Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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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 June 30, 2024


☐	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			23116
Mechanicsville, Virginia
(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	☐	Smaller reporting company	☐
Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐

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

The number of shares of Owens & Minor, Inc.’s common stock outstanding as of July 26, 2024 was 77,096,148 shares.

Table of Contents

Owens & Minor, Inc. and Subsidiaries

Index



Part I. Financial Information		Page

Item 1.	Financial Statements	3
	Consolidated Statements of Operations—Three and Six Months Ended June 30, 2024 and 2023	3
	Consolidated Statements of Comprehensive Loss—Three and Six Months Ended June 30, 2024 and 2023	4
	Consolidated Balance Sheets—June 30, 2024 and December 31, 2023	5
	Consolidated Statements of Cash Flows—Six Months Ended June 30, 2024 and 2023	6
	Consolidated Statements of Changes in Equity—Three and Six Months Ended June 30, 2024 and 2023	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

Part II. Other Information

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2024		2023		2024		2023
Net revenue	$	2,671,006	$	2,563,226	$	5,283,686	$	5,086,075
Cost of goods sold		2,126,853		2,043,794		4,204,003		4,069,336
Gross profit		544,153		519,432		1,079,683		1,016,739
Distribution, selling and administrative expenses		469,313		455,030		946,926		903,752
Acquisition-related charges and intangible amortization		19,985		22,203		40,298		44,392
Exit and realignment charges, net		29,293		28,963		56,649		44,637
Other operating expense, net		5,263		2,397		5,815		3,312
Operating income		20,299		10,839		29,995		20,646
Interest expense, net		35,899		40,728		71,554		82,926
Other expense, net		1,205		1,072		2,358		2,458
Loss before income taxes		(16,805)		(30,961)		(43,917)		(64,738)
Income tax provision (benefit)		15,108		(2,720)		9,882		(12,079)
Net loss	$	(31,913)	$	(28,241)	$	(53,799)	$	(52,659)

Net loss per common share:
Basic	$	(0.42)	$	(0.37)	$	(0.70)	$	(0.70)
Diluted	$	(0.42)	$	(0.37)	$	(0.70)	$	(0.70)

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Loss

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2024		2023		2024		2023
Net loss	$	(31,913)	$	(28,241)	$	(53,799)	$	(52,659)
Other comprehensive (loss) income, net of tax:
Currency translation adjustments		(5,302)		(5,167)		(18,568)		(49)
Change in unrecognized net periodic pension costs		199		136		434		(11)
Change in gains and losses on derivative instruments		(204)		3,299		1,208		(78)
Total other comprehensive loss, net of tax		(5,307)		(1,732)		(16,926)		(138)
Comprehensive loss	$	(37,220)	$	(29,973)	$	(70,725)	$	(52,797)

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)


	June 30,		December 31,
(in thousands, except per share data)	2024		2023
Assets
Current assets
Cash and cash equivalents	$	243,671	$	243,037
Accounts receivable, net of allowances of $7,658 and $7,861		662,444		598,257
Merchandise inventories		1,231,413		1,110,606
Other current assets		189,542		150,890
Total current assets		2,327,070		2,102,790
Property and equipment, net of accumulated depreciation and amortization of $561,238 and $546,397		493,075		543,972
Operating lease assets		368,471		296,533
Goodwill		1,634,723		1,638,846
Intangible assets, net		326,173		361,835
Other assets, net		154,492		149,346
Total assets	$	5,304,004	$	5,093,322
Liabilities and equity
Current liabilities
Accounts payable	$	1,381,871	$	1,171,882
Accrued payroll and related liabilities		108,103		116,398
Current portion of long-term debt		210,913		206,904
Other current liabilities		430,298		396,701
Total current liabilities		2,131,185		1,891,885
Long-term debt, excluding current portion		1,871,800		1,890,598
Operating lease liabilities, excluding current portion		297,728		222,429
Deferred income taxes, net		28,900		41,652
Other liabilities		113,689		122,592
Total liabilities		4,443,302		4,169,156
Commitments and contingencies
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 77,048 shares and 76,546 shares as of June 30, 2024 and December 31, 2023		154,096		153,092
Paid-in capital		440,442		434,185
Retained earnings		314,908		368,707
Accumulated other comprehensive loss		(48,744)		(31,818)
Total equity		860,702		924,166
Total liabilities and equity	$	5,304,004	$	5,093,322

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)


	Six Months Ended June 30,
(in thousands)	2024		2023
Operating activities:
Net loss	$	(53,799)	$	(52,659)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization		137,974		142,988
Share-based compensation expense		13,601		11,675
Provision (benefit) for losses on accounts receivable		324		(900)
Loss on extinguishment of debt		—		843
Deferred income tax benefit		(9,029)		(6,758)
Changes in operating lease right-of-use assets and lease liabilities		3,766		(3,077)
Gain on sale and dispositions of property and equipment		(27,876)		(18,563)
Changes in operating assets and liabilities:
Accounts receivable		(68,442)		90,203
Merchandise inventories		(123,077)		165,651
Accounts payable		203,371		52,159
Net change in other assets and liabilities		(19,517)		82,954
Other, net		5,891		6,994
Cash provided by operating activities		63,187		471,510
Investing activities:
Additions to property and equipment		(90,379)		(92,750)
Additions to computer software		(4,829)		(8,229)
Proceeds from sale of property and equipment		67,026		35,729
Other, net		(8,858)		(418)
Cash used for investing activities		(37,040)		(65,668)
Financing activities:
Borrowings under amended Receivables Financing Agreement		667,300		348,200
Repayments under amended Receivables Financing Agreement		(667,300)		(444,200)
Repayments of term loans		(12,375)		(78,301)
Other, net		(12,545)		(8,819)
Cash used for financing activities		(24,920)		(183,120)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(682)		196
Net increase in cash, cash equivalents and restricted cash		545		222,918
Cash, cash equivalents and restricted cash at beginning of period		272,924		86,185
Cash, cash equivalents and restricted cash at end of period	$	273,469	$	309,103
Supplemental disclosure of cash flow information:
Income taxes paid (received), net	$	5,240	$	(10,506)
Interest paid	$	70,819	$	78,625
Noncash investing activity:
Unpaid purchases of property and equipment and computer software at end of period	$	76,373	$	65,808

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(unaudited)


		Common						Accumulated
	Common	Stock						Other
	Shares	($2 par		Paid-In		Retained		Comprehensive		Total
(in thousands, except per share data)	Outstanding	value )		Capital		Earnings		Loss		Equity
Balance, December 31, 2023	76,546	$	153,092	$	434,185	$	368,707	$	(31,818)	$	924,166
Net loss	—		—		—		(21,886)		—		(21,886)
Other comprehensive loss	—		—		—		—		(11,619)		(11,619)
Share-based compensation expense, exercises and other	(97)		(195)		4,402		—		—		4,207
Balance, March 31, 2024	76,449		152,897		438,587		346,821		(43,437)		894,868
Net loss	—		—		—		(31,913)		—		(31,913)
Other comprehensive loss	—		—		—		—		(5,307)		(5,307)
Share-based compensation expense, exercises and other	599		1,199		1,855		—		—		3,054
Balance, June 30, 2024	77,048	$	154,096	$	440,442	$	314,908	$	(48,744)	$	860,702

Balance, December 31, 2022	76,279	$	152,557	$	418,894	$	410,008	$	(35,855)	$	945,604
Net loss	—		—		—		(24,418)		—		(24,418)
Other comprehensive income	—		—		—		—		1,594		1,594
Share-based compensation expense, exercises and other	(83)		(166)		1,786		—		—		1,620
Balance, March 31, 2023	76,196		152,391		420,680		385,590		(34,261)		924,400
Net loss	—		—		—		(28,241)		—		(28,241)
Other comprehensive loss	—		—		—		—		(1,732)		(1,732)
Share-based compensation expense, exercises and other	244		489		1,313		—		—		1,802
Balance, June 30, 2023	76,440	$	152,880	$	421,993	$	357,349	$	(35,993)	$	896,229

See accompanying notes to consolidated financial statements.

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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 necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results expected for the full year.

We report our business under two distinct segments: Products & Healthcare Services and Patient Direct. The Products & Healthcare Services segment includes our Medical Distribution division, which includes our U.S. distribution business, along with our outsourced logistics and value-added services businesses, and our Global Products division which manufactures and sources medical surgical products through our production and kitting operations. The Patient Direct segment includes our home healthcare divisions (Byram and Apria).

Reclassifications

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

Use of Estimates

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 North America, Europe, and Asia. Cash that is held by a major bank and has restrictions on its availability to us is classified as restricted cash. Restricted cash as of June 30, 2024 and December 31, 2023 includes cash held in an escrow account as required by the Centers for Medicare & Medicaid Services in conjunction with the Bundled Payments for Care Improvement initiatives related to wind-down costs of Fusion5, as well as $13.4 million and $13.5 million of cash deposits received subject to limitations on use until remitted to a third-party financial institution (the Purchaser), pursuant to the Master Receivables Purchase Agreement (RPA).

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


	June 30, 2024		December 31, 2023
Cash and cash equivalents	$	243,671	$	243,037
Restricted cash included in Other current assets		13,402		29,887
Restricted cash included in Other assets, net		16,396		—
Total cash, cash equivalents, and restricted cash	$	273,469	$	272,924

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Rental Revenue

Within our Patient Direct segment, revenues are recognized under fee-for-service arrangements for equipment we rent to patients and sales of equipment, supplies and other items we sell to patients. Revenue that is generated from equipment that we rent to patients is primarily recognized over the noncancelable rental period, typically one month, and commences on delivery of the equipment to the patients. Revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, Medicare, Medicaid and patients. Rental revenue, less estimated adjustments, is recognized as earned on a straight-line basis over the noncancelable lease term. We recorded $148 million and $153 million for the three months ended June 30, 2024 and 2023 and $294 million and $300 million for the six months ended June 30, 2024 and 2023 in net revenue related to equipment we rent to patients.

Sales of Accounts Receivable

On March 14, 2023, we entered into the RPA, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $200 million are sold, on a limited-recourse basis, to the Purchaser in exchange for cash. As of June 30, 2024 and December 31, 2023, there were a total of $129 million and $124 million of uncollected accounts receivable, that were accounted for as sales and removed from our consolidated balance sheets. Under the RPA, we provide certain servicing and collection actions on behalf of the Purchaser; however, we do not maintain any beneficial interest in the accounts receivable sold.

Proceeds from the sale of accounts receivable are recorded as an increase to cash and cash equivalents and a reduction to accounts receivable, net of allowances, in the consolidated balance sheets. Cash received from the sale of accounts receivable, net of payments made to the Purchaser, is reflected as cash provided by operating activities in the consolidated statements of cash flows. Total accounts receivable sold under the RPA were $573 million and $1.1 billion for the three and six months ended June 30, 2024. During the three and six months ended June 30, 2024, we received net cash proceeds of $569 million and $1.1 billion from the sale of accounts receivable under the RPA and collected $547 million and $1.1 billion of the sold accounts receivable. Total accounts receivable sold under the RPA were $412 million for the three and six months ended June 30, 2023. During the three and six months ended June 30, 2023, we received net cash proceeds of $409 million from the sale of accounts receivable under the RPA and collected $297 million of the sold accounts receivable. The losses on sale of accounts receivable, inclusive of professional fees incurred to establish the agreement, recorded in other operating expense, net in the consolidated statements of operations were $3.9 million and $2.9 million for the three months ended June 30, 2024 and 2023 and $7.2 million and $3.6 million for the six months ended June 30, 2024 and 2023. The RPA is separate and distinct from the accounts receivable securitization program (the Receivables Financing Agreement).

Note 2—Fair Value

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

The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued payroll and related liabilities reported in the consolidated balance sheets approximate fair value due to the short-term nature of these instruments. The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 5 for the fair value of debt. The fair value of our derivative contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 7 for the fair value of derivatives.

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Our acquisitions may include contingent consideration as part of the purchase price. The fair value of contingent consideration is estimated as of the acquisition date and at the end of each subsequent reporting period based on the present value of the contingent payments to be made using a weighted probability of possible payments (Level 3). Subsequent changes in fair value are recorded as adjustments to acquisition-related charges and intangible amortization within the consolidated statements of operations.

Note 3—Goodwill and Intangible Assets

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


			Products &
			Healthcare
	Patient Direct		Services		Consolidated
Carrying amount of goodwill, December 31, 2023	$	1,535,252	$	103,594	$	1,638,846
Currency translation adjustments		—		(4,123)		(4,123)
Carrying amount of goodwill, June 30, 2024	$	1,535,252	$	99,471	$	1,634,723

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


	June 30, 2024						December 31, 2023
	Customer				Other		Customer				Other
	Relationships		Tradenames		Intangibles		Relationships		Tradenames		Intangibles
Gross intangible assets	$	396,763	$	202,000	$	73,055	$	433,750	$	202,000	$	73,958
Accumulated amortization		(222,098)		(79,434)		(46,113)		(236,791)		(69,655)		(41,427)
Net intangible assets	$	174,665	$	122,566	$	26,942	$	196,959	$	132,345	$	32,531
Weighted average useful life		14 years		10 years		6 years		13 years		10 years		6 years

At June 30, 2024 and December 31, 2023, $226 million and $250 million in net intangible assets were held in the Patient Direct segment and $100 million and $112 million were held in the Products & Healthcare Services segment. Amortization expense for intangible assets was $16.3 million and $20.9 million for the three months ended June 30, 2024 and 2023 and $36.5 million and $41.8 million for the six months ended June 30, 2024 and 2023.

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


Year
2024 (remainder)	$	32,831
2025		54,296
2026		48,849
2027		41,594
2028		29,439
Thereafter		117,164
Total future amortization	$	324,173

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Note 4—Exit and Realignment Costs

We periodically incur exit and realignment and other charges associated with optimizing our operations which includes the consolidation of certain facilities, information technology (IT) strategic initiatives and other strategic actions. These charges also include costs associated with our Operating Model Realignment Program, which include professional fees, severance and other costs to streamline functions and processes. These amounts are excluded from our segments’ operating income.

During the three months ended June 30, 2024 and 2023, exit and realignment charges, net of $29.3 million and $29.0 million included $28.3 million and $27.6 million in charges under our Operating Model Realignment Program and IT strategic initiatives. During the six months ended June 30, 2024 and 2023, exit and realignment charges, net of $56.6 million and $44.6 million included $63.1 million and $42.8 million in charges under our Operating Model Realignment Program and IT strategic initiatives. Exit and realignment charges, net for the six months ended June 30, 2024 also included a gain of $7.4 million associated with the sale of our corporate headquarters. We expect to incur material future costs relating to our Operating Model Realignment Program and IT strategic initiatives, which we are not able to reasonably estimate.

The following table summarizes the activity related to exit and realignment cost accruals, which are classified as other current liabilities in our consolidated balance sheets, through June 30, 2024 and 2023:


	Total
Accrued exit and realignment costs, December 31, 2023	$	20,047
Provision for exit and realignment activities:
Severance		184
Professional fees		25,625
IT strategic initiatives - related costs		1,241
Other		1,252
Cash payments		(11,728)
Accrued exit and realignment costs, March 31, 2024		36,621
Provision for exit and realignment activities:
Severance		(205)
Professional fees		19,182
IT strategic initiatives - related costs		4,809
Other		3,606
Cash payments		(33,908)
Accrued exit and realignment costs, June 30, 2024	$	30,105

Accrued exit and realignment costs, December 31, 2022	$	969
Provision for exit and realignment activities:
Severance		4,127
Professional fees		9,012
IT strategic initiatives - related costs		123
Other		2,412
Cash payments		(5,546)
Accrued exit and realignment costs, March 31, 2023		11,097
Provision for exit and realignment activities:
Severance		505
Professional fees		22,953
IT strategic initiatives - related costs		3,374
Other		2,131
Cash payments		(20,196)
Accrued exit and realignment costs, June 30, 2023	$	19,864

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

Note 5—Debt

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


	June 30, 2024				December 31, 2023
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
4.375% Senior Notes, due December 2024	$	171,352	$	169,861	$	171,232	$	168,754
Term Loan A		379,102		385,189		387,591		390,668
4.500% Senior Notes, due March 2029		473,426		411,609		472,869		422,647
Term Loan B		501,561		514,000		503,212		518,293
6.625% Senior Notes, due April 2030		541,385		501,327		540,445		529,472
Finance leases and other		15,887		15,887		22,153		22,153
Total debt		2,082,713		1,997,873		2,097,502		2,051,987
Less current maturities		(210,913)		(210,913)		(206,904)		(206,904)
Long-term debt	$	1,871,800	$	1,786,960	$	1,890,598	$	1,845,083

We have $171 million of 4.375% senior notes due in December 2024 (the 2024 Notes), with interest payable semi-annually. The 2024 Notes were sold at 99.6% of the principal amount with an effective yield of 4.422%. Prior to September 15, 2024, we have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to the greater of 100% of the principal amount or the present value of the remaining scheduled payments discounted at the applicable Benchmark Treasury Rate (as defined in the Indenture which governs the 2024 Notes) plus 30 basis points. On and after September 15, 2024, we have the option to redeem the 2024 Notes in part or in whole prior to maturity at a redemption price equal to 100% of the principal amount of the 2024 Notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. On July 31, 2024, we provided notice that we intend to redeem the 2024 Notes, see Note 14 in Notes to Consolidated Financial Statements.

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

The Receivables Financing Agreement has a maximum borrowing capacity of $450 million. The interest rate under the Receivables Financing Agreement is based on a spread over a benchmark SOFR rate (as described in the Fourth Amendment to the Receivables Financing Agreement, as further amended by the Fifth Amendment to the Receivables Financing Agreement). Under the Receivables Financing Agreement, certain of our accounts receivable balances are sold to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Financing Agreement matures in March 2025.

We had no borrowings at June 30, 2024 and December 31, 2023 under our Receivables Financing Agreement. At June 30, 2024 and December 31, 2023, we had maximum revolving borrowing capacity of $450 million under our Receivables Financing Agreement.

On March 29, 2022, we entered into a term loan credit agreement with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (the Credit Agreement) that provides for two credit facilities (i) a $500 million Term Loan A facility (the Term Loan A), and (ii) a $600 million Term Loan B facility (the Term Loan

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B). The interest rate on the Term Loan A is based on the sum of either Term SOFR or the Base Rate and an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable pricing to the Borrowers (each as defined in the Credit Agreement). The interest rate on the Term Loan B is based on either the Term SOFR or the Base Rate plus an Applicable Rate. The Term Loan A will mature in March 2027 and the Term Loan B will mature in March 2029.

On March 10, 2021, we issued $500 million of 4.500% senior unsecured notes due in March 2029 (the 2029 Unsecured Notes), with interest payable semi-annually. The 2029 Unsecured Notes were sold at 100% of the principal amount with an effective yield of 4.500%. We may redeem all or part of the 2029 Unsecured Notes at the applicable redemption prices described in the Indenture dated March 10, 2021 (the Indenture), plus accrued and unpaid interest, if any, to, but not including, the redemption date.

On March 29, 2022, we issued $600 million of 6.625% senior unsecured notes due in April 2030 (the 2030 Unsecured Notes), with interest payable semi-annually. The 2030 Unsecured Notes were sold at 100% of the principal amount with an effective yield of 6.625%. We may redeem all or part of the 2030 Unsecured Notes, prior to April 1, 2025, at a price equal to 100% of the principal amount of the 2030 Unsecured Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a “make-whole” premium, as described in the Indenture dated March 29, 2022 (the New Indenture). From and after April 1, 2025, we may redeem all or part of the 2030 Unsecured Notes at the applicable redemption prices described in the New Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. We may also redeem up to 40% of the aggregate principal amount of the 2030 Unsecured Notes at any time prior to April 1, 2025, at a redemption price equal to 106.625% with an amount equal to or less than the net cash proceeds from certain equity offerings, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

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

We have a revolving credit agreement with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (Revolving Credit Agreement) with a maximum borrowing capacity of $450 million. The interest rate under our Revolving Credit Agreement is based on the Adjusted Term SOFR Rate (as defined in the Revolving Credit Agreement). The Revolving Credit Agreement matures in March 2027.

At June 30, 2024 and December 31, 2023, our Revolving Credit Agreement was undrawn, and we had letters of credit, which reduce Revolving Credit Agreement availability, totaling $31.5 million and $27.4 million, leaving $419 million and $423 million available for borrowing at the end of each period. We also had letters of credit and bank guarantees which support certain leased facilities as well as other normal business activities in the U.S. and Europe that were issued outside of the Revolving Credit Agreement for $2.9 million and $3.0 million as of June 30, 2024 and December 31, 2023.

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

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


Year
2024 (remainder)	$	186,822
2025		40,375
2026		43,500
2027		305,375
2028		6,000
2029		965,654
2030		552,189

Of the $187 million due in 2024, $179 million is due in December 2024. Current maturities at June 30, 2024 include $171 million in principal payments on our 2024 Notes, $28.1 million in principal payments on our Term Loan A, $6.0 million in principal payments on our Term Loan B, and $5.5 million in current portion of finance leases and other.

Note 6—Retirement Plans

We have a frozen noncontributory, unfunded retirement plan for certain retirees in the U.S. (U.S. Retirement Plan). As of June 30, 2024 and December 31, 2023, the accumulated benefit obligation of the U.S. Retirement Plan was $33.3 million and $34.1 million. Certain of our foreign subsidiaries also have defined benefit pension plans covering substantially all of their respective teammates.

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Service cost	$	458	$	446	$	916	$	887
Interest cost		645		714		1,290		1,423
Recognized net actuarial loss		82		123		163		246
Net periodic benefit cost	$	1,185	$	1,283	$	2,369	$	2,556

Note 7—Derivatives

We are directly and indirectly affected by changes in foreign currency, which may adversely impact our financial performance and are referred to as “market risks.” When deemed appropriate, we use derivatives as a risk management tool to mitigate the potential impact of certain market risks. We do not enter into derivative financial instruments for trading purposes.

We enter into foreign currency contracts to manage our foreign exchange exposure related to certain balance sheet items that do not meet the requirements for hedge accounting. These derivative instruments are adjusted to fair value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability.

We pay interest on our Credit Agreement which fluctuates based on changes in our benchmark interest rates. In order to mitigate the risk of increases in benchmark rates on our term loans, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount. The interest rate swaps were designated as cash flow hedges. Cash flows related to the interest rate swap agreement are included in interest expense, net.

We determine the fair value of our foreign currency derivatives and interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data. We do not view the fair value of our

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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. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.

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

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