10q10k10q10k.net

What changed in ACCENDRA HEALTH INC/VA/'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of ACCENDRA HEALTH INC/VA/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+375 added−343 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-28)

Top changes in ACCENDRA HEALTH INC/VA/'s 2023 10-K

375 paragraphs added · 343 removed · 268 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

93 edited+10 added−12 removed96 unchanged
Biggest changeWe also have approximately 60 pending trademark applications in the U.S. and approximately 110 pending trademark applications outside of the U.S. 6 We manufacture and distribute products bearing the well-known “Halyard” brand. Other well-known registered trademarks we use include: Aero Blue, Apria, Byram Healthcare, Quick Check, Smart-Fold, Orange, One Step, Purple, Purple Nitrile, Purple Nitrile-Xtra, Lavender, Sterling, and Safeskin.
Biggest changeOther well-known registered trademarks we use include: Aero Blue, Apria, Byram Healthcare, Quick Check, Smart-Fold, Orange, One Step, Purple, Purple Nitrile, Purple Nitrile-Xtra, Lavender, Sterling, and Safeskin. We consider the patents and trademarks which we own and the trademarks under which we sell certain of our products, as a whole, to be material to our business.
Medicare contracts within our Patient Direct segment may be subject to a Competitive Bidding Process (CBP) for the durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), as further described in the Regulation section. Our customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals.
Medicare contracts within our Patient Direct segment may be subject to a Competitive Bidding Process (CBP) for durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), as further described in the Regulation section. Our customers include multi-facility networks of healthcare providers offering a broad spectrum of healthcare services to a particular market or markets as well as smaller, independent hospitals.
Additionally, certain states may require certain of our teammates to complete training programs, undergo background checks, and maintain state certification. In addition, various federal and state authorities and clinical practice boards regulate the licensure of our clinical specialists, working either directly as employees or on a per diem or contractual basis, and facilities.
Additionally, certain states may require certain of our teammates to complete training programs, undergo background checks, and maintain state certification. In addition, various federal and state authorities and clinical practice boards regulate the licensure of our clinical specialists, working either directly as employees or on a per diem or contractual basis, and in our facilities.
The statute also provides for a penalty of up to $185,009 for a circumvention scheme; • The federal FCA and similar state laws provide, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved..
The statute also provides for a penalty of up to $185,009 for a circumvention scheme; ● The FCA and similar state laws provide, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, a false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim approved.
An example of the continued prioritization by DOJ on corporate and healthcare matters is evidenced by the September 2022 release of the Monaco Guidelines, which reflect enhancements to long-standing DOJ Guidelines on corporate accountability. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business.
An example of the continued prioritization by the DOJ on corporate and healthcare matters is evidenced by the September 2022 release of the Monaco Guidelines, which reflect enhancements to long-standing DOJ Guidelines on corporate accountability. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business.
A violation of the FCPA or other similar laws by us and/or our agents or representatives could result in, among other things, the imposition of fines and penalties, changes to our business 9 practices, the termination of or other adverse impacts under our contracts or debarment from bidding on contracts, and/or harm to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price.
A violation of the FCPA or other similar laws by us and/or our agents or representatives could result in, among other things, the imposition of fines and penalties, changes to our business practices, the termination of or other adverse impacts under our contracts or debarment from bidding on contracts, and/or harm to our reputation, any of which could have a material adverse effect on our business, results of operations, financial condition, cash flows and stock price.
For example, our locations that fill and distribute medical oxygen containers must register with the FDA as a medical gas manufacturer, and these registered locations are subject to extensive regulation. Among other requirements, the FDA’s Good Manufacturing Practice (cGMP) regulations impose certain quality control, documentation and recordkeeping requirements on the receipt, processing and distribution of medical gas.
For example, our locations that fill and distribute medical oxygen containers must register with the FDA as a medical gas manufacturer, and these registered locations are subject to extensive regulation. Among other requirements, the FDA’s Current Good Manufacturing Practice (cGMP) regulations impose certain quality control, documentation and recordkeeping requirements on the receipt, processing and distribution of medical gas.
Of particular importance, each of which may be amended and updated from time to time, are: 10 • The federal Anti-Kickback statute and similar state equivalents prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a federal healthcare program.
Of particular importance, each of which may be amended and updated from time to time, are: ● The federal Anti-Kickback statute and similar state equivalents prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a federal healthcare program.
Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement. 11 Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.
Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.
Consumer protection laws require us to publish statements that describe how we 7 handle personal information and choices individuals may have about the way we handle their personal information. If we publish information that is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
Consumer protection laws require us to publish statements that describe how we handle personal information and choices individuals may have about the way we handle their personal information. If we publish information that is considered untrue, it may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences.
Revenues are generated through fee-for-service and capitation arrangements with large government and commercial payors (Payors) for equipment, supplies, services and other items rented or sold to patients. We provide patients with a variety of clinical and administrative support services and related products and supplies, most of which are prescribed by a physician as part of a care plan.
Revenues are generated through fee-for-service and capitation arrangements with large government and commercial payors (Payors) for equipment, supplies, services and other items rented and sold to patients. We provide patients with a variety of clinical and administrative support services and related products and supplies, most of which are prescribed by a physician as part of a care plan.
Additionally, we have adopted a written Code of Honor that applies to all of our directors, officers and teammates, including our principal executive officer and senior financial officers. This Code of Honor (including any amendments to or waivers of a provision thereof) and our Corporate Governance Guidelines are available on our website at www.owens-minor.com. 14
Additionally, we have adopted a written Code of Honor that applies to all of our directors, officers and teammates, including our principal executive officer and senior financial officers. This Code of Honor (including any amendments to or waivers of a provision thereof) and our Corporate Governance Guidelines are available on our website at www.owens-minor.com.
Fair Debt Collection Practices Act Some of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act and comparable statutes in many states. Under the Fair Debt Collection Practices Act, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts.
Fair Debt Collection Practices Act Some of our operations may be subject to compliance with certain provisions of the Fair Debt Collection Practices Act (FDCPA) and comparable statutes in many states. Under the FDCPA, a third-party collection company is restricted in the methods it uses to contact consumer debtors and elicit payments with respect to placed accounts.
As part of the provision of, and billing for, healthcare equipment and services, our Patient Direct business is required to collect and maintain PHI and as such, are subject to HIPAA as a covered entity. HIPAA also applies to business associates of covered entities, which are individuals and entities that provide services for or on behalf of those covered entities.
As part of the provision of, and billing for, healthcare equipment and services, our Patient Direct segment is required to collect and maintain PHI and as such, are subject to HIPAA as a covered entity. HIPAA also applies to business associates of covered entities, which are individuals and entities that provide services for or on behalf of those covered entities.
This includes oversight by the FDA, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security, the Occupational Safety and Health Administration, the Department of Labor, the Equal Employment Opportunity Commission, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.
This includes oversight by the FDA, the Centers for Medicare and Medicaid Services, the Drug Enforcement Agency, the Department of Transportation, the Environmental Protection Agency, the Department of Homeland Security (DHS), the Occupational Safety and Health Administration, the Department of Labor, the Equal Employment Opportunity Commission, and state boards of pharmacy, or similar state licensing boards and regulatory agencies.
In the absence of a secondary Payor, we generally require the co-payment to be paid at the time the patient is initially established. 5 We actively manage our accounts receivable to minimize credit risk, days sales outstanding (DSO) and accounts receivable carrying costs.
In the absence of a secondary Payor, we generally require the co-payment to be paid at the time the patient is initially established. We actively manage our accounts receivable to minimize credit risk, days sales outstanding (DSO) and accounts receivable carrying costs.
As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative expenses, rather than with the cost of the product, which is a component of cost of goods sold.
As a result, this fee-for-service pricing model aligns the fees we charge with the cost of the services provided, which is a component of distribution, selling and administrative (DS&A) expenses, rather than with the cost of the product, which is a component of cost of goods sold.
Notwithstanding this, violations of these laws and regulations may still occur, which could subject us to civil and criminal enforcement actions; licensure revocation, suspension, or non-renewal; severe fines and penalties; the repayment of amounts previously paid to us; and even the termination of our ability to provide services under certain government programs. Healthcare is an area of rapid regulatory change.
Notwithstanding this, violations of these laws and regulations may still occur, which could subject us to civil and criminal enforcement actions; licensure revocation, suspension, or non-renewal; severe fines and penalties; the repayment of amounts previously paid to us; and even the termination of our ability to provide services under certain government programs. Healthcare is an industry of rapid regulatory change.
Among other things, the CIA requires Apria to impose certain oversight obligations on our board of directors; provide certain management certifications; continue or implement, as applicable, certain compliance training and education; and engage an Independent Review Organization to perform certain reviews. The CIA also includes certain reporting, certification, record retention, and notification requirements.
Among other things, the CIA requires Apria to impose certain oversight obligations on Apria’s board of directors; provide certain management certifications; continue or implement, as applicable, certain compliance training and education; and engage an Independent Review Organization to perform certain reviews. The CIA also includes certain reporting, certification, record retention, and notification requirements.
Research and Development We continuously engage in research and development to commercialize new products and enhance the effectiveness, reliability and safety of our existing products. In our Products & Healthcare Services segment, we are focused on maintaining and improving our market position by providing innovative customer-preferred product enhancements, with a particular focus on the operating room.
Research and Development We continuously engage in research and development to commercialize new products and enhance the effectiveness, reliability and safety of our existing products. In our Products & Healthcare Services segment, we are focused on maintaining and improving our market position by providing innovative customer-preferred product enhancements, with a particular emphasis on the operating room.
Our teammates serve healthcare industry customers in approximately 70 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.
Our teammates serve healthcare industry customers in approximately 80 countries, by providing quality products and helping to reduce total costs across the healthcare supply chain by optimizing point-of care performance, freeing up capital and clinical resources and managing contracts to optimize financial performance.
We have long-term relationships with these important companies in the healthcare supply chain and have long provided traditional distribution services to them. No sales of products from any individual suppliers exceeded 10% of our consolidated net revenue for 2022.
We have long-term relationships with these important companies in the healthcare supply chain and have long provided traditional distribution services to them. No sales of products from any individual suppliers exceeded 10% of our consolidated net revenue for 2023.
We cannot predict the future of federal, state, local and foreign regulation or legislation, or possible changes in national healthcare policies. Future legislative and regulatory changes could have a material adverse effect on our financial condition and results of operations.
We cannot predict the future of federal, state, local and foreign regulation or legislation, or possible changes in national healthcare policies. Future legislative and regulatory changes could have a material adverse effect on our financial condition, results of operations and cash flows.
While we cannot predict the outcome of the DMEPOS CBP on our business in the future nor the Medicare payment rates that will be in effect in future years, the program may materially adversely affect our financial condition and results of operations.
While we cannot predict the outcome of the DMEPOS CBP on our business in the future nor the Medicare payment rates that will be in effect in future years, the program may materially adversely affect our financial condition, results of operations and cash flows.
Business General Owens & Minor, Inc. and subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home.
Business General Owens & Minor, Inc., along with its subsidiaries (we, us, our or the Company), a Fortune 500 company headquartered in Richmond, Virginia, is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home.
The FCA may be enforced directly by the federal government or by a whistleblower on the government’s behalf; • The Eliminating Kickbacks in Recovery Act, which imposes criminal liability on individuals or entities that pay, receive, or solicit any remuneration in return for patient referrals to recovery homes, clinical treatment facilities, or laboratories; • The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; • Similar state law provisions pertaining to Anti-Kickback, self-referral and false claims issues, some of which may apply to items or services reimbursed by any third-party Payor, including commercial insurers or services paid out-of-pocket by patients; and • Federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered.
The FCA may be enforced directly by the federal government or by a whistleblower on the government’s behalf; ● The federal Eliminating Kickbacks in Recovery Act, which imposes criminal liability on individuals or entities that pay, receive, or solicit any remuneration in return for patient referrals to recovery homes, clinical treatment facilities, or laboratories; ● The federal Civil Monetary Penalties Law prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; ● Similar state law provisions pertaining to Anti-Kickback, self-referral and false claims issues, some of which may apply to items or services reimbursed by any third-party Payor, including commercial insurers or services paid out-of-pocket by patients; and ● Federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered. 11 Table of Contents To enforce compliance with the federal laws, the U.S.
We store our products at our distribution centers and provide delivery of these products, along with related services, to healthcare providers around the U.S. Our service offerings to healthcare providers include supplier management, analytics, inventory management, and clinical supply management. These value-add services help providers improve their processes for contracting with vendors, purchasing supplies and streamlining inventory.
We store our products at our distribution centers and provide delivery of these products, along with related services, to healthcare providers around the world. Our service offerings to healthcare providers include supplier management, analytics, inventory management, and clinical supply management. These value-add services help providers improve their processes for contracting with vendors, purchasing supplies and streamlining inventory.
Key programs focus on teammate safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and teammate engagement. We believe that diversity, inclusion, and teammate engagement are integral to our vision, strategy and business success. We pride ourselves on sustaining a culture that respects teammates and values concern for others.
Key programs focus on teammate safety, leadership development, health and wellness, work-life balance, talent management, diversity and inclusion, and teammate engagement. We believe that diversity, inclusion, and teammate engagement are integral to our Life Takes Care purpose, vision, strategy and business success. We pride ourselves on sustaining a culture that respects teammates and values concern for others.
As a result, the termination or expiration of an agreement with a particular GPO would not necessarily mean that we would lose the members of such GPO as our customers. Our suppliers represent the largest and most influential healthcare manufacturers in the industry.
As a result, the termination or expiration of an agreement with a particular GPO would not necessarily mean that we would lose the members of such GPO as our customers. 5 Table of Contents Our suppliers represent the largest and most influential healthcare manufacturers in the industry.
Based on available information, we do not believe that any known compliance obligations, releases or 8 investigations under environmental laws or regulations will have a material adverse effect on our business, financial condition and results of operations.
Based on available information, we do not believe that any known compliance obligations, releases or investigations under environmental laws or regulations will have a material adverse effect on our business, financial condition, results of operations and cash flows.
In many cases, these laws are more restrictive than, and not preempted by, the HIPAA and HITECH rules and requirements, and may be subject to varying interpretation by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expenses, adverse publicity and liability. We are also subject to privacy laws outside the United States.
In many cases, these laws are more restrictive than, and not preempted by, the HIPAA and HITECH rules and requirements, and may be subject to varying interpretation by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expenses, adverse publicity and liability. We are also subject to privacy laws outside the U.S.
We believe we are in material compliance with all applicable statutes and regulations, as well as prevailing industry best practices, in the conduct of our business operations outside of the United States. Since we market our products worldwide, certain products of a local nature and variations of product lines must also meet other local regulatory requirements.
We believe we are in material compliance with all applicable statutes and regulations, as well as prevailing industry best practices, in the conduct of our business operations outside of the U.S. Since we market our products worldwide, certain products of a local nature and variations of product lines must also meet other local regulatory requirements.
In the United States, the Federal Food, Drug, and Cosmetic Act (FFDCA), Food and Drug Administration (FDA) regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution and post-market surveillance.
In the U.S., the Federal Food, Drug, and Cosmetic Act (FFDCA), Food and Drug Administration (FDA) regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution and post-market surveillance.
Our research team works with healthcare providers to develop and design exam glove and apparel portfolios that optimize comfort and fit and provide cost-effective infection prevention solutions for use throughout the hospital. We are also investing in new categories and solutions that complement our technical expertise and existing intellectual property.
Our research team works with healthcare providers to develop and design exam glove and apparel portfolios that optimize comfort and fit and provide cost-effective infection prevention solutions for use by healthcare providers. We are also investing in new categories and solutions that complement our technical expertise and existing intellectual property.
Courts have interpreted this statute broadly and held that there is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals. Violations of the federal Anti-Kickback Statute may result in civil monetary penalties up to $112,131 for each violation, plus up to three times the remuneration involved.
Courts have interpreted this statute broadly and held that there is a violation of the Anti-Kickback Statute if just one purpose of the remuneration is to generate referrals. Violations of the federal Anti-Kickback Statute may result in civil monetary penalties up to $50,000 for each violation, plus up to three times the remuneration involved.
Our Products & Healthcare Services segment manufactures and sources medical surgical products through our production and kitting operations. We provide medical supplies and solutions for the prevention of healthcare-associated infections across the acute and alternate site channels. Our manufacturing facilities are located in the United States, Thailand, Honduras, Mexico and Ireland.
Our Products & Healthcare Services segment manufactures and sources medical surgical products through our production and kitting operations. We provide medical supplies and solutions for the prevention of healthcare-associated infections across the acute and alternate site channels. Our manufacturing facilities are located in the U.S., Thailand, Honduras, Mexico and Ireland.
Fraud and Abuse Laws There are various federal and state laws that regulate the operation of healthcare providers, including those that prohibiting fraudulent and abusive business practices by healthcare providers, suppliers, and parties that contract with such providers and suppliers who participate in, receive payments from or are in a position to make or influence referrals in connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs.
Fraud and Abuse Laws There are various federal and state laws that regulate the operation of healthcare providers, including those that prohibit fraudulent and abusive business practices by healthcare providers, suppliers, and parties that contract with such providers and suppliers who participate in, receive payments from or are in a position to make or influence referrals in 10 Table of Contents connection with government-sponsored healthcare programs, including the Medicare and Medicaid programs.
Below is a summary of these agreements: GPO Year of Renewal or Extension Term Sales to Members as a % of Consolidated Net Revenue in 2022 Vizient 2021 2 years 35% Premier 2021 5 years 19% HPG 2022 4 years 12% We have our own independent relationships with most of our hospital customers through separate contractual commitments that may or may not be based upon the terms of our agreement with the GPO.
Below is a summary of these agreements: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales to Members as a ​ ​ Year of Renewal or ​ ​ ​ % of Consolidated GPO ​ Extension ​ Term ​ Net Revenue in 2023 Vizient 2023 5 years 34 % Premier 2021 5 years 19 % HPG 2022 4 years 11 % ​ We have our own independent relationships with most of our hospital customers through separate contractual commitments that may or may not be based upon the terms of our agreement with the GPO.
Although there are limited exemptions for PHI and HIPAA regulated entities, and the CCPA’s implementation standards and enforcement practices are continuing to develop and remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and potential liability.
Although there are limited exemptions for PHI and HIPAA regulated entities, and the CCPA’s 8 Table of Contents implementation standards and enforcement practices are continuing to develop and remain uncertain for the foreseeable future, the CCPA may increase our compliance costs and potential liability.
On December 18, 2020, a federal judge approved a civil and administrative settlement between Apria and the United States and certain state Medicaid programs, in a complaint filed by three relators under the qui tam provisions of the FCA, 31 U.S.C. § 3729 et seq., as well as comparable state false claims laws, in connection with the rental of non-invasive ventilation products (NIVs).
On December 18, 2020, prior to the completion of the Apria Acquisition on the Acquisition Date, a federal judge approved a civil and administrative settlement between Apria and the U.S. and certain state Medicaid programs, in a complaint filed by three relators under the qui tam provisions of the FCA, 31 U.S.C. § 3729 et seq., as well as comparable state false claims laws, in connection with the rental of non-invasive ventilation products (NIVs).
Through Patient Direct, we provide delivery of disposable medical supplies and equipment sold or rented directly to patients and home health agencies, for which payments are received from managed care plans, the U.S. federal government under the Medicare program, state governments under their respective Medicaid or similar programs, private insurers, home health agencies, and directly from patients.
Our Patient Direct segment provides delivery of disposable medical supplies and equipment rented and sold directly to patients and home health agencies, for which payments are received from managed care plans, the U.S. federal government under the Medicare program, state governments under their respective Medicaid or similar programs, private insurers, home health agencies, and directly from patients.
In addition, we are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace as well as laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the United States.
In addition, we are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace as well as laws and regulations pertaining to healthcare fraud and abuse, including state and federal anti-kickback and false claims laws in the U.S.
If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct liability, could be required to change some portions of our business model, could face negative publicity and our business, financial condition and results of operations could be adversely affected.
If we do not comply with these laws or regulations or if we become liable under these laws or regulations, we could face direct 14 Table of Contents liability, could be required to change some portions of our business model, could face negative publicity and our business, financial condition, results of operations and cash flows could be adversely affected.
We partner with a third party company to deliver most supplies in the United States. We also use contract carriers and parcel delivery services when they are more cost-effective and timely.
We partner with a third party company to deliver most supplies in the U.S. We also use contract carriers and parcel delivery services when they are more cost-effective and timely.
Certain additional risks are inherent in conducting business outside the United States, including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.
Certain additional risks are inherent in conducting business outside the U.S., including price and currency exchange controls, changes in currency exchange rates, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action.
To enforce compliance with the federal laws, the U.S. Department of Justice and the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) have continued their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.
Department of Justice (DOJ) and the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) have continued their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.
The MMA established a Competitive Bidding Process (CBP) for certain durable medical equipment, prosthetics, orthotics and supplies (DMEPOS) we provide. The DMEPOS CBP impacts the Medicare reimbursement amounts for suppliers of certain DMEPOS items, and in the past, included some DMEPOS items that we provide to our patients.
The MMA established a Competitive Bidding Process (CBP) for certain DMEPOS we provide. The DMEPOS CBP impacts the Medicare reimbursement amounts for suppliers of certain DMEPOS items, and in the past, included some DMEPOS items that we provide to our patients.
We have arrangements with certain customers under which they make deposits on account, because they do not meet our standards for creditworthiness, to reduce past due balances, or in order to obtain more favorable pricing. Competition The industries in which we operate are highly competitive.
We have arrangements with certain customers under which they make deposits on account, because they do not meet our standards for creditworthiness, to reduce past due balances, or in order to obtain more favorable pricing.
In addition, because of the potential for large monetary exposure under the federal False Claims Act, which provides for treble damages and mandatory minimum penalties of $12,537 to $25,076 per false claim or statement, with such penalty amounts being updated from time to time, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings.
In addition, because of the potential for large monetary exposure under the FCA, which provides for treble damages and mandatory minimum penalties of $13,508 to $27,018 per false claim or statement, with such penalty amounts being updated from time to time, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings.
Such laws may include limitations on greenhouse gas emissions, mandates that companies implement processes to monitor and disclose climate-related matters, additional taxes or offset charges on specified energy sources, and other requirements. Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions. New or expanded climate-related laws could impose substantial costs on us.
Such laws, including recent California legislation, may include limitations on greenhouse gas emissions, mandates that companies implement processes to monitor and disclose climate-related matters, additional taxes or offset charges on specified energy sources, and other requirements. Compliance with climate-related laws may be further complicated by disparate regulatory approaches in various jurisdictions.
These laws and regulations frequently change and have become increasingly stringent over time. Non-compliance with these laws and regulations may result in significant fines or penalties or limitations on our operations or claims for remediation costs, as well as alleged personal injury or property damages.
Non-compliance with these laws and regulations may result in significant fines or penalties or limitations on our operations or claims for remediation costs, as well as alleged personal injury or property damages.
Patient Direct remains focused on being the industry’s highest-quality provider of home healthcare equipment, medical supplies and related services, while maintaining a commitment to being a low-cost operator.
Patient Direct is one of the industry’s highest-quality providers of home healthcare equipment, medical supplies and related services, while maintaining a commitment to being a low-cost operator.
Through organic growth and acquisitions over many years, we significantly expanded and strengthened our company, achieving international scale in the healthcare market. Today, we have distribution, production, storage, customer service and sales facilities located across Asia, Australia, Europe, Latin America and the United States. Acquisition of Apria On March 29, 2022, we completed the acquisition of 100% of Apria, Inc.
Through organic growth and acquisitions over many years, we significantly expanded and strengthened our company, achieving international scale in the healthcare market. Today, we have production, distribution, storage, customer service and sales facilities located across the United States (U.S.), Canada, Asia, Australia, Europe and Latin America.
In 2021, we established the Owens & Minor Foundation, which is dedicated to further our commitment towards impactful contributions to charitable and civic organizations in the communities we serve. The Owens & Minor Foundation focuses on three primary areas, the environment, healthcare, and diversity and inclusion.
In 2021, we established the Owens & Minor Foundation, which is dedicated to building healthier communities through impactful contributions to the charitable and civic organizations it serves. The Owens & Minor Foundation focuses on three primary areas, the environment, healthcare, and diversity and inclusion.
Program incentives can be earned on a monthly, quarterly or annual basis. We operate a network of 54 distribution centers located throughout the United States, which are strategically located to efficiently serve our provider and manufacturer customers.
Program incentives can be earned on a monthly, quarterly or annual basis. 3 Table of Contents We operate a network of distribution centers located throughout the U.S., which are strategically located to efficiently serve our customers.
Apria did not admit that any of its conduct was illegal or otherwise improper. As part of the settlement, Apria also entered into a five-year CIA with the HHS OIG.
Apria did not admit that any of its conduct was illegal or otherwise improper. All amounts were paid prior to the Acquisition Date. As part of the settlement, Apria also entered into a five-year Corporate Integrity Agreement (CIA) with the HHS OIG.
Products & Healthcare Services competitors include two major nationwide manufacturers who also provide distribution services, Cardinal Health, Inc. and Medline Industries, Inc. We also compete against other product manufacturers, including Hogy Medical, Multigate Medical Products, Mölnlycke Health Care and the HARTMANN Group. In addition, we compete with a number of regional and local distributors, and customer self-distribution models.
We also compete against other product manufacturers, including Hogy Medical, Multigate Medical Products, Mölnlycke Health Care and the HARTMANN Group. In addition, we compete with a number of regional and local distributors, and customer self-distribution models.
We have approximately 825 patents and patent applications pending in the United States and other countries that relate to the technology used in many of our products. We utilize patents in our surgical and infection protection products and currently have approximately 135 issued patents in the U.S. and approximately 540 issued patents in countries outside the U.S.
We have approximately 825 patents and patent applications pending in the U.S. and other countries that relate to the technology used in many of our products. We utilize patents in our surgical and infection protection products and currently have approximately 580 issued patents. These patents generally expire between 2024 and 2044.
Failure to comply with applicable requirements can lead to a variety of administrative or legal sanctions, such as warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution. We expend significant resources to achieve compliance with federal and state law requirements at each of our facilities.
Failure to comply with applicable requirements can lead to a variety of administrative or legal sanctions, such as warning letters, product recalls, product seizures, total 9 Table of Contents or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
It is possible that the information we post on social media and blogs could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels and blogs listed on our investor relations website.
Therefore, we encourage 16 Table of Contents investors, the media, and others interested in our Company to review the information we post on the social media channels and blogs listed on our Investor Relations website.
In the rare event that such an audit results in major discrepancies of claims records which lacked medical necessity, we may be subject to broader corrective measures, including extrapolation of audit results across a wider population of claims, submission of recoupment demands for claims other than those examined in the audit, or placing the provider on a full pre-payment review.
In the rare event that such an audit results in major discrepancies of claims records which lacked medical necessity, we may be subject to broader corrective measures, including extrapolation of audit results across a wider population of claims, submission of recoupment demands for claims other than those examined in the audit, or placing us on a full pre-payment review. 12 Table of Contents Products & Healthcare Services Global Operations Our operations are subject to local, country and regional regulations, such as those promulgated by the European Medicines Agency and the Medical Devices Directive.
Furthermore, the SEC also maintains a website that contains reports, proxy and information statements, and other information regarding Owens & Minor, Inc. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov.
Furthermore, the SEC also maintains a website that contains reports, proxy and information statements, and other information regarding Owens & Minor, Inc. The public can obtain any documents that the Company files with the SEC at www.sec.gov. We announce material financial information to our investors using our investor relations website, SEC filings, press releases, public conference calls and webcasts.
We manufacture from raw material all the way to finished goods before transferring product to our distribution center network. Our portfolio of medical and surgical supplies includes branded products purchased from manufacturers and our own proprietary products.
This segment is vertically-integrated, starting with Americas-based manufacturing, using our proprietary technology, teammates, and leased or owned production facilities. We manufacture from raw material all the way to finished goods before transferring product to our distribution center network. Our portfolio of medical and surgical supplies includes branded products purchased from manufacturers and our own proprietary products.
Our current TRGs include Black Heritage, Outreach, Mentorship and Enrichment, Asian Americans and Pacific Islanders Rising to Excellence, Hispanic Organization for Leadership and Achievement, LGBTQ+, Military and Veteran, Women Empowerment Network, and Women in Technology.
Our current TRGs include Black Heritage, Outreach, Mentorship and Enrichment, Asian and Pacific Islanders Rising to Excellence, 15 Table of Contents Hispanic Organization for Leadership and Achievement, LGBTQ+, Veterans, Women’s Empowerment Network, Women in Technology, Diverse Abilities Inclusion and Support, and Young Emerging Professionals.
These patents generally expire between 2023 and 2043. We do not license any patents from third parties that are material to our business. We also file patent applications for innovative product lines and solutions that result from our technical expertise.
We do not license any patents from third parties that are material to our business. We also file patent applications for innovative product lines and solutions that result from our technical expertise. In order to protect our ongoing research & development investments, we have approximately 110 pending patent applications.
Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the Fair Debt Collection Practices Act. We believe we are in substantial compliance with the Fair Debt Collection Practices Act and comparable state statutes where applicable.
Requirements under state collection agency statutes vary, with most requiring compliance similar to that required under the FDCPA. We believe we are in substantial compliance with the FDCPA and comparable state statutes where applicable. If our collection practices are viewed as inconsistent with these standards, we may be subject to damages and penalties.
Demand for many of the existing and new medical devices and supplies dispensed to our customers is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse us and our customers for their members/beneficiaries’ medical expenses in the jurisdictions where we do business.
If we were to violate the applicable regulations or requirements governing participation, we could be excluded from participation in federal and state healthcare programs and be subject to substantial administrative, civil and criminal penalties. 13 Table of Contents Demand for many of the existing and new medical devices and supplies dispensed to our customers is, and will continue to be, affected by the extent to which government healthcare programs and private health insurers reimburse us and our customers for their members’/beneficiaries’ medical expenses in the jurisdictions where we do business.
With respect to trademarks, we have approximately 1,180 trademarks and trademark applications pending in the United States and other countries that are used to designate or identify our company or products. We have approximately 160 U.S. registration trademarks and approximately 850 registered trademarks outside of the U.S.
With respect to trademarks, we have approximately 1,280 trademarks and trademark applications pending in the U.S. and other countries that are used to designate or identify our company or products. We have approximately 1,100 registered trademarks and approximately 175 pending trademark applications. 7 Table of Contents We manufacture and distribute products bearing the well-known “Halyard” brand.
There can be no assurance, however, that these efforts will be successful and that our facilities will achieve and maintain compliance with applicable federal, state and local law requirements. We are also subject to certain federal and state disclosure requirements regarding financial arrangements within the healthcare industry.
We expend significant resources to achieve compliance with federal and state law requirements at each of our facilities. There can be no assurance, however, that these efforts will be successful and that our facilities will achieve and maintain compliance with applicable federal, state and local law requirements.
Our Customers Through Products & Healthcare Services we currently provide products and services to thousands of healthcare provider customers either directly or indirectly through third-party distributors.
Our Customers The Products & Healthcare Services segment provides products and services to thousands of healthcare providers, along with certain retailers either directly or indirectly through third-party distributors.
The United Kingdom has implemented similar legislation (the UK GDPR) that may carry similar compliance and operational costs, and potential fines, as the EU GDPR.
The United Kingdom (U.K.) has implemented similar legislation (the U.K. GDPR) that carries similar compliance and operational costs, and potential fines, as the EU GDPR. The costs of compliance with, and other burdens imposed by, the EU GDPR, U.K.
We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations. Products & Healthcare Services Global Operations Our operations are subject to local, country and regional regulations, such as those promulgated by the European Medicines Agency and the Medical Devices Directive.
We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.
The costs of compliance with, and other burdens imposed by, the EU GDPR, UK GDPR and other international data protection laws may impact our operations outside the U.S. and may limit the ways in which we can provide services or use personal data collected while providing services.
GDPR and other international data protection laws may impact our operations outside the U.S. and may limit the ways in which we can provide services or use personal data collected while providing services. Anti-bribery and Corruption We are subject to laws and regulations that seek to prevent corruption and bribery in the marketplace, including the U.S.
Through their creativity, talent and hard work, our teammates allow us to offer exceptional products and services, and they provide the force that propels our mission to empower our customers to advance healthcare. Thus, we are committed to maintaining a culture and providing benefits that will attract and retain top talent.
Human Capital Resources Teammate Overview Our teammates are at the heart of everything that we do. Through their creativity, talent and hard work, our teammates allow us to offer exceptional products and services, and they provide the force that propels our mission to empower our customers to advance healthcare.
Investments in information technology support our business including warehouse management systems, customer service and ordering functions, demand forecasting programs, electronic commerce, data warehousing, decision support and supply chain management. 3 We customize product deliveries, whether the orders are “just-in-time,” “low-unit-of-measure,” pallets, or truckloads.
Investments in information technology support our business including warehouse management systems, customer service and ordering functions, demand forecasting programs, electronic commerce, data warehousing, decision support and supply chain management.
Until the timing and extent of climate-related laws are clarified, we cannot predict their potential effect on our capital expenditures or our results of operations. Antitrust Laws The federal government, most states and foreign governments have enacted antitrust or competition laws that prohibit certain types of conduct deemed to be anti-competitive.
Antitrust Laws The federal government, most states and foreign governments have enacted antitrust or competition laws that prohibit certain types of conduct deemed to be anti-competitive.
For the products we manufacture, we operate four major distribution centers located in North America and Asia that ship finished products to customers, as well as other distribution sites that also have customer shipping capabilities, in order to optimize cost and customer service requirements.
For the products we manufacture, we operate distribution centers located in the U.S. that ship finished products to customers, as well as other distribution sites that also have customer shipping capabilities, in order to optimize cost and customer service requirements. We customize product deliveries, whether the orders are “just-in-time,” “low-unit-of-measure,” pallets, or truckloads.
We aim to provide a compelling value proposition to patients, providers and Payors by allowing patients to receive necessary care and services in the comfort of their own home, while, at the same time, reducing the costs of treatment. 4 Patient Direct has a nationwide sales force, focusing on managed care and key referral sources, six centers of excellence aligned with specific mail order product categories and a nationwide network to optimize shipping distance and time, with over 300 locations to serve patients.
Patient Direct has a nationwide sales force, focusing on managed care and key referral sources, along with centers of excellence strategically located in the U.S. aligned with specific mail order product categories and a nationwide network with over 300 locations to optimize shipping distance and time, to serve patients.
Major outsourced logistics competitors serving healthcare manufacturers in the United States include United Parcel Service and FedEx Corporation. In our Patient Direct segment, we compete against national providers that deliver products and services to patients' homes, including AdaptHealth Corp., Lincare, Rotech, Aerocare, Inogen, Inspire Medical Systems, Inc., Viemed Healthcare, Inc., as well as regional providers and local organizations.
In our Patient Direct segment, we compete against national providers that deliver products and services to patients’ homes, including AdaptHealth Corp., Lincare, Rotech, Aerocare, Inogen, Viemed Healthcare, Inc., as well as regional and local providers. In addition, pharmacy benefit managers, such as CVS Health Corporation, compete with us in the home healthcare market.
We also rely upon trade secrets, manufacturing know-how, continuing technological innovations and licensing opportunities to maintain and improve our competitive position.
Intellectual Property Patents, trademarks and other proprietary rights are very important to the growth of our Products & Healthcare Services segment. We also rely upon trade secrets, manufacturing know-how, continuing technological innovations and licensing opportunities to maintain and improve our competitive position.

… 35 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

94 edited+14 added−6 removed144 unchanged
Biggest changeDue to the uncertainty of the COVID-19 pandemic’s duration, any future outbreaks, the timing of recovery, travel restrictions, business closures or business disruptions, a recession or other sustained adverse market event resulting from the spread of the COVID-19, we are not able at this time to predict the extent to which the COVID-19 pandemic, or any future outbreaks or similar pandemics, may have a material effect on our financial or operational results.
Biggest changeWe are not able to predict at this time the extent to which any future outbreaks of COVID-19, or similar pandemics, would have a material effect on our financial or operational results. The market price for our common stock and debt have been, and may continue to be, highly volatile.
In addition, our relationships with referral sources are subject to federal and state healthcare laws such as U.S. federal Anti-kickback Statute and the U.S. federal Stark Law, and compliance with these laws limits the scope of our relationships with our referral sources.
In addition, our relationships with referral sources are subject to federal and state healthcare laws such as the U.S. federal Anti-kickback Statute (Anti-kickback Statute) and the U.S. federal Stark Law (Stark Law), and compliance with these laws limits the scope of our relationships with our referral sources.
The market price for our common stock and debt have been, and may continue to be, highly volatile. The market price for our common stock and debt have been, and may continue to be, highly volatile.
The market price for our common stock and debt have been, and may continue to be, highly volatile.
If we are unable to successfully complete and integrate our strategic acquisitions in a timely manner, our business, growth strategies, results of operations and cash flows could be adversely affected. 17 Our operations involve the storage, transportation and provision of compressed and liquid oxygen, which carries an inherent risk of rupture or other accidents with the potential to cause substantial loss.
If we are unable to successfully complete and integrate our strategic acquisitions in a timely manner, our business, growth strategies, results of operations and cash flows could be adversely affected. Our operations involve the storage, transportation and provision of compressed and liquid oxygen, which carries an inherent risk of rupture or other accidents with the potential to cause substantial loss.
A change in terms by a significant supplier, the decision of such a supplier to distribute its products directly to healthcare providers rather than through third-party distributors, or a key supplier’s failure 15 to sell and deliver us products necessary to meet our customers’ demands could have a material adverse effect on our results of operations, financial condition and cash flows.
A change in terms by a significant supplier, the decision of such a supplier to distribute its products directly to healthcare providers rather than through third-party distributors, or a key supplier’s failure to sell and deliver us products necessary to meet our customers’ demands could have a material adverse effect on our results of operations, financial condition and cash flows.
If we cannot obtain the patient equipment and supplies we currently use, or alternatives at similar or favorable prices, our ability to provide such products may be severely impacted, which could have an adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.
If we cannot obtain the patient service equipment and supplies we currently use, or alternatives at similar or favorable prices, our ability to provide such products may be severely impacted, which could have an adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.
Bribery Act and other similar laws and regulations in foreign jurisdictions, any violation of which could 20 result in substantial liability and a loss of reputation in the marketplace. Failure to comply with these laws also could subject us to civil and criminal penalties that could adversely affect our business, results of operations, financial condition and cash flows.
Bribery Act and other similar laws and regulations in foreign jurisdictions, any violation of which could result in substantial liability and a loss of reputation in the marketplace. Failure to comply with these laws also could subject us to civil and criminal penalties that could adversely affect our business, results of operations, financial condition and cash flows.
Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if 26 they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our brand and lead to adverse effects on our business, results of operations, financial condition and cash flows.
Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our brand and lead to adverse effects on our business, results of operations, financial condition and cash flows.
Any one of these could result in significant costs 23 and negative publicity resulting in reduced market acceptance and demand for our products and harm our reputation. In addition, a recall or injunction affecting our products could temporarily shut down production lines or place products on a shipping hold.
Any one of these could result in significant costs and negative publicity resulting in reduced market acceptance and demand for our products and harm our reputation. In addition, a recall or injunction affecting our products could temporarily shut down production lines or place products on a shipping hold.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or 27 technology changes) and other adverse effects.
The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes) and other adverse effects.
Some of our competitors may now or in the future have greater financial or marketing resources than we do, or have more effective sales and marketing activities, which may increase pricing pressure and limit our ability to maintain or increase 18 our market share.
Some of our competitors may now or in the future have greater financial or marketing resources than we do, or have more effective sales and marketing activities, which may increase pricing pressure and limit our ability to maintain or increase our market share.
The integration of acquisitions involves a number of significant risks, which may include but are not limited to, the following: • Expenses and difficulties in the transition and integration of operations and systems; • Complexities associated with managing the expanded operations; • Retention of current customers and the ability to obtain new customers; • The assimilation and retention of personnel; • Accounting, tax, regulatory and compliance issues; • Difficulties in implementing uniform controls, procedures, policies and information systems; • Unanticipated expenses, delays or regulatory issues associated with integrating the operations; • General economic conditions in the markets in which the acquired businesses operate; • Difficulties encountered in conducting business in markets where we have limited experience and expertise; • Difficulties obtaining or failure to obtain necessary regulatory licenses and Payor-specific approvals; • Diversion of management’s attention caused by completing the integration of the operations; • Inadequate indemnification from the seller; and • Failure of the seller to perform under any transition services agreement.
The integration of acquisitions involves a number of 19 Table of Contents significant risks, which may include but are not limited to, the following: expenses and difficulties in the transition and integration of operations and systems; complexities associated with managing the expanded operations; retention of current customers and the ability to obtain new customers; the assimilation and retention of personnel; accounting, tax, regulatory and compliance issues; difficulties in implementing uniform controls, procedures, policies and information systems; unanticipated expenses, delays or regulatory issues associated with integrating the operations; general economic conditions in the markets in which the acquired businesses operate; difficulties encountered in conducting business in markets where we have limited experience and expertise; difficulties obtaining or failure to obtain necessary regulatory licenses and Payor-specific approvals; diversion of management’s attention caused by completing the integration of the operations; inadequate indemnification from the seller; and failure of the seller to perform under any transition services agreement.
The present conditions and state of our U.S. and global economies make it difficult to predict whether and/or when and to what extent a recession has occurred or will occur in the near future.
The present conditions and state of U.S. and global economies make it difficult to predict whether and/or when and to what extent a recession has occurred or will occur in the near future.
If one or more of these facilities experience damage, or if these manufacturing capabilities are otherwise limited or stopped due to quality, regulatory or other reasons, including pandemic, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, it may not be possible to timely manufacture the relevant products at required levels or at all.
If one or more of these facilities experience damage, or if these manufacturing capabilities are otherwise limited or stopped due to quality, regulatory or other reasons, including pandemics, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, it may not be possible to timely manufacture the relevant products at required levels or at all.
There is also a risk that we may not adequately implement sustainable processes and 22 procedures to maintain regulatory compliance and to address future regulatory agency findings, should they occur.
There is also a risk that we may not adequately implement sustainable processes and procedures to maintain regulatory compliance and to address future regulatory agency findings, should they occur.
If the capabilities of suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including pandemic, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, or other reasons, that could negatively impact our ability to manufacture or distribute our products and could lead to exposure to regulatory actions.
If the capabilities of suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including pandemics, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, or other reasons, that could negatively impact our ability to manufacture or distribute our products and could lead to exposure to regulatory actions.
Failure to comply with applicable regulatory requirements could result in administrative enforcement action by the FDA or state agencies, which may include any of the following: adverse publicity; warning or untitled letters; fines; injunctions; consent decrees; civil money penalties; recalls; termination of distribution or seizure of our products; operating restrictions or partial suspension or total shutdown of production; delays in the introduction of products into the market; withdrawals or suspensions of current medical gas certifications or drug approvals, resulting in prohibitions on sales of our products; and criminal prosecution.
Failure to comply with applicable regulatory requirements could result in administrative enforcement action by the FDA or state agencies, which may include any of the following: adverse publicity; warning or untitled letters; fines; injunctions; consent decrees; civil money penalties; recalls; termination of distribution or seizure of our products; operating restrictions or partial suspension or total shutdown of production; delays in the introduction of products into 25 Table of Contents the market; withdrawals or suspensions of current medical gas certifications or drug approvals, resulting in prohibitions on sales of our products; and criminal prosecution.
Any change in the existing vendors we use could cause delays in the delivery of products and possible losses in revenue, which could adversely affect our results of operations and cash flows. In addition, alternative vendors may not be available, or may not provide their products and services at similar or favorable prices.
Any change in the existing suppliers we use could cause delays in the delivery of products and possible losses in revenue, which could adversely affect our results of operations and cash flows. In addition, alternative suppliers may not be available, or may not provide their products and services at similar or favorable prices.
Our goodwill may become impaired, which would require us to record a significant charge to earnings in accordance with generally accepted accounting principles. U.S. Generally Accepted Accounting Principals (GAAP) requires us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist.
Our goodwill may become impaired, which would require us to record a significant charge to earnings in accordance with generally accepted accounting principles. U.S. Generally Accepted Accounting Principles (GAAP) require us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist.
In addition, pharmacy benefit managers, such as CVS Health Corporation, are beginning to compete with us in the home healthcare market. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and, in the case of Amazon.com, Inc. and its new pharmacy offerings, entered the healthcare market.
In addition, pharmacy benefit managers, such as CVS Health Corporation, are beginning to compete with us in the home healthcare market. Large technology companies, such as Amazon.com, Inc. and Alphabet Inc., have disrupted other supply businesses and, in the case of Amazon.com, Inc. and its emerging pharmacy offerings, entered the healthcare market.
Our global operations involve issues and risks, including but not limited to the following, any of which could have an adverse effect on our business, results of operations and cash flows: • Lack of familiarity with and expertise in conducting business in foreign markets; • Foreign currency fluctuations and exchange risk; • Unexpected changes in foreign regulations or conditions relating to labor, the economic or political environment, and social norms or requirements; • Adverse tax consequences and difficulties in repatriating cash generated or held abroad; • Local economic environments, recession, inflation, indebtedness, currency volatility and competition; and • Changes in trade protection laws and other laws affecting trade and investment, including import/export regulations in both the United States and foreign countries.
Our global operations involve issues and risks, including but not limited to the following, any of which could have an adverse effect on our business, results of operations and cash flows: lack of familiarity with and expertise in conducting business in foreign markets; foreign currency fluctuations and exchange risk; unexpected changes in foreign regulations or conditions relating to labor, the economic or political environment, and social norms or requirements; adverse tax consequences and difficulties in repatriating cash generated or held abroad; local economic environments, recession, inflation, indebtedness, currency volatility and competition; and changes in trade protection laws and other laws affecting trade and investment, including import/export regulations in both the U.S. and foreign countries.
No impairment charges to goodwill were recorded in 2022, 2021, or 2020. We may be required to record a material charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill is determined, which charge could adversely affect our results of operations.
No impairment charges to goodwill were recorded in 2023, 2022, or 2021. We may be required to record a material charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill is determined, which charge could adversely affect our results of operations.
These and other possible consequences of financial and economic decline could have a material adverse effect on our business, results of operations, financial condition and cash flows. The U.S. and larger global economies experienced high inflation rates during 2022.
These and other possible consequences of financial and economic decline could have a material adverse effect on our business, results of operations, financial condition and cash flows. The U.S. and larger global economies experienced high inflation rates during 2023.
Damage or disruption to any of our facilities or distribution capabilities due to pandemic, weather, natural disaster, fire, terrorism, strikes, trade restrictions, the financial and/or operational instability of key suppliers, geo-political events (such as the Russia-Ukraine conflict) or other reasons could impair our ability to offer services, distribute products and conduct our business.
Damage or disruption to any of our facilities or distribution capabilities due to pandemic, weather, natural disaster, fire, terrorism, strikes, trade restrictions, the financial and/or operational instability of key suppliers, geo-political events (such as the Russia-Ukraine conflict or the Israel-Hamas War ) or other reasons could impair our ability to offer services, distribute products and conduct our business.
National and regional insurers and managed care organizations are regularly attempting to seek reductions in the prices we charge for our products and services to them and their members, including through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
National and regional insurers and managed care organizations are regularly attempting to seek reductions in the prices we charge 22 Table of Contents for our products and services to them and their members, including through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.
Despite current indebtedness levels, we may continue to incur indebtedness in the future, and the amount of that additional indebtedness may be substantial, which could further exacerbate the risks described herein. We and our subsidiaries may incur substantial additional indebtedness in the future.
Despite current indebtedness levels, we may continue to incur indebtedness in the future, and the amount of that additional indebtedness may be substantial, which could further exacerbate the risks described herein. We may incur substantial additional indebtedness in the future.
A variety of factors may have a significant impact on the market price of our common stock and debt, including, but not limited to: • the publication of earnings estimates or other research reports and speculation in the press or investment community; • changes in our financial projections or our failure to meet these projections; • changes in our industry and competitors; • changes in government or legislation; • government debt and/or budget crises; • changes in our board of directors or management; • our financial condition, results of operations and cash flows and prospects; • activism by any single large shareholder or combination of shareholders; • lawsuits threatened or filed against us; • any future issuances of our common stock, which may include primary offerings for cash, stock splits, issuances in connection with business acquisitions, issuances of restricted stock/units and the grant or exercise of stock options from time to time; • the trading volume of our common stock and debt; • general market and economic conditions; • any worsening of the COVID-19 pandemic, or future outbreaks and any future pandemics; • the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in the Ukraine and a wider European or global conflict); and • the other factors discussed in this Item 1A.
A variety of factors may have a significant impact on the market price of our common stock and debt, including, but not limited to: the publication of earnings estimates or other research reports and speculation in the press or investment community; 30 Table of Contents changes in our financial projections or our failure to meet these projections; changes in our industry and competitors; changes in government or legislation; government debt and/or budget crises; changes in our Board or management; our financial condition, results of operations and cash flows and prospects; activism by any single large shareholder or combination of shareholders; lawsuits threatened or filed against us; any future issuances of our common stock, which may include primary offerings for cash, stock splits, issuances in connection with business acquisitions, issuances of restricted stock/units and the grant or exercise of stock options from time to time; the trading volume of our common stock and debt; general market and economic conditions; any future outbreaks or reemergence of the COVID-19 pandemic, and any future pandemics; the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in the Ukraine and a wider European conflict, the conflict between Israel and Hamas, or any other global conflict); and the other factors discussed in this Item 1A.
Risk Factors, any of which could have a material effect on us. The stock and bond markets have recently experienced extreme price and volume fluctuations. The market prices of securities of companies have experienced fluctuations that often have been unrelated or disproportionate to their operating results.
“Risk Factors,” any of which could have a material effect on us. The stock and bond markets have recently experienced extreme price and volume fluctuations. The market prices of securities of companies have experienced fluctuations that often have been unrelated or disproportionate to their operating results.
In addition, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.
In addition, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.
If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or surcharges, we could experience lower margins and profitability which could have a material adverse effect on our business, results of operations and cash flows. Changing conditions in the United States healthcare industry may impact our results of operations and cash flows.
If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or surcharges, we could experience lower margins and profitability which could have a material adverse effect on our business, results of operations and cash flows. Changing conditions in the U.S. healthcare industry may impact our results of operations and cash flows.
Our Credit Agreement, Receivables Securitization Program, and Revolver, as well as the indentures that govern our existing senior notes, contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests.
Our Credit Agreement, Receivables Financing Agreement, and Revolver, as well as the indentures that govern our existing senior notes, contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests.
While we experienced growth in sales volumes for certain of our products (such as 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 or any other public health crisis.
While we experienced growth in sales volumes for certain of our products (such as 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 would be achieved during or following any other public health crisis.
Among the U.S. healthcare related laws that we are subject to include the Anti-kickback Statute, the Stark Law, the False Claims Act and similar state laws relating to fraud, waste and abuse. The requirements of these laws are complex and subject to varying interpretations, and it is possible that regulatory authorities could challenge our policies and practices.
Among the U.S. healthcare related laws that we are subject to include the Anti-kickback Statute, the Stark Law, the FCA and similar state laws relating to fraud, waste and abuse. The requirements of these laws are complex and subject to varying interpretations, and it is possible that regulatory authorities could challenge our policies and practices.
For instance, COVID-19 affected the ability of suppliers and vendors to provide products and services to us or to do so at acceptable quality levels or prices. Any worsening of the COVID-19 pandemic or any future outbreaks could further reduce demand for our products, which could have a material negative impact on our revenues and profit for future periods.
For instance, COVID-19 affected the ability of suppliers and vendors to provide products and services to us or to do so at acceptable quality levels or prices. Any future outbreaks of COVID-19 could further affect demand for our products, which could have a material negative impact on our revenues and profit for future periods.
We compete with other national distributors and a number of regional and local distributors, as well as customer self-distribution models and, to a lesser extent, certain outsourced logistics companies. In the United States, several of our distribution partners and GPOs directly compete with us by sourcing their own brands.
We compete with other national distributors and a number of regional and local distributors, as well as customer self-distribution models and, to a lesser extent, certain outsourced logistics companies. In the U.S., several of our distribution partners and GPOs directly compete with us by sourcing their own brands.
Our amended and restated bylaws designates the United States District Court for the Eastern District of Virginia as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated bylaws designates the U.S. District Court for the Eastern District of Virginia as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
From time to time, legislative and regulatory initiatives are proposed, including but not limited to proposals to repeal last-in, first-out (LIFO) treatment of inventory in the United States or changes in tax accounting methods for inventory, import tariffs and taxes, or other tax items.
From time to time, legislative and regulatory initiatives are proposed, including but not limited to proposals to repeal last-in, first-out (LIFO) treatment of inventory in the U.S. or changes in tax accounting methods for inventory, import tariffs and taxes, or other tax items.
In addition, actions by the United States government or other foreign government in response to any such public health developments could adversely affect our business and operations, including by way of closure of one or more facilities for an unknown period of time.
In addition, actions by the U.S. government or other foreign government in response to any such public health developments could adversely affect our business and operations, including by way of closure of one or more facilities for an unknown period of time.
Poor or deteriorating economic and political conditions in the United States and the other countries in which we conduct business could adversely affect the demand for healthcare services and consequently, the demand for our products and services. Such change in demand may result in further inventory valuation adjustments.
Poor or deteriorating economic and political conditions in the U.S. and the other countries in which we conduct business could adversely affect the demand for healthcare services and consequently, the demand for our products and services. Such change in demand may result in further inventory valuation adjustments.
We could be subject to adverse changes in the tax laws or challenges to our tax positions. We operate throughout the United States and other countries. As a result, we are subject to the tax laws and regulations of the United States federal, state and local governments and of various foreign jurisdictions.
We could be subject to adverse changes in the tax laws or challenges to our tax positions. We operate throughout the U.S. and other countries. As a result, we are subject to the tax laws and regulations of the U.S. federal, state and local governments and of various foreign jurisdictions.
Such sanctions and damages could adversely affect our results of operations, financial condition and cash flows. Our global operations are also subject to risks of violation of laws, including those that prohibit improper payments to and bribery of government officials and other individuals and organizations. These laws include the U.S. Foreign Corrupt Practices Act, the U.K.
Such sanctions and damages could adversely affect our results of operations, financial condition and cash flows. Our global operations are also subject to risks of violation of laws, including those that prohibit improper payments to and bribery of government officials and other individuals and organizations. These laws include the U.S. FCPA, the U.K.
Although we believe our assumptions and estimates are reasonable and appropriate, any changes in key assumptions, including, but not limited to, a failure to meet our business plans or expected earnings, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain expense, commodities costs or inflationary pressures and our planned efforts to mitigate such impacts, further disruptions in the supply chain, estimated demand and selling prices for PPE or other products, a further increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends, may affect the accuracy or validity of such estimates and may result in goodwill impairment.
Although we believe our assumptions and estimates are reasonable and appropriate, any significant adverse changes in one or a combination of key assumptions, including, but not limited to, a failure to meet our business plans or expected earnings and cash flows, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain expense, commodities costs or inflationary pressures and our planned efforts to mitigate such impacts, disruptions in the supply chain, estimated demand and selling prices for personal protective equipment (PPE) or other products, an increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends, may affect the accuracy or validity of such estimates and may result in goodwill impairment.
A large percentage of our revenue is derived in the United States. We, along with our customers and suppliers, are subject to extensive federal and state regulations relating to healthcare as well as the policies and practices of the private healthcare insurance industry.
A large percentage of our revenue is derived in the U.S. We, along with our customers and suppliers, are subject to extensive federal and state regulations relating to healthcare as well as the policies and practices of the private healthcare insurance industry.
In the United States, before we can market a new product, or a new use of, or claim for, or significant modification to, an existing product, we generally must first receive clearance or approval from the FDA and certain other regulatory authorities.
In the U.S., before we can market a new product, or a new use of, or claim for, or significant modification to, an existing product, we generally must first receive clearance or approval from the FDA and certain other regulatory authorities.
We have faced, and expect to continue 19 to face, pricing pressures due to reductions in provider reimbursement for our products and services. In addition, in recent years, the healthcare industry in the United States has experienced and continues to experience significant consolidation in response to cost containment legislation and general market pressures to reduce costs.
We have faced, and expect to continue to face, pricing pressures due to reductions in provider reimbursement for our products and services. In addition, in recent years, the healthcare industry in the U.S. has experienced and continues to experience significant consolidation in response to cost containment legislation and general market pressures to reduce costs.
Our success is dependent on the ability to compete on the above factors, while managing internal costs and expenses. The home healthcare industry in which our Patient Direct segment operates is also intensely competitive and highly fragmented.
Our success is dependent on the ability to compete on the above factors, while managing internal costs and expenses. 20 Table of Contents The home healthcare industry in which our Patient Direct segment operates is also intensely competitive and highly fragmented.
A cybersecurity incident could involve a material data breach or other material impact to the operations of our technology systems, which could result in failure of our systems to operate properly for an extended period of time, litigation or regulatory action, loss of customers or revenue, and increased expense, any of which might have a material adverse impact on our business operations, reputation, our growth and strategic initiatives, our results of operations, financial condition and cash flows.
A future cybersecurity incident could involve a material data breach or other material impact to the operations of our technology systems, or the third party service providers on which we rely, which could result in failure of our systems to operate properly for an extended period of time, litigation or regulatory action, loss of customers or revenue, and increased expense, any of which might have a material adverse impact on our business operations, reputation, our growth and strategic initiatives, results of our operations, financial condition and cash flows.
Inflation has and may continue to materially impact the costs to source materials or produce and distribute finished goods to customers. Continued inflationary pressures could result in market pressures on our customers to reduce costs, which could impact our profitability and cash flows.
Our profitability and cash flows may vary based on the impacts of rising inflationary pressures. Inflation has and may continue to materially impact the costs to source materials or produce and distribute finished goods to customers. Continued inflationary pressures could result in market pressures on our customers to reduce costs, which could impact our profitability and cash flows.
Most major markets for medical products outside the United States also require clearance, approval or compliance with certain standards before a product can be commercially marketed.
Most major markets for medical products outside the U.S. also require clearance, approval or compliance with certain standards before a product can be commercially marketed.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the United States District Court for the Eastern District of Virginia, (or, if United States District Court for the Eastern District of Virginia lacks subject matter jurisdiction, another state or federal court located within the Commonwealth of Virginia) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any director or officer or other employee of the Company to the Company or the Company’s shareholders, (iii) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Virginia Stock Corporation Act, our articles of incorporation or our amended and restated bylaws (as either, or (iv) any action asserting a claim against the Company or any director or officer or 24 other employee of the Corporation governed by the internal affairs doctrine.
District Court for the Eastern District of Virginia lacks subject matter jurisdiction, another state or federal court located within the Commonwealth of Virginia) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any director or officer or other employee of the Company to the Company or the Company’s shareholders, (iii) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Virginia Stock Corporation Act, our articles of incorporation or our amended and restated bylaws (as either, or (iv) any action asserting a claim against the Company or any director or officer or other employee of the Corporation governed by the internal affairs doctrine.
Adverse public health developments such as COVID-19 can also disrupt global capital markets, which can adversely impact our access to capital including deferred payment arrangements with key suppliers.
Adverse public health developments can also disrupt global capital markets, which can adversely impact our access to capital including deferred payment arrangements with key suppliers.
Uncertainty about current and future economic conditions and other adverse changes in general political conditions may adversely affect demand for our products and services.
Uncertainty about current and future economic conditions and other adverse changes in general political conditions may adversely affect demand for our products and services and collectability of our accounts receivable.
In the United States, several regulators, including the EPA, FDA, and agencies at the state and local level, play a role in regulating the use of EtO sterilization.
In the U.S., several regulators, including the EPA, the FDA, and agencies at the state and local level, play a role in regulating the use of EtO sterilization.
Further, we could be liable for damages and fines as a result of legislative or regulatory action or litigation, which could have a material adverse effect on our financial condition. 21 Accordingly, our arrangements and business practices may be the subject of government scrutiny or be found to violate applicable laws.
Further, we could be liable for damages and fines as a result of legislative or regulatory action or litigation, which could have a material adverse effect on our financial condition, results of operations, cash flows, capital resources and liquidity. Accordingly, our arrangements and business practices may be the subject of government scrutiny or be found to violate applicable laws.
An interruption in the ability of our business to manufacture products may have a material adverse effect on our business. We manufacture the majority of our products in 17 facilities: twelve in the United States, two in Mexico, and one each in Thailand, Ireland and Honduras.
An interruption in the ability of our business to manufacture products may have a material adverse effect on our business. We manufacture the majority of our products in 17 facilities: 12 in the U.S., two in Mexico, and one each in Thailand, Ireland and Honduras.
The FDA and state authorities conduct periodic, unannounced inspections at medical gas facilities to assess compliance with the cGMP and other regulations. We expend significant time, money, and resources in an effort to achieve substantial compliance with the cGMP regulations and other federal and state law requirements at each of our medical gas facilities.
We expend significant time, money, and resources in an effort to achieve substantial compliance with the cGMP regulations and other federal and state law requirements at each of our medical gas facilities.
Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing vendors, such as the disruptions associated with the Philips Respironics recall as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, may force us to increase our prices (which we may be unable to do) or reduce our margins and could force us to use alternative vendors.
Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing suppliers, such as the disruptions associated with the Philips Respironics recall as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, may reduce our income and could force us to use alternative suppliers.
In 2022, although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the United States represented approximately 26% of our consolidated net revenue. In addition, in 2022, approximately 66% of our consolidated net revenue was from sales to member hospitals under contract with our largest GPOs: Vizient, Premier and HPG.
In 2023, although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the U.S. represented approximately 20% of our consolidated net revenue. In addition, in 2023, approximately 64% of our consolidated net revenue was from sales to member hospitals under contract with our largest GPOs: Vizient, Premier and HPG.
If a default under the credit facilities and the indentures governing our existing notes is not cured or waived, such default could result in the acceleration of debt or other payment obligations under our debt or other agreements that contain cross-acceleration, cross-default or similar provisions, which could require us to repurchase or pay debt or other obligations prior to the date it is otherwise due.
If a default under the credit facilities and the indentures governing our existing notes is not cured or waived, such default could result in the acceleration of debt or other payment obligations under our debt or other agreements that contain cross-acceleration, cross-default or similar provisions, which could require us to repurchase or pay debt or other obligations prior to the date it is otherwise due. 29 Table of Contents Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.
We may need to raise capital in order to repay the 2024 Notes, 2029 Notes, and 2030 Notes. As of December 31, 2022, we owed $246 million, $500 million and $600 million in principal under our 2024 Notes, 2029 Notes, and 2030 Notes, respectively.
We may need to raise capital in order to repay the 2024 Notes, 2029 Notes, and 2030 Notes. As of December 31, 2023, we owed $171 million, $479 million and $552 million in principal under our 2024 Notes, 2029 Notes, and 2030 Notes, respectively.
General Risk Factors We are subject to risks related to public health crises or future outbreaks of health crises or other adverse public health developments such as the COVID-19 global pandemic. As a global healthcare solutions company, we are impacted by public health crises.
We are subject to risks related to public health crises or future outbreaks of health crises or other adverse public health developments. As a global healthcare solutions company, we are impacted by public health crises.
In 2022, sales of products of our ten largest domestic suppliers accounted for approximately 37% of consolidated net revenue. No sales of products of any individual suppliers exceeded 10% of our consolidated net revenue for 2022. We rely on suppliers to provide agreeable purchasing and delivery terms and performance incentives.
No sales of products of any individual suppliers exceeded 10% of our consolidated net revenue for 2023. We rely on suppliers to provide agreeable purchasing and delivery terms and performance incentives.
The Federal Reserve and other Central Banks already have raised interest rates more aggressively and, as a result, the prospect for a recession is high and considered by many to be likely.
The Federal Reserve and other Central Banks have raised interest rates more aggressively and, as a result, the risk of a recession is considered by many to be elevated.
These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand, damage our customer relationships, and could materially adversely affect our business operations, results of operations, financial condition and cash flows. Our profitability and cash flows may vary based on the impacts of rising inflationary pressures.
These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand, 21 Table of Contents damage our customer relationships, and could materially adversely affect our business operations, results of operations, financial condition and cash flows.
The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants.
Our liability insurance may not cover potential claims of this type adequately or at all. Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Our liability insurance may not cover potential claims of this type adequately or at all. Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows. We are subject to risks relating to asserted claims, litigation and other proceedings relating to employment and pay practices.
Our management’s attention may be diverted by these attempts, and we may need to use funds in litigation to protect our proprietary rights against any infringement, misappropriation or other violation. We may become subject to litigation brought by third parties claiming infringement, misappropriation or other violation by us of their intellectual property rights.
Our management’s attention may be diverted by these attempts, and we may need to use funds in litigation to protect our proprietary rights against any infringement, misappropriation or other violation. We may become subject to litigation, investigations, claims and other legal proceedings brought by regulatory agencies, third parties, or individuals.
If these audits result in assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities. Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price. Companies are facing increasing scrutiny from regulators, investors, consumers and other stakeholders related to ESG matters.
If these audits result in assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities. 27 Table of Contents Our aspirations, goals and disclosures related to ESG matters expose us to numerous risks, including risks to our reputation and stock price.
If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our earnings and cash flows will correspondingly decrease.
Certain borrowings under our Credit Agreement and Receivables Financing Agreement bear interest at variable rates and expose us to interest rate risk. If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our earnings and cash flows will correspondingly decrease.
The regulatory clearance process may result in substantial costs, delays and limitations on the types and uses of products we can bring to market, any of which could have a material adverse effect on our business.
We must obtain clearance or approval from the appropriate regulatory authorities prior to introducing a new product or a modification to an existing product. The regulatory clearance process may result in substantial costs, delays and limitations on the types and uses of products we can bring to market, any of which could have a material adverse effect on our business.
If we do not respond appropriately to the pandemic, any future outbreaks or similar pandemics, or if customers do not perceive our response to be adequate for the United States or our international markets, we could suffer damage to our reputation and our brands, which could adversely affect our business.
If we do not respond appropriately to any future outbreaks or similar pandemics, or if customers do not perceive our response to be adequate for the U.S. or our international markets, we could suffer damage to our reputation and our brands, which could adversely affect our business. We may also experience additional impacts that we are not aware of currently.
As of December 31, 2022, on a consolidated basis we had approximately $2.5 billion of aggregate principal amount of indebtedness, excluding deferred financing costs and third party fees, as well as approximately $262 million in contractual obligations under our operating leasing arrangements due beyond the next twelve months, $354 million of undrawn availability under our accounts receivable securitization program, and $422 million of undrawn availability under our revolving credit facility.
As of December 31, 2023, on a consolidated basis we had approximately $2.1 billion of aggregate principal amount of indebtedness, excluding deferred financing costs and third party fees, $450 million of undrawn availability under our Receivables Financing Agreement, $423 million of undrawn availability under our revolving credit facility, as well as other contractual obligations due beyond the next twelve months.
If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face to service debt levels and the risks associated with failure to adequately service our debt could intensify.
If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face to service debt levels and the risks associated with failure to adequately service our debt could intensify. General Risk Factors Our continued success is substantially dependent on positive perceptions of our reputation.
Violations of federal (such as the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA), state or foreign laws (such as the European Union’s General Data Protection Regulation, as amended, or GDPR) concerning privacy and data protection could subject us to civil or criminal penalties, breach of contract claims, costs for remediation and harm to our reputation.
Violations of federal (such as 23 Table of Contents HIPAA), state or foreign laws (such as the EU GDPR or U.K. GDPR) concerning privacy and data protection could subject us to civil or criminal penalties, breach of contract claims, costs for remediation and harm to our reputation.
We engage with key stakeholders to develop ESG focus areas and to set ESG-related goals, many of which are aspirational.
Companies are facing increasing scrutiny from regulators, investors, consumers and other stakeholders related to ESG matters. We engage with key stakeholders to develop ESG focus areas and to set ESG-related goals, many of which are aspirational.
We have incurred additional costs to ensure we meet the needs of our customers and protect our workforce and expect to continue to incur additional costs, which may be significant, as we continue to implement operational changes in response to the COVID-19 pandemic and any future pandemics.
We incurred additional costs to ensure we met the needs of our customers and protected our workforce in response to the COVID-19 pandemic, and may similarly incur additional costs if we are required to implement operational changes in response to any future pandemics.
To the extent that Payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a slowdown in collections and a reduction in the amounts we expect to collect.
To the extent that Payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a slowdown in collections and a reduction in the amounts we expect to collect. Furthermore, the collection of accounts receivable requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures.
Our continued success is substantially dependent on positive perceptions of our reputation. One of the reasons why customers choose to do business with us and why teammates choose us as a place of employment is the reputation that we have built over many years.
One of the reasons why customers choose to do business with us and why teammates choose us as a place of employment is the reputation that we have built over many years. To be successful in the future, we must continue to preserve, grow and leverage the value of our brand.
If the government or third parties successfully challenge our interpretation, such a challenge may have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity. We must obtain clearance or approval from the appropriate regulatory authorities prior to introducing a new product or a modification to an existing product.
If the government or third parties successfully challenge our 24 Table of Contents interpretation, such a challenge may have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.
Our inability to procure certain equipment and supplies, including as a result of failure to maintain and renew certain agreements and access arrangements, could have a materially adverse effect on our results of operations and cash flows. We often use vendors selectively for quality and cost reasons.
Further, some of our supply agreements contain pricing scales that depend on meeting certain order volumes. Our inability to procure certain equipment and supplies, including as a result of failure to maintain and renew certain agreements and access arrangements, could have a materially adverse effect on our results of operations and cash flows.

… 34 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−2 removed1 unchanged
Biggest changeThe following table provides a summary of our principal facilities: Owned Leased Other (1) Total Location Production 6 11 — 17 United States, Europe, Honduras, Mexico and Thailand Distribution 1 52 1 54 United States and India Storage — 26 — 26 United States, Honduras and Mexico Office 1 36 — 37 United States, Asia, Australia, Canada and Europe Branch — 277 — 277 United States Total 8 402 1 411 (1) Represents a distribution center owned by a customer.
Biggest changeThe following table provides a summary of our principal facilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Owned Leased Other (1) Total Location Production 6 11 — 17 U.S., Europe, Honduras, Mexico and Thailand Distribution 1 52 1 54 U.S.
Item 2. Properties As of December 31, 2022, we operated facilities located throughout the world that handle production, assembly, research, quality assurance testing, distribution, packaging and sales of our products, as well as office and warehouse space. We also leased customer service centers as well as small offices for sales personnel across the United States.
Item 2. Properties As of December 31, 2023, our Products & Healthcare Services segment operated facilities located throughout the world that handle production, assembly, research, quality assurance testing, distribution, packaging, and sales of our products, as well as office and warehouse space. We also leased customer service centers as well as small offices for sales personnel across the U.S.
As of December 31, 2022, our Patient Direct segme nt had over 300 locations to serve patients, including 277 branch locations that are capable of reaching over 90% of the U.S. population, six centers of excellence aligned with specific mail order product categories , as well as regional distribution and repair centers, customer service and billing centers, a national pharmacy and a biomedical center for the repair, maintenance and distribution of patient equipment.
In addition, we lease space on a temporary basis from time to time to meet our inventory storage needs. 32 Table of Contents As of December 31, 2023, our Patient Direct segment had over 300 locations to serve patients that are capable of reaching over 90% of the U.S. population, centers of excellence aligned with specific mail order product categories, as well as regional distribution and repair centers, customer service and billing centers, a national pharmacy and a biomedical center for the repair, maintenance and distribution of patient service equipment.
We believe that, if necessary, we could find facilities to replace these leased premises without suffering a material adverse effect on our business.
We believe that our facilities are adequate to carry on our business as currently conducted. A number of leases are scheduled to expire within the next several years. We believe that, if necessary, we could find facilities to replace these leased premises without suffering a material adverse effect on our business.
Removed
In addition, we lease space on a temporary basis from time to time to meet our inventory storage needs.
Added
Storage — 21 — 21 U.S., Honduras and Mexico Office 1 38 — 39 U.S., Asia, Australia, Canada and Europe Branch — 277 — 277 U.S. Total 8 399 1 408 (1) Represents a distribution center owned by a customer. We regularly assess our business needs and make changes to the capacity and the location of our facilities.
Removed
We regularly assess our business needs and make changes to the capacity and the location of our facilities. We believe that our facilities are adequate to carry on our business as currently conducted. A number of leases are scheduled to terminate within the next several years.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+14 added−2 removed0 unchanged
Biggest changeIn addition, we believe that any potential liability arising from employment, product liability, workers’ compensation and other personal injury litigation matters would be adequately covered by our insurance, subject to policy limits, applicable deductibles, exclusions, and insurer solvency.
Biggest changeWe maintain insurance coverage for cybersecurity, employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. From time to time, we establish estimated liabilities based upon periodic assessment of the potential outcomes of pending matters.
Removed
Item 3. Legal Proceedings We are party to various legal claims that are ordinary and incidental to our bu siness, including relating to commercial disputes, employment, workers’ compensation, product liability, regulatory and other matters. We establish reserves from time to time based upon periodic assessments of the potential outcomes of pending matters.
Added
Legal Proceedings O&M Halyard N95 Mask FDA Release ​ On April 5, 2023, we received a communication from the National Institute for Occupational Safety & Health (NIOSH) that products from one lot of a model (No. 46827) of surgical N95 respirator manufactured by O&M Halyard did not pass laboratory tests for fluid resistance and for filtration efficiency, and that products from one lot of another model (No. 46727) did not pass fluid resistance testing, but did pass filtration efficiency testing.
Removed
While the outcome of legal actions cannot be predicted with certainty, we believe, based on current knowledge and the advice of counsel, that the outcome of these currently pending matters, individually or in the aggregate, will not have a material adverse effect on our financial condition or results of ope rations.
Added
Our investigation determined that a limited number of lots were potentially implicated by the results of the NIOSH particulate filtration testing on model No. 46827, and that the vast majority of the products in those lots remained in our possession and under our control. Those lots have been segregated for disposal.
Added
We also determined that a limited quantity of products from one lot did reach the market. Although products from that lot passed internal and external follow-up testing for filtration efficiency, we initiated a voluntary recall of the lot on August 9, 2023 out of an abundance of caution.
Added
O&M Halyard has confirmed to NIOSH that the particle filtration issue was isolated to the identified lots. ​ On April 12, 2023, the FDA recommended that consumers, health care providers, and facilities not use the two models (model numbers 46827 and 46727) of O&M Halyard surgical N95 respirators due to concerns about fluid resistance performance.
Added
In addition, the FDA also recommended against using certain of our surgical, procedure and pediatric face masks when fluid resistance is required. On or about that date, we voluntarily stopped the sale in the U.S. of the above-referenced surgical N95 respirators and similar models pending our investigation of the performance issues identified by the FDA and NIOSH.
Added
Regulatory bodies in other non-U.S. markets where we sell our facial protection products have inquired about the relevance of the FDA notification to products sold in their countries. The FDA updated its recommendation on April 21, 2023, to permit use of the model No. 46727 of Halyard N95 respirators when fluid resistance is not required.
Added
These items are included in our Products & Healthcare Services segment. ​ On September 29, 2023, the FDA updated its previous recommendation to consumers, health care providers and facilities regarding the above-referenced models of O&M Halyard surgical N95 respirators based on extensive testing and performance data provided by O&M Halyard.
Added
Specifically, the FDA stated that both O&M Halyard respirator models could be used according to the product labeling for respiratory and fluid barrier protection to the wearer 33 Table of Contents (excluding the one lot of products that O&M Halyard voluntarily recalled on August 9, 2023).
Added
Following the FDA’s update, we published a user notice on our website announcing the resumption of sales and shipments of O&M Halyard surgical N95 respirators, noting that the data provided to the FDA and NIOSH demonstrated that our products provide the levels of particle filtration and fluid resistance for which they are rated.
Added
NIOSH reviewed and concurred with the facts set forth in our user notice published on September 29, 2023.
Added
While the FDA recommendation did not materially affect our results of operations for 2023, there is a risk that these matters and any other safety concerns could have a material adverse effect on our results of operations, financial condition, or cash flows, including as a result of a significant volume of customer product returns and/or recall of products, implementation of corrective action plans, and/or other costly remedial actions in the U.S. and elsewhere.
Added
In addition, these matters could potentially have other negative impacts including: government investigations and enforcement actions by the FDA or other U.S. or international regulators or governmental entities; the suspension or revocation of the authority to produce, distribute or sell products, and other sanctions; losses due to patient claims, including product liability claims and lawsuits; and customer claims related to their direct costs arising from supply disruption. ​ Other Litigation We are party to various legal claims that are ordinary and incidental to our business, including ones related to commercial disputes, employment, workers’ compensation, product liability, regulatory, cybersecurity and other matters.
Added
Based on current knowledge and the advice of counsel, we believe that the liability recorded on the consolidated balance sheet as of December 31, 2023 for currently pending matters considered probable of loss, is sufficient.
Added
In addition, we believe that other currently pending matters are not reasonably possible to result in a material loss, as payment of the amounts claimed is remote, the claims are immaterial, individually and in the aggregate, or the claims are expected to be adequately covered by insurance, subject to policy limits, applicable deductibles, exclusions, and insurer solvency.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

11 edited+5 added−5 removed5 unchanged
Biggest changePreviously Mr. Long served as Chief Financial Officer of Owens & Minor since joining the company on November 11, 2019. Prior to that, Mr. Long served as the Chief Executive Officer of Insys Therapeutics, Inc. (Insys) from April 2019 to November 8, 2019. Prior to that, Mr. Long served as the Chief Financial Officer of Insys from August 2017.
Biggest changeLong served as the Chief Executive Officer and as a board member of Insys Therapeutics, Inc. (Insys) from April 2019 to November 8, 2019. Prior to that, Mr. Long served as the Chief Financial Officer of Insys from August 2017. Prior to joining Insys, Mr.
Pesicka served as an independent consultant and advisor in the healthcare, life sciences and distribution industries since January 1, 2016. From January 2000 through April 2015, Mr. Pesicka served in various roles of increasing responsibility at Thermo Fisher Scientific Inc., including, most recently, Chief Commercial Officer and Senior Vice President from January 2014 to April 2015.
Pesicka served as an independent consultant and advisor in the healthcare, life sciences and distribution industries since January 1, 2016. From January 2000 through April 2015, Mr. Pesicka served in various roles of increasing responsibility at Thermo Fisher Scientific Inc., including Chief Commercial Officer and Senior Vice President from January 2014 to April 2015.
Prior to joining Insys, Mr. Long served as senior vice president of Global Finance at Patheon, a pharmaceutical company, from 2015 to 2017. Prior to working at Patheon, Mr. Long served as Vice President of Finance for multiple divisions at Thermo Fisher Scientific from 2006 until 2015. Mr.
Long served as senior vice president of Global Finance at Patheon, a pharmaceutical company, from 2015 to 2017. Prior to working at Patheon, Mr. Long served as Vice President of Finance for multiple divisions at Thermo Fisher Scientific from 2006 until 2015.
Item 4. Mine Safety Disclosures Not applicable. 28 Information about our Executive Officers Edward A. Pesicka (55) President, Chief Executive Officer & Director President and Chief Executive Officer since joining Owens & Minor in March 2019. Mr. Pesicka was also appointed to the board of directors at the time he joined the company. Previously Mr.
Item 4. Mine Safety Disclosures Not applicable. Information about our Executive Officers Edward A. Pesicka (56) President, Chief Executive Officer & Director President and Chief Executive Officer since joining Owens & Minor in March 2019. Mr. Pesicka was also appointed to the Board of Directors at the time he joined the Company. Previously Mr.
Michael W. Lowry (61) Senior Vice President, Corporate Controller & Chief Accounting Officer Senior Vice President, Corporate Controller & Chief Accounting Officer since June 2018. Prior to that, from May 2016 to June 2018, Mr. Lowry was Senior Vice President, Corporate Controller and Vice President, Corporate Controller beginning in 2013. Prior to that, from 2009 to 2013 Mr.
Michael W. Lowry (62) Senior Vice President, Corporate Controller & Chief Accounting Officer Senior Vice President, Corporate Controller & Chief Accounting Officer since June 2018. Prior to that, from May 2016 to June 2018, Mr. Lowry was Senior Vice President, Corporate Controller and Vice President, Corporate Controller beginning in 2013. Prior to that, from 2009 to 2013 Mr.
Leon (56) Senior Vice President, Corporate Treasurer Senior Vice President, Corporate Treasurer of Owens & Minor since May 2018. Prior to that, Mr. Leon served as Vice President, Treasurer, after joining Owens & Minor in January 2017. Before joining Owens & Minor, Mr. Leon worked for the Brinks Company for nineteen years, beginning in 1998, where he served as Treasurer.
Leon (57) Senior Vice President, Corporate Treasurer Senior Vice President, Corporate Treasurer of Owens & Minor since May 2018. Prior to that, Mr. Leon served as Vice President, Treasurer, after joining Owens & Minor in January 2017. Before joining Owens & Minor, Mr. Leon worked for the Brinks Company for 19 years, beginning in 1998, where he served as Treasurer.
Pesicka spent eight years with TRW, Inc. in its finance department and three years with PricewaterhouseCoopers as an auditor. Alexander J. Bruni (46) Executive Vice President & Chief Financial Officer Executive Vice President & Chief Financial Officer of Owens & Minor since October 2022. Previously, Mr.
Pesicka spent eight years with TRW, Inc. in its finance department and three years with PricewaterhouseCoopers as an auditor. 34 Table of Contents Alexander J. Bruni (47) Executive Vice President & Chief Financial Officer Executive Vice President & Chief Financial Officer of Owens & Minor since October 2022. Previously, Mr.
Starck (56) Executive Vice President, President of Patient Direct Segment, & Chief Executive Officer of Apria Executive Vice President, President of Patient Direct Segment, & Chief Executive Officer of Apria since the Apria acquisition on March 29, 2022. Previously, Mr. Starck served as Chief Executive Officer of Apria, Inc. since February 2015. Prior to that, Mr.
Starck served as Executive Vice President, President of Patient Direct Segment, & Chief Executive Officer of Apria since the Apria Acquisition on the Acquisition Date. Prior to that, Mr. Starck served as Chief Executive Officer of Apria, Inc. since February 2015. Prior to that, Mr.
Lowry was the Vice President, Treasurer. Mr. Lowry joined Owens & Minor in 1988. Part II
Lowry was the Vice President, Treasurer. Mr. Lowry joined Owens & Minor in 1988. ​ 36 Table of Contents Part II
Starck joined CorVel in 2006 as President and Chief Operating Officer after serving Apria and a predecessor company in a series of progressively more responsible operations roles from 1992 to 2006. 29 Tammy Gomez (51) Executive Vice President & Chief Human Resources Officer Executive Vice President & Chief Human Resource Officer since joining Owens & Minor in July 2022.
Starck joined CorVel in 2006 as President and Chief Operating Officer after serving Apria and a predecessor company in a series of progressively more responsible operations roles from 1992 to 2006. Andrew G.
Bruni served from 2012 until 2018 in multiple Vice President positions including Finance, Corporate FP&A, Continuous Improvement and Corporate Development at Patheon, a pharmaceutical services company. Andrew G. Long (57) Executive Vice President & Chief Executive Officer of Products & Healthcare Services Segment Executive Vice President & Chief Executive Officer of Products & Healthcare Services Segment since October 2022.
Bruni served from 2012 until 2018 in multiple vice president positions including Finance, Corporate FP&A, Continuous Improvement and Corporate Development at Patheon, a pharmaceutical services company. Daniel J. Starck (57) Executive Vice President, Business Excellence Executive Vice President, Business Excellence since March 2023. Previously, Mr.
Removed
Long has served as a Member of the Board of Directors of Insys, which filed for Chapter 11 bankruptcy protection in June 2019, from April 2019 until his resignation on November 8, 2019. Daniel J.
Added
Long (58) Executive Vice President & Chief Executive Officer of Products & Healthcare Services Segment Executive Vice President & Chief Executive Officer of Products & Healthcare Services Segment since October 2022. Previously Mr. Long served as Chief Financial Officer of Owens & Minor since joining the Company on November 11, 2019. Prior to that, Mr.
Removed
Prior to that, Ms. Gomez worked for Cardinal Health from 1999 to 2021 in various roles throughout her career. She served as Senior Vice President, Global HR Center of Excellence & HR Services at the time of her exit. Prior to that, Ms. Gomez served in various human resources business partner roles supporting the company’s business and functional leaders.
Added
Perry Bernocchi (65) Executive Vice President & Chief Executive Officer of Patient Direct Segment Executive Vice President & Chief Executive Officer of Patient Direct Segment since March 2023. Prior to that, Mr. Bernocchi served as President & Chief Executive Officer of the Company’s Byram Healthcare division, a position he held since 2009. Mr.
Removed
Nicholas J. Pace (52) Executive Vice President, General Counsel & Corporate Secretary Executive Vice President, General Counsel & Corporate Secretary since May 2018. Mr. Pace joined Owens & Minor in 2016, serving as its Senior Vice President, General Counsel & Corporate Secretary. Prior to joining the company, Mr.
Added
Bernocchi joined Byram Healthcare in 2006 as its Chief Operating Officer. Prior to that, Mr. Bernocchi served as Chief Operating Officer of Hemophilia Resources of America from 2000 to 2005 prior to its sale to Accredo Health. Prior to that, Mr.
Removed
Pace served as Executive Vice President, General Counsel & Secretary of Landmark Health, LLC, from July-December 2015. From January 2014 to July 2015, he served in simultaneous roles of Senior Vice President, Strategy & General Counsel of Landmark Health, LLC and Executive Vice President, Corporate Development & General Counsel of Avalon Health Services, LLC, two Francisco Partners portfolio companies.
Added
Bernocchi worked for Caremark/Coram from 1982 to 2000 in various roles of increasing responsibility in operations and general management within Coram Resource Network and as Senior Vice President of Operations. Heath Galloway (47) Executive Vice President, General Counsel & Corporate Secretary Executive Vice President, General Counsel & Corporate Secretary since May 2023.
Removed
From March to October 2013, Mr. Pace served as Executive Vice President, Operations & Compliance for Health Diagnostic Laboratory, Inc., which filed for Chapter 11 bankruptcy protection in June 2015. Prior to that role, he served as Executive Vice President, General Counsel & Secretary of Amerigroup Corporation, where he worked from 2006-2013 until its sale to Anthem, Inc. Jonathan A.
Added
Prior to that, from April 2016 to May 2023, Mr. Galloway served as Associate General Counsel. Prior to that, Mr. Galloway served as Assistant General 35 Table of Contents Counsel after joining Owens & Minor in February 2013. Prior to joining Owens & Minor, Mr. Galloway worked at Williams Mullen for nine years. Jonathan A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+1 added−7 removed0 unchanged
Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, the common shareholders of record do not reflect the total number of stockholders. 30 5-Year Total Shareholder Return The following performance g raph compares the performance of our common stock to the Standard & Poor's Composite-500 Index (S&P 500 Index), the Russell 3000 Medical Equipment and Services Sector Index, an index that includes more than 100 companies in the medical equipment and services industry, and the Standard & Poor's Composite-500 Healthcare Index (S&P 500 Healthcare Index), an independently prepared index that includes more than 50 companies in the healthcare industry.
Biggest changeBecause many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, the common shareholders of record do not reflect the total number of stockholders. 5-Year Total Shareholder Return The following performance graph compares the performance of our common stock to the Standard & Poor’s Composite-500 Index (S&P 500 Index), the Russell 3000 Medical Equipment and Services Sector Index, an index that includes more than 100 companies in the medical equipment and services industry.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Owens & Minor, Inc.’s common stock trades on the New York Stock Exchange under the symbol OMI. As of February 13, 2023, there were 2,354 common shareholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Owens & Minor, Inc.’s common stock trades on the New York Stock Exchange under the symbol OMI. As of January 31, 2024, there were 2,238 common shareholders of record.
Removed
Beginning this year, we are using the Russell 3000 Medical Equipment and Services Sector Index as our line of business index, but in prior years we used the S&P 500 Healthcare Index. We are changing our line of business index to the Russell 3000 Medical Equipment and Services Sector Index because that index more closely aligns with our business.
Added
This graph assumes that the value of the investment in the common stock and each index was $100 on December 31, 2018, and that all dividends were reinvested. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base Period Years Ended Company Name / Index ​ 12/2018 ​ 12/2019 12/2020 12/2021 12/2022 12/2023 Owens & Minor, Inc. ​ $ 100.00 ​ $ 81.86 ​ $ 428.78 ​ $ 689.73 ​ $ 309.66 ​ $ 305.54 S&P 500 Index ​ 100.00 ​ 131.47 ​ 155.65 ​ 200.29 ​ 163.98 ​ 207.04 Russell 3000 Medical Equipment and Services Sector ​ 100.00 ​ 131.43 ​ 165.52 ​ 199.89 ​ 155.44 ​ 163.19 ​ ​ 37 Table of Contents
Removed
In accordance with Item 201(e) of Regulation S-K, we are including both the Russell 3000 Medical Equipment and Services Sector Index and S&P 500 Healthcare Index in the performance graph below. This graph assumes that the value of the investment in the common stock an d each index was $100 on December 31, 2017, and that all dividends were reinvested.
Removed
Base Period Years Ended Company Name / Index 12/2017 12/2018 12/2019 12/2020 12/2021 12/2022 Owens & Minor, Inc. $ 100.00 $ 35.49 $ 29.05 $ 152.18 $ 244.79 $ 109.90 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 Russell 3000 Medical Equipment and Services Sector 100.00 112.27 146.90 185.83 224.41 174.51 S&P 500 Healthcare 100.00 106.47 128.64 145.93 184.07 180.47 In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an ag gregate offering price of up to $50.0 million .
Removed
We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of December 31, 2022, no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.
Removed
On October 6, 2020, we completed a follow-on equity offering wherein we sold an aggregate of 8,475,000 shares of our common stock at an offering price of $20.50, resulting in net proceeds to us of approximately $165 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.
Removed
Pursuant to the underwriting agreement, we granted the underwriters an option to purchase up to an additional 1,271,250 shares of our common stock, which the underwriters exercised in full. Inclusive of this exercised option, net proceeds to us were approximately 31 $190 million, after deducting expenses relating to the follow-on equity offering, including the underwriters’ discounts and commissions.
Removed
We used the proceeds from the follow-on equity offering to repay the remaining $109 million outstanding balance of Term Loan A-1 at par on October 8, 2020, to repay $51.7 million of our Term Loan A-2 at par on October 15, 2020, and to repay $30.0 million of borrowings under the revolving credit facility.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

56 edited+60 added−40 removed18 unchanged
Biggest changeThe 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. 33 Supplemental Financial Information (in thousands, except ratios and per share data) At or for the years ended December 31, 2022 2021 2020 Summary of Operations: Net revenue $ 9,955,475 $ 9,785,315 $ 8,480,177 Income from continuing operations $ 22,389 $ 221,589 $ 88,074 Per Common Share: Income from continuing operations per share—basic $ 0.30 $ 3.05 $ 1.39 Income from continuing operations per share—diluted $ 0.29 $ 2.94 $ 1.39 Cash dividends $ — $ 0.01 $ 0.01 Stock price at year end $ 19.53 $ 43.50 $ 27.05 Summary of Financial Position: Total assets $ 5,386,283 $ 3,536,551 $ 3,335,639 Cash and cash equivalents $ 69,467 $ 55,712 $ 83,058 Total debt $ 2,500,874 $ 949,577 $ 1,025,967 Total equity $ 945,604 $ 938,501 $ 712,054 Selected Ratios: Gross margin as a percent of revenue 18.35 % 15.46 % 15.10 % Distribution, selling and administrative expenses as a percent of revenue 16.41 % 11.41 % 12.28 % Operating income as a percent of revenue 1.44 % 3.77 % 2.41 % Days sales outstanding (DSO) (1) 27.0 24.6 26.0 Inventory days (2) 57.2 64.7 57.8 (1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2022, 2021 and 2020.
Biggest changeSupplemental Financial Information (in thousands, except ratios and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At or for the Years Ended December 31, ​ ​ 2023 2022 2021 Summary of Operations: ​ ​ ​ ​ Net revenue ​ $ 10,333,967 ​ $ 9,955,475 ​ $ 9,785,315 ​ Net (loss) income ​ $ (41,301) ​ $ 22,389 ​ $ 221,589 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Per Common Share: ​ ​ ​ ​ Net (loss) income per share—basic ​ $ (0.54) ​ $ 0.30 ​ $ 3.05 ​ Net (loss) income per share—diluted ​ $ (0.54) ​ $ 0.29 ​ $ 2.94 ​ Cash dividends ​ $ — ​ $ — ​ $ 0.01 ​ Stock price at year end ​ $ 19.27 ​ $ 19.53 ​ $ 43.50 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Summary of Financial Position: ​ ​ ​ ​ Total assets ​ $ 5,093,322 ​ $ 5,386,283 ​ $ 3,536,551 ​ Cash and cash equivalents ​ $ 243,037 ​ $ 69,467 ​ $ 55,712 ​ Total debt ​ $ 2,097,502 ​ $ 2,500,874 ​ $ 949,577 ​ Total equity ​ $ 924,166 ​ $ 945,604 ​ $ 938,501 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Selected Ratios: ​ ​ ​ ​ Gross margin as a percent of revenue ​ 20.56 % 18.35 % 15.46 % Distribution, selling and administrative expenses as a percent of revenue ​ 17.55 % 15.62 % 11.01 % Operating income as a percent of revenue ​ 1.01 % 1.44 % 3.77 % DSO (1) ​ 20.5 ​ 27.0 ​ 24.6 ​ Inventory days (2) ​ 49.0 ​ 57.2 ​ 64.7 ​ (1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2023, 2022 and 2021.
The Revolving Credit Agreement, the Credit Agreement, Receivables Financing Agreement, 2024 Notes, 2029 Unsecured Notes, and 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements.
The Revolving Credit Agreement, the Credit Agreement, the Receivables Financing Agreement, the 2024 Notes, the 2029 Unsecured Notes, and the 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements.
Off-Balance Sheet Arrangements We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, which we believe could have a material impact on financial condition or liquidity. Critical Accounting Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
Off-Balance Sheet Arrangements We do not have off-balance sheet financing arrangements or guarantees, including variable interest entities, which we believe could have a material impact on financial condition or liquidity. Critical Accounting Estimates Our consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP.
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 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 matures in March 2027 and the Term Loan B matures in March 2029.
The interest rate on the Term Loan B is based on either the Term SOFR or the Base Rate plus an Applicable Rate. The Term Loan A matures in March 2027 and the Term Loan B matures in March 2029.
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 10 of the accompanying consolidated financial statements for additional information regarding the terms of the 2024 Notes.
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, with respect to our 2024 Notes. See Note 9 of the accompanying consolidated financial statements for additional information regarding the terms of the 2024 Notes.
The Recall may 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.
The Recall may 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 from Philips of replacement devices for impacted devices, availability of new devices for new patients, patient hesitancy to use respiratory devices generally or other reasons.
Our estimates are generally based on historical experience and various other assumptions that are judged to be reasonable in light of the relevant facts and circumstances. Because of the uncertainty inherent in such estimates, actual results may differ. We believe our critical accounting estimates include accounting for business combinations, revenue recognition, and inventory. Business Combinations.
Our estimates are generally based on historical experience and various other assumptions that are judged to be reasonable in light of the relevant facts and circumstances. Because of the uncertainty inherent in such estimates, actual results may differ. We believe our critical accounting estimates include accounting for goodwill valuation, revenue recognition, and inventory valuation. Goodwill.
If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known. Inventory.
If actual amounts of consideration ultimately received differ from the Company’s estimates, the Company adjusts these estimates, which would affect net revenue in the period such adjustments become known. 49 Table of Contents Inventory.
The terms of the applicable credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture. We were in compliance with our debt covenants at December 31, 2022.
The terms of the applicable 45 Table of Contents credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture. We were in compliance with our debt covenants at December 31, 2023.
The Recall has caused us, and may continue to cause us, to incur significant costs, some or all of which may not be recoverable fro m the product manufacturer.
The Recall has caused us, and may continue to cause us, to incur significant costs, some or all of which may not be recoverable from the product manufacturer.
DS&A expenses also included a favorable impact for foreign currency translation of $5.7 million for the year ended December 31, 2022 as compared to the prior year. 35 Acquisition-related charges were $48.1 million for the year ended December 31, 2022 as compared to $3.0 million for the year ended December, 31, 2021.
DS&A expenses also included a favorable impact from foreign currency translation of $0.7 million for the year ended December 31, 2023 as compared to the prior year. Acquisition-related charges were $17.5 million for the year ended December 31, 2023 as compared to $48.1 million for the year ended December, 31, 2022.
We believe cash generated by operating activities, available financing sources, and borrowings under the Receivables Financing Agreement and Revolving Credit 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.
We believe cash generated by operating activities, including available cash proceeds from the RPA, available financing sources, and borrowings under the Receivables Financing Agreement and Revolving Credit Agreement, as well as cash on hand, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, debt repurchases and other cash requirements.
Cash used for investing activities in 2022 included cash paid for the acquisition of Apria of $1.7 billion and capital expenditures of $167 million for patient equipment and our strategic and operational efficiency initiatives associated with property and equipment and capitalized software, partially offset by $48.4 million in proceeds related primarily to the sale of patient equipment.
Cash used for investing activities in 2022 included net cash paid for the 44 Table of Contents acquisition of Apria of $1.7 billion and capital expenditures of $167 million for patient service equipment and our strategic and operational efficiency initiatives, partially offset by $48.4 million in proceeds related to the sale of primarily patient service equipment.
At December 31, 2022 and 2021, we had maximum revolving borrowing capacity of $354 million and $100 million available under our Receivable 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).
At December 31, 2023 and 2022, we had maximum revolving borrowing capacity of $450 million and $354 million available under our Receivables Financing Agreement. The Revolving Credit Agreement provides a revolving borrowing capacity of $450 million. We have $910 million in outstanding term loans under a term loan credit agreement (the Credit Agreement).
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. 38 We earn a portion of our operating income in foreign jurisdictions outside the United States.
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 also had letters of credit and bank guarantees, which were issued outside of the Revolving Credit Agreement for $2.3 million and $2.2 million as of December 31, 2022 and 2021, which supports certain leased facilities as well as other normal business activities in the United States and Europe.
We also had letters of credit and bank guarantees, which support certain leased facilities as well as other normal business activities in the U.S. and Europe that were issued outside of the Revolving Credit Agreement for $3.0 million and $2.3 million as of December 31, 2023 and 2022.
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. At December 31, 2022 and 2021, we had borrowings of $96.0 million and $200 million outstanding under our Receivables Financing Agreement.
Under the Receivables Financing Agreement, certain of our accounts receivable balances are sold to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Financing Agreement matures in March 2025. We had no borrowings at December 31, 2023 and $96.0 million outstanding at December 31, 2022 under our amended Receivables Financing Agreement.
Foreign currency translation had an unfavorable impact on net revenue of $43.5 million for the year ended December 31, 2022 as compared to the prior year. 34 Cost of goods sold.
Foreign currency translation had an unfavorable impact on net revenue of $5.3 million for the year ended December 31, 2023 as compared to the prior year.
The 2022 figure reflects the $92.3 million inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic. Liquidity and capital expenditures.
The decrease in inventory days as of December 31, 2023 is due to inventory management efforts in our Products & Healthcare Services segment. The 2022 figure reflects a $92.3 million inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic.
Philips Respironics issued a subsequent voluntary recall in December 2022 (together with the June 2021 recall, the Recall), related to deficiencies in repairs made to certain of the ventilators that had been recalled in June 2021.
The FDA has since identified this as a Class I recall, the most serious category of recall. Philips Respironics issued a subsequent voluntary recall in December 2022 (together with the June 2021 recall, the Recall), related to deficiencies in repairs made to certain of the ventilators that had been recalled in June 2021.
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).
We have from time to time, entered into, and from time to time in the future, 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).
Net income per diluted share was unfavorably impacted as compared to the prior year by foreign currency translation in the amount of $0.16 for the year ended December 31, 2022.
Net (loss) per share was unfavorably impacted as compared to the prior year by foreign currency translation in the amount of $0.04 for the year ended December 31, 2023. Products & Healthcare Services segment operating income was $57.8 million for the year ended December 31, 2023, compared to $175 million for the year ended December 31, 2022.
Other expense, net . For the years ended December 31, Change (Dollars in thousands) 2022 2021 $ % Other expense, net $ 3,131 $ 3,196 $ (65) (2.0) % Other expense, net in 2022 and 2021 represented interest cost and net actuarial losses related to our retirement plans. Income taxes.
Other expense, net. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) ​ 2023 2022 $ % Other expense, net $ 4,837 $ 3,131 $ 1,706 54.5 % ​ Other expense, net in 2023 and 2022 primarily represented interest cost and net actuarial losses related to our retirement plans.
The Receivables Financing Agreement provides a maximum revolving borrowing capacity of $450 million. The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement).
The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement, as further amended by the Fifth Amendment to the Receivables Financing Agreement).
Our cash and cash equivalents held by our foreign subsidiaries subject to repatriation totaled $26.3 million and $26.9 million at December 31, 2022 and 2021. As of December 31, 2022, we are permanently reinvested in our foreign subsidiaries.
We earn a portion of our operating income in foreign jurisdictions outside the U.S. Our cash and cash equivalents held by our foreign subsidiaries subject to repatriation totaled $22.0 million and $26.3 million at December 31, 2023 and 2022. As of December 31, 2023, we are permanently reinvested in our foreign subsidiaries.
Contractual Obligations As of December 31, 2022, material cash requirements, including known contractual and other obligations, in the next twelve months were primarily comprised of $100 million in operating leases, $73.0 million in fixed interest payments on our outstanding senior notes, $32.6 million in purchase obligations related to outsourced information technology operations, $15.4 million in principal debt payments, $3.6 million in retirement plan benefits, based on the same assumptions used to measure our year-end benefit obligation, and $3.6 million in finance leases.
Additionally, as of December 31, 2023, material cash requirements, including known contractual and other obligations, due beyond the next twelve months were primarily comprised of $1.9 billion in principal debt payments excluding finance leases, $284 million in fixed interest payments on our outstanding senior notes, $256 million in operating leases and $31.1 million in 46 Table of Contents U.S. retirement plan benefits, based on the same assumptions used to measure our year-end benefit obligation .
Our business 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.
We report our business under two segments: Products & Healthcare Services and Patient Direct. The Products & Healthcare Services segment includes our U.S. distribution division (Medical Distribution), including outsourced logistics and value-added services, and Global Products division which manufactures and sources medical surgical products through our production and kitting operations.
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 or Receivables Securitization Program, or a combination thereof of approximately $28 million.
We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our Revolving Credit Agreement or Receivables Financing Agreement, or a combination thereof of approximately $29 million.
For the years ended December 31, Change (Dollars in thousands) 2022 2021 $ % Income tax (benefit) provision $ (11,498) $ 55,165 $ (66,663) (120.8) % Effective tax rate (105.6) % 19.9 % The change in the effective tax rate for the year ended December 31, 2022 compared to 2021 resulted primarily from changes in income and losses and a change in our foreign repatriation plans related to the indefinite reinvestment of earnings associated with a subsidiary in Thailand. 36 Financial Condition, Liquidity and Capital Resources Financial condition.
Income taxes. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) ​ 2023 2022 ​ $ % Income tax benefit $ (13,425) $ (11,498) $ (1,927) (16.8) % Effective tax rate ​ 24.5 % ​ (105.6) % ​ ​ ​ ​ ​ ​ 43 Table of Contents The change in the effective tax rate for the year ended December 31, 2023 compared to 2022 resulted primarily from changes in income and losses and a change in our foreign repatriation plans related to indefinite reinvestments of earnings associated with a subsidiary in Thailand in 2022.
Summarized financial information of the Collateral Group is as follows: Summarized Consolidated Balance Sheet - Collateral Group December 31, 2022 (Dollars in thousands) Total current assets $ 1,523,290 Total assets 4,614,380 Current liabilities 1,562,680 Total liabilities 4,343,750 The results of operations of the Collateral Group are not materially different from the corresponding amounts presented in our consolidated statements of operations.
Summarized financial information of the Collateral Group is as follows: Summarized Consolidated Balance Sheets – Collateral Group ​ ​ ​ ​ (Dollars in thousands) ​ December 31, 2023 Total current assets ​ $ 1,280,045 Total assets ​ 4,220,357 Total current liabilities ​ 1,821,030 Total liabilities ​ 3,801,549 47 Table of Contents ​ The results of operations of the Collateral Group are not materially different from the corresponding amounts presented in our consolidated statements of operations.
Amounts in 2022 consisted primarily of severance and other charges associated with the reorganization of the Products & Healthcare Services segment and wind-down costs related to Fusion5. Amoun ts in 2021 consisted of wind-down costs related to Fusion5, IT restructuring charges, costs associated with our strategic organizational realignment, and other items.
Amounts in 2022 consisted primarily of severance and other charges associated with the reorganization of the Products & Healthcare Services segment and wind-down costs related to Fusion5. We expect to incur material future costs relating to our Operating Model Realignment Program and IT strategic initiatives, which we are not able to reasonably estimate.
Payments for taxes related to the vesting of restricted stock awards were $45.0 million and $20.2 million during 2022 and 2021, which are included in Other, net. Capital resources. Our primary sources of liquidity include cash and cash equivalents, our Receivables Financing Agreement, and our Revolving Credit Agreement.
Gross issuances and repayments under our amended Receivables Financing Agreement program were $1.0 billion and $1.2 billion during 2022. We also paid $42.6 million in financing costs during 2022. Payments for taxes related to the vesting of restricted stock awards were $10.4 million and $45.0 million during 2023 and 2022, which are included in Other, net. Capital resources.
Foreign currency translation had an unfavorable impact on gross margin of $21.7 million for the year ended December 31, 2022 as compared to the prior year. We value a portion of Products & Healthcare Services inventory held in the United States under the LIFO method.
Foreign currency translation had an unfavorable impact on gross margin of $4.4 million for the year ended December 31, 2023 as compared to the prior year.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in North America, Europe, and Asia. Changes in our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in North America, Europe, and Asia.
Had inventory been valued under the first-in, first-out (FIFO) method, gross margin as a percentage of net revenue would have been 6 basis points higher in 2022 and 56 basis points higher in 2021. Operating expenses.
We value a portion of Products & Healthcare Services inventory held in the U.S. under the LIFO method. Had inventory been valued under the first-in, first-out (FIFO) method, cost of goods sold as a percentage of net revenue would have been 2 basis points lower in 2023 and 6 basis points lower in 2022.
The following table summarizes our consolidated statements of cash flows for the year ended December 31, 2022 and 2021: For the years ended December 31, (Dollars in thousands) 2022 2021 Net cash provided by (used for): Operating activities $ 325,006 $ 124,177 Investing activities (1,804,476) (53,630) Financing activities 1,497,105 (129,478) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (3,485) (3,540) Net increase (decrease) in cash, cash equivalents and restricted cash $ 14,150 $ (62,471) Cash provided by operating activities in 2022 and 2021 reflected cash generated by net income along with changes in working capital.
The following table summarizes our consolidated statements of cash flows for the year ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ December 31, (Dollars in thousands) ​ 2023 2022 Net cash provided by (used for): ​ ​ Operating activities ​ $ 740,710 ​ $ 325,006 Investing activities ​ (137,254) ​ (1,804,476) Financing activities ​ (417,330) ​ 1,497,105 Effect of exchange rate changes ​ 613 ​ (3,485) Net increase in cash, cash equivalents and restricted cash ​ $ 186,739 ​ $ 14,150 ​ Cash provided by operating activities for the year ended December 31, 2023 of $741 million was primarily from continued optimization of our inventory levels generating $224 million of operating cash flow and a $167 million reduction in accounts receivable, net from $124 million of net cash proceeds under the RPA along with improved collections.
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. While the equipment shortage in the industry has begun to ease for certain CPAP and BiLevel positive airway pressure devices, we do not know whether that will continue.
While the equipment shortage in the industry has begun to ease for certain CPAP and BiLevel positive airway pressure devices, we do not know whether that will 39 Table of Contents 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.
Summarized financial information of the Guarantor Group is as follows: Summarized Consolidated Statement of Operations - Guarantor Group For the year ended December 31, 2022 (Dollars in thousands) Net revenue (1) $ 9,736,450 Gross margin 1,718,719 Operating income 111,754 Net income 1,984 (1) Includes $248 million in sales to non-guarantor subsidiaries for the year ended December 31, 2022. 39 Summarized Consolidated Balance Sheet - Guarantor Group December 31, 2022 (Dollars in thousands) Total current assets $ 1,442,661 Total assets 4,658,382 Current liabilities 1,613,228 Total liabilities 4,360,673 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.
Summarized Consolidated Balance Sheets – Guarantor Group ​ ​ ​ ​ (Dollars in thousands) ​ December 31, 2023 Total current assets ​ $ 1,472,999 Total assets ​ 4,601,026 Total current liabilities ​ 2,002,468 Total liabilities ​ 4,243,230 ​ ​ The following tables present summarized financial information for Owens & Minor, Inc. and the pledged subsidiaries of Owens & Minor, Inc.’s 2024 Notes 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.
(2) Based on year end merchandise inventories and cost of goods sold for the fourth quarter ended December 31, 2022, 2021 and 2020. The 2022 figure reflects the $92.3 million inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic.
(2) Based on year end merchandise inventories and cost of goods sold for the fourth quarter ended December 31, 2023, 2022 and 2021. The decrease in inventory days as of December 31, 2023 is due to inventory management efforts in our Products & Healthcare Services segment.
Cash provided by financing activities in 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), compared to $575 million in proceeds related to the 4.500% senior unsecured notes due in 2029 (the 2029 Unsecured Notes) and the accounts receivable securitization program during 2021.
Cash provided by financing activities in 2022 included proceeds from borrowings of $1.7 billion related to the 2030 Unsecured Notes, Term Loan A, and Term Loan B, and borrowings under our revolving credit facility, net and Receivables Financing Agreement of $30.0 million. Repayments of debt during 2022 included $4.5 million on our Term Loan B.
At December 31, 2022 and 2021, we had $422 million and $291 million available for borrowing under our Revolving Credit Agreement.
At December 31, 2023, and December 31, 2022, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce revolver availability, of $27.4 million and $27.9 million, leaving $423 million and $422 million available for borrowing.
Acquisition-related charges in 2022 and 2021 consisted primarily of costs related to the Apria Acquisition. Exit and realignment charges were $6.9 million and $31.1 million for the years ended Decemb er 31, 2022 and 2021.
Intangible amortization was $83.5 million and $78.8 million for the years ended December 31, 2023 and 2022 and related primarily to intangible assets acquired in the Apria, Halyard, and Byram acquisitions. Exit and realignment charges were $99.1 million and $6.9 million for the years ended December 31, 2023 and 2022.
Patient Direct segment operating income was $194 million for the year ended December 31, 2022, compared to $58.0 million for the year ended December 31, 2021.
Patient Direct segment operating income was $247 million for the year ended December 31, 2023, compared to $194 million for the year ended December 31, 2022. The increase was primarily the result of the inclusion of a full year of Apria results in 2023, strong organic revenue growth and operating efficiencies.
December 31, Change (Dollars in thousands) 2022 2021 $ % Cash and cash equivalents $ 69,467 $ 55,712 $ 13,755 24.7 % Accounts receivable, net $ 763,497 $ 681,564 $ 81,933 12.0 % Days sales outstanding (1) 27.0 24.6 Merchandise inventories $ 1,333,585 $ 1,495,972 $ (162,387) (10.9) % Inventory days (2) 57.2 64.7 Accounts payable $ 1,147,414 $ 1,001,959 $ 145,455 14.5 % (1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2022 and 2021 (2) Based on year end merchandise inventories and cost of goods sold for the fourth quarter ended December 31, 2022 and 2021.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) ​ 2023 2022 $ % Cash and cash equivalents ​ $ 243,037 ​ $ 69,467 ​ $ 173,570 ​ 249.9 % Accounts receivable, net ​ $ 598,257 ​ $ 763,497 ​ $ (165,240) ​ (21.6) % DSO (1) ​ ​ 20.5 ​ ​ 27.0 ​ ​ ​ ​ ​ ​ Merchandise inventories ​ $ 1,110,606 ​ $ 1,333,585 ​ $ (222,979) ​ (16.7) % Inventory days (2) ​ ​ 49.0 ​ ​ 57.2 ​ ​ ​ ​ ​ ​ Accounts payable $ 1,171,882 $ 1,147,414 $ 24,468 2.1 % (1) Based on year end accounts receivable and net revenue for the fourth quarter ended December 31, 2023 and 2022.
Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Annual Report on Form 10-K generally d iscusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
The 2022 figure reflects a $92.3 million inventory valuation adjustment in our Products & Healthcare Services segment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic. ​ 40 Table of Contents Results of Operations Our Management’s Discussion and Analysis of Financial Condition and Results of Operations within this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Additionally, as of December 31, 2022, material cash requirements, including known contractual and other obligations, due beyond the next twelve months were primarily comprised of $2.5 billion in principal debt payments, $377 million in fixed interest payments on our outstanding senior notes, $262 million in operating leases, which excludes $40.2 million of legally binding lease payments for the Morgantown, West Virginia center of excellence lease not yet commenced, $48.0 million in purchase obligations related to outsourced information technology operations, $35.7 million in retirement plan benefits, based on the same assumptions used to measure our year-end benefit obligation, and $14.3 million in finance leases.
Contractual Obligations As of December 31, 2023, material cash requirements, including known contractual and other obligations, in the next twelve months were primarily comprised of $204 million in principal debt payments, $113 million in operating leases and $65.3 million in fixed interest payments on our outstanding senior notes.
We do not expect material additional costs in 2023 for activities that were initiated through December 31, 2022. We expect material costs in 2023 for new actions taken in 2023. The change in other operating income, net for the year ended December 31, 2022 includes the impact of foreign currency transaction losses, as compared to prior year gains.
During the year ended December 31, 2023, we incurred an unfavorable change of $1.4 million in foreign currency transaction gains and losses, net of derivative adjustments, as compared to the prior year.
For the years ended December 31, Change (Dollars in thousands) 2022 2021 $ % Interest expense, net $ 128,891 $ 48,090 $ 80,801 168.0 % Effective interest rate 5.70 % 4.61 % Interest expense, net and the effective interest rate for the year ended December 31, 2022 increased primarily due to the increase in debt associated with the Apria Acquisition on March 29, 2022, along with rising market interest rates.
Interest expense, net. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) ​ 2023 2022 $ % Interest expense, net ​ $ 157,915 ​ $ 128,891 ​ $ 29,024 ​ 22.5 % Effective interest rate ​ 6.96 % 5.70 % ​ ​ ​ The increase in interest expense was primarily from the rise in the effective interest rate which increased interest expense by $29.7 million, and was driven primarily from higher interest rates on our term loans, net of the interest rate swap.
Beginning in 2022, we have reported financial results using this two segment structure and have recast our prior period segment results on the sa me basis. Net income per diluted share was $0.29 for the year ended December 31, 2022 as compared to $2.94 for the year ended December 31, 2021.
The Patient Direct segment includes our home healthcare divisions (Byram and Apria). Net (loss) per share was ($0.54) for the year ended December 31, 2023 as compared to net income per diluted share of $0.29 for the year ended December 31, 2022.
Cash used for investing activities in 2021 included capital expenditures of $49.7 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas and Thailand, as well as capitalized software.
Cash used for investing activities in 2023 included capital expenditures of $208 million for patient service equipment and our strategic and operational efficiency initiatives, partially offset by $71.6 million in proceeds related to the sale of primarily patient service equipment.
Segment operating incomes exclude adjustments noted in Note 20, "Segments", in Notes to Consolidated Financial Statements, including a $92.3 million (approximately $69.6 million, net of tax) inventory valuation adjustment, primarily associated with PPE inventory built up and a subsequent decline in demand as a result of the COVID-19 pandemic.
These were partially offset by the non-recurrence of the 2022 inventory valuation allowance adjustment of $92.3 million primarily associated with PPE inventory built up and subsequent decline in demand as a result of the COVID-19 pandemic, Patient Direct segment operating income growth of $53.1 million as outlined below and lower acquisition-related charges and intangible amortization of $25.9 million.
Discussions of year-to-year comparisons between 2021 and 2020 can be found in Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated by reference herein. 2022 compared to 2021 Net revenue.
Discussions of year-to-year comparisons between 2022 and 2021 can be found in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated by reference herein. 2023 compared to 2022 Net revenue. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) ​ 2023 2022 $ % Products & Healthcare Services ​ $ 7,781,395 ​ $ 7,898,397 ​ $ (117,002) ​ (1.5) % Patient Direct ​ 2,552,572 ​ 2,057,078 ​ ​ 495,494 ​ 24.1 % Net revenue ​ $ 10,333,967 ​ $ 9,955,475 ​ $ 378,492 ​ 3.8 % ​ The increase in net revenue for the year ended December 31, 2023 was driven primarily by $308 million in incremental net revenue due to the inclusion of a full year of Apria results in 2023 and strong organic revenue growth of $187 million in our Patient Direct segment, driven by growth across a number of product categories as compared to the prior year as a result of new patient starts and high retention of customers.
Philips Respironics Recall In June 2021, one of Apria's suppliers, Philips Respironics, announced a voluntary recall for continuous and non-continuous ventilators (certain 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.
In addition, these matters could potentially have other negative impacts including: government investigations and enforcement actions by the FDA or other U.S. or international regulators or governmental entities; the suspension or revocation of the authority to produce, distribute or sell products, and other sanctions; losses due to patient claims, including product liability claims and lawsuits; and customer claims related to their direct costs arising from supply disruption. ​ Philips Respironics Recall In June 2021, one of Apria’s suppliers, Philips Respironics, announced a voluntary recall for continuous and non-continuous ventilators (certain CPAP, BiLevel positive airway pressure and ventilator devices) related to polyurethane foam used in those devices.
Due to the uncertainty of forecasting variable interest rate payments, interest payment amounts on our variable rate debt are excluded from the contractual obligations disclosed in this section. See Note 8, "Leases", Note 10, "Debt", Note 12, "Retirement Plans", Note 14, "Income Taxes", and Note 18, "Commitments and Contingencies" of the Notes to Consolidated Financial Statements.
We cannot reasonably estimate the timing of cash settlement for the liability associated with unrecognized tax benefits, which was $22.7 million as of December 31, 2023. Due to the uncertainty of forecasting variable interest rate payments, interest payment amounts on our variable rate debt are excluded from the contractual obligations disclosed in this section.
For the years ended December 31, Change (Dollars in thousands) 2022 2021 $ % Loss on extinguishment of debt $ — $ 40,433 $ (40,433) (100.0) % Loss on extinguishment of debt for the year ended December 31, 2021 included 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.
Gain on extinguishment of debt. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ Change (Dollars in thousands) 2023 2022 $ % Gain on extinguishment of debt ​ $ (3,518) ​ $ — ​ $ (3,518) ​ (100.0) % ​ Gain on extinguishment of debt for the year ended December 31, 2023 represented the gain associated with early retirement of indebtedness of $314 million.
Removed
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.
Added
The decrease reflected the decline in Products & Healthcare Services segment operating income of $118 million as described below, incremental exit and realignment charges of $92.2 million primarily related to our Operating Model Realignment Program and information technology (IT) strategic initiatives and higher interest expense of $29.0 million.
Removed
Products & Healthcare Services segment operating income was $175 million for the year ended December 31, 2022, compared to $384 million for the year ended December 31, 2021.
Added
The decrease reflected lower PPE net revenues, including COVID-19 related product purchases declining from elevated levels during the first half of 2022 and losses on sales of accounts receivable under the RPA in the amount of $10.6 million, partially offset by a benefit in excess of $40 million from the Operating Model Realignment Program, along with productivity gains derived from operating efficiencies.
Removed
The decrease reflected overall reduced hospital demand, including reliance on stockpiles, and price changes, particularly for gloves , and headwinds created by macroeconomic conditions, including inflationary pressures, supply chain issues, and rising interest rates, partially offset by productivity gains derived from operating efficiencies, and changes in accrued incentive compensation.
Added
On a consolidated basis, teammate benefit costs increased by $57.4 million, which impacted both segments. Segment operating incomes exclude adjustments noted in Note 17, “Segments”, in Notes to Consolidated Financial Statements. Refer to 'Results of Operations' for further detail of quantitative and qualitative drivers of our results.
Removed
The increase was primarily the result of the inclusion of Apria in the Patient Direct segment since March 29, 2022 (the Acquisition Date), strong revenue growth in our Byram business, leveraging our fixed costs, and operating efficiencies, partially offset by inflationary pressures.
Added
O&M Halyard N95 Mask FDA Release ​ On April 5, 2023, we received a communication from the National Institute for Occupational Safety & Health (NIOSH) that products from one lot of a model (No. 46827) of surgical N95 respirator manufactured by O&M Halyard did not pass laboratory tests for fluid resistance and for filtration efficiency, and that products from one lot of another model (No. 46727) did not pass fluid resistance testing, but did pass filtration efficiency testing.
Removed
Acquisition of Apria On the Acquisition Date, we completed the Apria Acquisition, in which we acquired 100% of Apria 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.
Added
Our investigation determined that a limited number of lots were potentially implicated by the results of the NIOSH particulate filtration testing on model No. 46827, and that the vast majority of the products in those lots remained in our possession and under our control. Those lots have been segregated for disposal.
Removed
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.
Added
We also determined that a limited quantity of products from one lot did reach the market. Although products from that lot passed internal and external follow-up testing for filtration 38 Table of Contents efficiency, we initiated a voluntary recall of the lot on August 9, 2023 out of an abundance of caution.
Removed
COVID-19 Update We continue to closely monitor the impact of COVID-19, including its variants and sub-variants, on all aspects of our business, including our customers, teammates, suppliers, vendors and distribution channels.
Added
O&M Halyard has confirmed to NIOSH that the particle filtration issue was isolated to the identified lots. ​ On April 12, 2023, the FDA recommended that consumers, health care providers, and facilities not use the two models (model numbers 46827 and 46727) of O&M Halyard surgical N95 respirators due to concerns about fluid resistance performance.
Removed
We have taken actions to protect our teammates while maintaining business continuity as we respond to the needs from this global pandemic and may take further actions that may alter our business operations.
Added
In addition, the FDA also recommended against using certain of our surgical, procedure and pediatric face masks when fluid resistance is required. On or about that date, we voluntarily stopped the sale in the U.S. of the above-referenced surgical N95 respirators and similar models pending our investigation of the performance issues identified by the FDA and NIOSH.
Removed
We are unable to predict the timing and the full impact that COVID-19 and any new pandemic(s) will have on our future operating results, financial position and cash flows due to numerous varia bles and continued uncertainties.
Added
Regulatory bodies in other non-U.S. markets where we sell our facial protection products have inquired about the relevance of the FDA notification to products sold in their countries. The FDA updated its recommendation on April 21, 2023, to permit use of the model No. 46727 of Halyard N95 respirators when fluid resistance is not required.
Removed
Transportation and business operation restrictions arising from virus containment efforts of governments around the world have impacted 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 created supply chain challenges resulting in additional direct costs.
Added
These items are included in our Products & Healthcare Services segment. ​ On September 29, 2023, the FDA updated its previous recommendation to consumers, health care providers and facilities regarding the above-referenced models of O&M Halyard surgical N95 respirators based on extensive testing and performance data provided by O&M Halyard.
Removed
We have experienced growth in sales volumes for certain of our products (such as PPE) during the COVID-19 pandemic, as well as improved productivity and manufacturing output. During the COVID-19 pandemic, customers, state 32 agencies and the federal government purchased a significant amount of PPE to serve patients, and to build stockpiles of product.
Added
Specifically, the FDA stated that both O&M Halyard respirator models could be used according to the product labeling for respiratory and fluid barrier protection to the wearer (excluding the one lot of products that O&M Halyard voluntarily recalled on August 9, 2023).
Removed
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.
Added
Following the FDA’s update, we published a user notice on our website announcing the resumption of sales and shipments of O&M Halyard surgical N95 respirators, noting that the data provided to the FDA and NIOSH demonstrated that our products provide the levels of particle filtration and fluid resistance for which they are rated.

… 76 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−1 removed3 unchanged
Biggest changeAs of December 31, 2022 and 2021, we held contracts with notional amounts of $58.3 million and $9.7 million to exchange the U.S. dollar, Euro, and Thai baht. We are exposed to market risk from changes in interest rates related to our borrowing under our Revolving Credit Agreement and Receivables Financing Agreement.
Biggest changeWe are exposed to market risk from changes in interest rates related to our borrowing under our Revolving Credit Agreement and Receivables Financing Agreement, and related to our participation in the RPA.
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.
In the normal course of business, we are exposed to foreign currency translation and transaction risks. Our business transactions outside of the U.S. 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.
Due to the nature and pricing of our distribution and delivery 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.
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.
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 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. 41
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 changes in fuel prices.
E xcluding deferred financing costs and third party fees, we had $500 million in borrowings under our Term Loan A, $596 million in borrowings under our Term Loan B, no borrowings under our Revolving Credit Agreement, $96.0 million in borrowings under our Receivables Financing Agreement at December 31, 2022.
Excluding deferred financing costs and third party fees, we had $393 million in borrowings under our Term Loan A, $517 million in borrowings under our Term Loan B, and no borrowings under our Revolving Credit Agreement and under our amended Receivables Financing Agreement at December 31, 2023.
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 $7.9 million per year based on our borrowings outstanding at December 31, 2022.
After considering the effects of our interest rate swap agreement (See Note 12 of Notes to Consolidated Financial Statements), we estimate an increase in interest rates of 100 basis points would result in a potential reduction in future pre-tax earnings of approximately $7.6 million per year based on our borrowings at December 31, 2023 and the maximum aggregate outstanding accounts receivable amount of $200 million under the RPA.
Weekly Retail On-Highway Diesel Prices (benchmark) as quoted by the U.S. Energy Information Administration. The benchmark averaged $5.01 per gallon for 2022, an increase from $3.29 per gallon in 2021.
Weekly Retail On-Highway Diesel Prices (benchmark) as quoted by the U.S. Energy Information Administration. The benchmark averaged $4.20 per gallon for 2023, a decrease from $5.01 per gallon in 2022. Based on business activity in 2023, we estimate that every 10 cents per gallon increase in the benchmark would reduce our annual operating income by approximately $0.6 million.
Removed
Based on our fuel consumption in 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.
Added
As of December 31, 2023 and 2022, we held contracts with notional amounts of $78.4 million and $58.3 million to exchange the U.S. dollar, Euro, Thai baht and other currencies. See Note 12 of Notes to Consolidated Financial Statements.
Added
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. 50 Table of Contents

Other ACH 10-K year-over-year comparisons