UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-9810

Owens & Minor, Inc.

(Exact name of Registrant as specified in its charter)


Virginia			54-1701843
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

9120 Lockwood Boulevard	Mechanicsville	Virginia	23116
(Address of principal executive offices)			(Zip Code)

Post Office Box 27626, Richmond, Virginia			23261-7626
(Mailing address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code (804) 723-7000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $2 par value per share

OMI

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Owens & Minor, Inc.’s common stock outstanding as of ~~July 28,~~October 27, 2022 was ~~76,247,585~~76,234,454 shares.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Index


Part I. Financial Information		Page

Item 1.	Financial Statements	3
	Consolidated Statements of Operations—Three and S ixNine Months Ended ~~June~~ September 30,, 2022 and 2021	3
	Consolidated Statements of Comprehensive ~~Income~~—Income—Three and ~~Six~~Nine Months Ended ~~June~~Sept ember 30, 2022 and 2021	4
	Consolidated Balance Sheets—~~June~~Sept ember 3 0 ,30, 2022 and December 31, 2021	5
	Consolidated Statements of Cash Flows—~~Six~~Nine Months Ended ~~June~~September 30,, 2022 and 2021	56
	Consolidated Statements of Changes in Equity—Three and ~~and Six~~ Nine Months Ended ~~June~~September 30,, 2022 and 2021	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33
Part II. Other Information

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	33
Item 5.	Other Information	33
Item 6.	Exhibits	3334

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2022		2021		2022		2021
Net revenue	Net revenue	$	2,500,015	$	2,489,460	$	4,906,967	$	4,815,994	Net revenue	$	2,497,401	$	2,502,175	$	7,404,368	$	7,318,169
Cost of goods sold	Cost of goods sold	1,967,510		2,089,392		4,001,014		3,973,175		Cost of goods sold	1,984,122		2,173,336		5,985,136		6,146,511
Gross margin	Gross margin	532,505		400,068		905,953		842,819		Gross margin	513,279		328,839		1,419,232		1,171,658
Distribution, selling and administrative expenses	Distribution, selling and administrative expenses	452,813		294,096		732,553		586,796		Distribution, selling and administrative expenses	445,259		262,457		1,177,812		849,255
Acquisition-related and exit and realignment charges	Acquisition-related and exit and realignment charges	7,602		8,624		41,150		14,587		Acquisition-related and exit and realignment charges	8,898		6,380		50,048		20,967
Other operating (income) expense, net		(2,995)		464		(3,894)		(2,141)
Other operating income, net										Other operating income, net	(1,125)		(2,873)		(5,020)		(5,016)
Operating income	Operating income	75,085		96,884		136,144		243,577		Operating income	60,247		62,875		196,392		306,452
Interest expense, net	Interest expense, net	35,839		11,540		47,858		25,212		Interest expense, net	39,869		11,572		87,727		36,784
Loss on extinguishment of debt	Loss on extinguishment of debt	—		—		—		40,433		Loss on extinguishment of debt	—		—		—		40,433
Other expense, net	Other expense, net	783		1,028		1,565		1,598		Other expense, net	783		799		2,347		2,397
Income before income taxes	Income before income taxes	38,463		84,316		86,721		176,334		Income before income taxes	19,595		50,504		106,318		226,838
Income tax provision	Income tax provision	9,859		18,420		18,837		40,848		Income tax provision	7,098		6,375		25,937		47,224
Net income	Net income	$	28,604	$	65,896	$	67,884	$	135,486	Net income	$	12,497	$	44,129	$	80,381	$	179,614

Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.38	$	0.90	$	0.92	$	1.87	Basic	$	0.17	$	0.60	$	1.08	$	2.47
Diluted	Diluted	$	0.37	$	0.87	$	0.89	$	1.80	Diluted	$	0.16	$	0.58	$	1.05	$	2.38

See accompanying notes to consolidated financial statements.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2022		2021		2022		2021
Net income	Net income	$	28,604	$	65,896	$	67,884	$	135,486	Net income	$	12,497	$	44,129	$	80,381	$	179,614
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) net of tax:										Other comprehensive income (loss) net of tax:
Currency translation adjustments	Currency translation adjustments	(18,831)		(2,448)		(19,618)		(14,710)		Currency translation adjustments	(19,986)		(12,014)		(39,604)		(26,724)
Change in unrecognized net periodic pension costs	Change in unrecognized net periodic pension costs	297		36		486		157		Change in unrecognized net periodic pension costs	288		395		774		552
Change in gains and losses on derivative instruments	Change in gains and losses on derivative instruments	2,764		—		2,764		20,044		Change in gains and losses on derivative instruments	9,167		—		11,931		20,044
Total other comprehensive income (loss), net of tax		(15,770)		(2,412)		(16,368)		5,491
Total other comprehensive (loss), net of tax										Total other comprehensive (loss), net of tax	(10,531)		(11,619)		(26,899)		(6,128)
Comprehensive income	Comprehensive income	$	12,834	$	63,484	$	51,516	$	140,977	Comprehensive income	$	1,966	$	32,510	$	53,482	$	173,486

See accompanying notes to consolidated financial statements.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)

June 30, December 31,
(in thousands, except per share data) 2022 2021
Assets
Current assets
Cash and cash equivalents $ 56,406 $ 55,712
Accounts receivable, net of allowances of $14,922 and $18,003 743,853 681,564
Merchandise inventories 1,525,331 1,495,972
Other current assets 108,612 88,564
Total current assets 2,434,202 2,321,812
Property and equipment, net of accumulated depreciation of $373,954 and $334,500 595,888 317,235
Operating lease assets 278,291 194,006
Goodwill 1,656,308 390,185
Intangible assets, net 462,444 209,745
Other assets, net 128,145 103,568
Total assets $ 5,555,278 $ 3,536,551
Liabilities and equity
Current liabilities
Accounts payable $ 1,137,337 $ 1,001,959
Accrued payroll and related liabilities 97,829 115,858
Other current liabilities 334,198 226,204
Total current liabilities 1,569,364 1,344,021
Long-term debt, excluding current portion 2,565,613 947,540
Operating lease liabilities, excluding current portion 220,504 162,241
Deferred income taxes 107,181 35,310
Other liabilities 133,957 108,938
Total liabilities 4,596,619 2,598,050
Commitments and contingencies 0 0
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 76,171 shares and 75,433 shares 152,343 150,865
Paid-in capital 407,773 440,608
Retained earnings 455,502 387,619
Accumulated other comprehensive loss (56,959) (40,591)
Total equity 958,659 938,501
Total liabilities and equity $ 5,555,278 $ 3,536,551


	September 30,		December 31,
(in thousands, except per share data)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	76,770	$	55,712
Accounts receivable, net of allowances of $11,016 and $18,003	751,970		681,564
Merchandise inventories	1,508,443		1,495,972
Other current assets	104,734		88,564
Total current assets	2,441,917		2,321,812
Property and equipment, net of accumulated depreciation of $414,920 and $334,500	575,799		317,235
Operating lease assets	275,833		194,006
Goodwill	1,631,336		390,185
Intangible assets, net	464,077		209,745
Other assets, net	149,620		103,568
Total assets	$	5,538,582	$	3,536,551
Liabilities and equity
Current liabilities
Accounts payable	$	1,156,230	$	1,001,959
Accrued payroll and related liabilities	106,618		115,858
Other current liabilities	339,526		226,204
Total current liabilities	1,602,374		1,344,021
Long-term debt, excluding current portion	2,547,059		947,540
Operating lease liabilities, excluding current portion	215,022		162,241
Deferred income taxes	83,473		35,310
Other liabilities	123,817		108,938
Total liabilities	4,571,745		2,598,050
Commitments and contingencies
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 76,217 shares and 75,433 shares	152,434		150,865
Paid-in capital	413,894		440,608
Retained earnings	467,999		387,619
Accumulated other comprehensive loss	(67,490)		(40,591)
Total equity	966,837		938,501
Total liabilities and equity	$	5,538,582	$	3,536,551

See accompanying notes to consolidated financial statements.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2022		2021
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	67,884	$	135,486	Net income	$	80,381	$	179,614
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	97,286		45,501		Depreciation and amortization	155,438		68,142
Share-based compensation expense	Share-based compensation expense	11,210		13,040		Share-based compensation expense	15,765		19,078
Loss on extinguishment of debt	Loss on extinguishment of debt	—		40,433		Loss on extinguishment of debt	—		40,433
Provision for losses on accounts receivable	Provision for losses on accounts receivable	4,512		15,777		Provision for losses on accounts receivable	5,289		19,270
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	1,601		(11,293)		Deferred income tax expense (benefit)	2,991		(18,286)
Changes in operating lease right-of-use assets and lease liabilities	Changes in operating lease right-of-use assets and lease liabilities	606		826		Changes in operating lease right-of-use assets and lease liabilities	922		1,190
Loss on sale and dispositions of property and equipment		226		—
Gain on sale and dispositions of property and equipment						Gain on sale and dispositions of property and equipment	(17,002)		—
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	16,275		(57,256)		Accounts receivable	7,417		(84,381)
Merchandise inventories	Merchandise inventories	(24,438)		(298,294)		Merchandise inventories	(6,823)		(284,188)
Accounts payable	Accounts payable	12,349		127,473		Accounts payable	30,424		120,821
Net change in other assets and liabilities	Net change in other assets and liabilities	(23,945)		(3,363)		Net change in other assets and liabilities	(45,423)		(8,341)
Other, net	Other, net	5,958		4,076		Other, net	8,666		20,484
Cash provided by operating activities	Cash provided by operating activities	169,524		12,406		Cash provided by operating activities	238,045		73,836
Investing activities:	Investing activities:					Investing activities:
Acquisition, net of cash acquired	Acquisition, net of cash acquired	(1,684,607)		—		Acquisition, net of cash acquired	(1,684,607)		—
Additions to property and equipment	Additions to property and equipment	(62,236)		(14,630)		Additions to property and equipment	(109,275)		(26,446)
Additions to computer software	Additions to computer software	(3,463)		(4,051)		Additions to computer software	(5,873)		(6,179)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	5,846		22		Proceeds from sale of property and equipment	29,720		41
Other, net	Other, net	(839)		—		Other, net	(1,670)		—
Cash used for investing activities	Cash used for investing activities	(1,745,299)		(18,659)		Cash used for investing activities	(1,771,705)		(32,584)
Financing activities:	Financing activities:					Financing activities:
Proceeds from issuance of debt	Proceeds from issuance of debt	1,691,000		500,000		Proceeds from issuance of debt	1,691,000		574,900
Borrowings under revolving credit facility, net and accounts receivable securitization program		30,000		5,000
Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program						Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program	30,000		(90,900)
Repayments of debt	Repayments of debt	(1,500)		(523,140)		Repayments of debt	(3,000)		(553,140)
Borrowings under amended accounts receivable securitization program	Borrowings under amended accounts receivable securitization program	347,800		—		Borrowings under amended accounts receivable securitization program	697,700		—
Repayments under amended accounts receivable securitization program	Repayments under amended accounts receivable securitization program	(402,800)		—		Repayments under amended accounts receivable securitization program	(770,700)		—
Financing costs paid	Financing costs paid	(41,479)		(12,868)		Financing costs paid	(42,602)		(13,912)
Cash dividends paid	Cash dividends paid	—		(364)		Cash dividends paid	—		(548)
Payment for termination of interest rate swaps	Payment for termination of interest rate swaps	—		(15,434)		Payment for termination of interest rate swaps	—		(15,434)
Other, net	Other, net	(42,388)		(17,982)		Other, net	(41,813)		(18,188)
Cash provided by (used for) financing activities	Cash provided by (used for) financing activities	1,580,633		(64,788)		Cash provided by (used for) financing activities	1,560,585		(117,222)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,864)		(1,718)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(5,752)		(2,454)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	994		(72,759)		Net increase (decrease) in cash, cash equivalents and restricted cash	21,173		(78,424)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	72,035		134,506		Cash, cash equivalents and restricted cash at beginning of period	72,035		134,506
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	73,029	$	61,747	Cash, cash equivalents and restricted cash at end of period	$	93,208	$	56,082
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds	Income taxes paid, net of refunds	$	25,782	$	68,030	Income taxes paid, net of refunds	$	33,568	$	83,606
Interest paid	Interest paid	$	32,417	$	17,768	Interest paid	$	61,889	$	32,035
Noncash investing activity:	Noncash investing activity:					Noncash investing activity:
Unpaid purchases of property and equipment at end of period		$	56,429	$	—
Unpaid purchases of property and equipment and software at end of period						Unpaid purchases of property and equipment and software at end of period	$	63,158	$	—

See accompanying notes to consolidated financial statements.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(unaudited)


(in thousands, except per share data)	(in thousands, except per share data)	Common Shares Outstanding	Common Stock ($2 par value )		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity		(in thousands, except per share data)	Common Shares Outstanding	Common Stock ($2 par value )		Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity
Balance, December 31, 2021	Balance, December 31, 2021	75,433	$	150,865	$	440,608	$	387,619	$	(40,591)	$	938,501	Balance, December 31, 2021	75,433	$	150,865	$	440,608	$	387,619	$	(40,591)	$	938,501
Net income	Net income						39,279				39,279		Net income						39,279				39,279
Other comprehensive loss	Other comprehensive loss								(598)		(598)		Other comprehensive loss								(598)		(598)
Share-based compensation expense, exercises and other	Share-based compensation expense, exercises and other	653	1,307		(30,867)						(29,560)		Share-based compensation expense, exercises and other	653	1,307		(30,867)						(29,560)
Balance, March 31, 2022	Balance, March 31, 2022	76,086	152,172		409,741		426,898		(41,189)		947,622		Balance, March 31, 2022	76,086	152,172		409,741		426,898		(41,189)		947,622
Net income	Net income						28,604				28,604		Net income						28,604				28,604
Other comprehensive loss	Other comprehensive loss								(15,770)		(15,770)		Other comprehensive loss								(15,770)		(15,770)
Share-based compensation expense, exercises and other	Share-based compensation expense, exercises and other	85	171		(1,968)						(1,797)		Share-based compensation expense, exercises and other	85	171		(1,968)						(1,797)
Balance, June 30, 2022	Balance, June 30, 2022	76,171	$	152,343	$	407,773	$	455,502	$	(56,959)	$	958,659	Balance, June 30, 2022	76,171	152,343		407,773		455,502		(56,959)		958,659
Net income													Net income						12,497				12,497
Other comprehensive loss													Other comprehensive loss								(10,531)		(10,531)
Share-based compensation expense, exercises and other													Share-based compensation expense, exercises and other	46	91		6,121						6,212
Balance, September 30, 2022													Balance, September 30, 2022	76,217	$	152,434	$	413,894	$	467,999	$	(67,490)	$	966,837

Balance, December 31, 2020	Balance, December 31, 2020	73,472	$	146,944	$	436,597	$	167,022	$	(38,509)	$	712,054	Balance, December 31, 2020	73,472	$	146,944	$	436,597	$	167,022	$	(38,509)	$	712,054
Net income	Net income						69,589				69,589		Net income						69,589				69,589
Other comprehensive income	Other comprehensive income								7,903		7,903		Other comprehensive income								7,903		7,903
Dividends declared ($0.0025 per share)	Dividends declared ($0.0025 per share)						(434)				(434)		Dividends declared ($0.0025 per share)						(434)				(434)
Share-based compensation expense, exercises and other	Share-based compensation expense, exercises and other	1,628	3,256		(6,107)						(2,851)		Share-based compensation expense, exercises and other	1,628	3,256		(6,107)						(2,851)
Balance, March 31, 2021	Balance, March 31, 2021	75,100	150,200		430,490		236,177		(30,606)		786,261		Balance, March 31, 2021	75,100	150,200		430,490		236,177		(30,606)		786,261
Net income	Net income						65,896				65,896		Net income						65,896				65,896
Other comprehensive loss	Other comprehensive loss								(2,412)		(2,412)		Other comprehensive loss								(2,412)		(2,412)
Dividends declared ($0.0025 per share)	Dividends declared ($0.0025 per share)						(187)				(187)		Dividends declared ($0.0025 per share)						(187)				(187)
Share-based compensation expense, exercises and other	Share-based compensation expense, exercises and other	295	591		(2,130)						(1,539)		Share-based compensation expense, exercises and other	295	591		(2,130)						(1,539)
Balance, June 30, 2021	Balance, June 30, 2021	75,395	$	150,791	$	428,360	$	301,886	$	(33,018)	$	848,019	Balance, June 30, 2021	75,395	150,791		428,360		301,886		(33,018)		848,019
Net income													Net income						44,129				44,129
Other comprehensive loss													Other comprehensive loss								(11,619)		(11,619)
Dividends declared ($0.0025 per share)													Dividends declared ($0.0025 per share)						(183)				(183)
Share-based compensation expense, exercises and other													Share-based compensation expense, exercises and other	34	67		6,592						6,659
Balance, September 30, 2021													Balance, September 30, 2021	75,429	$	150,858	$	434,952	$	345,832	$	(44,637)	$	887,005

See accompanying notes to consolidated financial statements.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

(in thousands, except per share data, unless otherwise indicated)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, our or the Company) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.

To better reflect how we go to market as well as certain changes to the leadership team, organizational structure, budgeting and financial reporting processes which drive changes to segment reporting, we have organized ourOur business ~~into 2~~has 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 with the quarter ended March 31, 2022, we ~~now report~~have reported financial results using this 2two segment structure and have recastour prior year segment results on the same basis.

On March 29, 2022, we completed the acquisition of 100% of Apria, Inc. pursuant to the Agreement and Plan of Merger dated January 7, 2022, in exchange for approximately $1.7 billion, net of cash acquired. Refer to Note 3 for additional details.

Reclassifications

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

Use of Estimates

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

Cash, Cash Equivalents and Restricted Cash

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. Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in ~~the United States,~~North America, Europe, and Asia. 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 ~~June~~September 30, 2022 and December 31, 2021 primarily represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives related to wind-down costs of Fusion5.

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


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	56,406	$	55,712	Cash and cash equivalents	$	76,770	$	55,712
Restricted cash included in Other assets, net	Restricted cash included in Other assets, net	16,623		16,323		Restricted cash included in Other assets, net	16,438		16,323
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	73,029	$	72,035	Total cash, cash equivalents, and restricted cash	$	93,208	$	72,035

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation. Depreciation and amortization expense for financial reporting purposes is computed on a straight-line method over the estimated useful lives of the assets or, for capital leases and leasehold improvements, over the term of the lease, if shorter. In general, the estimated useful lives for computing depreciation and amortization are three to 15 years for machinery and equipment, five to 40 years for buildings, one to 10 years for patient equipment, and up to 15 years for leasehold and land improvements. Straight-line and accelerated methods of

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depreciation are used for income tax purposes. Normal maintenance and repairs are expensed as incurred, and renovations and

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betterments are capitalized. We suspend depreciation and amortization on assets that are held for sale. In addition, we record capital-related government grants earned as reductions to the cost of property and equipment; and associated unpaid liabilities and grant proceeds receivable are considered non-cash changes in such balances for purposes of preparation of our consolidated statements of cash flows. Patient equipment consists of medical equipment rented to patients on a month-to-month basis. Patient equipment depreciation is classified in our consolidated statements of operations within cost of goods sold as the equipment is rented to patients as part of our primary operations within the Patient Direct segment.

Revenue Recognition

Our revenue is primarily generated from sales contracts with customers. Under most of our distribution and product sales arrangements, our performance obligations are limited to delivery of products to a customer upon receipt of a purchase order. For these arrangements, we recognize revenue at the point in time when shipment is completed, as control passes to the customer upon product receipt.

Revenue for activity-based fees and other services is recognized over time as activities are performed. Depending on the specific contractual provisions and nature of the performance obligation, revenue from services may be recognized on a straight-line basis over the term of the service, on a proportional performance model, based on level of effort, or when final deliverables have been provided.

Our contracts sometimes allow for forms of variable consideration including rebates, discounts, performance guarantees, and implicit price concessions. In these cases, we estimate the amount of consideration to which we will be entitled in exchange for transferring the product or service to the customer. Rebates and customer discounts are estimated based on contractual terms or historical experience and we maintain an accrual for rebates or discounts that have been earned but are unpaid. When we have implicit price concessions, we determine the variable consideration under the expected value method as part of determining the sales transaction price using historical reimbursement experience, historical sales returns, and other operating trends.

In most cases, we record revenue gross, as we are the primary obligor. When we act as an agent in a sales arrangement and do not bear a significant portion of inventory risks, primarily for our outsourced logistics business, we record revenue net of product cost. Sales taxes collected from customers and remitted to governmental authorities are excluded from revenues.

Within our Patient Direct segment, revenues are recognized under fee-for-service arrangements for equipment we rent to patients and sales of equipment, supplies and other items we sell to patients. 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. Rental revenue, less estimated adjustments, is recognized as earned on a straight-line basis over the noncancellable lease term. We recorded ~~$144~~$148 million and ~~$151~~$299 million in revenue related to equipment we rent to patients for the three and ~~six~~nine months ended ~~June~~September 30, 2022. Equipment rental revenue was not material in the prior year.

Note 2—Fair Value

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 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). See Note 6 for the fair value of debt. The fair value of our derivative contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 8 for the fair value of derivatives.

Note 3—Acquisition

On March 29, 2022 (the Acquisition Date), we completed the acquisition of 100% of Apria, Inc. (Apria) pursuant to the Agreement and Plan of Merger (Apria Acquisition) dated January 7, 2022, in exchange for approximately $1.7 billion, net of $144 million of cash acquired. 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.

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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

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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 ~~review of publicly available data for transactions involving companies deemed comparable to the Company.~~discount rate. These inputs are considered Level 3 inputs. The allocation of purchase price to assets and liabilities acquired is not yet complete, as valuations of tangible and intangible assets and liabilities are still in process. The updated preliminary purchase price allocation resulted in an approximate $8.3 million reduction in intangible amortization expense during the three months ended September 30, 2022 that would have been recognized in previous periods if the adjustment to provisional amounts were recognized as of the Acquisition Date. This reduction resulted from a reallocation of intangible assets value to those with longer useful lives as compared to the purchase price allocation originally estimated as of the Acquisition Date.


		Preliminary Fair Value Originally Estimated as of Acquisition Date(1)		Differences Between Prior and the Current Periods Preliminary Fair Value Estimate		Preliminary Fair Value Currently Estimated as of Acquisition Date			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
Assets acquired:	Assets acquired:							Assets acquired:
Current assets	Current assets	$	142,136	$	(2,209)	$	139,927	Current assets	$	142,136	$	(1,968)	$	140,168
Goodwill	Goodwill	1,267,079		2,808		1,269,887		Goodwill	1,267,079		(17,601)		1,249,478
Intangible assets	Intangible assets	295,466		—		295,466		Intangible assets	295,466		17,334		312,800
Other non-current assets	Other non-current assets	371,320		1,468		372,788		Other non-current assets	371,320		(11,149)		360,171
Total assets	Total assets	2,076,001		2,067		2,078,068		Total assets	$	2,076,001	$	(13,384)	$	2,062,617
Liabilities assumed:	Liabilities assumed:							Liabilities assumed:
Current liabilities	Current liabilities	241,266		2,741		244,007		Current liabilities	$	241,266	$	5,012	$	246,278
Noncurrent liabilities	Noncurrent liabilities	150,128		(674)		149,454		Noncurrent liabilities	150,128		(18,396)		131,732
Total liabilities	Total liabilities	391,394		2,067		393,461		Total liabilities	391,394		(13,384)		378,010
Fair value of net assets acquired, net of cash	Fair value of net assets acquired, net of cash	$	1,684,607	$	—	$	1,684,607	Fair value of net assets acquired, net of cash	$	1,684,607	$	—	$	1,684,607

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

Current assets acquired includes $89.3 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 ~~contracts, trade names and~~relationships, including payor and capitated relationships, and trade names over their estimated weighted average useful lives of ~~two~~one to 15 years.

Goodwill of ~~$1.3~~$1.2 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. ~~None~~Approximately $32 million of the goodwill ~~recognized~~ is expected to be deductible for income tax purposes.

The following table provides pro forma results of net revenue and net (loss) income for the three and ~~six~~nine months ended ~~June~~September 30, 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.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net revenue	Net revenue	$	2,500,015	$	2,775,739	$	5,184,080	$	5,377,547	Net revenue	$	2,497,401	$	2,789,372	$	7,681,481	$	8,166,919
Net income (loss)	Net income (loss)	$	28,604	$	86,472	$	(61,578)	$	160,606	Net income (loss)	$	12,497	$	66,935	$	(39,696)	$	227,540

Pro forma net loss of ~~$61.6~~$39.7 million for the ~~six~~nine months ended ~~June~~September 30, 2022 includes pro forma adjustments for interest expense of $20.8 million and amortization of intangible assets of ~~$20.3 million.~~$10.9 million, which reflects the updated preliminary purchase price allocation. The pro forma net loss also includes $39.4 million in seller transaction expenses and stock compensation expense associated with $108 million owed to the holders of Apria stock awards in connection with the Apria Acquisition.Revenue and net income of Apria since the Acquisition Date for the three months ended September 30, 2022 included in the consolidated statement of operations were $310 million and $0.7 million, respectively.Revenue and net loss of Apria since the Acquisition Date included in the consolidated statement of operations for the ~~six~~nine months ended ~~June~~September 30, 2022 were ~~$310~~$620 million and ~~$30.3~~$38.4 million, respectively.

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Note 4—Goodwill and Intangible Assets

In connection with our new segment structure, which began in the first quarter of 2022, goodwill is now reported as part of Products & Healthcare Services or Patient Direct. There was no change to our underlying reporting units as part of that segment change and therefore no reallocation of goodwill. The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through ~~June~~September 30, 2022:


		Products & Healthcare Services		Patient Direct		Consolidated			Products & Healthcare Services		Patient Direct		Consolidated
Carrying amount of goodwill, December 31, 2021	Carrying amount of goodwill, December 31, 2021	$	106,280	$	283,905	$	390,185	Carrying amount of goodwill, December 31, 2021	$	106,280	$	283,905	$	390,185
Acquisition		—		1,269,887		1,269,887
Acquisitions								Acquisitions	(532)		1,249,478		1,248,946
Currency translation adjustments	Currency translation adjustments	(3,764)		—		(3,764)		Currency translation adjustments	(7,795)		—		(7,795)
Carrying amount of goodwill, June 30, 2022		$	102,516	$	1,553,792	$	1,656,308
Carrying amount of goodwill, September 30, 2022								Carrying amount of goodwill, September 30, 2022	$	97,953	$	1,533,383	$	1,631,336

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


		June 30, 2022							December 31, 2021								September 30, 2022							December 31, 2021
			Customer Relationships		Tradenames		Other Intangibles			Customer Relationships		Tradenames		Other Intangibles				Customer Relationships		Tradenames		Other Intangibles			Customer Relationships		Tradenames		Other Intangibles
Gross intangible assets	Gross intangible assets		$	273,030	$	156,936	$	271,518		$	275,526	$	90,000	$	43,189	Gross intangible assets		$	434,582	$	202,000	$	79,062		$	275,526	$	90,000	$	43,189
Accumulated amortization	Accumulated amortization		(157,804)		(39,238)		(41,998)			(146,168)		(33,242)		(19,560)		Accumulated amortization		(182,741)		(45,203)		(23,623)			(146,168)		(33,242)		(19,560)
Net intangible assets	Net intangible assets		$	115,226	$	117,698	$	229,520		$	129,358	$	56,758	$	23,629	Net intangible assets		$	251,841	$	156,797	$	55,439		$	129,358	$	56,758	$	23,629
Weighted average useful life	Weighted average useful life		10 years		11 years		5 years			10 years		11 years		8 years		Weighted average useful life		12 years		10 years		7 years			10 years		11 years		8 years

At ~~June~~September 30, 2022 and December 31, 2021, ~~$150~~$142 million and $164 million in net intangible assets were held in the Products & Healthcare Services segment and ~~$313~~$322 million and $45.7 million were held in the Patient Direct segment. Amortization expense for intangible assets was ~~$30.9~~$14.3 million and $10.0 million for the three months ended ~~June~~September 30, 2022 and 2021 and ~~$41.2~~$55.5 million and ~~$20.1~~$30.1 million for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021. At ~~June~~September 30, 2022, customer relationships, tradenames, and other intangibles ~~includes~~include preliminary estimated fair values of ~~payor relationships, customer list and other intangible~~ assets acquired as part of the Apria Acquisition.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is approximately ~~$63~~$22 million for the remainder of 2022, ~~$126~~$82 million for 2023, ~~$67~~$65 million for 2024, ~~$42~~$55 million for 2025, ~~$41~~$54 million for 2026 and ~~$38~~$47 million for 2027.

Note 5—Exit and Realignment Costs

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses, our client engagement center and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment which include leadership reorganization costs, certain professional fees, costs to streamline administrative functions and processes and divestiture related costs.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Products & Healthcare Services	$	1,983	$	5,091	$	4,396	$	18,933
Patient Direct	—		1,289		483		2,034
Total exit and realignment charges	$	1,983	$	6,380	$	4,879	$	20,967

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~~Exit and realignment charges by segment for the three and six months ended June 30, 2022 and 2021 were as follows:~~

Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Products & Healthcare Services $ 1,214 $ 7,879 $ 2,413 $ 13,842
Patient Direct — 745 483 745
Total exit and realignment charges $ 1,214 $ 8,624 $ 2,896 $ 14,587

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


	Total
Accrued exit and realignment costs, December 31, 2021	$	8,306
Provision for exit and realignment activities:
Severance	811
Other	871
Cash payments	(6,903)
Accrued exit and realignment costs, March 31, 2022	3,085
Provision for exit and realignment activities:
Severance	246
Other	968
Cash payments	(3,477)
Accrued exit and realignment costs, June 30, 2022	822
Provision for exit and realignment activities:
Other	1,251
Cash payments	(1,693)
Accrued exit and realignment costs, September 30, 2022	$	~~822~~380

Accrued exit and realignment costs, December 31, 2020	$	3,146
Provision for exit and realignment activities:
Information system restructuring costs	1,029
Lease obligations	347
Other	781
Cash payments	(2,915)
Accrued exit and realignment costs, March 31, 2021	2,388
Provision for exit and realignment activities:
Information system restructuring costs	1,611
Lease obligations	(126)
Other	989
Cash payments	(2,302)
Accrued exit and realignment costs, June 30, 2021	2,560
Provision for exit and realignment activities:
Information system restructuring costs	1,506
Lease obligations	107
Other	3,142
Cash payments	(4,199)
Accrued exit and realignment costs, September 30, 2021	$	~~2,560~~3,116

In addition to the exit and realignment accruals in the preceding table, we also incurred ~~$6.2 million and $10.0~~$0.7 million of costs that were expensed as incurred for the three and ~~six~~nine months ended ~~June~~September 30, ~~2021,~~2022, which ~~primarily includes $4.9 million and $8.0 million~~ related to an increase in reserves associated with certain retained assets of Fusion5. We incurred $1.6 million and $11.6 million of costs that were expensed as incurred for the three and nine months ended September 30, 2021, which primarily includes $1.5 million and $9.6 million of wind-down costs related to Fusion5 for the three and ~~six~~nine months ended ~~June~~September 30, 2021.

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Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were ~~$6.4~~$6.9 million and ~~$38.3~~$45.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, which consisted primarily of costs related to the Apria ~~acquisition.~~Acquisition. There were 0no acquisition-related charges included within acquisition-related and exit and realignment charges presented in our consolidated statements of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2021.

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

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Note 6—Debt

Debt consists of the following:


		June 30, 2022				December 31, 2021					September 30, 2022				December 31, 2021
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Receivables Securitization Program		$	171,503	$	175,000	$	197,026	$	200,000
Receivables securitization program										Receivables securitization program	$	153,823	$	157,000	$	197,026	$	200,000
4.375% Senior Notes, due December 2024	4.375% Senior Notes, due December 2024	245,361		241,739		245,086		263,263		4.375% Senior Notes, due December 2024	245,436		239,179		245,086		263,263
Term Loan A	Term Loan A	489,789		500,000		—		—		Term Loan A	490,278		500,000		—		—
4.500% Senior Notes, due March 2029	4.500% Senior Notes, due March 2029	492,176		406,660		491,656		515,225		4.500% Senior Notes, due March 2029	492,469		394,855		491,656		515,225
Term Loan B	Term Loan B	577,746		595,508		—		—		Term Loan B	577,062		585,806		—		—
6.625% Senior Notes, due March 2030		584,432		550,782		—		—
6.625% Senior Notes, due April 2030										6.625% Senior Notes, due April 2030	584,934		526,968		—		—
Finance leases and other	Finance leases and other	15,421		15,421		15,809		15,809		Finance leases and other	17,777		17,777		15,809		15,809
Total debt	Total debt	2,576,428		2,485,110		949,577		994,297		Total debt	2,561,779		2,421,585		949,577		994,297
Less current maturities	Less current maturities	(10,815)		(10,815)		(2,037)		(2,037)		Less current maturities	(14,720)		(14,720)		(2,037)		(2,037)
Long-term debt	Long-term debt	$	2,565,613	$	2,474,295	$	947,540	$	992,260	Long-term debt	$	2,547,059	$	2,406,865	$	947,540	$	992,260

We have $246 million, excluding deferred financing costs and third party fees, of 4.375% senior notes due in December 2024 (the 2024 Notes), with interest payable semi-annually. The 2024 Notes were sold at 99.6% of the principal amount with an effective yield of 4.422%. We have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100% of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate (as defined) plus 30 basis points.

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

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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 2two 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 B is based on either the

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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.

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 ~~June~~September 30, 2022, we had no borrowings and letters of credit of ~~$28.0~~$27.9 million under our ~~revolving credit facility.~~Revolving Credit Agreement. At December 31, 2021, we had no borrowings and letters of credit of $9.4 million outstanding under our ~~revolving credit facility.~~Revolving Credit Agreement. At ~~June~~September 30, 2022 and December 31, 2021, we had $422 million and $291 million available for borrowing under our ~~revolving credit facility.~~Revolving Credit Agreement. We also had letters of credit and bank guarantees, which were issued outside of the ~~revolving credit facility~~Revolving Credit Agreement for ~~$2.1~~$2.3 million and $2.2 million as of ~~June~~September 30, 2022 and December 31, 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.

On March 29, 2022, we entered into 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 accounts receivable securitization program (the Receivables Financing Agreement). Pursuant to the amended Receivables Financing Agreement, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $450 million outstanding at any time. The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement). Under the Receivables Financing Agreement, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Financing Agreement matures in March 2025.

The Revolving Credit Agreement, Term Loan A, Term Loan B, Receivables Financing Agreement, 2024 Notes, 2029 Unsecured Notes, and 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture. We were in compliance with our debt covenants at ~~June~~September 30, 2022.

As of ~~June~~September 30, 2022, scheduled future principal payments of debt, excluding finance leases and other, were ~~$3.0~~$1.5 million in 2022, $15.4 million in 2023, $274 million in 2024, ~~$215~~of which $254 million is due in December 2024, $197 million in 2025, $43.5 million in 2026, $403 million in 2027, $6.0 million in 2028, $1.1 billion in 2029, and $600 million in 2030. Current maturities at ~~June~~September 30, 2022 include ~~$3.1~~$6.3 million in principal payments on our Term Loan A, $6.0 million in principal payments on our Term Loan B and ~~$1.7~~$2.5 million in current portion of finance leases.

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Note 7—Retirement Plans

We have a frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S. Retirement Plan). As of ~~June~~September 30, 2022 and December 31, 2021, the accumulated benefit obligation of the U.S. Retirement Plan was ~~$49.0~~$48.3 million and $50.2 million. Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective teammates.

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Service cost	Service cost	$	617	$	709	$	1,250	$	1,413	Service cost	$	603	$	693	$	1,853	$	2,106
Interest cost	Interest cost	519		448		1,042		894		Interest cost	516		443		1,559		1,337
Recognized net actuarial loss	Recognized net actuarial loss	267		354		534		707		Recognized net actuarial loss	267		353		801		1,060
Net periodic benefit cost	Net periodic benefit cost	$	1,403	$	1,511	$	2,826	$	3,014	Net periodic benefit cost	$	1,386	$	1,489	$	4,213	$	4,503

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Note 8—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. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

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.

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. All derivatives are carried at fair value in our consolidated balance ~~sheets in other current assets and other current liabilities.~~sheets. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of ~~June~~September 30, 2022:

Derivative Assets

Derivative Liabilities

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

Fair Value

Classification

Fair Value

Notional Amount

Maturity Date

Classification

Fair Value

Classification

Fair Value

Cash flow hedges

Interest rate swaps

400,000

March 2027

Other assets

3,736

Other liabilities

—

Interest rate swaps

400,000

March 2027

Other assets, net

16,123

Other liabilities

—

Economic (non-designated) hedges

Foreign currency contracts

61,077

July 2022

Other current assets

Other current liabilities

227

Foreign currency contracts

54,062

October 2022

Other current assets

Other current liabilities

273

In March 2021, we terminated the remaining $300 million in notional value of interest rate swaps concurrent with the debt financing transaction. The remaining balance of the fair value adjustments of $25.1 million, which related to these

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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 ~~six~~nine months ended ~~June~~September 30, 2021.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2021:

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

Fair Value

Classification

Fair Value

Economic (non-designated) hedges

Foreign currency contracts

9,700

January 2022

Other current assets

Other current liabilities

—

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

Amount of Gain Recognized in Other Comprehensive Income (Loss) Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Three months ended June 30, 2022 Six months ended June 30, 2022 Three months ended June 30, 2022 Six months ended June 30, 2022 Three months ended June 30, 2022 Six months ended June 30, 2022
Interest rate swaps $ 2,044 $ 2,044 Interest expense, net $ (35,839) $ (47,858) $ (1,692) $ (1,692)


	Amount of Gain Recognized in Other Comprehensive Income (Loss)				Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded				Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
	Three months ended September 30, 2022		Nine months ended September 30, 2022			Three months ended September 30, 2022		Nine months ended September 30, 2022		Three months ended September 30, 2022		Nine months ended September 30, 2022
Interest rate swaps	$	12,153	$	14,197	Interest expense, net	$	39,869	$	87,727	$	(234)	$	(1,926)

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

Amount of Gain Recognized in Other Comprehensive Income (Loss) Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Three months ended June 30, 2021 Six months ended June 30, 2021 Three months ended June 30, 2021 Six months ended June 30, 2021 Three months ended June 30, 2021 Six months ended June 30, 2021
Interest rate swaps $ — $ 2,426 Loss on extinguishment of debt $ — $ (40,433) $ — $ (25,518)


	Amount of Gain Recognized in Other Comprehensive Income (Loss)				Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income	Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded				Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
	Three months ended September 30, 2021		Nine months ended September 30, 2021			Three months ended September 30, 2021		Nine months ended September 30, 2021		Three months ended September 30, 2021		Nine months ended September 30, 2021
Interest rate swaps	$	—	$	2,426	Loss on extinguishment of debt	$	—	$	(40,433)	$	—	$	(25,518)

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

For the three and ~~six~~nine months ended ~~June~~September 30, 2022 we recognized losses of ~~$1.3~~$1.8 million and ~~$1.4~~$3.2 million associated with our economic (non-designated) foreign currency contracts. For the three and ~~six~~nine months ended ~~June~~September 30, 2021 we recognized losses of ~~$0.6~~$0.9 million and ~~$1.6~~$2.5 million associated with our economic (non-designated) foreign currency contracts.

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

Note 9—Leases

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The components of lease expense were as follows:


			Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended September 30,				Nine Months Ended September 30,
		Classification	2022		2021		2022		2021			Classification	2022		2021		2022		2021
Operating lease cost	Operating lease cost	DS&A Expenses	$	24,501	$	14,705	$	40,601	$	28,791	Operating lease cost	DS&A Expenses	$	24,231	$	15,307	$	64,832	$	44,098
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of lease assets	Amortization of lease assets	DS&A Expenses	295		182		626		421		Amortization of lease assets	DS&A Expenses	318		254		944		675
Interest on lease liabilities	Interest on lease liabilities	Interest expense, net	304		294		611		601		Interest on lease liabilities	Interest expense, net	304		315		915		916
Total finance lease cost	Total finance lease cost		599		476		1,237		1,022		Total finance lease cost		622		569		1,859		1,591
Short-term lease cost	Short-term lease cost	DS&A Expenses	1,039		225		1,155		483		Short-term lease cost	DS&A Expenses, Cost of goods sold	1,207		225		2,363		708
Variable lease cost	Variable lease cost	DS&A Expenses	9,299		4,343		14,028		8,660		Variable lease cost	DS&A Expenses, Cost of goods sold	10,390		4,349		24,418		13,009
Total lease cost	Total lease cost		$	35,438	$	19,749	$	57,021	$	38,956	Total lease cost		$	36,450	$	20,450	$	93,472	$	59,406

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.

~~Table~~ Variable lease cost also includes expense associated with patient services equipment, which is based on equipment usage or a percentage of ~~Contents~~

net revenues collected for specific products. Patient equipment lease expense is recorded in cost of goods sold in the consolidated statement of operations.

Supplemental balance sheet information is as follows:


		Classification	June 30, 2022		December 31, 2021			Classification	September 30, 2022		December 31, 2021
Assets:	Assets:						Assets:
Operating lease assets	Operating lease assets	Operating lease assets	$	278,291	$	194,006	Operating lease assets	Operating lease assets	$	275,833	$	194,006
Finance lease assets	Finance lease assets	Property and equipment, net	8,468		8,896		Finance lease assets	Property and equipment, net	10,754		8,896
Total lease assets	Total lease assets		$	286,759	$	202,902	Total lease assets		$	286,587	$	202,902
Liabilities:	Liabilities:						Liabilities:
Current	Current						Current
Operating	Operating	Other current liabilities	$	69,650	$	41,817	Operating	Other current liabilities	$	72,990	$	41,817
Finance	Finance	Other current liabilities	1,691		2,037		Finance	Other current liabilities	2,470		2,037
Noncurrent	Noncurrent						Noncurrent
Operating	Operating	Operating lease liabilities, excluding current portion	220,504		162,241		Operating	Operating lease liabilities, excluding current portion	215,022		162,241
Finance	Finance	Long-term debt, excluding current portion	11,429		11,314		Finance	Long-term debt, excluding current portion	13,023		11,314
Total lease liabilities	Total lease liabilities		$	303,274	$	217,409	Total lease liabilities		$	303,505	$	217,409

The gross value recorded under finance leases was ~~$17.9~~$20.0 million and $20.6 million with associated accumulated ~~amortization~~depreciation of ~~$9.4~~$9.2 million and $11.7 million as of ~~June~~September 30, 2022 and December 31, 2021. Operating lease assets include ~~$77.8~~$83.6 million in right-of-use assets and ~~$79.6~~$86.8 million of operating lease liabilities associated with Apria as of ~~June~~September 30, 2022.

~~Other information related to leases was as follows:~~
Six Months Ended
June 30,
2022 2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating and finance leases $ 39,256 $ 28,471
Financing cash flows from finance leases $ 744 $ 423
Right-of-use assets obtained in exchange for new operating and finance lease liabilities $ 49,641 $ 54,640
Weighted average remaining lease term (years)
Operating leases 4.5 5.2
Finance leases 6.1 7.7
Weighted average discount rate
Operating leases 6.8% 8.8%
Finance leases 10.8% 12.4%

~~Maturities of lease liabilities as of June 30, 2022 were as follows:~~

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Operating Leases Finance Leases Total
2022 $ 45,195 $ 1,351 $ 46,546
2023 88,720 2,693 91,413
2024 74,905 2,641 77,546
2025 54,017 2,588 56,605
2026 37,149 2,506 39,655
Thereafter 54,088 4,774 58,862
Total lease payments 354,074 16,553 370,627
Less: Interest (63,920) (3,433) (67,353)
Present value of lease liabilities $ 290,154 $ 13,120 $ 303,274
Other information related to leases was as follows:


	Nine Months Ended September 30,
	2022		2021
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating and finance leases	$	63,488	$	43,687
Financing cash flows from finance leases	$	1,115	$	726

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

Weighted average remaining lease term (years)
Operating leases	4.3		5.2
Finance leases	5.9		6.9

Weighted average discount rate
Operating leases	6.9%		8.6%
Finance leases	10.8%		11.0%

AsMaturities of ~~June~~lease liabilities as of September 30, 2022 ~~we had an estimated net $50~~were as follows:


	Operating Leases (1)		Finance Leases		Total
2022	$	24,060	$	675	$	24,735
2023	93,913		2,693		96,606
2024	80,267		2,641		82,908
2025	58,612		2,588		61,200
2026	41,058		2,506		43,564
Thereafter	49,224		4,774		53,998
Total lease payments	347,134		15,877		363,011
Less: Interest	(59,122)		(384)		(59,506)
Present value of lease liabilities	$	288,012	$	15,493	$	303,505

(1) Operating lease payments exclude $40.2 million ~~cancellable commitment, which includes a potential~~of legally binding lease ~~associated with a future site of a~~payments for the Morgantown, West Virginia center of excellence for medical supplies and logistics ~~in Morgantown, West Virginia.~~lease signed, but not yet commenced.

Note 10—Income Taxes

The effective tax rate was ~~25.6%~~36.2% and ~~21.7%~~24.4% for the three and ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~21.8%~~12.6% and ~~23.2%~~20.8% in the same periods of 2021. The change in these rates resulted primarily from the mixture of income and losses in jurisdictions in which we operate, ~~offset by~~as well as the ~~incremental income~~utilization of foreign tax ~~benefit associated with the vesting of restricted stock recorded~~benefits in the ~~six~~three and nine months ended ~~June~~September 30, ~~2022.~~2021. The liability for unrecognized tax benefits was ~~$21.7~~$22.1 million at ~~June~~September 30, 2022 and $21.4 million at December 31, 2021. Included in the liability at ~~June~~September 30, 2022 and December 31, 2021 were $2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

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. 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. 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. 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

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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.

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Note 11—Net Income per Common Share

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021		(in thousands, except per share data)	2022		2021		2022		2021
Net income	Net income	$	28,604	$	65,896	$	67,884	$	135,486	Net income	$	12,497	$	44,129	$	80,381	$	179,614

Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	74,710		72,818		74,158		72,474		Weighted average shares outstanding - basic	74,905		73,215		74,376		72,649
Dilutive shares	Dilutive shares	1,587		2,987		2,011		2,791		Dilutive shares	1,510		2,743		1,835		2,754
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	76,297		75,805		76,169		75,265		Weighted average shares outstanding - diluted	76,415		75,958		76,211		75,403

Net income per common share:	Net income per common share:									Net income per common share:
Basic	Basic	$	0.38	$	0.90	$	0.92	$	1.87	Basic	$	0.17	$	0.60	$	1.08	$	2.47
Diluted	Diluted	$	0.37	$	0.87	$	0.89	$	1.80	Diluted	$	0.16	$	0.58	$	1.05	$	2.38

Note 12—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 aggregate 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 ~~June~~September 30, 2022, no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.

Note 13—Accumulated Other Comprehensive Loss

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

Retirement Plans Currency
Translation
Adjustments Derivatives Total
Accumulated other comprehensive loss, March 31, 2022 $ (14,408) $ (26,781) $ — $ (41,189)
Other comprehensive (loss) income before reclassifications — (18,831) 2,044 (16,787)
Income tax — — (532) (532)
Other comprehensive (loss) income before reclassifications, net of tax — (18,831) 1,512 (17,319)
Amounts reclassified from accumulated other comprehensive loss 386 — 1,692 2,078
Income tax (89) — (440) (529)
Amounts reclassified from accumulated other comprehensive loss, net of tax 297 — 1,252 1,549
Other comprehensive (loss) income 297 (18,831) 2,764 (15,770)
Accumulated other comprehensive (loss) gain, June 30, 2022 $ (14,111) $ (45,612) $ 2,764 $ (56,959)


	Retirement Plans		Currency Translation Adjustments		Derivatives		Total
Accumulated other comprehensive (loss) income, June 30, 2022	$	(14,111)	$	(45,612)	$	2,764	$	(56,959)
Other comprehensive (loss) income before reclassifications	—		(19,986)		12,153		(7,833)
Income tax	—		—		(3,159)		(3,159)
Other comprehensive (loss) income before reclassifications, net of tax	—		(19,986)		8,994		(10,992)
Amounts reclassified from accumulated other comprehensive (loss) income	374		—		234		608
Income tax	(86)		—		(61)		(147)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	288		—		173		461
Other comprehensive income (loss)	288		(19,986)		9,167		(10,531)
Accumulated other comprehensive (loss) gain, September 30, 2022	$	(13,823)	$	(65,598)	$	11,931	$	(67,490)

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		Retirement Plans		Currency Translation Adjustments		Derivatives		Total			Retirement Plans		Currency Translation Adjustments		Derivatives		Total
Accumulated other comprehensive loss, March 31, 2021		$	(18,326)	$	(12,280)	$	—	$	(30,606)
Accumulated other comprehensive loss, June 30, 2021										Accumulated other comprehensive loss, June 30, 2021	$	(18,290)	$	(14,728)	$	—	$	(33,018)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	—		(2,448)		—		(2,448)		Other comprehensive loss before reclassifications	—		(12,014)		—		(12,014)
Income tax	Income tax	—		—		—		—		Income tax	—		—		—		—
Other comprehensive loss before reclassifications, net of tax	Other comprehensive loss before reclassifications, net of tax	—		(2,448)		—		(2,448)		Other comprehensive loss before reclassifications, net of tax	—		(12,014)		—		(12,014)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	48		—		—		48		Amounts reclassified from accumulated other comprehensive loss	500		—		—		500
Income tax	Income tax	(12)		—		—		(12)		Income tax	(105)		—		—		(105)
Amounts reclassified from accumulated other comprehensive loss, net of tax	Amounts reclassified from accumulated other comprehensive loss, net of tax	36		—		—		36		Amounts reclassified from accumulated other comprehensive loss, net of tax	395		—		—		395
Other comprehensive income (loss)	Other comprehensive income (loss)	36		(2,448)		—		(2,412)		Other comprehensive income (loss)	395		(12,014)		—		(11,619)
Accumulated other comprehensive loss, June 30, 2021		$	(18,290)	$	(14,728)	$	—	$	(33,018)
Accumulated other comprehensive loss, September 30, 2021										Accumulated other comprehensive loss, September 30, 2021	$	(17,895)	$	(26,742)	$	—	$	(44,637)


		Retirement Plans		Currency Translation Adjustments		Derivatives		Total			Retirement Plans		Currency Translation Adjustments		Derivatives		Total
Accumulated other comprehensive loss, December 31, 2021	Accumulated other comprehensive loss, December 31, 2021	$	(14,597)	$	(25,994)	$	—	$	(40,591)	Accumulated other comprehensive loss, December 31, 2021	$	(14,597)	$	(25,994)	$	—	$	(40,591)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	—		(19,618)		2,044		(17,574)		Other comprehensive (loss) income before reclassifications	—		(39,604)		14,197		(25,407)
Income tax	Income tax	—		—		(532)		(532)		Income tax	—		—		(3,691)		(3,691)
Other comprehensive (loss) income before reclassifications, net of tax	Other comprehensive (loss) income before reclassifications, net of tax	—		(19,618)		1,512		(18,106)		Other comprehensive (loss) income before reclassifications, net of tax	—		(39,604)		10,506		(29,098)
Amounts reclassified from accumulated other comprehensive loss		635		—		1,692		2,327
Amounts reclassified from accumulated other comprehensive (loss) income										Amounts reclassified from accumulated other comprehensive (loss) income	1,009		—		1,926		2,935
Income tax	Income tax	(149)		—		(440)		(589)		Income tax	(235)		—		(501)		(736)
Amounts reclassified from accumulated other comprehensive loss, net of tax		486		—		1,252		1,738
Other comprehensive (loss) income		486		(19,618)		2,764		(16,368)
Accumulated other comprehensive (loss) gain, June 30, 2022		$	(14,111)	$	(45,612)	$	2,764	$	(56,959)
Amounts reclassified from accumulated other comprehensive (loss) income, net of tax										Amounts reclassified from accumulated other comprehensive (loss) income, net of tax	774		—		1,425		2,199
Other comprehensive income (loss)										Other comprehensive income (loss)	774		(39,604)		11,931		(26,899)
Accumulated other comprehensive (loss) gain, September 30, 2022										Accumulated other comprehensive (loss) gain, September 30, 2022	$	(13,823)	$	(65,598)	$	11,931	$	(67,490)


		Retirement Plans		Currency Translation Adjustments		Derivatives		Total			Retirement Plans		Currency Translation Adjustments		Derivatives		Total
Accumulated other comprehensive loss, December 31, 2020	Accumulated other comprehensive loss, December 31, 2020	$	(18,447)	$	(18)	$	(20,044)	$	(38,509)	Accumulated other comprehensive loss, December 31, 2020	$	(18,447)	$	(18)	$	(20,044)	$	(38,509)
Other comprehensive (loss) income before reclassifications	Other comprehensive (loss) income before reclassifications	—		(14,710)		2,426		(12,284)		Other comprehensive (loss) income before reclassifications	—		(26,724)		2,426		(24,298)
Income tax	Income tax	—		—		(611)		(611)		Income tax	—		—		(611)		(611)
Other comprehensive (loss) income before reclassifications, net of tax	Other comprehensive (loss) income before reclassifications, net of tax	—		(14,710)		1,815		(12,895)		Other comprehensive (loss) income before reclassifications, net of tax	—		(26,724)		1,815		(24,909)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	204		—		25,518		25,722		Amounts reclassified from accumulated other comprehensive loss	704		—		25,518		26,222
Income tax	Income tax	(47)		—		(7,289)		(7,336)		Income tax	(152)		—		(7,289)		(7,441)
Amounts reclassified from accumulated other comprehensive loss, net of tax	Amounts reclassified from accumulated other comprehensive loss, net of tax	157		—		18,229		18,386		Amounts reclassified from accumulated other comprehensive loss, net of tax	552		—		18,229		18,781
Other comprehensive income (loss)	Other comprehensive income (loss)	157		(14,710)		20,044		5,491		Other comprehensive income (loss)	552		(26,724)		20,044		(6,128)
Accumulated other comprehensive loss, June 30, 2021		$	(18,290)	$	(14,728)	$	—	$	(33,018)
Accumulated other comprehensive loss, September 30, 2021										Accumulated other comprehensive loss, September 30, 2021	$	(17,895)	$	(26,742)	$	—	$	(44,637)

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

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Note 14—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. We report our business under 2two segments: 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 Global Products 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 and acquisition-related and exit and realignment charges that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis. 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:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net revenue:	Net revenue:									Net revenue:
Products & Healthcare Services	Products & Healthcare Services	$	1,927,388	$	2,255,820	$	4,061,429	$	4,365,265	Products & Healthcare Services	$	1,903,356	$	2,256,295	$	5,964,784	$	6,621,560
Patient Direct	Patient Direct	572,627		233,640		845,538		450,729		Patient Direct	594,045		245,880		1,439,584		696,609
Consolidated net revenue	Consolidated net revenue	$	2,500,015	$	2,489,460	$	4,906,967	$	4,815,994	Consolidated net revenue	$	2,497,401	$	2,502,175	$	7,404,368	$	7,318,169

Operating income:	Operating income:									Operating income:
Products & Healthcare Services	Products & Healthcare Services	$	61,243	$	101,229	$	150,325	$	251,647	Products & Healthcare Services	$	23,781	$	64,415	$	174,108	$	316,062
Patient Direct	Patient Direct	52,332		14,305		68,125		26,569		Patient Direct	59,666		14,865		127,791		41,434
Intangible amortization	Intangible amortization	(30,888)		(10,026)		(41,156)		(20,052)		Intangible amortization	(14,302)		(10,025)		(55,459)		(30,077)
Acquisition-related and exit and realignment charges	Acquisition-related and exit and realignment charges	(7,602)		(8,624)		(41,150)		(14,587)		Acquisition-related and exit and realignment charges	(8,898)		(6,380)		(50,048)		(20,967)
Consolidated operating income	Consolidated operating income	$	75,085	$	96,884	$	136,144	$	243,577	Consolidated operating income	$	60,247	$	62,875	$	196,392	$	306,452

Depreciation and amortization:	Depreciation and amortization:									Depreciation and amortization:
Products & Healthcare Services	Products & Healthcare Services	$	19,209	$	18,847	$	38,203	$	38,007	Products & Healthcare Services	$	19,121	$	18,868	$	57,325	$	56,874
Patient Direct	Patient Direct	53,952		3,753		59,083		7,494		Patient Direct	39,030		3,774		98,113		11,268
Consolidated depreciation and amortization	Consolidated depreciation and amortization	$	73,161	$	22,600	$	97,286	$	45,501	Consolidated depreciation and amortization	$	58,151	$	22,642	$	155,438	$	68,142

Capital expenditures:	Capital expenditures:									Capital expenditures:
Products & Healthcare Services	Products & Healthcare Services	$	18,418	$	11,806	$	29,061	$	18,270	Products & Healthcare Services	$	9,743	$	13,498	$	38,804	$	31,768
Patient Direct	Patient Direct	36,320		252		36,638		411		Patient Direct	39,706		446		76,344		857
Consolidated capital expenditures	Consolidated capital expenditures	$	54,738	$	12,058	$	65,699	$	18,681	Consolidated capital expenditures	$	49,449	$	13,944	$	115,148	$	32,625


		June 30, 2022		December 31, 2021			September 30, 2022		December 31, 2021
Total assets:	Total assets:					Total assets:
Products & Healthcare Services	Products & Healthcare Services	$	2,968,089	$	3,012,303	Products & Healthcare Services	$	2,952,570	$	3,012,303
Patient Direct	Patient Direct	2,530,783		468,536		Patient Direct	2,509,242		468,536
Segment assets	Segment assets	5,498,872		3,480,839		Segment assets	5,461,812		3,480,839
Cash and cash equivalents	Cash and cash equivalents	56,406		55,712		Cash and cash equivalents	76,770		55,712
Consolidated total assets	Consolidated total assets	$	5,555,278	$	3,536,551	Consolidated total assets	$	5,538,582	$	3,536,551

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The following table presents net revenue by geographic area, which were attributed based on the location from which

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we ship products or provide ~~services.~~services:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2022		2021		2022		2021
Net revenue:	Net revenue:									Net revenue:
United States	United States	$	2,376,573	$	2,336,673	$	4,638,592	$	4,519,428	United States	$	2,410,790	$	2,380,794	$	7,049,382	$	6,900,222
International	International	123,442		152,787		268,375		296,566		International	86,611		121,381		354,986		417,947
Consolidated net revenue	Consolidated net revenue	$	2,500,015	$	2,489,460	$	4,906,967	$	4,815,994	Consolidated net revenue	$	2,497,401	$	2,502,175	$	7,404,368	$	7,318,169

Note 15—Recent Accounting Pronouncements

On June 16, 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses, Measurement of Credit Losses on Financial Instruments, which changes the way entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net earnings. This standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We are still evaluating the impact the adoption of ASU No. 2016-13 will have on our consolidated financial statements and related disclosures; however, we do not expect this to have a material impact. Subsequent to the issuance of ASU No. 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses and ASU No. 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief. These ASUs do not change the core principle of the guidance in ASU No. 2016-13. 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. 2016-13.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. Our material debt agreements no longer reference LIBOR as a benchmark rate. The transition did not have a material impact on our consolidated financial statements.

In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, to improve consistency by amending the FASB Accounting Standards Codification (the Codification) to include all disclosure guidance in the appropriate disclosure sections. This ASU also clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The amendments in this ASU do not change GAAP and, therefore, are not expected to result in a significant change in practice. We adopted ASU No. 2020-10 effective beginning January 1, 2021. Its adoption did not have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires the company acquiring contract assets and contract liabilities obtained in a business combination to recognize and measure them in accordance with ASC 606, Revenue from Contracts with Customers. At the acquisition date, the company acquiring the business should record related revenue, as if it had originated the contract. Before the update such amounts were recognized by the acquiring company at fair value. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. We adopted ASU 2021-08 prospectively, effective beginning January 1, 2022. Its adoption did not have a material impact on our consolidated financial statements.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires certain annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. We adopted ASU No. 2021-10 effective beginning January 1, 2022. Its adoption did not have a material impact on our consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis describes results of operations and material changes in the financial condition of Owens & Minor, Inc. and its subsidiaries since December 31, 2021. Trends of a material nature are discussed to the extent known and considered relevant. This discussion should be read in conjunction with the consolidated financial statements,

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related notes thereto, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Overview

Owens & Minor, Inc., along with its subsidiaries, (we, us, or our) is a leading global healthcare solutions company. ~~To better reflect how we go to market as well as certain changes to the leadership team, organizational structure, budgeting and financial reporting processes, we have organized our~~Our business ~~into~~has 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 with the quarter ended March 31, 2022, we ~~now report~~have reported financial results using this two segment structure and have recast our prior ~~year~~period segment results on the same basis.

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.~~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.

Net income per diluted share was ~~$0.37~~$0.16 and ~~$0.89~~$1.05 for the three and ~~six~~nine months ended ~~June~~September 30, 2022 as compared to ~~$0.87~~$0.58 and ~~$1.80~~$2.38 for the three and ~~six~~nine months ended ~~June~~September 30, 2021. Products & Healthcare Services segment operating income was ~~$61.2~~$23.8 million and ~~$150~~$174 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$101~~$64.4 million and ~~$252~~$316 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021. The decreases were primarily the result of ~~lower~~overall reduced hospital demand, including reliance on stockpiles built up during the COVID-19 pandemic, the reduction of glove cost pass through, and headwinds created by macroeconomic conditions, including ~~accelerating~~ inflationary pressures, supply chain issues, and rising interest rates, partially offset by operating efficiencies and productivity gains derived from the Owens & Minor business ~~system.~~system and changes in accrued incentive compensation. Patient Direct segment operating income was ~~$52.3~~$59.7 million and ~~$68.1~~$127.8 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, compared to ~~$14.3~~$14.9 million and ~~$26.6~~$41.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021. The increase was primarily the result of the inclusion of Apria in the Patient Direct segment since the Acquisition Date, strong revenue growth in our Byram business, leveraging our fixed costs, and operating efficiencies, partially offset by ~~accelerating~~ inflationary pressures. Net income per diluted share was unfavorably impacted as compared to the prior year by foreign currency translation in the amount of ~~$0.05~~$0.04 and ~~$0.08~~$0.13 for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

COVID-19 Update

We ~~are~~continue to closely ~~monitoring~~monitor the impact of the 2019 novel coronavirus (COVID-19), including its variants and sub-variants, on all aspects of our business, including our customers, teammates, suppliers, vendors and distribution channels. We have taken actions to protect our teammates while maintaining business continuity as we respond to the needs from this global pandemic. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our teammates, customers, suppliers and shareholders.

We are unable to predict the timing of the pandemic and the full impact that COVID-19 will have on our future operating results, financial position and cash flows due to numerous variables and continued uncertainties. Transportation and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations in certain locations, including within Asia. Essential activity exceptions from these restrictions have allowed us to continue to operate, but virus containment efforts have ~~resulted~~created supply chain challenges resulting in additional direct ~~costs from supply chain challenges.~~costs. Although we have experienced growth in sales volumes for certain of our products (such as personal protective equipment (PPE)) during the COVID-19 pandemic, as well as improved productivity and manufacturing output, there can be no assurance that such growth rates, increased sales volumes or other improvements will be maintained during or following the COVID-19 pandemic.

Philips Respironics Recall

In June 2021, one of Apria's suppliers, Philips Respironics, announced a voluntary recall (Recall) for continuous and non-continuous ventilators (certain continuous positive airway pressure (CPAP), BiLevel positive airway pressure and ventilator devices) related to polyurethane foam used in those devices. The Food and Drug Administration (FDA) has since identified this as a Class I recall, the most serious category of recall. Because we distribute these products and provide related home respiratory services and, in part, due to the substantial number of impacted devices, we will likely devote substantial time

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and resources to coordinating ~~recall-related~~Recall-related activity and to supporting our home healthcare patients’ needs. This Recall may cause us to incur significant costs, some or all of which may not be recoverable from the product manufacturer. The Recall may

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also materially negatively affect our revenues and results of operations as a result of patients not using their impacted devices, current shortages in the availability of both replacement devices for impacted patients and new devices for new patients, patient hesitancy to use respiratory devices generally or other reasons.

We are closely monitoring the impact of the Recall on our business and the uncertainty surrounding the availability and supply of CPAP and ventilators due to the Recall. ~~There is an~~While the equipment shortage in the industry ~~and the~~has begun to ease, we do not know whether that will continue. The Recall or other supply chain disruptions may have a future material adverse effect on our financial condition or results of operations, cash flows and liquidity.

Results of Operations

Net revenue.


		Three Months Ended June 30,				Change					Three Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Products & Healthcare Services	Products & Healthcare Services	$	1,927,388	$	2,255,820	$	(328,432)	(14.6)	%	Products & Healthcare Services	$	1,903,356	$	2,256,295	$	(352,939)	(15.6)	%
Patient Direct	Patient Direct	572,627		233,640		338,987		145.1	%	Patient Direct	594,045		245,880		348,165		141.6	%
Net revenue	Net revenue	$	2,500,015	$	2,489,460	$	10,555	0.4	%	Net revenue	$	2,497,401	$	2,502,175	$	(4,774)	(0.2)	%


		Six Months Ended June 30,				Change					Nine Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Products & Healthcare Services	Products & Healthcare Services	$	4,061,429	$	4,365,265	$	(303,836)	(7.0)	%	Products & Healthcare Services	$	5,964,784	$	6,621,560	$	(656,776)	(9.9)	%
Patient Direct	Patient Direct	845,538		450,729		394,809		87.6	%	Patient Direct	1,439,584		696,609		742,975		106.7	%
Net revenue	Net revenue	$	4,906,967	$	4,815,994	$	90,973	1.9	%	Net revenue	$	7,404,368	$	7,318,169	$	86,199	1.2	%

The increase in net revenue in our Patient Direct segment for the three and ~~six~~nine months ended ~~June~~September 30, 2022 was driven by the acquisition of Apria on March 29, 2022 and continued strong performance in our Byram business. The decrease in net revenue in our Products & Healthcare Services segment for the three and ~~six~~nine months ended ~~June~~September 30, 2022 reflected ~~lower~~overall reduced hospital demand, including reliance on stockpiles and the reduction of glove cost pass through. Foreign currency translation had an unfavorable impact on net revenue of ~~$12.6~~$12.0 million and ~~$21.1~~$33.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the prior year.

Cost of goods sold.


		Three Months Ended June 30,				Change					Three Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Cost of goods sold	Cost of goods sold	$	1,967,510	$	2,089,392	$	(121,882)	(5.8)	%	Cost of goods sold	$	1,984,122	$	2,173,336	$	(189,214)	(8.7)	%


		Six Months Ended June 30,				Change					Nine Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Cost of goods sold	Cost of goods sold	$	4,001,014	$	3,973,175	$	27,839	0.7	%	Cost of goods sold	$	5,985,136	$	6,146,511	$	(161,375)	(2.6)	%

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 and bear risk of general and physical inventory loss. These are sometimes referred to as distribution contracts. Cost of goods sold also includes direct and certain indirect labor, depreciation of certain property and equipment, product costs, and material and overhead costs. Cost of goods sold compared to prior year reflects the inclusion of Apria since the Acquisition Date, changes in sales activity, including product mix, ~~accelerating~~ inflationary pressures, and supply chain issues.

~~Gross margin.~~

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Three Months Ended
June 30, Change
(Dollars in thousands) 2022 2021 $ %
Gross margin $ 532,505 $ 400,068 $ 132,437 33.1 %
As a % of net revenue 21.30 % 16.07 %
Gross margin.


	Three Months Ended September 30,						Change
(Dollars in thousands)	2022			2021			$		%
Gross margin	$	513,279		$	328,839		$	184,440	56.1	%
As a % of net revenue	20.55		%	13.14		%


		Six Months Ended June 30,						Change					Nine Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Gross margin	Gross margin	$	905,953		$	842,819		$	63,134	7.5	%	Gross margin	$	1,419,232		$	1,171,658		$	247,574	21.1	%
As a % of net revenue	As a % of net revenue	18.46		%	17.50		%					As a % of net revenue	19.17		%	16.01		%

Gross margin increase in the three and ~~six~~nine months ended ~~June~~September 30, 2022 was driven by inclusion of Apria in the Patient Direct segment since the Acquisition Date and sales mix, partially offset by ~~lower~~overall reduced hospital demand, including reliance on stockpiles, the reduction of glove cost pass through, ~~accelerating~~ inflationary pressures, and supply chain issues. Foreign currency translation had an unfavorable impact on gross margin of ~~$6.9~~$6.4 million and ~~$10.8~~$17.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022 as compared to the prior year.

Operating expenses.


		Three Months Ended June 30,						Change					Three Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Distribution, selling and administrative expenses	Distribution, selling and administrative expenses	$	452,813		$	294,096		$	158,717	54.0	%	Distribution, selling and administrative expenses	$	445,259		$	262,457		$	182,802	69.7	%
As a % of net revenue	As a % of net revenue	18.11		%	11.81		%					As a % of net revenue	17.83		%	10.49		%
Acquisition-related and exit and realignment charges	Acquisition-related and exit and realignment charges	$	7,602		$	8,624		$	(1,022)	(11.9)	%	Acquisition-related and exit and realignment charges	$	8,898		$	6,380		$	2,518	39.5	%
Other operating (income) expense, net		$	(2,995)		$	464		$	(3,459)	(745.5)	%
Other operating income, net												Other operating income, net	$	(1,125)		$	(2,873)		$	1,748	60.8	%


		Six Months Ended June 30,						Change					Nine Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Distribution, selling and administrative expenses	Distribution, selling and administrative expenses	$	732,553		$	586,796		$	145,757	24.8	%	Distribution, selling and administrative expenses	$	1,177,812		$	849,255		$	328,557	38.7	%
As a % of net revenue	As a % of net revenue	14.93		%	12.18		%					As a % of net revenue	15.91		%	11.60		%
Acquisition-related and exit and realignment charges	Acquisition-related and exit and realignment charges	$	41,150		$	14,587		$	26,563	182.1	%	Acquisition-related and exit and realignment charges	$	50,048		$	20,967		$	29,081	138.7	%
Other operating (income) expense, net		$	(3,894)		$	(2,141)		$	(1,753)	(81.9)	%
Other operating income, net												Other operating income, net	$	(5,020)		$	(5,016)		$	(4)	(0.1)	%

Distribution, selling and administrative (DS&A) expenses include labor and warehousing costs associated with our distribution and outsourced logistics services and all costs associated with our fee-for-service arrangements in our Products & Healthcare Services segment. Shipping and handling costs are primarily included in DS&A expenses and include costs to store, move, and prepare products for shipment, as well as costs to deliver products to customers. Overall DS&A expenses were affected by inclusion of Apria in our results since the Acquisition Date, and ~~accelerating~~ inflationary pressures for the three and ~~six~~nine months ended ~~June~~September 30, 2022, partially offset by operating efficiencies and productivity gains derived from the Owens & Minor business system, and changes in accrued incentive compensation. DS&A expenses also included a favorable impact for foreign currency translation of ~~$1.5~~$1.8 million and ~~$2.4~~$4.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022.

Acquisition-related charges were ~~$6.4~~$6.9 million and ~~$38.3~~$45.2 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022 as compared to no acquisition-related charges for the three and ~~six~~nine months ended ~~June~~September 30, 2021. Acquisition-related charges in 2022 consisted primarily of costs related to the Apria ~~acquisition.~~Acquisition. Exit and realignment charges were ~~$1.2~~$2.0 million and ~~$2.9~~$4.9 million for the three and ~~six~~nine months ended ~~June~~September 30, 2022, which consisted primarily of wind-down costs related to Fusion5 and severance and other charges associated with the reorganization of our segments. Exit and realignment charges were ~~$8.6~~$6.4 million and ~~$14.6~~$21.0 million for the three and ~~six~~nine months ended ~~June~~September 30, 2021 and consisted primarily of ~~an increase in reserves associated with certain retained assets of~~wind-down costs related to Fusion5, leadership reorganization costs, IT restructuring charges, and other costs related to the reorganization of the U.S. operations.

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~~The change in other~~Other operating ~~(income) expense,~~income, net for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 includes the impact of foreign currency transaction ~~gains, as compared to foreign currency transaction losses for the three months ended June 30, 2021 and foreign currency gains for the six months ended June 30, 2021.~~gains.

Interest expense, net.


		Three Months Ended June 30,						Change					Three Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Interest expense, net	Interest expense, net	$	35,839		$	11,540		$	24,299	210.6	%	Interest expense, net	$	39,869		$	11,572		$	28,297	244.5	%
Effective interest rate	Effective interest rate	5.26		%	4.30		%					Effective interest rate	5.96		%	4.17		%


		Six Months Ended June 30,						Change					Nine Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Interest expense, net	Interest expense, net	$	47,858		$	25,212		$	22,646	89.8	%	Interest expense, net	$	87,727		$	36,784		$	50,943	138.5	%
Effective interest rate	Effective interest rate	5.12		%	4.94		%					Effective interest rate	5.47		%	4.72		%

Interest expense, net and the effective interest rate for the three and ~~six~~nine months ended ~~June~~September 30, 2022 increased primarily due to the increase in debt associated with the Apria Acquisition on March 29, ~~2022.~~2022, along with rising market interest rates. See Note 6 in Notes to Consolidated Financial Statements.

Loss on extinguishment of debt.


		Six Months Ended June 30,				Change					Nine Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Loss on extinguishment of debt	Loss on extinguishment of debt	$	—	$	40,433	$	(40,433)	(100.0)	%	Loss on extinguishment of debt	$	—	$	40,433	$	(40,433)	(100.0)	%

Loss on extinguishment of debt for the ~~six~~nine months ended ~~June~~September 30, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in March 2021 of $15.3 million and amounts reclassified from accumulated other comprehensive loss as a result of the termination of our interest rate swaps of $25.1 million.

Other expense, net.


		Three Months Ended June 30,				Change					Three Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Other expense, net	Other expense, net	$	783	$	1,028	$	(245)	(23.8)	%	Other expense, net	$	783	$	799	$	(16)	(2.0)	%


		Six Months Ended June 30,				Change					Nine Months Ended September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2022		2021		$		%		(Dollars in thousands)	2022		2021		$		%
Other expense, net	Other expense, net	$	1,565	$	1,598	$	(33)	(2.1)	%	Other expense, net	$	2,347	$	2,397	$	(50)	(2.1)	%

Other expense, net for the three and ~~six~~nine months ended ~~June~~September 30, 2022 and 2021 represents interest cost and net actuarial losses related to our retirement plans.

Income taxes.


	Three Months Ended September 30,						Change
(Dollars in thousands)	2022			2021			$		%
Income tax provision	$	7,098		$	6,375		$	723	11.3	%
Effective tax rate	36.2		%	12.6		%

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Three Months Ended
June 30, Change
(Dollars in thousands) 2022 2021 $ %
Income tax provision $ 9,859 $ 18,420 $ (8,561) (46.5) %
Effective tax rate 25.6 % 21.8 %


		Six Months Ended June 30,						Change					Nine Months Ended September 30,						Change
(Dollars in thousands)	(Dollars in thousands)	2022			2021			$		%		(Dollars in thousands)	2022			2021			$		%
Income tax provision	Income tax provision	$	18,837		$	40,848		$	(22,011)	(53.9)	%	Income tax provision	$	25,937		$	47,224		$	(21,287)	(45.1)	%
Effective tax rate	Effective tax rate	21.7		%	23.2		%					Effective tax rate	24.4		%	20.8		%

The change in the effective tax rate for the three and ~~six~~nine months ended ~~June~~September 30, 2022 compared to the same periods in 2021 resulted primarily from the mixture of income and losses in jurisdictions in which we operate, ~~offset by~~as well as the ~~incremental income~~as the utilization of foreign tax ~~benefit associated with the vesting of restricted stock recorded~~benefits in the ~~six~~three and nine months ended ~~June~~September 30, ~~2022.~~2021.

Financial Condition, Liquidity and Capital Resources

Financial condition. We monitor operating working capital through days sales outstanding (DSO) and merchandise inventory days. We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our ~~revolving credit facility~~Revolving Credit Agreement (as defined below) or ~~receivables securitization program,~~Receivables Financing Agreement (as defined below), or a combination thereof of approximately $27 million.

The majority of our cash and cash equivalents are held in cash depository accounts with major banks in ~~the United States,~~North America, Europe, and Asia. Changes in our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.


		June 30, 2022		December 31, 2021				Change							September 30, 2022				December 31, 2021		Change
(Dollars in thousands)	(Dollars in thousands)					$				%		(Dollars in thousands)					$				%
Cash and cash equivalents	Cash and cash equivalents	$	56,406			$	55,712			$	694			1.2			%	Cash and cash equivalents	$	76,770	$	55,712	$	21,058		37.8	%
Accounts receivable, net of allowances	Accounts receivable, net of allowances	$	743,853	$	681,564			$	62,289			9.1	%	Accounts receivable, net of allowances	$	751,970			$	681,564	$	70,406	10.3		%
Consolidated DSO (1)	Consolidated DSO (1)	26.0		24.6										Consolidated DSO (1)	26.9				24.6
Merchandise inventories	Merchandise inventories	$	1,525,331	$	1,495,972			$	29,359			2.0	%	Merchandise inventories	$	1,508,443			$	1,495,972	$	12,471	0.8		%
Inventory days (2)	Inventory days (2)	70.5		64.7										Inventory days (2)	69.9				64.7
Accounts payable	Accounts payable	$	1,137,337	$	1,001,959			$	135,378			13.5	%	Accounts payable	$	1,156,230			$	1,001,959	$	154,271	15.4		%

(1) Based on period end accounts receivable and net revenue for the quarters ended ~~June~~September 30, 2022 and December 31, 2021.

(2) Based on period end merchandise inventories and cost of goods sold for the quarters ended ~~June~~September 30, 2022 and December 31, 2021.

Liquidity and capital expenditures. The following table summarizes our consolidated statements of cash flows for the ~~six~~nine months ended ~~June~~September 30, 2022 and 2021:


(Dollars in thousands)	(Dollars in thousands)	2022		2021		(Dollars in thousands)	2022		2021
Net cash provided by (used for):	Net cash provided by (used for):					Net cash provided by (used for):
Operating activities	Operating activities	$	169,524	$	12,406	Operating activities	$	238,045	$	73,836
Investing activities	Investing activities	(1,745,299)		(18,659)		Investing activities	(1,771,705)		(32,584)
Financing activities	Financing activities	1,580,633		(64,788)		Financing activities	1,560,585		(117,222)
Effect of exchange rate changes	Effect of exchange rate changes	(3,864)		(1,718)		Effect of exchange rate changes	(5,752)		(2,454)
Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	$	994	$	(72,759)	Net increase (decrease) in cash, cash equivalents and restricted cash	$	21,173	$	(78,424)

Cash provided by operating activities in the first ~~six~~nine months of 2022 and 2021 reflected cash generated by net income along with changes in working capital.

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Cash used for investing activities in the first ~~six~~nine months of 2022 included cash paid for the acquisition of Apria of $1.7 billion and capital expenditures of ~~$65.7~~$115 million for patient equipment and our strategic and operational efficiency initiatives associated with property and equipmentand capitalized ~~software.~~software, partially offset by $29.7 million in proceeds related to the sale of property and equipment. Cash used for investing activities in the first ~~six~~nine months of 2021 included capital expenditures of ~~$18.7~~$32.6 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas, and capitalized software.

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Cash used for financing activities in the first ~~six~~nine months of 2022 included proceeds from borrowings of $1.7 billion related to the 6.625% senior notes due in 2030 (the 2030 Unsecured Notes), Term Loan A (as defined below), and Term Loan B (as defined below) for the first nine months of 2022, compared to $575 million related to the 4.500% senior unsecured notes due in 2029 (the 2029 Unsecured Notes) and the accounts receivable securitization program for the first nine months of 2021. Borrowings under our revolving credit facility, net and accounts receivable securitization program of $30.0 million compared to net repayments of ~~$5.0~~$90.9 million for the same period of 2021. Repayments of debt in the first nine months of 2022 included $3.0 million on our Term Loan B compared to 2021 included repayments of $553 million on our previous Term Loan A-2, previous Term Loan B, 3.875% Senior Notes due 2021 and 2024 Notes, and accounts receivable securitization program. Gross issuances and repayments under our amended accounts receivable securitization program were ~~$347.8~~$697.7 million and ~~$402.8~~$770.7 million for the first ~~six~~nine months of 2022. We also had proceeds from borrowings of $1.7 billion related to the 2030 Unsecured Notes, Term Loan A, and Term Loan B for the first six months of 2022, compared to $500 million related to the 2029 Unsecured Notes for the first six months of 2021. We also paid ~~$41.5~~$42.6 million in financing costs in the first ~~six~~nine months of 2022, as compared to ~~$12.9~~$13.9 million for the same period of 2021. ~~Payments for taxes related to the vesting of restricted stock awards were $44.4 million and $19.1 million for the first six months of 2022 and 2021, which are included in Other, net.~~ ~~Financing activities in the first six months of 2021 included repayments of~~ ~~$523 million~~ ~~on our previous Term Loan A-2 and previous Term Loan B.~~ ~~In addition, we~~We paid $15.4 million to terminate the remaining $300 million in notional value of interest rate swaps during the first ~~six~~nine months of 2021. Payments for taxes related to the vesting of restricted stock awards were $44.6 million and $19.3 million for the first nine months of 2022 and 2021, which are included in Other, net.

Capital resources. Our sources of liquidity include cash and cash equivalents, ~~a revolving credit facility with an administrative and collateral agent and a syndicate of financial institutions, as lenders (the~~our Revolving Credit ~~Agreement),~~Agreement, and ~~a receivables securitization program.~~our Receivables Financing Agreement. The Revolving Credit Agreement provides a revolving borrowing capacity of $450 million. We have $1.1 billion in outstanding term loans under a term loan credit agreement (the Credit Agreement). The interest rate on our ~~revolving credit facility~~Revolving Credit Agreement is based on a spread over a benchmark rate (as described in the Revolving Credit Agreement). The Revolving Credit Agreement matures in March 2026. The interest rate on the Term Loan A facility (Term Loan A) is based on either the Term SOFR or the Base Rate plus an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable pricing to the Borrowers (each as defined in the Credit Agreement). The interest rate on the Term Loan B facility (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.

At ~~June~~September 30, 2022, we had no borrowings and letters of credit of ~~$28.0~~$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 ~~June~~September 30, 2022 and December 31, 2021, we had $422 million and $291 million, available for borrowing under our Revolving Credit Agreement. We also had letters of credit and bank guarantees, which were issued outside of the Revolving Credit ~~Facility~~Agreement for ~~$2.1~~$2.3 million and $2.2 million as of ~~June~~September 30, 2022 and December 31, 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.

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

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We regularly evaluate market conditions, our liquidity profile and various financing alternatives to enhance our capital structure. From time to time, we may enter into transactions to repay, repurchase or redeem our outstanding indebtedness (including by means of open market purchases, privately negotiated repurchases, tender or exchange offers and/or repayments or redemptions pursuant to the debt’s terms). Our ability to consummate any such transaction will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.

We believe available financing sources, including cash generated by operating activities and borrowings under the Revolving Credit Agreement and Receivables Financing Agreement, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, debt repurchases and other cash requirements. While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us or (iii) our cost of borrowing.

We earn a portion of our operating income in foreign jurisdictions outside the United States. Our cash and cash equivalents held by our foreign subsidiaries subject to repatriation totaled ~~$23.0~~$25.2 million and $26.9 million at ~~June~~September 30, 2022 and December 31, 2021. We continue to remain permanently reinvested in our foreign subsidiaries, with the exception of a subsidiary in Thailand. We have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of ~~June~~September 30, 2022. As such, we have recorded withholding tax liabilities that would be incurred upon future distribution to the U.S. There are no unrecognized deferred taxes as there is no outside basis difference unrelated to unremitted earnings for Thailand. We will continue to evaluate our foreign earnings repatriation policy in 2022 for all our foreign subsidiaries.

Impact of Inflation

The cost to manufacture and distribute our products is influenced by the cost of raw materials, finished goods, labor, and transportation. We have recently experienced inflationary pressure and higher costs as a result of the increasing cost of raw materials, finished goods, labor, transportation, and other administrative costs associated with the normal course of business. The increase in cost of raw materials and finished goods are due in part to a shortage in the availability of certain products, the higher cost of shipping, and inflation. ~~Additionally, it is not certain that we will be able to~~We can only pass elevated costs onto customers in an effort to offset inflationary ~~pressures.~~pressures on a limited basis. Future volatility of general price inflation and the impact of inflation on costs and availability of materials, costs for shipping and warehousing and other operational overhead could adversely affect our financial results.

Guarantor and Collateral Group Summarized Financial Information

We are providing the following information in compliance with Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and Rule 13-02 of Regulation S-X, of with respect to our 2024 Notes. See Note 6 of the accompanying consolidated financial statements for additional information regarding the terms of the 2024 Notes.

The following tables present summarized financial information for Owens & Minor, Inc. and the guarantors of Owens & Minor, Inc.’s 2024 Notes (together, "the Guarantor Group"), on a combined basis with intercompany balances and transactions between entities in the Guarantor Group eliminated. The guarantor subsidiaries are 100% owned by Owens & Minor, Inc. Separate financial statements of the guarantor subsidiaries are not presented because the guarantees by our guarantor subsidiaries are full and unconditional, as well as joint and several.

Summarized financial information of the Guarantor Group is as follows:


Summarized Consolidated Statement of Operations - Guarantor Group	~~Six~~Nine Months Ended ~~June~~September 30, 2022
(Dollars in thousands)
Net revenue(1)	$	~~4,771,148~~7,236,833
Gross margin	~~839,511~~1,343,310
Operating income	~~100,937~~164,680
Net income	~~48,825~~67,007

(1)Includes ~~$140~~$200 million in sales to non-guarantor subsidiaries for the ~~six~~nine months ended ~~June~~September 30, 2022.

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Summarized Consolidated Balance Sheets - Guarantor Group	Summarized Consolidated Balance Sheets - Guarantor Group	June 30, 2022		December 31, 2021		Summarized Consolidated Balance Sheets - Guarantor Group	September 30, 2022		December 31, 2021
(Dollars in thousands)	(Dollars in thousands)					(Dollars in thousands)
Total current assets	Total current assets	$	1,648,833	$	1,449,917	Total current assets	$	1,629,336	$	1,449,917
Total assets	Total assets	4,915,785		2,807,581		Total assets	4,876,092		2,807,581
Current liabilities	Current liabilities	1,643,705		1,399,499		Current liabilities	1,677,527		1,399,499
Total liabilities	Total liabilities	4,464,205		2,422,542		Total liabilities	4,448,037		2,422,542

The following tables present summarized financial information for Owens & Minor, Inc. and the subsidiaries of Owens & Minor, Inc.’s 2024 Notes pledged that constitute a substantial portion of collateral (together, "the Collateral Group"), on a combined basis with intercompany balances and transactions between entities in the Collateral Group eliminated. The pledged subsidiaries are 100% owned by Owens & Minor, Inc. No trading market for the subsidiaries included in the Collateral Group exists.

Summarized financial information of the Collateral Group is as follows:


Summarized Consolidated Balance Sheets - Collateral Group	Summarized Consolidated Balance Sheets - Collateral Group	June 30, 2022		December 31, 2021		Summarized Consolidated Balance Sheets - Collateral Group	September 30, 2022		December 31, 2021
(Dollars in thousands)	(Dollars in thousands)					(Dollars in thousands)
Total current assets	Total current assets	$	1,718,358	$	1,514,724	Total current assets	$	1,692,162	$	1,514,724
Total assets	Total assets	4,839,246		2,729,455		Total assets	4,788,819		2,729,455
Current liabilities	Current liabilities	1,567,372		1,341,691		Current liabilities	1,599,546		1,341,691
Total liabilities	Total liabilities	4,423,123		2,398,694		Total liabilities	4,415,095		2,398,694

The results of operations of the Collateral Group are not materially different from the corresponding amounts presented in our consolidated statements of operations.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see our Annual Report on Form 10-K for the year ended December 31, 2021 and Note 15 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the period ended on ~~June~~September 30, 2022.

Forward-looking Statements

Certain statements in this discussion constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including, but not limited to:

•our ability to achieve revenue and operating income goals may be affected by: COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, and any worsening of the pandemic, including through any new variant strains of the underlying virus, or future pandemics, related governmental responses, the effectiveness, availability, and public acceptance of vaccines, a decrease in revenue ultimately resulting in less cash flow, longer duration in receivables collection, the need to expedite payments to important suppliers may grow, shifts in demand away from certain products we manufacture and distribute, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government vaccine and other mandates, temporary production and distribution center and office closures due to reduced workforces or government vaccine and other mandates, availability of raw materials, potential labor negotiations or disputes, changes in the types and numbers of businesses that compete with us, including non-traditional competitors, and the aggressiveness of that competition, impacts of the pandemic or future pandemics on other third parties with whom we conduct business, the healthcare industry, and the broader business environment, and trends in elective surgeries and other healthcare spending not directly associated with COVID-19;

•competitive pressures in the marketplace, including intense pricing pressure;

•our ability to retain existing and attract new customers in a market characterized by consolidation among significant customers, health insurers and/or other industry participants, and intense cost-containment initiatives;

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•our dependence on sales to certain customers or the loss or material reduction in purchases by key customers;

•our dependence on distribution of product of certain suppliers;

•our ability to successfully identify, manage or integrate acquisitions;

•our ability to successfully manage our international operations, including risks associated with changes in international trade regulations, foreign currency volatility, changes in regulatory conditions, deteriorating economic conditions, adverse tax consequences, and other risks of operating in international markets;

•the risk that problems may arise in successfully integrating the businesses of Apria and the Company, which may result in the combined company not operating as effectively and efficiently as expected and the risk that the combined company may be unable to achieve the anticipated synergies or cost savings, or it may take longer than expected to achieve those synergies;

•the effect of our acquisition of Apria and any developments relating thereto on our relationships with customers, suppliers and other third parties, as well as our operating results and business;

•uncertainties related to and our ability to adapt to changes in government regulations, including healthcare laws and regulations;

•risks arising from possible violations of legal, regulatory or licensing requirements of the markets in which we operate;

•uncertainties related to general economic, regulatory and business conditions;

•our ability to successfully implement our strategic initiatives;

•the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;

•the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;

•our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;

•the ability of customers and suppliers to meet financial commitments due to us;

•changes in manufacturer preferences between direct sales and wholesale distribution;

•changing trends in customer profiles and ordering patterns and our ability to meet customer demand for additional value-added services;

•our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;

•our ability to meet performance targets specified by customer contracts under contractual commitments;

•availability of and our ability to access special inventory buying opportunities;

•the ability of business partners and financial institutions to perform their contractual responsibilities;

•our ability to continue to obtain financing, obtain financing at reasonable rates and to manage financing costs and interest rate risk, and our ability to refinance, extend or repay our substantial indebtedness;

•our financial flexibility may be limited by the restrictive covenants in our credit facilities and existing notes;

•the risk that information systems are interrupted or damaged or fail for any extended period of time, that new information systems are not successfully implemented or integrated, or that there is a data security breach in our information systems;

•we depend on reimbursements by payors, which could lead to delays and uncertainties in the reimbursement process;

•the home healthcare industry is highly competitive and fragmented, with limited barriers to entry which may make it susceptible to vertical integration by manufacturers, payors, providers (such as hospital systems) or disruptive new entrants;

•the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived ~~assets;~~assets, which would require us to record a significant charge to earnings in accordance with generally accepted accounting principles;

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•our ability to timely or adequately respond to technological advances in the medical supply and home healthcare industries and/or product and therapy innovations may make the services we currently provide obsolete or less competitive;

•our failure to adequately insure against losses, including from substantial claims and litigation, could have an adverse impact on our operations, financial condition, or prospects;

•recalls of any of our products, either voluntarily or at the direction of the Food and Drug Administration or another governmental authority, or safety risks or the discovery of serious safety issues with our products;

•our capitation arrangements may prove unprofitable if actual utilization rates exceed our assumptions;

•reductions in Medicare, Medicaid and commercial payor reimbursement rates could have a material adverse effect on our results of operations and financial condition;

•the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims;

•the market price for our common stock may be highly volatile;

•adverse changes in U.S. and foreign tax laws and the outcome of outstanding tax contingencies and legislative and tax proposals;

•our ability to successfully implement the expense reduction and productivity and efficiency initiatives;

•our ability to continue to comply with the terms and conditions of Apria’s Corporate Integrity Agreement; and

•other factors detailed from time to time in the reports we file with the SEC, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 ~~and~~ our Form 10-Q for the three months ended March 31, ~~2022.~~2022, and our Form 10-Q for the three and six months ended June 30, 2022

We undertake no obligation to update or revise any forward-looking statements, except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to price risk for our raw materials, the most significant of which relates to the cost of polypropylene and nitrile used in the manufacturing processes of our Products & Healthcare Services segment. Prices of the commodities underlying these raw materials are volatile and have fluctuated significantly in recent years and in the future may contribute to fluctuations in our results of operations. The ability to hedge these commodity prices is limited.

We are exposed to risks of changes in shipping and freight costs, including container and other third party fees associated with the transportation of our products. Shipping and freight costs have fluctuated significantly in recent years and in the future may contribute to changes in our results of operations.

In the normal course of business, we are exposed to foreign currency translation and transaction risks. Our business transactions outside of the United States are denominated in the euro, Malaysian ringgit, Mexican peso, Thai baht and other currencies. We may use foreign currency forwards, swaps and options, where possible, to manage our risk related to certain foreign currency fluctuations.

We are exposed to market risk from changes in interest rates related to our borrowing under our Revolving Credit Agreement and Receivables Financing Agreement. Excluding deferred financing costs and third party fees, we had $500 million in borrowings under our Term Loan A, ~~$600~~$597 million in borrowings under our Term Loan B, no borrowings under our ~~revolving credit facility, $175~~Revolving Credit Agreement, $157 million in borrowings under our Receivables Financing Agreement ~~and $28.0 million in letters of credit under the Revolving Credit Agreement~~ at ~~June~~September 30, 2022. After considering the effects of an interest rate swap agreement entered into during April 2022, we estimate an increase in interest rates of 100 basis points would result in a potential reduction in future pre-tax earnings of approximately ~~$8.8~~$8.5 million per year based on our borrowings outstanding at ~~June~~September 30, 2022.

Due to the nature and pricing of our Products & Healthcare Services segment distribution services, we are exposed to potential volatility in fuel prices. Our strategies for helping to mitigate our exposure to changing domestic fuel prices have included using trucks with improved fuel efficiency. We benchmark our domestic diesel fuel purchase prices against the U.S. Weekly Retail On-Highway Diesel Prices (benchmark) as quoted by the U.S. Energy Information Administration. The benchmark averaged ~~$4.92~~$5.00 and ~~$3.06~~$3.16 per gallon in the first ~~six~~nine months of 2022 and 2021. Based on our fuel consumption in the first ~~six~~nine months of 2022, we estimate that every 10 cents per gallon increase in the benchmark would directly reduce our operating income by approximately $0.4 million on an annualized basis. We are also indirectly exposed to increased shipping and freight costs, including container and other third party fees associated with the transportation of our products due to

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changes in fuel prices. Changes in fuel prices have contributed to significant shipping and freight costs in recent years and in the future may contribute to changes in our results of operations.

Item 4. 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. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2022. There was no change in our internal control over financial reporting that occurred during the period of this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In connection with the Apria Acquisition, we are currently evaluating the acquired processes, information technology systems and other components of internal controls over financial reporting as part of our integration activities which may result in periodic changes. Such changes will be disclosed as required by applicable SEC guidance.

SEC guidance permits the exclusion of an evaluation of the effectiveness of a registrant's disclosure controls and procedures as they relate to the internal control over financial reporting for an acquired business during the first year following such acquisition. In the first quarter of 2022, we acquired Apria, Inc. This acquisition represented $2.0 billion of total assets and ~~$310~~$620 million of revenues as of and for the ~~six~~nine months ended ~~June~~September 30, 2022. Management's evaluation and conclusion as to the effectiveness of the design and operation of the Company's disclosure controls and procedures as of and for the period covered by this report excludes any evaluation of the internal control over financial reporting of Apria, Inc.

Part II. Other Information

Item 1. Legal Proceedings

Certain legal proceedings pending against us are described in our Annual Report on Form 10-K for the year ended December 31, 2021. Through ~~June~~September 30, 2022, there have been no material developments in any legal proceedings reported in such Annual Report.

Item 1A. Risk Factors

Certain risk factors that we believe could affect our business and prospects are described in our Annual Report on Form 10-K for the year ended December 31, 2021 and our Form 10-Q for the three months ended March 31, 2022. Through ~~June~~September 30, 2022, there have been no material changes in the risk factors described in such Annual Report and First Quarter 2022 Form 10-Q.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

Item 5. Other Information

On October 28, 2022, the Company’s Board of Directors (the “Board”) adopted and approved, effective immediately, the amended and restated bylaws (as amended and restated, the “Amended and Restated Bylaws”) of the Company. The Amended and Restated Bylaws, among other things:

•revise procedures and disclosure requirements for shareholders to provide notice of the nomination of directors (outside of “proxy access”) and the submission of proposals for consideration at meetings of the shareholders of the Company;

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•clarify the power of the Board to set rules and procedures for, postpone, reschedule or cancel any meeting of shareholders previously scheduled, and clarify the power of the chair of a shareholder meeting to adjourn any meeting of stockholders;

•clarify the powers of the Board and the chair of a shareholder meeting to establish rules for the conduct of any meeting of shareholders;

•clarify that for the applicability of the plurality voting standard to an election of directors, an election remains “contested” (and the plurality voting standard continues to apply) even if the Board determines that a shareholder’s nomination notice does not comply with the advance notice bylaws;

•provide that the size of the Board can be fixed from time to time by resolution of the Board;

•adopt a forum selection bylaw to provide that (i) shareholder suits and other derivative actions asserted against the Company or its directors and officers be brought only before the United States District Court for the Eastern District of Virginia and (ii) the U.S. federal district courts shall be the exclusive forum for the resolution of claims under the Securities Act of 1933, as amended; and

•make certain other administrative, modernizing, clarifying and conforming changes.

The foregoing description of the Amended and Restated Bylaws is not complete and is qualified in its entirety by reference to the complete text of the Amended and Restated Bylaws, which is filed as Exhibit 3.1 hereto and is incorporated herein by reference.

Item 6. Exhibits

(a)Exhibits


2.1						Agreement and Plan of Merger, dated as of January 7, 2022, by and among Owens & Minor, Inc., StoneOak Merger Sub Inc. and Apria, Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed with the SEC on January 10, 2022, File No. 001-09810).

3.1						Amended and Restated Bylaws of the Company effective ~~June 1,~~October 28, 2022 ~~(incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 3.1, dated June 1, 2022)~~

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4.1						Indenture dated March 29, 2022 by and among the Company, 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 29, 2022)

4.2						Form of Global Note for the 6.625% Senior Notes due 2030 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.2, dated March 29, 2022)

4.3						Seventh Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and U.S. Bank National Association, as trustee (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.3, dated March 29, 2022)

4.4						First Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and Regions Bank, as trustee, to the Indenture dated as of March 10, 2021 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.4, dated March 29, 2022)

4.5						First Supplemental Indenture dated as of March 29, 2022, by and among the Company, the guarantors named therein and Regions Bank, as trustee, to the Indenture dated of March 29, 2022 (incorporated herein by reference to the Company’s Current Report on Form 8-K, Exhibit 4.5, dated March 29, 2022)

10.1						Amendment No. 3 to the Owens & Minor, Inc. 2018 Stock Incentive Plan - (incorporated herein by reference to our Form 10-Q, Exhibit 10.7, dated May 3, 2022)**

10.2						Executive Separation Agreement and General Release, dated as of October 12, 2022, by and between Jeffrey T. Jochims and Owens & Minor, Inc. **

22.1						List of Guarantor Subsidiaries

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22.2						List of Subsidiaries Pledged as Collateral

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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

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104						Cover Page Interactive Data File (formatted as inline iXBRL and contained in Exhibit 101)

* Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We hereby undertake to furnish copies of such omitted materials supplementally upon request by the SEC.

** Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Owens & Minor, Inc.
		(Registrant)

Date:	~~August 3,~~November 2, 2022	/s/ Edward A. Pesicka
		Edward A. Pesicka
		President, Chief Executive Officer & Director

Date:	~~August 3,~~November 2, 2022	/s/ ~~Andrew G. Long~~Alexander J. Bruni
		~~Andrew G. Long~~Alexander J. Bruni
		Executive Vice President & Chief Financial Officer


	June 30,		December 31,
(in thousands, except per share data)	2022		2021
Assets
Current assets
Cash and cash equivalents	$	56,406	$	55,712
Accounts receivable, net of allowances of $14,922 and $18,003	743,853		681,564
Merchandise inventories	1,525,331		1,495,972
Other current assets	108,612		88,564
Total current assets	2,434,202		2,321,812
Property and equipment, net of accumulated depreciation of $373,954 and $334,500	595,888		317,235
Operating lease assets	278,291		194,006
Goodwill	1,656,308		390,185
Intangible assets, net	462,444		209,745
Other assets, net	128,145		103,568
Total assets	$	5,555,278	$	3,536,551
Liabilities and equity
Current liabilities
Accounts payable	$	1,137,337	$	1,001,959
Accrued payroll and related liabilities	97,829		115,858
Other current liabilities	334,198		226,204
Total current liabilities	1,569,364		1,344,021
Long-term debt, excluding current portion	2,565,613		947,540
Operating lease liabilities, excluding current portion	220,504		162,241
Deferred income taxes	107,181		35,310
Other liabilities	133,957		108,938
Total liabilities	4,596,619		2,598,050
Commitments and contingencies	0		0
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 76,171 shares and 75,433 shares	152,343		150,865
Paid-in capital	407,773		440,608
Retained earnings	455,502		387,619
Accumulated other comprehensive loss	(56,959)		(40,591)
Total equity	958,659		938,501
Total liabilities and equity	$	5,555,278	$	3,536,551