

Use of Estimates

6 unchanged sentences

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

Restricted cash as of March 31, 2024 and December 31, 2023 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, as well as $ 9.5 million and $ 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).

Restricted cash as of June 30, 2024 and December 31, 2023 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, as well as $ 13.4 million and $ 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.

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Restricted cash included in Other current assets

Restricted cash included in Other assets, net

Total cash, cash equivalents, and restricted cash

2 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 third-party 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 noncancelable lease term.

We recorded $ 147 million and $ 172 million for the three months ended March 31, 2024 and 2023 in revenue related to equipment we rent to patients.

We recorded $ 148 million and $ 153 million for the three months ended June 30, 2024 and 2023 and $ 294 million and $ 300 million for the six months ended June 30, 2024 and 2023 in net revenue related to equipment we rent to patients.

Sales of Accounts Receivable

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

As of March 31, 2024 and December 31, 2023, there were a total of $ 103 million and $ 124 million of uncollected accounts receivable, that had been sold and removed from our consolidated balance sheets.

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

As of June 30, 2024 and December 31, 2023, there were a total of $ 129 million and $ 124 million of uncollected accounts receivable, that were accounted for as sales and removed from our consolidated balance sheets.

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

2 unchanged sentences

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

Total accounts receivable sold under the RPA were $ 515 million for the three months ended March 31, 2024.

During the three months ended March 31, 2024, we received net cash proceeds of $ 512 million from the sale of accounts receivable under the RPA and collected $ 536 million of the sold accounts receivable.

No accounts receivables were sold under the RPA for the three months ended March 31, 2023.

The losses on sale of accounts receivable, inclusive of professional fees incurred to establish the agreement, recorded in other operating expense, net in the consolidated statements of operations were $ 3.3 million and $ 0.8 million for the three months ended March 31, 2024 and 2023.

Total accounts receivable sold under the RPA were $ 573 million and $ 1.1 billion for the three and six months ended June 30, 2024.

During the three and six months ended June 30, 2024, we received net cash proceeds of $ 569 million and $ 1.1 billion from the sale of accounts receivable under the RPA and collected $ 547 million and $ 1.1 billion of the sold accounts receivable.

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

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

The losses on sale of accounts receivable, inclusive of professional fees incurred to establish the agreement, recorded in other operating expense, net in the consolidated statements of operations were $ 3.9 million and $ 2.9 million for the three months ended June 30, 2024 and 2023 and $ 7.2 million and $ 3.6 million for the six months ended June 30, 2024 and 2023.

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

12 unchanged sentences

Note 3—Goodwill and Intangible Assets

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill at March 31, 2024:

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill at June 30, 2024:

Patient Direct

1 unchanged sentence

Currency translation adjustments

Carrying amount of goodwill, March 31, 2024

Intangible assets subject to amortization, which exclude indefinite-lived intangible assets, at March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024

Carrying amount of goodwill, June 30, 2024

Intangible assets subject to amortization, which exclude indefinite-lived intangible assets at June 30, 2024 and December 31, 2023 were as follows:

June 30, 2024

December 31, 2023

5 unchanged sentences

Weighted average useful life

At March 31, 2024 and December 31, 2023, $ 236 million and $ 250 million in net intangible assets were held in the Patient Direct segment and $ 107 million and $ 112 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 20.3 million and $ 20.9 million for the three months ended March 31, 2024 and 2023.

As of March 31, 2024, based on the current carrying value of intangible assets subject to amortization, estimated amortization expense were as follows:

At June 30, 2024 and December 31, 2023, $ 226 million and $ 250 million in net intangible assets were held in the Patient Direct segment and $ 100 million and $ 112 million were held in the Products & Healthcare Services segment.

Amortization expense for intangible assets was $ 16.3 million and $ 20.9 million for the three months ended June 30, 2024 and 2023 and $ 36.5 million and $ 41.8 million for the six months ended June 30, 2024 and 2023.

As of June 30, 2024, based on the current carrying value of intangible assets subject to amortization, estimated amortization expense were as follows:

2024 (remainder)

1 unchanged sentence

Note 4—Exit and Realignment Costs

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

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

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

Exit and realignment charges, net were $ 27.4 million and $ 15.7 million for the three months ended March 31, 2024 and 2023.

These amounts are excluded from our segments’ operating income.

During the three months ended March 31, 2024, exit and realignment charges, net included a gain of $ 7.4 million associated with the sale of our corporate headquarters and $ 34.7 million in charges under our Operating Model Realignment Program and IT strategic initiatives.

During the three months ended June 30, 2024 and 2023, exit and realignment charges, net of $ 29.3 million and $ 29.0 million included $ 28.3 million and $ 27.6 million in charges under our Operating Model Realignment Program and IT strategic initiatives.

During the six months ended June 30, 2024 and 2023, exit and realignment charges, net of $ 56.6 million and $ 44.6 million included $ 63.1 million and $ 42.8 million in charges under our Operating Model Realignment Program and IT strategic initiatives.

Exit and realignment charges, net for the six months ended June 30, 2024 also included a gain of $ 7.4 million associated with the sale of our corporate headquarters.

We 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, which are classified as other current liabilities in our consolidated balance sheets, through March 31, 2024 and 2023:

Accrued exit and realignment costs, December 31, 2023

1 unchanged sentence

Professional fees

IT strategic initiatives - related costs

Cash payments

Accrued exit and realignment costs, March 31, 2024

Provision for exit and realignment activities:

Professional fees

IT strategic initiatives - related costs

Cash payments

Accrued exit and realignment costs, June 30, 2024

Accrued exit and realignment costs, December 31, 2022

1 unchanged sentence

Professional fees

IT strategic initiatives - related costs

Cash payments

Accrued exit and realignment costs, March 31, 2023

In addition to the exit and realignment accruals in the preceding table and the $ 7.4 million gain associated with the sale of our corporate headquarters, we also incurred $ 6.5 million of costs that were expensed as incurred for the three months ended March 31, 2024, which primarily related to accelerated depreciation of certain assets held in our Products & Healthcare Services segment.

Provision for exit and realignment activities:

Professional fees

IT strategic initiatives - related costs

Cash payments

Accrued exit and realignment costs, June 30, 2023

In addition to the exit and realignment accruals in the preceding table and the $ 7.4 million gain associated with the sale of our corporate headquarters, we also incurred $ 1.9 million and $ 8.4 million of costs that were expensed as incurred for the three and six months ended June 30, 2024, which primarily related to accelerated depreciation of certain assets held in our Products & Healthcare Services segment.

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

March 31, 2024

June 30, 2024

December 31, 2023

4.375 % Senior Notes, due December 2024

Receivables Financing Agreement

4.500 % Senior Notes, due March 2029

5 unchanged sentences

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 in the Indenture which governs the 2024 Notes ) plus 30 basis points.

Prior to September 15, 2024, 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 in the Indenture which governs the 2024 Notes) plus 30 basis points.

On and after September 15, 2024, we have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to 100 % of the principal amount of the 2024 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

On July 31, 2024, we provided notice that we intend to redeem the 2024 Notes, see Note 14 in Notes to Consolidated Financial Statements.

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 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.

3 unchanged sentences

The Receivables Financing Agreement matures in March 2025.

We had $ 65.7 million in principal outstanding and no borrowings at March 31, 2024 and December 31, 2023 under our Receivables Financing Agreement.

At March 31, 2024 and December 31, 2023, we had maximum revolving borrowing capacity of $ 384 million and $ 450 million 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 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).

We had no borrowings at June 30, 2024 and December 31, 2023 under our Receivables Financing Agreement.

At June 30, 2024 and December 31, 2023, we had maximum revolving borrowing capacity of $ 450 million under our Receivables Financing 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).

1 unchanged sentence

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

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).

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 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 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 at the applicable redemption prices described in the Indenture dated March 10, 2021 (the Indenture), plus accrued and unpaid interest, if any, to, but not including, the redemption date.

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.

7 unchanged sentences

The Revolving Credit Agreement matures in March 2027.

At March 31, 2024 and December 31, 2023, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce Revolver availability, totaling $ 26.7 million and $ 27.4 million, leaving $ 423 million available for borrowing at the end of each period.

At June 30, 2024 and December 31, 2023, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce Revolving Credit Agreement availability, totaling $ 31.5 million and $ 27.4 million, leaving $ 419 million and $ 423 million available for borrowing at the end of each period.

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 as of March 31, 2024 and December 31, 2023.

and Europe that were issued outside of the Revolving Credit Agreement for $ 2.9 million and $ 3.0 million as of June 30, 2024 and December 31, 2023.

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

The terms of the applicable credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture.

We were in compliance with our debt covenants at March 31, 2024.

As of March 31, 2024, scheduled future principal payments of debt, excluding finance leases and other, were as follows:

We were in compliance with our debt covenants at June 30, 2024.

As of June 30, 2024, scheduled future principal payments of debt, excluding finance leases and other, were as follows:

2024 (remainder)

Of the $ 187 million due in 2024, $ 179 million is due in December 2024.

Current maturities at March 31, 2024 include $ 171 million in principal payments on our 2024 Notes, $ 25.0 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 5.3 million in current portion of finance leases and other.

Current maturities at June 30, 2024 include $ 171 million in principal payments on our 2024 Notes, $ 28.1 million in principal payments on our Term Loan A, $ 6.0 million in principal payments on our Term Loan B, and $ 5.5 million in current portion of finance leases and other.

Note 6—Retirement Plans

1 unchanged sentence

Retirement Plan).

As of March 31, 2024 and December 31, 2023, the accumulated benefit obligation of the U.S.

As of June 30, 2024 and December 31, 2023, the accumulated benefit obligation of the U.S.

Retirement Plan was $ 33.3 million and $ 34.1 million.

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

The components of net periodic benefit cost for the three months ended March 31, 2024 and 2023 were as follows:

The components of net periodic benefit cost for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

Six Months Ended

Interest cost

12 unchanged sentences

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

We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure.

We do not view the fair value of our

derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure.

All derivatives are carried at fair value in our consolidated balance sheets.

1 unchanged sentence

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

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of March 31, 2024:

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of June 30, 2024:

Derivative Assets

27 unchanged sentences

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

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three months ended March 31, 2024:

Amount of Gain Recognized in Other Comprehensive Income (Loss)

Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income

Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded

Amount of Gain Reclassified from Accumulated Other Comprehensive Loss into Net Loss

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and six months ended June 30, 2024:

Total Amount of Expense

Amount of Gain

Line Items Presented in the

Amount of Gain Reclassified

Recognized in Other

Location of Gain

Consolidated Statement of

from Accumulated Other

Comprehensive Income

Reclassified from

Operations in Which the

Comprehensive Loss into

Accumulated Other

Effects are Recorded

Three months ended

Six months ended

Comprehensive Loss

Three months ended

Six months ended

Three months ended

Six months ended

June 30, 2024

Interest rate swaps

Interest expense, net

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

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

Amount of Loss Recognized in Other Comprehensive Income (Loss)

Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income

Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded

Amount of Gain Reclassified from Accumulated Other Comprehensive Loss into Net Loss

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 three and six months ended June 30, 2023:

Total Amount of Expense

Amount of Gain

Line Items Presented in the

Amount of Gain Reclassified

Recognized in Other

Location of Gain

Consolidated Statement of

from Accumulated Other

Comprehensive Income

Reclassified from

Operations in Which the

Comprehensive Loss into

Accumulated Other

Effects are Recorded

Three months ended

Six months ended

Comprehensive Loss

Three months ended

Six months ended

Three months ended

Six months ended

June 30, 2023

Interest rate swaps

Interest expense, net

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

For the three months ended March 31, 2024 and 2023, we recognized a loss of $ 4.2 million and no gain (loss) associated with our economic (non-designated) foreign currency contracts.

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

For the three and six months ended June 30, 2024, we recognized losses of $ 1.0 million and $ 5.1 million associated with our economic (non-designated) foreign currency contracts.

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

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, net for our foreign exchange contracts.

Note 8—Income Taxes

The effective tax rate was 19.3 % for the three months ended March 31, 2024, compared to 27.7 % in the same period of 2023.

The change in these rates were primarily from changes in results of operations in the jurisdictions in which we operate and changes in forecasted results reflected in the tax rates.

The liability for unrecognized tax benefits was $ 22.8 million at March 31, 2024 and $ 22.7 million at December 31, 2023.

Included in the liability at March 31, 2024 and December 31, 2023 were $ 2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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

The effective tax rate was ( 89.9 )% and ( 22.5 )% for the three and six months ended June 30, 2024, compared to 8.8 % and 18.7 % in the same periods of 2023.

The change in these rates resulted primarily from remeasurement of our uncertain tax positions, as described below.

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

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

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

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

- Ireland Income Tax Treaty to alleviate double taxation.

The transfer pricing methodology was consistently applied for all years subject to the NOPAs and 2019 into 2022, but is no longer employed.

During the three months ended June 30, 2024, the IRS and the relevant foreign taxing authority mutually agreed to proposed adjustments to our 2015 through 2018 consolidated tax returns.

This was communicated to us in late June 2024.

As a result, we remeasured the uncertain tax position for the 2015 through 2018 tax years, as well as the affected 2019 through 2022 tax years, to the amount expected to be paid upon a final agreement with the IRS.

This matter does not impact our 2023, 2024 or future tax years.

The total change in estimate, net of an income tax benefit from the foreign taxing authority, is $ 17.2 million, or $( 0.22 ) impact per basic and diluted common share, including $ 4.0 million of interest, for the three and six months ended June 30, 2024 and is reflected within the income tax provision on our consolidated statements of operations.

The total change in estimate reflects an increase in the liability for unrecognized tax benefits of $ 19.1 million recorded within other current liabilities, partially offset by a $ 1.9 million increase in the receivable from the foreign taxing authority recorded within other current assets, on our consolidated balance sheet at June 30, 2024.

The balance sheet classification and amount owed may be subject to change depending on the timing of a final agreement with the IRS .

The liability for unrecognized tax benefits was $ 37.9 million at June 30, 2024 and $ 22.7 million at December 31, 2023.

Included in the liability at June 30, 2024 and December 31, 2023 were $ 2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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

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

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

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

adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows beyond the amounts described herein.

Note 9—Net Loss per Common Share

The following summarizes the calculation of net loss per common share attributable to common shareholders for the three months ended March 31, 2024 and 2023:

The following summarizes the calculation of net loss per common share attributable to common shareholders for the three and six months ended June 30, 2024 and 2023:

Three Months Ended

Six Months Ended

(in thousands, except per share data)

3 unchanged sentences

Net loss per common share:

Share-based awards for the three months ended March 31, 2024 and 2023 of approximately 1.6 million and 1.7 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Share-based awards of approximately 1.6 million shares for the three and six months ended June 30, 2024 and approximately 1.8 million and 1.7 million shares for the three and six months ended June 30, 2023 were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

Note 10—Accumulated Other Comprehensive (Loss) Income

The following table shows the changes in accumulated other comprehensive (loss) income by component for the three months ended March 31, 2024 and 2023:

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

The following table shows the changes in accumulated other comprehensive (loss) income by component for the three and six months ended June 30, 2024 and 2023:

Accumulated other comprehensive (loss) income, March 31, 2024

Other comprehensive income (loss) before reclassifications

3 unchanged sentences

Other comprehensive income (loss)

Accumulated other comprehensive (loss) income, June 30, 2024

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

Other comprehensive (loss) income before reclassifications

Other comprehensive (loss) 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) income, June 30, 2023

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

3 unchanged sentences

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

Other comprehensive (loss) income

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

Other comprehensive income (loss)

Accumulated other comprehensive (loss) income, June 30, 2024

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

Other comprehensive (loss) income before reclassifications

Other comprehensive (loss) 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 loss

Accumulated other comprehensive (loss) income, June 30, 2023

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

Note 11—Segment Information

We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance.

decisions and assessing performance.

We report our business under two segments:

Products & Healthcare Services and Patient Direct.

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

distribution division (Medical Distribution), including our outsourced logistics and value-added services businesses, and our Global Products division which manufactures and sources medical surgical products through our production and kitting operations.

The Products & Healthcare Services segment includes our Medical Distribution division, which includes our U.S.

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, net, 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.

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

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

1 unchanged sentence

Three Months Ended

Six Months Ended

Products & Healthcare Services

6 unchanged sentences

Exit and realignment charges, net

Litigation and related charges (1)

Consolidated operating income

11 unchanged sentences

Consolidated capital expenditures

(1) Other share-based compensation expense is captured within exit and realignment charges, net or acquisition-related charges for the three months ended March 31, 2024 and 2023.

March 31, 2024

(1) Litigation and related charges includes settlement costs and related fees of legal matters within our Apria division, which do not occur in the ordinary course of our business, are non-recurring/infrequent and are inherently unpredictable in timing and amount.

These charges are reported within Other operating expense, net in our Statements of Operations for the three and six months ended June 30, 2024.

(2) Other share-based compensation expense is captured within Exit and realignment charges, net or Acquisition-related charges for the three and six months ended June 30, 2024 and 2023.

June 30, 2024

December 31, 2023

5 unchanged sentences

Consolidated total assets

For the three months ended March 31, 2024 and 2023, non-cash adjustments to merchandise inventories valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S.

within our Products & Healthcare Services segment were $ 5.4 million and $ 4.9

The net book value of patient service equipment dispositions were $ 9.6 million and $ 9.0 million for the three months ended March 31, 2024 and 2023, within the Patient Direct segment.

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

within our Products & Healthcare Services segment were $( 1.1 ) million and $( 4.5 ) million for the three months ended June 30, 2024 and 2023, and $ 4.3 million and $ 0.4 million for the six months ended June 30, 2024 and 2023.

The net book value of patient service equipment dispositions within the Patient Direct segment were $ 5.2 million and $ 8.1 million for the three months ended June 30, 2024 and 2023 and $ 14.8 million and $ 17.2 million for the six months ended June 30, 2024 and 2023.

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

Three Months Ended

Six Months Ended

United States

19 unchanged sentences

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

Based on current knowledge and the advice of counsel, we believe that the accrual as of March 31, 2024 for currently pending matters considered probable of loss, which is not material, is sufficient.

Based on current knowledge and the advice of counsel, we believe that the accrual as of June 30, 2024 for currently pending matters considered probable of loss, which is not material, is sufficient.

In addition, we believe that other currently pending matters are not reasonably possible to result in a material loss, as payment of the amounts claimed is remote, the claims are immaterial, individually and in the aggregate, or the claims are expected to be adequately covered by insurance, subject to policy limits, applicable deductibles, exclusions and insurer solvency.

Note 14—Subsequent Events

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

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

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

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

In the event that we terminate the contract, we will be required to pay Rotech a termination fee of $ 70.0 million.

The transaction is subject to customary closing conditions, including expiration or termination of the applicable waiting period under the Hart Scott Rodino Act, and is expected to close by the end of 2024.

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

On July 31, 2024, we provided notice that we intend to exercise the redemption option on our 2024 Notes effective September 16, 2024.

As disclosed in Note 5 in Notes to Consolidated Financial Statements , for redemptions o n and after September 15, 2024, we have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to 100 % of the principal amount of the 2024 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

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

What changed 10-Q

Item 1. Financial Statements