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2020-09-30
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________ 
FORM 10-Q
________________________________________________ 
 
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-9810
_______________________________________________________
Owens & Minor, Inc.
(Exact name of Registrant as specified in its charter)
_______________________________________________________
Virginia 54-1701843
(State or other jurisdiction of
incorporation or organization) 		(I.R.S. Employer
Identification No.)
9120 Lockwood Boulevard Mechanicsville Virginia 23116
(Address of principal executive offices) (Zip Code)
Post Office Box 27626,
Richmond, Virginia 		23261-7626
(Mailing address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (804) 723-7000
    Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $2 par value per share OMI New York Stock Exchange
_________________________________________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒     No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “larger accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer
☐  (Do not check if a smaller reporting company)
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐   No  ☒
The number of shares of Owens & Minor, Inc.’s common stock outstanding as of October 31, 2021, was 75,455,760 shares.


Table of Contents
Owens & Minor, Inc. and Subsidiaries
Index
 
Page
Item 1.
3
3
4
5
6
7
8
Item 2.
20
Item 3.
29
Item 4.
30
Item 1.
30
Item 1A.
30
Item 2.
32
Item 6.
32
2

Table of Contents
Part I. Financial Information
Item 1. Financial Statements
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
 
  Three Months Ended
 September 30, 		Nine Months Ended
September 30,
(in thousands, except per share data) 2021 2020 2021 2020
Net revenue $ 2,502,175  $ 2,187,928  $ 7,318,169  $ 6,118,340 
Cost of goods sold 2,173,336  1,843,589  6,146,511  5,236,035 
Gross margin 328,839  344,339  1,171,658  882,305 
Distribution, selling and administrative expenses 262,457  262,538  849,255  758,320 
Acquisition-related and exit and realignment charges 6,380  6,382  20,967  18,500 
Other operating income, net (2,873) (134) (5,016) (3,020)
Operating income 62,875  75,553  306,452  108,505 
Interest expense, net 11,572  20,975  36,784  65,923 
Loss on extinguishment of debt —  308  40,433  2,580 
Other expense (income), net 799  785  2,397  (1,193)
Income from continuing operations before income taxes 50,504  53,485  226,838  41,195 
Income tax provision 6,375  7,404  47,224  3,863 
Income from continuing operations, net of tax 44,129  46,081  179,614  37,332 
Loss from discontinued operations, net of tax —  —  —  (58,203)
Net income (loss) $ 44,129  $ 46,081  $ 179,614  $ (20,871)
Basic income (loss) per common share:
Income from continuing operations $ 0.60  $ 0.76  $ 2.47  $ 0.61 
Loss from discontinued operations —  —  —  (0.95)
Net income (loss) $ 0.60  $ 0.76  $ 2.47  $ (0.34)
Diluted income (loss) per common share:
Income from continuing operations $ 0.58  $ 0.76  $ 2.38  $ 0.61 
Loss from discontinued operations —  —  —  (0.95)
Net income (loss) $ 0.58  $ 0.76  $ 2.38  $ (0.34)
See accompanying notes to consolidated financial statements.
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Table of Contents
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
 
Three Months Ended
 September 30, 		Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
Net income (loss) $ 44,129  $ 46,081  $ 179,614  $ (20,871)
Other comprehensive income (loss), net of tax:
Currency translation adjustments (12,014) 5,173  (26,724) 7,003 
Change in unrecognized net periodic pension costs 395  167  552  932 
Change in gains and losses on derivative instruments —  1,681  20,044  (9,792)
Total other comprehensive income (loss), net of tax (11,619) 7,021  (6,128) (1,857)
Comprehensive income (loss) $ 32,510  $ 53,102  $ 173,486  $ (22,728)
    
See accompanying notes to consolidated financial statements.
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Table of Contents
Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
 
September 30, December 31,
(in thousands, except per share data) 2021 2020
Assets
Current assets
Cash and cash equivalents $ 39,759  $ 83,058 
Accounts receivable, net of allowances of $19,273 and $19,087
759,744  700,792 
Merchandise inventories 1,514,387  1,233,751 
Other current assets 84,335  118,264 
Total current assets 2,398,225  2,135,865 
Property and equipment, net of accumulated depreciation of $320,389 and $284,126
308,463  315,662 
Operating lease assets 184,554  144,755 
Goodwill 386,693  394,086 
Intangible assets, net 209,789  243,351 
Other assets, net 96,395  101,920 
Total assets $ 3,584,119  $ 3,335,639 
Liabilities and equity
Current liabilities
Accounts payable $ 1,118,753  $ 1,000,186 
Accrued payroll and related liabilities 100,171  109,447 
Other current liabilities 206,094  236,094 
Total current liabilities 1,425,018  1,345,727 
Long-term debt, excluding current portion 959,485  986,018 
Operating lease liabilities, excluding current portion 154,009  119,932 
Deferred income taxes 37,093  50,641 
Other liabilities 121,509  121,267 
Total liabilities 2,697,114  2,623,585 
Commitments and contingencies
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 75,429 shares and 73,472 shares
150,858  146,944 
Paid-in capital 434,952  436,597 
Retained earnings 345,832  167,022 
Accumulated other comprehensive loss (44,637) (38,509)
Total equity 887,005  712,054 
Total liabilities and equity $ 3,584,119  $ 3,335,639 
See accompanying notes to consolidated financial statements.
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Table of Contents
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
 
Nine Months Ended September 30,
(in thousands) 2021 2020
Operating activities:
Net income (loss) $ 179,614  $ (20,871)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization 68,142  69,494 
Share-based compensation expense 19,078  15,275 
Loss on divestiture —  65,472 
Loss on extinguishment of debt
40,433  2,580 
Provision for losses on accounts receivable 19,270  9,583 
Deferred income tax (benefit) expense (18,286) 25,017 
Changes in operating lease right-of-use assets and lease liabilities 1,190  (1,328)
Changes in operating assets and liabilities:
Accounts receivable (84,381) (20,173)
Merchandise inventories (284,188) 52,605 
Accounts payable 120,821  136,156 
Net change in other assets and liabilities (8,341) (69,117)
Other, net 20,484  3,503 
Cash provided by operating activities 73,836  268,196 
Investing activities:
Proceeds from divestiture —  133,000 
Additions to property and equipment (26,446) (21,678)
Additions to computer software (6,179) (4,702)
Proceeds from sale of property and equipment 41  178 
Proceeds from cash surrender value of life insurance policies —  6,032 
Cash (used for) provided by investing activities (32,584) 112,830 
Financing activities:
Proceeds from issuance of debt 574,900  150,000 
Repayments under revolving credit facility, net (90,900) (107,900)
Repayments of debt (553,140) (270,399)
Financing costs paid (13,912) (10,367)
Cash dividends paid (548) (467)
Payment for termination of interest rate swaps
(15,434) — 
Other, net (18,188) (5,822)
Cash used for financing activities (117,222) (244,955)
Effect of exchange rate changes on cash and cash equivalents (2,454) 6,721 
Net (decrease) increase in cash, cash equivalents and restricted cash (78,424) 142,792 
Cash, cash equivalents and restricted cash at beginning of period 134,506  84,687 
Cash, cash equivalents and restricted cash at end of period $ 56,082  $ 227,479 
Supplemental disclosure of cash flow information:
Income taxes paid (received), net of refunds $ 83,606  $ (1,892)
Interest paid $ 32,035  $ 61,271 
    

See accompanying notes to consolidated financial statements.
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Table of Contents
Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Changes in Equity
(unaudited)
 
(in thousands, except per share data) Common
Shares
Outstanding
Common 
Stock
($2 par value )
Paid-In
Capital 		Retained
Earnings 		Accumulated
Other
Comprehensive Loss 		Total
Equity
Balance, December 31, 2020 73,472  $ 146,944  $ 436,597  $ 167,022  $ (38,509) $ 712,054 
Net income 69,589  69,589 
Other comprehensive income 7,903  7,903 
Dividends declared ($0.0025 per share)
(434) (434)
Share-based compensation expense, exercises and other 1,628  3,256  (6,107) (2,851)
Balance, March 31, 2021 75,100  150,200  430,490  236,177  (30,606) 786,261 
Net income 65,896  65,896 
Other comprehensive loss (2,412) (2,412)
Dividends declared ($0.0025 per share)
(187) (187)
Share-based compensation expense, exercises and other 295  591  (2,130) (1,539)
Balance, June 30, 2021 75,395 150,791  428,360  301,886  (33,018) 848,019 
Net income 44,129  44,129 
Other comprehensive loss (11,619) (11,619)
Dividends declared ($0.0025 per share)
(183) (183)
Share-based compensation expense, exercises and other 34  67  6,592  6,659 
Balance, September 30, 2021 75,429 $ 150,858  $ 434,952  $ 345,832  $ (44,637) $ 887,005 
Balance, December 31, 2019 62,843  $ 125,686  $ 251,401  $ 137,774  $ (52,707) $ 462,154 
Net loss (11,324) (11,324)
Other comprehensive loss (39,405) (39,405)
Dividends declared ($0.0025 per share)
(127) (127)
Share-based compensation expense, exercises and other 42  84  4,956  5,040 
Balance, March 31, 2020 62,885  125,770  256,357  126,323  (92,112) 416,338 
Net loss (55,627) (55,627)
Other comprehensive income 30,527  30,527 
Dividends declared ($0.0025 per share)
(156) (156)
Share-based compensation expense, exercises and other 852  1,704  2,376  4,080 
Balance, June 30, 2020 63,737  127,474  258,733  70,540  (61,585) 395,162 
Net income 46,081  46,081 
Other comprehensive income 7,021  7,021 
Dividends declared ($0.0025 per share)
(156) (156)
Share-based compensation expense, exercises and other (21) (42) 3,269  3,227 
Balance, September 30, 2020 63,716 $ 127,432  $ 262,002  $ 116,465  $ (54,564) $ 451,335 
See accompanying notes to consolidated financial statements.
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Table of Contents
Owens & Minor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
(in thousands, except per share data, unless otherwise indicated)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, or our) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The Movianto business represented a component that met accounting requirements to be classified as discontinued operations for the nine months ended September 30, 2020. In accordance with GAAP, the results of operations of the Movianto business are presented as discontinued operations through June 18, 2020 (the Divestiture Date) and, as such, have been excluded from continuing operations for the nine months ended September 30, 2020. With the exception of Note 3, the Notes to Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. and its subsidiaries. See Note 3 for additional information regarding discontinued operations. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect reported amounts and related disclosures. Actual results may differ from these estimates.
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash includes cash and marketable securities with an original maturity or maturity at acquisition of three months or less. Cash, cash equivalents and restricted cash are stated at cost. Nearly all of our cash, cash equivalents and restricted cash are held in cash depository accounts in major banks in the United States, Europe, and Asia. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. Restricted cash included in Other assets, net as of September 30, 2021 represents cash held in an escrow account as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) initiatives.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets that sum to the total of those same amounts presented in the accompanying consolidated statements of cash flows.

September 30, 2021 December 31, 2020
Cash and cash equivalents $ 39,759  $ 83,058 
Restricted cash included in Other current assets —  35,126 
Restricted cash included in Other assets, net 16,323  16,322 
Total cash, cash equivalents, and restricted cash $ 56,082  $ 134,506 

Note 2—Fair Value

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The carrying amount of restricted cash also approximates fair value due to its nature. The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 6 for the fair value of debt. The fair value of foreign currency contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 8 for the fair value of derivatives.

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Note 3—Discontinued Operations

On June 18, 2020, we completed the divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million. We concluded that the Movianto business met the criteria for discontinued operations through the Divestiture Date, as the intention to sell represented a strategic shift and the criteria for held-for-sale were met. Movianto was previously reported in the Global Solutions segment.
Accordingly, the results of operations from the Movianto business are reported in the accompanying consolidated statements of operations as Loss from discontinued operations, net of tax for the three and nine months ended September 30, 2020.
The following table summarizes the financial results of our discontinued operations for the three and nine months ended September 30, 2020:

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Net revenue $ —  $ 226,759 
Cost of goods sold —  53,923 
Gross margin —  172,836 
Distribution, selling, and administrative expenses —  157,512 
Loss on divestiture —  65,472 
Acquisition-related and exit and realignment charges —  4,825 
Other operating income, net —  (388)
Operating loss —  (54,585)
Interest expense, net —  3,144 
Loss from discontinued operations before income taxes —  (57,729)
Income tax provision from discontinued operations —  474 
Loss from discontinued operations, net of tax $ —  $ (58,203)

We suspended depreciation and amortization on assets that are held-for-sale, including right-of-use assets recorded in accordance with ASU No. 2016-02, for the nine months ended September 30, 2020.
No revenue or expense have been recorded in discontinued operations related to the disposal group subsequent to the Divestiture Date.
We have entered into transition services agreements with a subsidiary of the Buyer, pursuant to which we and a subsidiary of the Buyer will provide to each other various transitional services. Certain transition service arrangement costs and reimbursements were recorded during the three and nine months ended September 30, 2021 and 2020 and were immaterial for the periods presented. These arrangements were substantially completed as of September 30, 2021.
We had no assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheets at September 30, 2021 and December 31, 2020.
The following table provides operating and investing cash flow information for our discontinued operations:

Nine Months Ended September 30, 2020
Operating Activities:
Loss on divestiture $ 65,472 
Investing Activities:
Capital expenditures 3,027

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Note 4—Goodwill and Intangible Assets

The following table summarizes the goodwill balances by segment and the changes in the carrying amount of goodwill through September 30, 2021:

Global Solutions Global Products Consolidated
Carrying amount of goodwill, December 31, 2020 $ 283,905  $ 110,181  $ 394,086 
Currency translation adjustments —  (7,393) (7,393)
Carrying amount of goodwill, September 30, 2021 $ 283,905  $ 102,788  $ 386,693 

Intangible assets at September 30, 2021 and December 31, 2020 were as follows:

September 30, 2021 December 31, 2020
Customer
Relationships 		Tradenames Other
Intangibles 		Customer
Relationships 		Tradenames Other
Intangibles
Gross intangible assets $ 265,527  $ 90,000  $ 43,313  $ 270,505  $ 90,000  $ 43,245 
Accumulated amortization (139,632) (31,152) (18,267) (121,209) (24,881) (14,309)
Net intangible assets $ 125,895  $ 58,848  $ 25,046  $ 149,296  $ 65,119  $ 28,936 
Weighted average useful life 10 years 11 years 8 years 10 years 11 years 8 years

At September 30, 2021, $51.1 million in net intangible assets were held in the Global Solutions segment and $159 million were held in the Global Products segment. Amortization expense for intangible assets was $10.0 million and $10.2 million for the three months ended September 30, 2021 and 2020, and $30.1 million and $31.5 million for the nine months ended September 30, 2021 and 2020.
Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is approximately $10 million for the remainder of 2021, $39 million for 2022, $39 million for 2023, $34 million for 2024, $28 million for 2025 and $27 million for 2026.

Note 5—Exit and Realignment Costs

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain distribution and outsourced logistics centers, administrative offices and warehouses, our client engagement center and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment which include leadership reorganization costs, certain professional fees, and costs to streamline administrative functions and processes and divestiture related costs.
Exit and realignment charges by segment for the three and nine months ended September 30, 2021 and 2020 were as follows:

Three Months Ended
 September 30, 		Nine Months Ended September 30,
2021 2020 2021 2020
Global Solutions segment $ 5,352  $ 2,714  $ 16,166  $ 6,255 
Global Products segment 1,028  2,877  4,801  3,364 
Total exit and realignment charges $ 6,380  $ 5,591  $ 20,967  $ 9,619 

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The following table summarizes the activity related to exit and realignment cost accruals through September 30, 2021 and 2020:

Total
Accrued exit and realignment costs, December 31, 2020 $ 3,146 
Provision for exit and realignment activities:
Information system restructuring costs 1,029 
Lease obligations 347 
Other 781 
Cash payments (2,915)
Accrued exit and realignment costs, March 31, 2021 2,388
Provision for exit and realignment activities:
Information system restructuring costs 1,611 
Lease obligations (126)
Other 989 
Cash payments (2,302)
Accrued exit and realignment costs, June 30, 2021 2,560
Provision for exit and realignment activities:
Information system restructuring costs 1,506 
Lease obligations 107 
Other 3,142 
Cash payments (4,199)
Accrued exit and realignment costs, September 30, 2021 $ 3,116 
Accrued exit and realignment costs, December 31, 2019 $ 8,162 
Provision for exit and realignment activities:
Severance 1,391 
Information system restructuring costs 183 
Lease obligations 202 
Other 53 
Cash payments (5,799)
Accrued exit and realignment costs, March 31, 2020 4,192
Provision for exit and realignment activities:
Severance 809
Information system restructuring costs 671
Lease obligations 219
Other 501
Cash payments (2,072)
Accrued exit and realignment costs, June 30, 2020 4,320
Provision for exit and realignment activities:
Severance 1,950 
Information system restructuring costs 77 
Lease obligations 848 
Other 2,716 
Cash payments (7,083)
Accrued exit and realignment costs, September 30, 2020 $ 2,828 
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In addition to the exit and realignment accruals in the preceding table, we also incurred $1.6 million and $11.6 million of costs that were expensed as incurred for the three and nine months ended September 30, 2021, which primarily includes $1.5 million and $9.6 million of wind-down costs related to Fusion5 for the three and nine months ended September 30, 2021.
There were no acquisition-related charges included within acquisition-related and exit and realignment charges presented in our consolidated statements of operations for the three and nine months ended September 30, 2021. Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $0.8 million and $8.9 million for the three and nine months ended September 30, 2020, which consisted primarily of transition costs for the Halyard acquisition.
We may incur additional charges in 2021 for wind-down costs related to Fusion5.

Note 6—Debt

Debt consists of the following:
September 30, 2021 December 31, 2020
Carrying
Amount 		Estimated
Fair Value 		Carrying
Amount 		Estimated
Fair Value
Term Loan A-2 $ —  $ —  $ 33,865  $ 34,390 
Term Loan B —  —  477,525  486,614 
Receivables Securitization Program 196,683  200,000  152,929  155,100 
4.375% Senior Notes, due December 2024
245,011  261,329  244,780  253,241 
Revolver 12,300  12,300  103,200  103,200 
4.500% Senior Notes, due March 2029
491,430  507,075  —  — 
Finance leases and other 15,677  15,677  13,668  13,668 
Total debt 961,101  996,381  1,025,967  1,046,213 
Less current maturities (1,616) (1,616) (39,949) (40,453)
Long-term debt $ 959,485  $ 994,765  $ 986,018  $ 1,005,760 

We have $246 million, excluding deferred financing costs and third party fees, of 4.375% senior notes due in 2024 (the 2024 Notes), with interest payable semi-annually. The 2024 Notes were sold at 99.6% of the principal amount with an effective yield of 4.422%. We have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100% of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate (as defined) plus 30 basis points.
In March 2021, we issued $500 million, excluding deferred financing costs and third party fees, of 4.500% senior unsecured notes due in 2029 (the 2029 Unsecured Notes), with interest payable semi-annually (the Notes Offering). The 2029 Unsecured Notes were sold at 100% of the principal amount with an effective yield of 4.500%. We used a portion of the net proceeds from the Notes Offering to repay our Term B Loan and borrowings under our revolving credit facility. In connection with these repayments, we recorded $15.3 million in write-offs of deferred financing costs and third party fees within loss on extinguishment of debt for the nine months ended September 30, 2021. No write-offs of deferred financing costs and third party fees were recorded for the three months ended September 30, 2021. We may redeem all or part of the 2029 Unsecured Notes prior to March 31, 2024, at a price equal to 100% of the principal amount of the 2029 Unsecured Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium, as described in the Indenture dated March 10, 2021 (the Indenture). On or after March 31, 2024, we may redeem all or part of the 2029 Unsecured Notes at the applicable redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. We may also redeem up to 40% of the aggregate principal amount of the 2029 Unsecured Notes at any time prior to March 31, 2024, at a redemption price equal to 104.5% with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
On March 10, 2021, we terminated our then existing credit agreement and all obligations thereunder were repaid. On that same date, we entered into a new credit agreement with Bank of America, N.A. and a syndicate of lenders (the Credit Agreement) with a $300 million revolving credit facility. The interest rate on our revolving credit facility is based on a spread over a benchmark rate (as described in the Credit Agreement). The Credit Agreement matures in March 2026.
At September 30, 2021 and December 31, 2020, we had borrowings of $12.3 million and $103 million and letters of credit of $9.4 million and $13.9 million outstanding under our revolving credit facilities. At September 30, 2021 and December
12

31, 2020, we had $278 million and $283 million available for borrowing. We also had letters of credit and bank guarantees outstanding for $2.2 million and $1.6 million as of September 30, 2021 and December 31, 2020, which supports certain leased facilities as well as other normal business activities in the United States and Europe. These letters of credit and guarantees were issued outside of the revolving credit facility.
We entered into a Security and Pledge Agreement (the Security Agreement), dated March 10, 2021, pursuant to which we granted collateral on behalf of the holders of the 2024 Notes, and the parties secured under the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries, subject to certain customary exceptions, and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions.
On March 10, 2021, we entered into an amendment to our accounts receivable securitization program (the Receivables Securitization Program). Pursuant to the amended Receivables Securitization Program, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $450 million outstanding at any time. The interest rate under the Receivables Securitization Program is based on a spread over a benchmark rate (as described in the Third Amendment to the Receivables Financing Agreement). Under the Receivables Securitization Program, 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 Securitization Program matures in March 2024.
The Credit Agreement, Receivables Securitization Program, 2024 Notes and 2029 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the Credit Agreement 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 September 30, 2021.
As of September 30, 2021, scheduled future principal payments of debt, excluding finance leases and other, were $446 million in 2024, $12.3 million in 2026, and $500 million in 2029. Current maturities at September 30, 2021 include $1.6 million in current portion of finance leases.

Note 7—Retirement Plans

We have a noncontributory, unfunded retirement plan for certain retirees in the United States. Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective teammates.
The components of net periodic benefit cost for the three and nine months ended September 30, 2021 and 2020 were as follows:
Three Months Ended
 September 30, 		Nine Months Ended
 September 30,
2021 2020 2021 2020
Service cost $ 693  $ 362  $ 2,106  $ 1,073 
Interest cost 443  498  1,337  1,488 
Recognized net actuarial loss 353  214  1,060  642 
Net periodic benefit cost $ 1,489  $ 1,074  $ 4,503  $ 3,203 

Note 8—Derivatives

We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. We do not enter into derivative financial instruments for trading purposes.
We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.
We determine the fair value of our foreign currency derivatives based on observable market-based inputs or unobservable inputs that are corroborated by market data. We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure. All derivatives are carried at fair value in our consolidated balance sheets in other current assets and other current liabilities. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.
13

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of September 30, 2021:
Derivative Assets Derivative Liabilities
Notional Amount Maturity Date Classification Fair Value Classification Fair Value
Economic (non-designated) hedges
Foreign currency contracts $ 14,400  October 2021 Other current assets $ 92  Other current liabilities $ — 
In March 2021, we terminated the remaining $300 million in notional value of interest rate swaps concurrent with the debt financing transaction. In September 2020, we terminated $150 million in notional value of interest rate swaps. The remaining balance of the fair value adjustments of $25.1 million, which related to these terminated interest rate swaps, within Accumulated other comprehensive loss was reclassified to Loss on extinguishment of debt within our consolidated statements of operations for the nine months ended September 30, 2021.
The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2020:
Derivative Assets Derivative Liabilities
Notional Amount Maturity Date Classification Fair Value Classification Fair Value
Cash flow hedges
Interest rate swaps $ 300,000  May 2022 and May 2025 Other assets, net $ —  Other liabilities $ 17,872 
Economic (non-designated) hedges
Foreign currency contracts $ 30,300  January 2021 Other current assets $ 151  Other current liabilities $ — 

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 30, 2021:
Amount of Gain Recognized in Other Comprehensive Income (Loss) Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
Interest rate swaps $ —  $ 2,426  Loss on extinguishment of debt $ —  $ (40,433) $ —  $ (25,518)
The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three and nine months ended September 30, 2020:
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Amount of Loss Recognized in Other Comprehensive Income (Loss) Location of Loss Reclassified from Accumulated Other Comprehensive Loss into Income Total Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded Amount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Interest rate swaps $ (515) $ (19,913) Interest expense, net $ (20,975) $ (65,923) $ (3,028) $ (6,889)
The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.

For the three and nine months ended September 30, 2021 we recognized losses of $0.9 million and $2.5 million associated with our economic (non-designated) foreign currency contracts. For the three and nine months ended September 30, 2020 we recognized losses of $0.9 million and $2.3 million associated with our economic (non-designated) foreign currency contracts.
We recorded the change in fair value of derivative instruments and the remeasurement adjustment of the foreign currency denominated asset or liability in other operating income, net for our foreign exchange contracts.

Note 9—Income Taxes

The effective tax rate was 12.6% and 20.8% for the three and nine months ended September 30, 2021, compared to 13.8% and 9.4% in the same periods of 2020. The change in these rates resulted primarily from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and in the third quarter of 2021 associated with the 2017 Tax Cuts and Jobs Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax benefit associated with the vesting of restricted stock. The liability for unrecognized tax benefits was $23.0 million at September 30, 2021 and $20.8 million at December 31, 2020. Included in the liability at September 30, 2021 and December 31, 2020 were $2.7 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Services (IRS) regarding our 2015 and 2016 consolidated income tax returns. On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns. Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the United States in connection with our sourcing of products by our foreign subsidiaries for sale in the United States by our domestic subsidiaries. Our amount of taxable income in the United States is based on our transfer pricing methodology, which has been consistently applied through the current date. We strongly disagree with the IRS position and will pursue all available administrative and judicial remedies, including those available under the U.S. - Ireland Income Tax Treaty to alleviate double taxation. We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves. We believe that we have adequately reserved for this matter and that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows. However, the ultimate outcome of disputes of this nature is uncertain, and if the IRS were to prevail on its assertions, the additional tax, interest, and any potential penalties could have a material adverse impact on our financial position, results of operations or cash flows.

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Note 10—Net Income (Loss) per Common Share

The following summarizes the calculation of net income (loss) per common share attributable to common shareholders for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended
 September 30, 		Nine Months Ended
 September 30,
(in thousands, except per share data) 2021 2020 2021 2020
Income from continuing operations, net of tax $ 44,129  $ 46,081  $ 179,614  $ 37,332 
Loss from discontinued operations, net of tax —  —  —  (58,203)
Net income (loss) $ 44,129  $ 46,081  $ 179,614  $ (20,871)
Weighted average shares outstanding - basic 73,215  60,786  72,649  60,983
Dilutive shares 2,743  137  2,754  — 
Weighted average shares outstanding - diluted 75,958  60,923  75,403  60,983 
Basic income (loss) per common share:
Income from continuing operations $ 0.60  $ 0.76  $ 2.47  $ 0.61 
Loss from discontinued operations —  —  —  (0.95)
Net income (loss) $ 0.60  $ 0.76  $ 2.47  $ (0.34)
Diluted income (loss) per common share:
Income from continuing operations $ 0.58  $ 0.76  $ 2.38  $ 0.61 
Loss from discontinued operations —  —  —  (0.95)
Net income (loss) $ 0.58  $ 0.76  $ 2.38  $ (0.34)

Note 11—Shareholders' Equity

In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of September 30, 2021, no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.

Note 12—Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss by component for the three and nine months ended September 30, 2021 and 2020: 
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Retirement Plans Currency
Translation
Adjustments 		Derivatives Total
Accumulated other comprehensive loss, June 30, 2021 $ (18,290) $ (14,728) $ —  $ (33,018)
Other comprehensive loss before reclassifications —  (12,014) —  (12,014)
Income tax —  —  —  — 
Other comprehensive loss before reclassifications, net of tax —  (12,014) —  (12,014)
Amounts reclassified from accumulated other comprehensive loss 500  —  —  500 
Income tax (105) —  —  (105)
Amounts reclassified from accumulated other comprehensive loss, net of tax 395  —  —  395 
Other comprehensive income (loss) 395  (12,014) —  (11,619)
Accumulated other comprehensive loss, September 30, 2021 $ (17,895) $ (26,742) $ —  $ (44,637)
Retirement Plans Currency Translation Adjustments Derivatives Total
Accumulated other comprehensive loss, June 30, 2020 $ (13,926) $ (23,471) $ (24,188) $ (61,585)
Other comprehensive income (loss) before reclassifications —  5,173  (516) 4,657 
Income tax —  —  40  40 
Other comprehensive income (loss) before reclassifications, net of tax —  5,173  (476) 4,697 
Amounts reclassified from accumulated other comprehensive loss 214  —  3,028  3,242 
Income tax (47) —  (871) (918)
Amounts reclassified from accumulated other comprehensive loss, net of tax 167  —  2,157  2,324 
Other comprehensive income 167  5,173  1,681  7,021 
Accumulated other comprehensive loss, September 30, 2020 $ (13,759) $ (18,298) $ (22,507) $ (54,564)

Retirement Plans Currency
Translation
Adjustments 		Derivatives Total
Accumulated other comprehensive loss, December 31, 2020 $ (18,447) $ (18) $ (20,044) $ (38,509)
Other comprehensive (loss) income before reclassifications —  (26,724) 2,426  (24,298)
Income tax —  —  (611) (611)
Other comprehensive (loss) income before reclassifications, net of tax —  (26,724) 1,815  (24,909)
Amounts reclassified from accumulated other comprehensive loss 704  —  25,518  26,222 
Income tax (152) —  (7,289) (7,441)
Amounts reclassified from accumulated other comprehensive loss, net of tax 552  —  18,229  18,781 
Other comprehensive income (loss) 552  (26,724) 20,044  (6,128)
Accumulated other comprehensive loss, September 30, 2021 $ (17,895) $ (26,742) $ —  $ (44,637)
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Retirement Plans Currency Translation Adjustments Derivatives Total
Accumulated other comprehensive loss, December 31, 2019 $ (14,691) $ (25,301) $ (12,715) $ (52,707)
Other comprehensive loss before reclassifications —  (8,577) (19,913) (28,490)
Income tax —  —  5,113  5,113 
Other comprehensive loss before reclassifications, net of tax —  (8,577) (14,800) (23,377)
Amounts reclassified from accumulated other comprehensive loss 1,067  15,580  6,889  23,536 
Income tax (135) —  (1,881) (2,016)
Amounts reclassified from accumulated other comprehensive loss, net of tax 932  15,580  5,008  21,520 
Other comprehensive income (loss) 932  7,003  (9,792) (1,857)
Accumulated other comprehensive loss, September 30, 2020 $ (13,759) $ (18,298) $ (22,507) $ (54,564)

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

Note 13—Segment Information

We periodically evaluate our application of accounting guidance for reportable segments and disclose information about reportable segments based on the way management organizes the enterprise for making operating decisions and assessing performance. We report our business under two segments: Global Solutions and Global Products. The Global Solutions segment includes our United States distribution businesses (Medical Distribution and Patient Direct), outsourced logistics and value-added services business. Global Products manufactures and sources medical surgical products through our production and kitting operations.
We evaluate the performance of our segments based on their operating income excluding intangible amortization and acquisition-related and exit and realignment charges that, either as a result of their nature or size, would not be expected to occur as part of our normal business operations on a regular basis.
Segment assets exclude inter-segment account balances as we believe their inclusion would be misleading and not meaningful. We believe all inter-segment sales are at prices that approximate market.
The following tables present financial information by segment:
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Three Months Ended
 September 30, 		Nine Months Ended
 September 30,
2021 2020 2021 2020
Net revenue:
Segment net revenue
Global Solutions $ 2,022,919  $ 1,865,182  $ 5,850,007  $ 5,261,415 
Global Products 679,067  473,797  2,026,385  1,235,391 
Total segment net revenue 2,701,986  2,338,979  7,876,392  6,496,806 
Inter-segment revenue
Global Products (199,811) (151,051) (558,223) (378,466)
       Total inter-segment revenue (199,811) (151,051) (558,223) (378,466)
Consolidated net revenue $ 2,502,175  $ 2,187,928  $ 7,318,169  $ 6,118,340 
Operating income:
Global Solutions $ 20,366  $ 10,972  $ 47,729  $ 8,522 
Global Products 51,327  89,923  310,242  160,268 
Inter-segment eliminations 7,587  (8,718) (475) (10,322)
Intangible amortization (10,025) (10,242) (30,077) (31,463)
Acquisition-related and exit and realignment charges (6,380) (6,382) (20,967) (18,500)
Consolidated operating income $ 62,875  $ 75,553  $ 306,452  $ 108,505 
Depreciation and amortization:
Global Solutions $ 9,951  $ 9,572  $ 29,678  $ 31,273 
Global Products 12,691  11,118  38,464  38,221 
Consolidated depreciation and amortization $ 22,642  $ 20,690  $ 68,142  $ 69,494 
Capital expenditures:
Global Solutions $ 5,752  $ 3,582  $ 14,776  $ 7,545 
Global Products 8,192  10,656  17,849  15,808 
Discontinued operations —  —  —  3,027 
Consolidated capital expenditures $ 13,944  $ 14,238  $ 32,625  $ 26,380 


September 30, 2021 December 31, 2020
Total assets:
Global Solutions $ 2,135,865  $ 2,117,372 
Global Products 1,408,495  1,135,209 
Segment assets 3,544,360  3,252,581 
Cash and cash equivalents 39,759  83,058 
Consolidated total assets $ 3,584,119  $ 3,335,639 

The following table presents net revenue by geographic area, which were attributed based on the location from which we ship products or provide services.
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Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Net revenue:
United States $ 2,380,794  $ 2,101,074  $ 6,900,222  $ 5,872,143 
International 121,381  86,854  417,947  246,197
Consolidated net revenue $ 2,502,175  $ 2,187,928  $ 7,318,169  $ 6,118,340 

Note 14—Recent Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted ASU No. 2019-12 effective beginning January 1, 2021. Its adoption did not have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. Our current debt agreements contemplate a transition from LIBOR to another benchmark rate in the event that LIBOR ceases to exist. We do not expect the transition to have a material impact on our consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements, to improve consistency by amending the FASB Accounting Standards Codification (the Codification) to include all disclosure guidance in the appropriate disclosure sections. This ASU also clarifies application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. The amendments in this ASU do not change GAAP and, therefore, are not expected to result in a significant change in practice. We adopted ASU No. 2020-10 effective beginning January 1, 2021. Its adoption did not have a material impact on our consolidated financial statements.
There have been no further changes in our significant accounting policies from those contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

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

The following discussion and analysis describes results of operations and material changes in the financial condition of Owens & Minor, Inc. and its subsidiaries since December 31, 2020. Trends of a material nature are discussed to the extent known and considered relevant. This discussion should be read in conjunction with the consolidated financial statements, related notes thereto, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Overview
Owens & Minor, Inc., along with its subsidiaries, (we, us, or our) is a leading global healthcare solutions company. On June 18, 2020 (the Divestiture Date), we completed the divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin, Ireland office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million. The Divestiture provides us with a greater ability to focus on and invest in our differentiated products, services and U.S. distribution businesses.
As a result of the Divestiture, the results of operations from our Movianto business are reported as “Loss from discontinued operations, net of tax” for the three and nine months ended September 30, 2020. See Note 3, “Discontinued Operations,” of the Notes to Consolidated Financial Statements for further information. Unless otherwise indicated, the following information relates to continuing operations.
Income from continuing operations per diluted share was $0.58 and $2.38 for the three and nine months ended September 30, 2021 as compared to $0.76 and $0.61 for the three and nine months ended September 30, 2020. Global Solutions segment operating income was $20.4 million and $47.7 million for the three and nine months ended September 30, 2021, compared to $11.0 million and $8.5 million for the three and nine months ended September 30, 2020. These increases were a
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result of strong revenue growth, leveraging our fixed costs, and operating efficiencies. Global Products segment operating income was $51.3 million and $310 million for the three and nine months ended September 30, 2021, compared to $89.9 million and $160 million for the three and nine months ended September 30, 2020. The decrease for the three months ended September 30, 2021 was primarily the result of the timing of glove cost pass-through, accelerating inflationary pressures, including commodities, transportation, and labor, partially offset by revenue growth. The increase for the nine months ended September 30, 2021 was a result of higher personal protective equipment (PPE) sales, favorable timing of cost pass-through on gloves, productivity initiatives, favorable product mix, and improved fixed cost leverage, partially offset by higher commodity prices and rising transportation costs, compared to the prior year.

COVID-19 Update

We are closely monitoring the impact of the 2019 novel coronavirus (COVID-19), including the related Delta variant, on all aspects of our business, including how it impacts our customers, teammates, suppliers, vendors and distribution channels. We have taken actions to protect our teammates while maintaining business continuity as we respond to the needs from this global pandemic. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our teammates, customers, suppliers and shareholders.
Revenue for the nine months ended September 30, 2021 of $7.3 billion continues to be impacted by COVID-19 and includes the effective response to the ongoing recovery of elective procedures, higher sales of PPE, and pass-through of elevated glove costs. Operating income for the nine months ended September 30, 2021 also benefited from improved productivity and increased manufacturing output related to PPE, favorable product mix and operating efficiencies. In 2020, we expanded our PPE production operations and have taken measures to increase and improve our production such as retooling existing equipment, installing and optimizing new production lines and ramping up our new non-woven fabric machinery. We expect that we will continue servicing our customers' needs related to the heightened demand for our PPE as a result of various factors, including the implementation of new regulations and healthcare protocols calling for increased use of PPE, healthcare professional preference for medical grade PPE, stockpile PPE demand and the creation of new channels for PPE demand in healthcare, non-healthcare and international markets.
In March 2020, under the Defense Production Act (DPA), we were awarded a contract with the U.S. Department of Health and Human Services to produce N-95 respirator masks in an effort to replenish the Strategic National Stockpile. In April 2020, also under the DPA, the U.S. Department of Defense initiated a technology investment agreement with us involving up to $30.0 million of anticipated funding of assets to expand capacity to supply N-95 respirator masks. Through September 30, 2021, substantially all of the anticipated funding had been expended and reimbursed in accordance with this arrangement.
We are unable to predict the timing of the pandemic and the full impact that COVID-19 will have on our future operating results, financial position and cash flows due to numerous variables and continued uncertainties. Travel, transportation, and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations in certain locations, including within Asia. Essential activity exceptions from these restrictions have allowed us to continue to operate but virus containment efforts have resulted in additional direct costs from supply chain challenges. Although 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, 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.
Results of Operations

Net revenue.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Global Solutions $ 2,022,919  $ 1,865,182  $ 157,737  8.5  %
Global Products 679,067  473,797  205,270  43.3  %
Inter-segment (199,811) (151,051) (48,760) (32.3) %
Net revenue $ 2,502,175  $ 2,187,928  $ 314,247  14.4  %

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Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Global Solutions $ 5,850,007  $ 5,261,415  $ 588,592  11.2  %
Global Products 2,026,385  1,235,391  790,994  64.0  %
Inter-segment (558,223) (378,466) (179,757) (47.5) %
Net revenue $ 7,318,169  $ 6,118,340  $ 1,199,829  19.6  %

The change in net revenue for the three and nine months ended September 30, 2021 reflected our market share gains, the effective response to the ongoing recovery of elective procedures, higher sales of surgical & infection prevention (S&IP) products, pass-through of elevated glove costs, as well as continued strong performance in our Patient Direct business. Foreign currency translation had a favorable impact on net revenue of $1.8 million and $23.5 million for the three and nine months ended September 30, 2021 as compared to the prior year.

Cost of goods sold.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Cost of goods sold $ 2,173,336  $ 1,843,589  $ 329,747  17.9  %

Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Cost of goods sold $ 6,146,511  $ 5,236,035  $ 910,476  17.4  %

Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor and bear risk of general and physical inventory loss. These are sometimes referred to as distribution contracts. Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products segment. There is no cost of goods sold associated with our fee-for-service arrangements. Cost of goods sold compared to prior year reflects changes in sales activity, including sales mix, and accelerating inflationary pressures.

Gross margin.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Gross margin $ 328,839  $ 344,339  $ (15,500) (4.5) %
As a % of net revenue 13.14  % 15.74  %

Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Gross margin $ 1,171,658  $ 882,305  $ 289,353  32.8  %
As a % of net revenue 16.01  % 14.42  %
Gross margin decrease in the three months ended September 30, 2021 was driven by the timing of glove cost pass-through and accelerating inflationary pressures, partially offset by revenue growth. Gross margin increase in the nine months ended September 30, 2021 was driven by revenue growth, market dynamics including timing of glove price and cost changes, an overall improved sales mix and operating efficiencies, partially offset by accelerating inflationary pressures. Foreign
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currency translation had an unfavorable impact on gross margin of $6.2 million and $0.8 million for the three and nine months ended September 30, 2021 as compared to the prior year.

Operating expenses.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Distribution, selling and administrative expenses $ 262,457  $ 262,538  $ (81) —  %
As a % of net revenue 10.49  % 12.00  %
Acquisition-related and exit and realignment charges $ 6,380  $ 6,382  $ (2) —  %
Other operating income, net $ (2,873) $ (134) $ (2,739) (2,044.0) %

Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Distribution, selling and administrative expenses $ 849,255  $ 758,320  $ 90,935  12.0  %
As a % of net revenue 11.60  % 12.39  %
Acquisition-related and exit and realignment charges $ 20,967  $ 18,500  $ 2,467  13.3  %
Other operating income, net $ (5,016) $ (3,020) $ (1,996) (66.1) %

Distribution, selling and administrative (DS&A) expenses include labor and warehousing costs associated with our distribution and outsourced logistics services and all costs associated with our fee-for-service arrangements. Shipping and handling costs are primarily included in DS&A expenses and include costs to store, move, and prepare products for shipment, as well as costs to deliver products to customers. Overall DS&A expenses were affected by revenue growth, changes in incentive compensation, teammate benefits, accelerating inflationary pressures, and operational efficiencies for the three and nine months ended September 30, 2021. In addition, overall DS&A expenses were affected by charitable contributions for the nine months ended September 30, 2021. DS&A expenses also included an unfavorable impact for foreign currency translation of $0.1 million and $2.3 million for the three and nine months ended September 30, 2021.
Acquisition-related and exit and realignment charges presented in our consolidated statements of operations of $6.4 million and $21.0 million for the three and nine months ended September 30, 2021 consisted primarily of wind-down costs related to Fusion5, leadership reorganization costs, IT restructuring charges, and other costs related to the reorganization of the U.S. operations. Acquisition-related charges within acquisition-related and exit and realignment charges presented in our consolidated statements of operations were $0.8 million and $8.9 million for the three and nine months ended September 30, 2020, which consisted primarily of transition costs for the Halyard acquisition. Exit and realignment charges were $5.6 million and $9.6 million for the three and nine months ended September 30, 2020 and consisted primarily of severance from reduction in force, post divestiture costs related to the Movianto business, and other costs related to the reorganization of the U.S. commercial, operations and executive teams.
The change in other operating income, net for the three and nine months ended September 30, 2021 includes the impact of higher foreign currency transaction gains as compared to the prior year.

Interest expense, net.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Interest expense, net $ 11,572  $ 20,975  $ (9,403) (44.8) %
Effective interest rate 4.17  % 5.64  %
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Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Interest expense, net $ 36,784  $ 65,923  $ (29,139) (44.2) %
Effective interest rate 4.72  % 6.35  %
Interest expense, net and the effective interest rate for the three and nine months ended September 30, 2021 decreased primarily due to a reduction of debt and lower interest rates. See Note 6 in Notes to Consolidated Financial Statements.

Loss on extinguishment of debt.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Loss on extinguishment of debt $ —  $ 308  $ (308) (100.0) %

Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Loss on extinguishment of debt $ 40,433  $ 2,580  $ 37,853  1,467.2  %

Loss on extinguishment of debt for the nine months ended September 30, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in March 2021 of $15.3 million and amounts reclassified from accumulated other comprehensive loss as a result of the termination of our interest rate swaps of $25.1 million. Loss on extinguishment of debt for the three and nine months ended September 30, 2020 primarily includes the write-off of deferred financing costs and third party fees, offset by the gain on extinguishment of debt related to the partial repurchase of our 2021 and 2024 Notes.

Other expense (income), net.

Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Other expense (income), net $ 799  $ 785  $ 14  1.8  %

Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Other expense (income), net $ 2,397  $ (1,193) $ 3,590  300.9  %

Other expense (income), net for the three and nine months ended September 30, 2021 and 2020 represents interest cost and net actuarial losses related to our retirement plans. Other expense (income), net for the nine months ended September 30, 2020 includes a gain from the surrender of company-owned life insurance policies.

Income taxes.
Three Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Income tax provision $ 6,375  $ 7,404  $ (1,029) (13.9) %
Effective tax rate 12.6  % 13.8  %

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Nine Months Ended
 September 30, 		Change
(Dollars in thousands) 2021 2020 $ %
Income tax provision $ 47,224  $ 3,863  $ 43,361  1,122.5  %
Effective tax rate 20.8  % 9.4  %
The change in the effective tax rate for the three and nine months ended September 30, 2021 compared to the same periods in 2020 resulted primarily from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act and in the third quarter of 2021 associated with the 2017 Tax Cuts and Jobs Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax benefit associated with the vesting of restricted stock.

Financial Condition, Liquidity and Capital Resources

Financial condition. We monitor operating working capital through days sales outstanding (DSO) and merchandise inventory days. We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our revolving credit facility or Receivables Securitization Program, or a combination thereof of approximately $27 million.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in the United States, 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.
September 30, 2021 December 31, 2020 Change
(Dollars in thousands) $ %
Cash and cash equivalents $ 39,759  $ 83,058  $ (43,299) (52.1) %
Accounts receivable, net of allowances $ 759,744  $ 700,792  $ 58,952  8.4  %
Consolidated DSO (1)
27.3  26.0
Merchandise inventories $ 1,514,387  $ 1,233,751  $ 280,636  22.7  %
Inventory days (2)
64.1  57.8
Accounts payable $ 1,118,753  $ 1,000,186  $ 118,567  11.9  %
    (1) Based on period end accounts receivable and net revenue for the quarters ended September 30, 2021 and December 31, 2020
    (2) Based on period end merchandise inventories and cost of goods sold for the quarters ended September 30, 2021 and December 31, 2020

Liquidity and capital expenditures. The following table summarizes our consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020, which relates to continuing operations and discontinued operations:

(Dollars in thousands) 2021 2020
Net cash provided by (used for):
Operating activities $ 73,836  $ 268,196 
Investing activities (32,584) 112,830 
Financing activities (117,222) (244,955)
Effect of exchange rate changes (2,454) 6,721 
Net (decrease) increase in cash, cash equivalents and restricted cash $ (78,424) $ 142,792 

Cash provided by operating activities in the first nine months of 2021 and 2020 reflected fluctuations in net income along with changes in working capital.
Cash used for investing activities in the first nine months of 2021 and 2020 included capital expenditures of $32.6 million and $26.4 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas, and capitalized software. Cash provided by investing activities in the first nine months of 2020 included cash consideration received of $133 million from the sale of Movianto and proceeds of $6.0 million from the surrender of company-owned life insurance policies.
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Cash used for financing activities in the first nine months of 2021 included dividend payments of $0.5 million and net repayments of $90.9 million under our revolving credit facility, compared to $0.5 million and $108 million for the same period of 2020. We also had proceeds from borrowings of $575 million related to the 2029 Unsecured Notes and Accounts Receivable Securitization Program for the first nine months of 2021, compared to $150 million related to the Accounts Receivable Securitization Program for the first nine months of 2020. Financing activities also included repayments of $553 million for the first nine months of 2021 on our term loans, 2021 and 2024 Notes, and Accounts Receivable Securitization Program, compared to $270 million in the same period of 2020 on our term loans and 2021 and 2024 Notes. We used $83.3 million of cash to repurchase $87.9 million aggregate principal amount of the 2021 and 2024 Notes during the first nine months of 2020. We also paid $13.9 million in financing costs in the first nine months of 2021, as compared to $10.4 million in financing costs for the same period of 2020. In addition, we paid $15.4 million to terminate the remaining $300 million in notional value of interest rate swaps during the first nine months of 2021. Payments for taxes related to the vesting of restricted stock awards were $19.3 million and $3.6 million for the first nine months of 2021 and 2020, which are included in Other, net.

Capital resources. Our sources of liquidity include cash and cash equivalents, a revolving credit facility under our Credit Agreement with Bank of America, N.A, as an administrative agent and collateral agent, and a syndicate of financial institutions, as lenders (the Credit Agreement), and the Receivables Securitization Program. The Credit Agreement provides a revolving borrowing capacity of $300 million. The interest rate on our revolving credit facility is based on a spread over a benchmark rate (as described in the Credit Agreement). The Credit Agreement matures in March 2026.
At September 30, 2021 and December 31, 2020, we had borrowings of $12.3 million and $103 million, and letters of credit of $9.4 million and $13.9 million outstanding under our credit agreements. At September 30, 2021 and December 31, 2020, we had $278 million and $283 million, available for borrowing. We also had letters of credit and bank guarantees outstanding for $2.2 million and $1.6 million as of September 30, 2021 and December 31, 2020, which supports certain leased facilities as well as other normal business activities in the United States and Europe. These letters of credit and guarantees were issued outside of the revolving credit facility.
We entered into a Security and Pledge Agreement (the Security Agreement), dated March 10, 2021, pursuant to which we granted collateral on behalf of the holders of the 2024 Notes, and the parties secured under the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries, subject to certain customary exceptions, and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions.
On March 10, 2021, we entered into an amendment to our accounts receivable securitization program (the Receivables Securitization Program). Pursuant to the amended Receivables Securitization Program, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $450 million outstanding at any time. The interest rate under the Receivables Securitization Program is based on a spread over a benchmark rate (as described in the Third Amendment to the Receivables Financing Agreement). Under the Receivables Securitization Program, 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 Securitization Program matures in March 2024.
The Credit Agreement, Receivables Securitization Program, 2024 Notes and 2029 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the Credit Agreement 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 September 30, 2021.
In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of September 30, 2021 no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.
We regularly evaluate market conditions, our liquidity profile and various financing alternatives to enhance our capital structure. From time to time, we may enter into transactions to repay, repurchase or redeem our outstanding indebtedness (including by means of open market purchases, privately negotiated repurchases, tender or exchange offers and/or repayments or redemptions pursuant to the debt’s terms). Our ability to consummate any such transaction will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.
The third quarter dividend of $0.0025 per share was paid in September 2021. The payment of future dividends remains within the discretion of the Board of Directors and will depend upon our results of operations, financial condition, capital requirements, current and future limitations under our Credit Agreement and other factors.
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We believe available financing sources, including cash generated by operating activities and borrowings under the Credit Agreement and Receivables Securitization Program, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, payments of quarterly cash dividends, debt repurchases and other cash requirements. While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us or (iii) our cost of borrowing.
We earn a portion of our operating income in foreign jurisdictions outside the United States. Our cash and cash equivalents held by our foreign subsidiaries totaled $28.7 million and $72.0 million at September 30, 2021 and December 31, 2020. We continue to remain permanently reinvested in our foreign subsidiaries, with the exception of a subsidiary in Thailand. We have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of September 30, 2021. As such, we have recorded withholding tax liabilities that would be incurred upon future distribution to the U.S. There are no unrecognized deferred taxes as there is no outside basis difference unrelated to unremitted earnings for Thailand. We will continue to evaluate our foreign earnings repatriation policy in 2021 for all our foreign subsidiaries.

Guarantor and Collateral Group Summarized Financial Information

We are providing the following information in compliance with Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and Rule 13-02 of Regulation S-X, of with respect to our 2024 Notes. See Note 6 of the accompanying consolidated financial statements for additional information regarding the terms of the 2024 Notes.
The following tables present summarized financial information for Owens & Minor, Inc. and the guarantors of Owens & Minor, Inc.’s 2024 Notes (together, "the Guarantor Group"), on a combined basis with intercompany balances and transactions between entities in the Guarantor Group eliminated. The guarantor subsidiaries are 100% owned by Owens & Minor, Inc. Separate financial statements of the guarantor subsidiaries are not presented because the guarantees by our guarantor subsidiaries are full and unconditional, as well as joint and several.
Summarized financial information of the Guarantor Group is as follows:
Summarized Consolidated Statement of Operations - Guarantor Group Nine Months Ended September 30, 2021
(Dollars in thousands)
Net revenue(1)
$ 7,197,318 
Gross margin 1,086,054 
Operating income 265,888 
Income from continuing operations, net of tax 158,735 
Net income 158,735 
(1)Includes $297 million in sales to non-guarantor subsidiaries for the nine months ended September 30, 2021.

Summarized Consolidated Balance Sheets - Guarantor Group September 30, 2021 December 31, 2020
(Dollars in thousands)
Total current assets $ 1,428,986  $ 1,559,248 
Total assets 2,950,802  2,943,125 
Current liabilities 1,456,508  1,374,800 
Total liabilities 2,500,939  2,465,894 

The following tables present summarized financial information for Owens & Minor, Inc. and the subsidiaries of Owens & Minor, Inc.’s 2024 Notes pledged that constitute a substantial portion of collateral (together, "the Collateral Group"), on a combined basis with intercompany balances and transactions between entities in the Collateral Group eliminated. The pledged subsidiaries are 100% owned by Owens & Minor, Inc. No trading market for the subsidiaries included in the Collateral Group exists.
Summarized financial information of the Collateral Group is as follows:
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Summarized Consolidated Balance Sheets - Collateral Group September 30, 2021 December 31, 2020
(Dollars in thousands)
Total current assets $ 1,517,670  $ 1,651,460 
Total assets 2,703,556  2,851,226 
Current liabilities 1,422,746  1,356,024 
Total liabilities 2,498,158  2,480,953 

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

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see our Annual Report on Form 10-K for the year ended December 31, 2020 and Note 14 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the period ended on September 30, 2021.

Forward-looking Statements

Certain statements in this discussion constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including, but not limited to:
•our ability to achieve revenue and operating income goals may be affected by: COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, and any worsening of the pandemic, including through any new variant strains of the underlying virus, or future pandemics, related governmental responses, the effectiveness, availability, and public acceptance of vaccines, a decrease in revenue ultimately resulting in less cash flow, longer duration in receivables collection, the need to expedite payments to important suppliers may grow, shifts in demand away from certain products we manufacture and distribute, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government vaccine and other mandates, temporary production and distribution center and office closures due to reduced workforces or government vaccine and other mandates, availability of raw materials, potential resulting labor negotiations or disputes, changes in the types and numbers of businesses that compete with us, including non-traditional competitors, and the aggressiveness of that competition, impacts of the pandemic or future pandemics on other third parties with whom we conduct business, the healthcare industry, and the broader business environment, and trends in elective surgeries and other healthcare spending not directly associated with COVID-19;
•competitive pressures in the marketplace, including intense pricing pressure;
•our ability to retain existing and attract new customers in a market characterized by significant customer consolidation and intense cost-containment initiatives;
•our dependence on sales to certain customers or the loss or material reduction in purchases by key customers;
•our dependence on distribution of product of certain suppliers;
•our ability to successfully identify, manage or integrate acquisitions;
•our ability to successfully manage our international operations, including risks associated with changes in international trade regulations, foreign currency volatility, changes in regulatory conditions, deteriorating economic conditions, adverse tax consequences, and other risks of operating in international markets;
•uncertainties related to and our ability to adapt to changes in government regulations, including healthcare laws and regulations;
•risks arising from possible violations of legal, regulatory or licensing requirements of the markets in which we operate;
•uncertainties related to general economic, regulatory and business conditions;
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•our ability to successfully implement our strategic initiatives;
•the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;
•the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;
•our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;
•the ability of customers and suppliers to meet financial commitments due to us;
•changes in manufacturer preferences between direct sales and wholesale distribution;
•changing trends in customer profiles and ordering patterns and our ability to meet customer demand for additional value-added services;
•our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;
•our ability to meet performance targets specified by customer contracts under contractual commitments;
•availability of and our ability to access special inventory buying opportunities;
•the ability of business partners and financial institutions to perform their contractual responsibilities;
•our ability to continue to obtain financing, obtain financing at reasonable rates and to manage financing costs and interest rate risk, and our ability to refinance, extend or repay our substantial indebtedness;
•the risk that information systems are interrupted or damaged or fail for any extended period of time, that new information systems are not successfully implemented or integrated, or that there is a data security breach in our information systems;
•the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived assets;
•our ability to timely or adequately respond to technological advances in the medical supply industry;
•the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims;
•adverse changes in U.S. and foreign tax laws and the outcome of outstanding tax contingencies and legislative and tax proposals;
•our ability to successfully implement the expense reduction and productivity and efficiency initiatives;
•our ability to continue to comply with the terms and conditions of Byram Healthcare’s Corporate Integrity Agreement; and
•other factors detailed from time to time in the reports we file with the SEC, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, our Form 10-Q for the three months ended March 31, 2021, and our Form 10-Q for the three and six months ended June 30, 2021.
We undertake no obligation to update or revise any forward-looking statements, except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to price risk for our raw materials, the most significant of which relates to the cost of polypropylene and nitrile used in the manufacturing processes of our Global Products segment. Prices of the commodities underlying these raw materials are volatile and have fluctuated significantly in recent years and in the future may contribute to fluctuations in our results of operations.
In the normal course of business, we are exposed to foreign currency translation and transaction risks. Our business transactions outside of the United States are denominated in the euro, Malaysian ringgit, Mexican peso, Thai baht and other currencies. We may use foreign currency forwards, swaps and options, where possible, to manage our risk related to certain foreign currency fluctuations.
We are exposed to market risk from changes in interest rates related to our borrowing under our Credit Agreement and Receivables Securitization Program. We had $12.3 million in borrowings under our revolving credit facility, $197 million in
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borrowings under our Receivables Securitization Program and $9.4 million in letters of credit under the Credit Agreement at September 30, 2021. We estimate an increase in interest rates of 100 basis points would result in a potential reduction in future pre-tax earnings of approximately $2.2 million per year based on our borrowings outstanding at September 30, 2021.
Due to the nature and pricing of our Global Solutions segment distribution services, we are exposed to potential volatility in fuel prices. Our strategies for helping to mitigate our exposure to changing domestic fuel prices have included using trucks with improved fuel efficiency. We benchmark our domestic diesel fuel purchase prices against the U.S. Weekly Retail On-Highway Diesel Prices (benchmark) as quoted by the U.S. Energy Information Administration. The benchmark averaged $3.16 and $2.58 per gallon in the first nine months of 2021 and 2020. Based on our fuel consumption in the first nine months of 2021, we estimate that every 10 cents per gallon increase in the benchmark would reduce our Global Solutions segment operating income by approximately $0.2 million on an annualized basis.

Item 4. Controls and Procedures

We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2021. There was no change in our internal control over financial reporting that occurred during the period of this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Certain legal proceedings pending against us are described in our Annual Report on Form 10-K for the year ended December 31, 2020. Through September 30, 2021, there have been no material developments in any legal proceedings reported in such Annual Report.

Item 1A. Risk Factors

The following description of risk factors updates and supplements risk factors associated with our business previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, our Form 10-Q for the three months ended March 31, 2021, and our Form 10-Q for the three and six months ended June 30, 2021. These risk factors are in addition to those mentioned in other parts of this report and are not all of the risks that we face. We could also be affected by risks that we currently are not aware of or that we currently do not consider material to our business.

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 global pandemic associated with the 2019 novel coronavirus (COVID-19).
As a global healthcare solutions company, we are impacted by public health crises such as the global pandemic associated with COVID-19. The outbreak has significantly increased uncertainty and unpredictability of global economic conditions and the demand for and supply of raw materials and finished goods required for our operations. In addition, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the adoption of remote working and vaccination mandates, have impacted or may in the future impact our operations. In these challenging and dynamic circumstances, we continue to work to protect our teammates and the public, maintain business continuity and sustain our operations, including ensuring the safety and protection of the people who work in our production and distribution centers across the world, many of whom support the manufacturing and delivery of products that are critical in response to the global pandemic. We may restrict the operations of our production and distribution centers if we deem it necessary or if recommended or mandated by governmental authorities which would have an adverse impact on us. There is a risk that revenues will decrease ultimately resulting in less cash flow, we may see longer duration in receivables collection, and the need to expedite payments to important suppliers may grow. COVID-19 has impacted and may further impact our supply chains relative to global demand for our facial protection, nitrile gloves, and protective apparel products. COVID-19 has also affected and may further affect the ability of suppliers and vendors to provide products and services to us or to do so at acceptable quality levels or prices. Some of these factors could increase the demand for our products, while others could decrease demand or make it more difficult for us to serve customers. For example, the significant reduction in elective surgical procedures, which began mid-March of 2020, resulted in a material negative impact on our revenue for 2020. Any worsening of the COVID-19 pandemic or future outbreaks could result in similar reductions in elective surgical procedures or otherwise
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reduce demand for our products, any of which could have a material negative impact on our revenues and profit for future periods.
Although we have experienced significant 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. We may also see a decline in such growth rates and sales volumes when the impact of the pandemic subsides and the healthcare system returns to a more normalized state. In particular, demand for such products may also decline as government-sponsored COVID-19 response stimulus, relief and production initiatives, such as those under the Defense Production Act (DPA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act, expire. An accelerated shift of demand away from certain of our products and services could also adversely impact our revenues and profit margins.
Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates. For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. Due to the speed with which the situation is developing and the uncertainty of its duration, any future outbreaks, similar pandemics, the timing of recovery, travel restrictions, business closures or business disruptions, a recession, depression or other sustained adverse market event resulting from the spread of the COVID-19 and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, 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. However, the following adverse risks exist:
•Actions by the United States government or other foreign government could affect our business. These actions include purchasing products that we make or sell, imposing new product standards or allowing the use of alternative products, instituting regulatory requirements to purchase only locally manufactured products, exercising control over manufacturing or distribution operations, including use of the DPA, taking trade actions including the imposition or removal of tariffs or import / export controls, subsidizing the supply of products, imposition of vaccine mandates or other actions;
•Quarantine decisions by public or private entities may influence our ability to operate or our ability to ship or receive products. For example, if shipping companies cease or reduce land or sea freight channels, raw material and finished good deliveries may be slowed or stopped;
•Our customers may change their payment patterns or lose their ability to pay invoices, which could have a material adverse impact on our cash flow;
•Our suppliers may increase pricing or impose new purchasing requirements, such as minimum purchase quantities or pay-in-advance payment terms, which could have a material adverse impact on our cash flow;
•Raw materials or finished goods that we require for our operations may not be available, or pricing for such items may increase beyond the willingness of our customers to pay;
•New competitors may enter our market, including both small and large scale manufacturers;
•COVID-19 illness among our workers in manufacturing or distribution operations could impact our operations or compel the closure of one or more facilities for an unknown period of time. Labor relations in our facilities related to COVID-19 could also negatively impact our operations;
•We may invest in additional manufacturing capacity for which demand slows in the future, which could have a material adverse impact on our cash flow; and
•Technology infrastructure failures could materially inhibit our operations that currently include a substantial portion of remote work. For example, voice or data line failures resulting from natural, manmade or cyber-attack could impair our ability to operate.
We have incurred additional costs to ensure we meet the needs of our customers, including increasing our workforce in order to produce or distribute certain essential products for our customers, providing personal protective equipment to our workforce, incremental shipping and transportation costs, incremental technology costs, and additional cleaning costs throughout our facilities. We expect to continue to incur additional costs, which may be significant as we continue to implement operational changes in response to this pandemic, any future outbreaks or similar pandemics. Further, our management is focused on mitigating COVID-19, which has required and will continue to require, a large investment of time and resources across our enterprise and will delay other value added services and strategic initiatives. Additionally, some of our teammates are currently working remotely. An extended period of remote work arrangements, and any worsening of the COVID-19 pandemic, or future outbreaks, could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage 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.
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The impact of COVID-19 may also exacerbate other risks discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K, any of which could have a material effect on us. This situation is changing rapidly and additional impacts may arise that we are not aware of currently.

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

In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purposes. As of September 30, 2021, no shares were issued and $50.0 million of common stock remained available under the at-the-market equity financing program.


Item 6. Exhibits

(a)Exhibits
3.1
4.1
4.2
4.3
10.1
10.2
10.3
22.1
22.2
31.1   
31.2   
32.1   
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32.2   
101.INS    Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH    Inline XBRL Taxonomy Extension Schema Document
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    Inline XBRL Taxonomy Definition Linkbase Document
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  Owens & Minor, Inc.
  (Registrant)
Date: November 3, 2021   /s/ Edward A. Pesicka
  Edward A. Pesicka
  President, Chief Executive Officer & Director
Date: November 3, 2021   /s/ Andrew G. Long
  Andrew G. Long
  Executive Vice President & Chief Financial Officer
 
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OWENS & MINOR, INC.
Restricted Stock Agreement


    THIS RESTRICTED STOCK AGREEMENT (the “Agreement”) dated ___Grant Date___ between OWENS & MINOR, INC., a Virginia corporation (the "Company"), and _Participant Name___ ("Participant"), is made pursuant and subject to the provisions of the Company's 2018 Stock Incentive Plan (as amended, the "Plan"). All capitalized terms used herein that are not otherwise defined shall have the same meaning given to them in the Plan.

W I T N E S S E T H:

1.    Restricted Stock Grant. Pursuant to the provisions of the Plan, on __Grant Date__________ (the “Date of Grant”), the Company granted to Participant, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, a Stock Award of __# Shs Granted____ shares of Common Stock (the “Restricted Stock”).

2.    Terms and conditions. The shares of Restricted Stock evidenced hereby are subject to the following terms and conditions:

(a)    Vesting. The shares of Restricted Stock shall be subject to the following restrictions from the Date of Grant until that portion of shares of Restricted Stock vests in accordance with the Vesting Table below (at which time that portion of the Restricted Shares shall no longer be subject to such restrictions)or until the lapse of restrictions as provided in subsection 2(d) hereof (such period being referred to herein as the (the “Restricted Period”)):
(i)    Participant shall not be entitled to receive the certificate or certificates evidencing the Restricted Stock;

(ii)    Shares of Restricted Stock may not be sold, transferred, assigned, pledged, conveyed, hypothecated or otherwise disposed of; and

(iii)    Shares of Restricted Stock may be forfeited immediately as provided in subsection 2(d) hereof.

Vesting Table

Vesting Dates Percentage Vesting
On the date listed below which is closest to the one year anniversary of the grant date on or after such anniversary date and annually thereafter on said date:
•February 15
•May 15
•August 15
•November 15
Vesting Date on or after*:
•First Anniversary – 34%
•Second Anniversary – 33%
•Third Anniversary – 33%

*(rounded up to the nearest whole share)

Notwithstanding the foregoing, Participant shall be entitled to vote the shares of Restricted Stock and receive dividends thereon while the Restricted Stock is outstanding to the extent herein set forth. Any


stock dividends or other shares of Company stock or other property issued in respect of Restricted Stock, including without limitation, shares issued in connection with stock splits and recapitalizations, will be subject to the same restrictions applicable to the Restricted Stock with respect to which such dividends were credited. Any cash dividends paid in respect of Restricted Stock will be accumulated and paid, without interest, if and at the time of vesting (i.e., expiration of the Restricted Period) or, if earlier, the lapse of restrictions with respect to the Restricted Stock with respect to which the dividends were credited; provided, however, no cash dividends will be paid with respect to any Restricted Stock that does not vest and is forfeited.

(b)    Custody of Shares of Restricted Stock. Certificates representing the shares of Restricted Stock shall be issued in Participant’s name but shall be held by the Company (or its transfer agent) during the applicable Restricted Period. The Company’s Secretary and its General Counsel shall serve as attorney-in-fact for Participant during the applicable Restricted Period with full power and authority in Participant’s name to assign and convey to the Company any shares of Restricted Stock that Participant forfeits under subsection 2(d) hereof. Each certificate representing shares of Restricted Stock may bear a legend referring to the risk of forfeiture of the shares and stating that such shares are nontransferable until all restrictions have been satisfied and the legend has been removed.

(c)    Distribution of Restricted Stock. If Participant remains in the continuous employment of the Company or an Affiliate during the applicable Restricted Period and otherwise does not forfeit such shares pursuant to subsection 2(d) hereof, all restrictions applicable to the shares of Restricted Stock hereunder shall lapse upon expiration of the applicable Restricted Period and a certificate or certificates representing the shares of Common Stock that were granted to Participant in the form of shares of Restricted Stock shall be delivered to Participant.

(d)    Lapse of Restrictions or Forfeiture.

(i)    Death. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of Participant’s death, all restrictions applicable to the shares of Restricted Stock that have not lapsed previously shall immediately lapse on the date of Participant’s death and the certificate or certificates representing the shares of Common Stock shall be delivered to Participant’s estate.

(ii)    Disability. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of “total and permanent disability” (as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”)), all restrictions applicable to a pro rata number of shares of Restricted Stock that have not lapsed previously shall lapse. The “pro rata number” shall be that number of shares of Restricted Stock with respect to which all restrictions have not lapsed previously that, when added to the number of shares of Restricted Stock with respect to which all restrictions have lapsed previously, will equal the number of shares of Restricted Stock as of the Date of Grant multiplied by a fraction, the numerator of which is the number of months (including a fractional month) of Participant’s employment after the Date of Grant and the denominator of which is 36. The certificate or certificates representing the shares of Common Stock upon which the restrictions have lapsed shall be delivered to Participant and the remaining shares of Restricted Stock shall be forfeited immediately and all rights of Participant to such shares shall terminate immediately without further obligation on the part of the Company.

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(iii)    Retirement. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of retirement (defined below), all shares of Restricted Stock with respect to which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to such shares shall terminate immediately without further obligation on the part of the Company. Notwithstanding the foregoing, if Participant’s service to the Company or an Affiliate continues from and after the date of retirement through (i) membership on the Board, (ii) a written consulting services arrangement with the Company or an Affiliate or (iii) at the discretion of the Company, a written confidentiality and non-solicitation agreement with the Company (“Post-Retirement Service”), shares of Restricted Stock with respect to which all restrictions have not lapsed previously shall not be forfeited but shall continue to be held by the Company until the earlier of (i) the end of the applicable Restricted Period at which time such shares shall be delivered to the Participant or (ii) the date Participant ceases to provide Post-Retirement Service at which time shares of restricted stock with respect to which all restrictions have not lapsed previously shall be forfeited. For purposes of this Section 2(d)(iii), retirement shall mean severance from the employment of the Company and its Affiliates, other than for cause (as defined below), (i) at or after the attainment of age 55 and after completing a number of years of service (the total years of “Credited Service” attributable to Participant as of the date of termination, as such term is defined in the Owens & Minor 401(k) Savings and Retirement Plan, as amended, whether or not Participant participates in such plan) that, when added to Participant’s age at the time of severance from employment, equals at least 65 or (ii) at or after the attainment of age 65.

(iv)    Termination of Employment by Company or Affiliate.

(a)    With Cause. If the Company or an Affiliate terminates Participant’s employment with the Company and its Affiliates with “cause,” all shares of Restricted Stock with respect to which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to such shares shall terminate immediately without further obligation on the part of the Company, and Participant will be required to return to the Company that number of shares of Common Stock that equals the number of shares of Restricted Stock with respect to which all restrictions lapsed previously. For purposes of this Agreement, “cause” means: (i) misappropriation, theft or embezzlement of funds or property from the Company or an Affiliate or securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company or an Affiliate, (ii) conviction of, or entry of a plea of “nolo contendere” with respect to, a felony which, in the reasonable opinion of the Company, is likely to cause material harm to the Company’s or an Affiliate’s business, customer or supplier relations, financial condition or prospects, (iii) violation of the Company’s Code of Honor or any successor code of conduct; or (iv) failure to substantially perform (other than by reason of illness or temporary disability, regardless of whether such temporary disability is or becomes a total and permanent disability (as defined in paragraph 2(d)(ii) above), or by reason of approved leave of absence) the duties of Participant’s job.

(b)    Without Cause. If Participant’s employment with the Company and its Affiliates is terminated by the Company or an Affiliate without “cause,” all restrictions on a pro rata number of shares of Restricted Stock that have not lapsed previously shall lapse.
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The “pro rata number” shall be the number of shares of Restricted Stock with respect to which all restrictions have not lapsed previously that, when added to the number of shares of Restricted Stock with respect to which all restrictions have lapsed previously, will equal the number of shares of Restricted Stock as of the Date of Grant multiplied by a fraction, the numerator of which is the number of months (including a fractional month) of Participant’s employment after the Date of Grant and denominator of which is 36. The certificate or certificates representing the shares of Common Stock upon which the restrictions have lapsed shall be delivered to Participantand the remaining shares of Restricted Stock shall be forfeited immediately and all rights of Participant to such shares shall terminate immediately without further obligation on the part of the Company.

(v)    Termination of Employment by Participant. If Participant resigns from employment with the Company and its Affiliates before the expiration of the applicable Restricted Period, without regard to the reason for such resignation (other than death, disability or retirement as provided in subsections (i), (ii) and (iii) above), all of the shares of Restricted Stock with respect to which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to such shares shall terminate immediately without further obligation on the part of the Company.

(vi)    Change in Control.

(a)    If, upon a Change in Control, (i) the Restricted Stock is assumed by, or a substitute award granted by, the surviving entity (together with its Related Entities, the “Surviving Entity”) in the Change in Control (such assumed or substituted award to be of the same type of award as this Restricted Stock with a value as of the Control Change Date substantially equal to the value of this Restricted Stock) and (ii) within 24 months following the Control Change Date, Participant’s employment with the Surviving Entity is terminated by the Surviving Entity without Cause (defined below), all restrictions applicable to the shares of Restricted Stock that have not lapsed previously shall immediately lapse on the date of employment termination and the certificate or certificates representing the shares of Common Stock upon which the restrictions have lapsed shall be delivered to Participant.

(b)    For purposes of this subsection 2(d)(vi), “Cause” shall mean (i) the willful and continued failure by Participant to substantially perform his or her duties with the Surviving Entity (other than any such failure resulting from Participant’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Participant by the Surviving Entity, which demand specifically identifies the manner in which the Surviving Entity believes that Participant has not substantially performed his or her duties, or (ii) the willful engaging by Participant in conduct which is demonstrably and materially injurious to the Surviving Entity, monetarily or otherwise. For purposes of this paragraph, no act, or failure to act, on Participant’s part shall be deemed "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that the action or omission was in the best interest of the Surviving Entity.

(c)     If, upon a Change in Control, the Restricted Stock is not assumed by, or a substitute award granted by, the Surviving Entity in the Change in Control as provided in subsection 2(d)(vi)(a) above, all restrictions applicable to the shares of Restricted
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Stock that have not lapsed previously shall immediately lapse on the Control Change Date and the certificate or certificates representing the shares of Common Stock upon which the restrictions have lapsed shall be delivered to Participant.

3.    Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for the Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than sixty (60) days following the date of grant. If the Agreement is not accepted within 60 days, the entire Award will be forfeited and cancelled without any consideration thereof, except as otherwise determined in the Committee’s sole and absolute discretion.

4.    Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Virginia.

5.    No Right to Continued Employment. The grant of Restricted Stock hereunder does not confer upon Participant any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate his employment at any time.

6.    Change in Capital Structure. The terms of this award shall be adjusted as the Committee determines is equitably required in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.

7.    Withholding.    The Participant may be required to pay to the Company and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Stock, their grant or vesting or any payment or transfer with respect to the Restricted Stock and to take such action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such withholding taxes. Any withholding tax obligations required hereunder shall be satisfied by withholding or reducing the number of shares of Common Stock, as determined by the Company, otherwise issuable to Participant upon the settlement of the Restricted Stock (i.e., “Net Shares” election).

8.    Conflicts. In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof.

9.    Participant Bound by Plan. Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

10.    Binding Effect. Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees and personal representatives of Participant and the successors of the Company.

11.    Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Acceptance of this Agreement as set forth in Section 3 above shall be deemed the Participant’s execution of this Agreement.

[signature page follows]

5

    IN WITNESS WHEREOF, OWENS & MINOR, INC. has caused this Agreement to be signed by a duly authorized officer and Participant has affixed his or her signature hereto.

OWENS & MINOR, INC.


By:________________________________
        

PARTICIPANT



________________________________            
Participant Name
                            
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OWENS & MINOR, INC.
Restricted Stock Unit Award Agreement


    THIS STOCK UNIT AWARD AGREEMENT (the “Agreement”) dated [Grant Date], between OWENS & MINOR, INC., a Virginia corporation (the "Company"), and [Participant Name] ("Participant"), is made pursuant and subject to the provisions of the Company's 2018 Stock Incentive Plan (as amended, the "Plan"). All capitalized terms used herein that are not otherwise defined shall have the same meaning given to them in the Plan.

W I T N E S S E T H:

1.    Stock Unit Award Grant. Pursuant to the provisions of the Plan, on [Grant Date] (the “Date of Grant”), the Company granted to Participant, subject to the terms and conditions of the Plan and subject further to the terms and conditions herein set forth, a Stock Unit Award covering [# of shares] shares of Common Stock (the “Restricted Stock Units”). Upon fulfillment of the conditions described in subsection 2(a) below, each Restricted Stock Unit shall vest and entitle the Participant to receive one share of the Company’s Common Stock.

2.    Terms and conditions. The Restricted Stock Units evidenced hereby are subject to the following terms and conditions:

(a)    Vesting. The Restricted Stock Units shall be subject to the following restrictions from the Date of Grant until that portion of Restricted Stock Units vests in accordance with the Vesting Table below (at which time that portion of the Restricted Stock Units shall no longer be subject to such restrictions) or until the lapse of restrictions as provided in subsection 2(d) hereof (such period being referred to herein as the (the “Restricted Period”)):

(i)    Participant shall not be entitled to receive any of the shares of Common Stock covered by the Restricted Stock Units;

(ii)    The Restricted Stock Units may not be sold, transferred, assigned, pledged, conveyed, hypothecated or otherwise disposed of; and

(iii)    The Restricted Stock Units may be forfeited immediately as provided in subsection 2(d) hereof.

Vesting Table

Vesting Dates Percentage Vesting
On the date listed below which is closest to the one year anniversary of the grant date on or after such anniversary date and annually thereafter on said date:
•February 15
•May 15
•August 15
•November 15
Vesting Date on or after*:
•First Anniversary – 34%
•Second Anniversary – 33%
•Third Anniversary – 33%

*(rounded up to the nearest whole share)



Participant shall not be entitled to vote the shares of Common Stock covered by the Restricted Stock Units. Notwithstanding any of the foregoing, Participant shall be entitled to receive dividends on the shares of Common Stock covered by the Restricted Stock Units, while the Restricted Stock Units are outstanding, to the extent herein set forth. Any stock dividends or other shares of Company stock or other property issued in respect of the number of shares of Common Stock covered by the Restricted Stock Units, including without limitation, shares issued in connection with stock splits and recapitalizations, will be subject to the same restrictions applicable to the Restricted Stock Units with respect to which such dividends are credited. Any cash dividends paid in respect of the shares of Common Stock covered by the Restricted Stock Units will be accumulated and paid, without interest, if and at the time of vesting (i.e., expiration of the Restricted Period) or, if earlier, the lapse of restrictions with respect to the Restricted Stock Units with respect to which the dividends are credited; provided, however, no stock dividends or other shares of Company stock or other property or cash dividends will be paid with respect to any Restricted Stock Units that do not vest and are forfeited.

(b)    Shares of Common Stock Covered by the Restricted Stock Units. Certificates representing the shares of Common Stock covered by the Restricted Stock Units shall not be issued in Participant’s name until the time of expiration of the Restricted Period or, if earlier, the lapse of restrictions with respect to the Restricted Stock Units, prior to forfeiture of the Restricted Stock Units.

(c)    Distribution of Shares of Common Stock. If Participant remains in the continuous employment of the Company or an Affiliate during the applicable Restricted Period and otherwise does not forfeit such Restricted Stock Units pursuant to subsection 2(d) hereof, all restrictions applicable to the Restricted Stock Units hereunder shall lapse upon expiration of the applicable Restricted Period and a certificate or certificates representing the shares of Common Stock covered by such Restricted Stock Units shall be issued to Participant no later than 30 days after the expiration of the applicable Restricted Period (along with any stock dividends or other shares of Company stock or other property or cash dividends that are payable thereon with respect to such Restricted Stock Units).

(d)    Lapse of Restrictions or Forfeiture.

(i)    Death. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of Participant’s death, all restrictions applicable to the Restricted Stock Units that have not lapsed previously shall immediately lapse on the date of Participant’s death, and the certificate or certificates representing the shares of Common Stock covered by such Restricted Stock Units shall be issued to Participant’s estate no later than 30 days after Participant’s death.

(ii)    Disability. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of Participant’s “total and permanent disability” (as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”)), all restrictions applicable to a pro rata number of the Restricted Stock Units that have not lapsed previously shall lapse. The “pro rata number” shall be that number of Restricted Stock Units with respect to which all restrictions have not lapsed previously that, when added to the number of Restricted Stock Units with respect to which all restrictions have lapsed previously, will equal the number of Restricted Stock Units as of the Date of Grant multiplied by a fraction, the numerator of which is the number of months (including a fractional month) of Participant’s employment after the Date of Grant and the denominator of which is 36. The certificate or certificates representing the shares of Common Stock covered by the Restricted Stock Units upon which the restrictions have lapsed shall be issued to Participant no later than 30 days after termination of Participant’s employment as
2

described herein, and the remaining Restricted Stock Units shall be forfeited immediately and all rights of Participant to such remaining Restricted Stock Units shall terminate immediately without further obligation on the part of the Company.

(iii)    Retirement. If Participant’s employment with the Company and its Affiliates is terminated before the expiration of the applicable Restricted Period by reason of retirement (defined below), all Restricted Stock Units with respect to which all restrictions have not lapsed previously shall be forfeited immediately, and all rights of Participant to shares of Common Stock covered by such Restricted Stock Units shall terminate immediately without further obligation on the part of the Company. For purposes of this Section 2(d)(iii), retirement shall mean severance from the employment of the Company and its Affiliates, other than for cause (as defined below), (i) at or after the attainment of age 55 and after completing a number of years of service (the total years of “Credited Service” attributable to Participant as of the date of termination, as such term is defined in the Owens & Minor 401(k) Savings and Retirement Plan, as amended, whether or not Participant participates in such plan) that, when added to Participant’s age at the time of severance from employment, equals at least 65 or (ii) at or after the attainment of age 65.

(iv)    Termination of Employment by Company or Affiliate.

(a)    With Cause. If the Company or an Affiliate terminates Participant’s employment with the Company and its Affiliates with “cause,” all Restricted Stock Units with respect to which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to shares of Common Stock covered by such Restricted Stock Units shall terminate immediately without further obligation on the part of the Company, and Participant will forfeit any right to receive any of shares of Common Stock covered by the Restricted Stock Units with respect to which all restrictions lapsed previously. For purposes of this Agreement, “cause” means: (i) misappropriation, theft or embezzlement of funds or property from the Company or an Affiliate or securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company or an Affiliate, (ii) conviction of, or entry of a plea of “nolo contendere” with respect to, a felony which, in the reasonable opinion of the Company, is likely to cause material harm to the Company’s or an Affiliate’s business, customer or supplier relations, financial condition or prospects, (iii) violation of the Company’s Code of Honor or any successor code of conduct; or (iv) failure to substantially perform (other than by reason of illness or temporary disability, regardless of whether such temporary disability is or becomes a total and permanent disability (as defined in paragraph 2(d)(ii) above), or by reason of approved leave of absence) the duties of Participant’s job.

(b)    Without Cause. Except as set forth below in connection with a Change in Control, if Participant’s employment with the Company and its Affiliates is terminated by the Company or an Affiliate without “cause,” all restrictions on a pro rata number of the Restricted Stock Units that have not lapsed previously shall lapse. The “pro rata number” shall be the number of Restricted Stock Units with respect to which all restrictions have not lapsed previously that, when added to the number of Restricted Stock Units with respect to which all restrictions have lapsed previously, will equal the number of Restricted Stock Units as of the Date of Grant multiplied by a fraction, the numerator of which is the number of months (including a fractional month) of
3

Participant’s employment after the Date of Grant and denominator of which is 36. The certificate or certificates representing the shares of Common Stock covered by the Restricted Stock Units with respect to which the restrictions have lapsed shall be issued to Participant no later than 30 days after termination of Participant’s employment, and the remaining shares of Common Stock covered by the Restricted Stock Units for which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to such shares of Common Stock shall terminate immediately without further obligation on the part of the Company.

(v)    Termination of Employment by Participant. If Participant resigns from employment with the Company and its Affiliates before the expiration of the applicable Restricted Period, without regard to the reason for such resignation (other than death, disability or retirement as provided in subsections (i), (ii) and (iii) above), all of the Restricted Stock Units with respect to which all restrictions have not lapsed previously shall be forfeited immediately and all rights of Participant to the shares of Common Stock covered by such Restricted Stock Units shall terminate immediately without further obligation on the part of the Company.

(vi)    Change in Control.

(a)    If, upon a Change in Control, (i) the Restricted Stock Units are assumed by, or a substitute award granted by, the surviving entity (together with its Related Entities, the “Surviving Entity”) in the Change in Control (such assumed or substituted award to be of the same type of award as this Stock Unit Award with a value as of the Control Change Date substantially equal to the value of this Stock Unit Award) and (ii) within 24 months following the Control Change Date, Participant’s employment with the Surviving Entity is terminated by the Surviving Entity without Cause (defined below), all restrictions applicable to the Restricted Stock Units that have not lapsed previously shall immediately lapse on the date of employment termination and the certificate or certificates representing the shares of Common Stock covered by the Restricted Stock Units upon which the restrictions have lapsed shall be issued to Participant no later than 30 days after termination of Participant’s employment.

(b)    For purposes of this subsection 2(d)(vi), “Cause” shall mean (i) the willful and continued failure by Participant to substantially perform his or her duties with the Surviving Entity (other than any such failure resulting from Participant’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Participant by the Surviving Entity, which demand specifically identifies the manner in which the Surviving Entity believes that Participant has not substantially performed his or her duties, or (ii) the willful engaging by Participant in conduct which is demonstrably and materially injurious to the Surviving Entity, monetarily or otherwise. For purposes of this paragraph, no act, or failure to act, on Participant’s part shall be deemed "willful" unless done, or omitted to be done, not in good faith and without reasonable belief that the action or omission was in the best interest of the Surviving Entity.

(c)    If, upon a Change in Control, the Restricted Stock Units are not assumed by, or a substitute award granted by, the Surviving Entity in the Change in Control as provided in subsection 2(d)(vi)(a) above, all restrictions applicable to the Restricted Stock Units that have not lapsed previously shall immediately lapse on the Control Change Date and the certificate or certificates representing the shares of Common
4

Stock covered by the Restricted Stock Units upon which the restrictions have lapsed shall be issued to Participant no later than 30 days after the Control Change Date if Participant remains employed with the Company or an Affiliate as of the Control Change Date.

3.    Acceptance of Agreement. Notwithstanding anything herein to the contrary, in order for the Award to become effective, the Participant must acknowledge acceptance of this Agreement no later than sixty (60) days following the date of grant. If the Agreement is not accepted within 60 days, the entire Award will be forfeited and cancelled without any consideration thereof, except as otherwise determined in the Committee’s sole and absolute discretion.

4.    Governing Law. This Agreement shall be governed by the laws of the Commonwealth of Virginia.

5.    No Right to Continued Employment. The grant of Restricted Stock Units hereunder does not confer upon Participant any right with respect to continuance of employment by the Company or an Affiliate, nor shall it interfere in any way with the right of the Company or an Affiliate to terminate Participant’s employment at any time.

6.    Change in Capital Structure. The terms of this award shall be adjusted as the Committee determines is equitably required in the event the Company effects one or more stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization.

7.    Withholding.    The Participant may be required to pay to the Company, and the Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Stock Units, their grant or vesting or any payment or transfer with respect to the Restricted Stock Units and to take such action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such withholding taxes. Any withholding tax obligations required hereunder shall be satisfied by withholding or reducing the number of Restricted Stock Units, as determined by the Company, otherwise issuable to Participant upon the settlement of the Restricted Stock Units (i.e., “Net Shares” election).

8.    Conflicts. In the event of any conflict between the provisions of the Plan as in effect on the date hereof and the provisions of this Agreement, the provisions of the Plan shall govern. All references herein to the Plan shall mean the Plan as in effect on the date hereof.

9.    Participant Bound by Plan. Participant hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.

10.    Binding Effect. Subject to the limitations stated above and in the Plan, this Agreement shall be binding upon and inure to the benefit of the legatees, distributees and personal representatives of Participant and the successors of the Company.

11.    Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Acceptance of this Agreement as set forth in Section 3 above shall be deemed the Participant’s execution of this Agreement.

[signature page follows]

5

    IN WITNESS WHEREOF, OWENS & MINOR, INC. has caused this Agreement to be signed by a duly authorized officer and Participant has affixed his or her signature hereto.

OWENS & MINOR, INC.
        

By: ________________________________    

    
PARTICIPANT



________________________________                            
[Participant Name]
                            
6

Exhibit 22.2
Owens & Minor, Inc.

List of Subsidiaries Pledged as Collateral

The following table lists the pledged subsidiaries of Owens & Minor, Inc.’s 2024 Notes that constitute collateral (together, "the Collateral Group") as of September 30, 2021:

Entity
Owens & Minor, Inc.
Owens & Minor Distribution, Inc.
Owens & Minor Medical, Inc.
Barista Acquisition I, LLC
Barista Acquisition II, LLC
O&M Halyard, Inc.
O&M Byram Holding, GP
Byram Holdings I, Inc.
Byram Healthcare Centers, Inc.
Owens & Minor International Logistics, Inc.
500 Expressway Drive South LLC, a Delaware limited liability company
Access Diabetic Supply, L.L.C., a Florida limited liability company
Access Respiratory Supply Inc., a Florida corporation
AVID Medical, Inc., a Delaware corporation
Clinical Care Services, L.L.C., a Utah limited liability company
Diabetes Specialty Center, L.L.C., a Utah limited liability company
Fusion 5 Inc., a Delaware corporation
Halyard North Carolina, LLC, a North Carolina limited liability company
Key Diabetes Supply Co., a Michigan corporation
MAI Acquisition Corp., a Delaware corporation
Medegen Newco, LLC, a Delaware limited liability company
Medical Action Industries, Inc., a Delaware corporation
Medical Supply Group, Inc., a Virginia corporation
O&M Worldwide, LLC, a Virginia limited liability company
OM Solutions International, Inc., a Virginia corporation
Owens & Minor Canada, Inc., a Virginia corporation
Owens & Minor Global Resources, LLC, a Virginia limited liability company
Owens & Minor Healthcare Supply, Inc., a Virginia corporation
O&M Halyard Canada Inc.
O&M Halyard Honduras S.A. de C.V.
O&M Halyard Mexico S. del R.L. de C.V.
O&M Brasil Consultoria Ltda
La Ada de Acuna-S. de R.L. de C.V.
O&M Halyard UK Limited
O&M Halyard France
O&M Halyard Germany GMBH
O&M Halyard Netherlands B.V.
O and M Halyard South Africa Pty Ltd
Mira MEDsource Holding Company Limited
MIRA Medsource (Malaysia) SDN. BHD.
Mira MEDsource (Shanghai) Co., LTD
O&M International Healthcare C.V.
Owens & Minor International Unlimited Company
Owens & Minor Jersey Holdings Limited
O&M Ireland Unlimited Company
Owens & Minor Jersey Unlimited


Nalvest Limited
ArcRoyal Holdings Unlimited Company
ArcRoyal Unlimited Company
Owens & Minor Global Services Unlimited Company
O&M Healthcare Italia S.R.L.
O&M Halyard Belgium
O&M Halyard Australia PYT LTD
O&M Halyard Singapore PTE Ltd
O&M Halyard Ireland Limited
O&M Halyard Japan GK
O&M Halyard Health India Private Limited
Safeskin Medical & Scientific (Thailand) Ltd.
Halyard Malaysia SND BHD


Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Edward A. Pesicka, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 of Owens & Minor, Inc.;
 
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2021
/s/ Edward A. Pesicka
Edward A. Pesicka
President, Chief Executive Officer & Director


Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andrew G. Long, certify that:
 
1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, of Owens & Minor, Inc.;
 
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2021
/s/ Andrew G. Long
Andrew G. Long
Executive Vice President & Chief Financial Officer


Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Owens & Minor, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward A. Pesicka, President, Chief Executive Officer & Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Edward A. Pesicka
Edward A. Pesicka
President, Chief Executive Officer & Director
Owens & Minor, Inc.
November 3, 2021


Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Owens & Minor, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrew G. Long, Executive Vice President & Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Andrew G. Long
Andrew G. Long
Executive Vice President & Chief Financial Officer
Owens & Minor, Inc.
November 3, 2021