SEC Filing | Owens & Minor, Inc.

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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 March 31, 2020



☐	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 April 30, 2020, was 63,007,803 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 Months Ended March 31, 2020 and 2019	3
	Consolidated Statements of Comprehensive Loss—Three Months Ended March 31, 2020 and 2019	4
	Consolidated Balance Sheets—March 31, 2020 and December 31, 2019	5
	Consolidated Statements of Cash Flows—Three Months Ended March 31, 2020 and 2019	6
	Consolidated Statements of Changes in Equity—Three Months Ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II. Other Information

Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 6.	Exhibits	27

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Part I. Financial Information

Item 1. Financial Statements

Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Operations

(unaudited)



	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019
Net revenue	$	2,122,693		$	2,350,840
Cost of goods sold	1,854,134			2,074,219
Gross margin	268,559			276,621
Distribution, selling and administrative expenses	254,048			255,112
Acquisition-related and exit and realignment charges	6,064			4,863
Other operating (income) expense, net	(2,309		)	42
Operating income	10,756			16,604
Interest expense, net	23,342			25,458
Other expense, net	4,846			2,734
Loss from continuing operations before income taxes	(17,432		)	(11,588		)
Income tax benefit	(8,523		)	(670		)
Loss from continuing operations, net of tax	(8,909		)	(10,918		)
Loss from discontinued operations, net of tax	(2,415		)	(3,178		)
Net loss	$	(11,324	)	$	(14,096	)

Loss from continuing operations per common share: basic and diluted	$	(0.15	)	$	(0.18	)
Loss from discontinued operations per common share: basic and diluted	(0.04		)	(0.05		)
Net loss per common share: basic and diluted	$	(0.19	)	$	(0.23	)

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 March 31,
(in thousands)	2020			2019
Net loss	$	(11,324	)	$	(14,096	)
Other comprehensive loss, net of tax:
Currency translation adjustments (net of income tax of $0 in 2020 and 2019)	(28,178		)	(4,207		)
Change in unrecognized net periodic pension costs (net of income tax of $44 in 2020 and $69 in 2019)	170			197
Net unrealized loss on derivative instruments and other (net of income tax benefit of $4,302 in 2020 and $658 in 2019)	(11,397		)	(2,413		)
Other comprehensive loss	(39,405		)	(6,423		)
Comprehensive loss	$	(50,729	)	$	(20,519	)

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Balance Sheets

(unaudited)



	March 31,			December 31,
(in thousands, except per share data)	2020			2019
Assets
Current assets
Cash and cash equivalents	$	92,315		$	67,030
Accounts receivable, net of allowances of $23,971 and $21,015	667,607			674,706
Merchandise inventories	1,108,844			1,146,192
Other current assets	151,635			79,372
Current assets of discontinued operations	499,410			439,983
Total current assets	2,519,811			2,407,283
Property and equipment, net of accumulated depreciation of $254,054 and $245,718	301,335			315,427
Operating lease assets	133,738			142,219
Goodwill	388,000			393,181
Intangible assets, net	271,513			285,018
Other assets, net	100,473			99,956
Total assets	$	3,714,870		$	3,643,084
Liabilities and equity
Current liabilities
Accounts payable	$	891,542		$	808,035
Accrued payroll and related liabilities	44,722			53,584
Other current liabilities	229,824			231,029
Current liabilities of discontinued operations	383,586			323,511
Total current liabilities	1,549,674			1,416,159
Long-term debt, excluding current portion	1,484,340			1,508,415
Operating lease liabilities, excluding current portion	109,381			117,080
Deferred income taxes	42,962			40,550
Other liabilities	112,175			98,726
Total liabilities	3,298,532			3,180,930
Commitments and contingencies
Equity
Common stock, par value $2 per share; authorized - 200,000 shares; issued and outstanding - 62,885 shares and 62,843 shares	125,770			125,686
Paid-in capital	256,357			251,401
Retained earnings	126,323			137,774
Accumulated other comprehensive loss	(92,112		)	(52,707		)
Total equity	416,338			462,154
Total liabilities and equity	$	3,714,870		$	3,643,084

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)



	Three Months Ended March 31,
(in thousands)	2020			2019
Operating activities:
Net loss	$	(11,324	)	$	(14,096	)
Adjustments to reconcile net loss to cash provided by (used for) operating activities:
Depreciation and amortization	23,913			28,720
Share-based compensation expense	3,941			4,505
Impairment charges	9,080			—
Provision for losses on accounts receivable	5,213			3,619
Deferred income tax expense (benefit)	6,348			(8,613		)
Changes in operating lease right-of-use assets and lease liabilities	(714		)	(190		)
Changes in operating assets and liabilities:
Accounts receivable	(7,942		)	(22,573		)
Merchandise inventories	39,340			80,194
Accounts payable	98,743			(120,480		)
Net change in other assets and liabilities	(77,178		)	(15,668		)
Other, net	4,034			3,678
Cash provided by (used for) operating activities	93,454			(60,904		)
Investing activities:
Additions to property and equipment	(4,771		)	(11,674		)
Additions to computer software	(942		)	(2,605		)
Proceeds from sale of property and equipment	33			271
Cash used for investing activities	(5,680		)	(14,008		)
Financing activities:
Proceeds from issuance of debt	150,000			—
(Repayments) borrowings under revolving credit facility	(6,200		)	72,100
Repayments of debt	(166,798		)	(12,394		)
Financing costs paid	(5,785		)	(4,313		)
Cash dividends paid	(155		)	(4,764		)
Other, net	(2,468		)	(1,124		)
Cash (used for) provided by financing activities	(31,406		)	49,505
Effect of exchange rate changes on cash and cash equivalents	(62		)	(2,721		)
Net increase (decrease) in cash, cash equivalents and restricted cash	56,306			(28,128		)
Cash, cash equivalents and restricted cash at beginning of period	84,687			103,367
Cash, cash equivalents and restricted cash at end of period	$	140,993		$	75,239
Supplemental disclosure of cash flow information:
Income taxes paid (received), net of refunds	$	2,695		$	(12,388	)
Interest paid	$	21,431		$	24,504

See accompanying notes to consolidated financial statements.

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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, 2018	62,294	$	124,588	$	238,773	$	200,670		$	(45,612	)	$	518,419
Net loss						(14,096		)				(14,096		)
Other comprehensive loss									(6,423		)	(6,423		)
Dividends declared ($0.0025 per share)						(119		)				(119		)
Share-based compensation expense, exercises and other	642	1,284		2,774								4,058
Balance, March 31, 2019	62,936	$	125,872	$	241,547	$	186,455		$	(52,035	)	$	501,839

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

See accompanying notes to consolidated financial statements.

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Owens & Minor, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

(in thousands, unless otherwise indicated)

Note 1—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Owens & Minor, Inc. and the subsidiaries it controls (we, us, our or the Company) and contain all adjustments (which are comprised only of normal recurring accruals and use of estimates) necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. The Movianto business represents a component that met accounting requirements to be classified as discontinued operations and held for sale beginning December 31, 2019. In accordance with GAAP, the financial position and results of operations of the Movianto business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 3, the Notes to the Consolidated Financial Statements reflect the continuing operations of Owens & Minor, Inc. 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 represents $16.3 million held in an escrow account as of March 31, 2020 as required by the Centers for Medicare & Medicaid Services (CMS) in conjunction with the Bundled Payments for Care Improvement (BPCI) Advanced Program.

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. The restricted cash presented below is classified as non-current in Other assets, net within the accompanying consolidated balance sheets.



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	92,315	$	67,030
Restricted cash included in Other assets, net	16,315		16,261
Cash of discontinued operations	32,363		1,396
Total cash, cash equivalents and restricted cash	$	140,993	$	84,687

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 interest rate swaps and 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 January 16, 2020, we announced our intention to sell our European logistics business, Movianto, to EHDH Holding Group (EHDH), a privately held French company, for cash consideration of $133 million. The Company concluded that the Movianto business met the criteria for discontinued operations as of March 31, 2020 and December 31, 2019, 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. The transaction is expected to close in the first half of 2020.

Accordingly, the results of operations from our Movianto business are reported in the accompanying consolidated statements of operations as “Loss from discontinued operations, net of tax” for the quarters ended March 31, 2020 and 2019, and the related assets and liabilities are classified as held-for-sale as of March 31, 2020 and December 31, 2019 in the accompanying balance sheets. We recognized a loss of $9.1 million and $32.1 million in connection with the classification of the related assets and liabilities as held-for-sale as of March 31, 2020 and December 31, 2019, respectively.

The following table summarizes the financial results of our discontinued operations for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
	2020			2019
Net revenue	$	122,342		$	110,548
Cost of goods sold	32,106			28,745
Gross margin	90,236			81,803
Distribution, selling, and administrative expenses	80,953			83,044
Asset impairment charges	9,080			—
Acquisition-related and exit and realignment charges	271			126
Other operating income, net	(461		)	(186		)
Operating income (loss)	393			(1,181		)
Interest expense, net	1,720			1,640
Loss from discontinued operations before income taxes	(1,327		)	(2,821		)
Income tax provision from discontinued operations	1,088			357
Loss from discontinued operations, net of tax	$	(2,415	)	$	(3,178	)

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 three months ended March 31, 2020.

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The assets and liabilities of the discontinued Movianto business reflected on the consolidated balance sheets at March 31, 2020 and December 31, 2019, are as follows:



	March 31, 2020			December 31, 2019
Assets of discontinued operations
Cash and cash equivalents	$	32,363		$	1,396
Accounts receivable, net	78,193			78,643
Merchandise inventories	12,979			16,058
Other current assets	227,070			188,853
Current assets of discontinued operations	350,605			284,950
Property and equipment, net	70,730			70,976
Intangible assets, net	7,010			6,579
Other assets, net	27,248			22,165
Operating lease assets	84,202			87,425
Valuation allowance on disposal group classified as held for sale	(40,385		)	(32,112		)
Total assets of discontinued operations	$	499,410		$	439,983
Liabilities of discontinued operations
Accounts payable	$	68,058		$	53,981
Other current liabilities	191,728			182,980
Current liabilities of discontinued operations	259,786			236,961
Long-term debt, excluding current portion	2,781			5,523
Operating lease liabilities, excluding current portion	69,820			76,270
Other liabilities	51,199			4,757
Total liabilities of discontinued operations	$	383,586		$	323,511

Assets and liabilities held for sale as of March 31, 2020 and December 31, 2019 are classified as current since we expect the divestiture to be completed within one year of the balance sheet dates.

The following table provides operating and investing cash flow information for our discontinued operations:



	March 31, 2020		March 31, 2019
Operating Activities:
Depreciation and amortization	$	—	$	5,613
Asset impairment charges	9,080		—
Investing Activities:
Capital expenditures	1,664		8,035

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 March 31, 2020:



	Global Solutions		Global Products			Consolidated
Carrying amount of goodwill, December 31, 2019	$	283,905	$	109,276		$	393,181
Currency translation adjustments	—		(5,181		)	(5,181		)
Carrying amount of goodwill, March 31, 2020	$	283,905	$	104,095		$	388,000

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Intangible assets at March 31, 2020 and December 31, 2019, were as follows:



	March 31, 2020									December 31, 2019
	Customer Relationships			Tradenames			Other Intangibles			Customer Relationships			Tradenames			Other Intangibles

Gross intangible assets	$	266,595		$	90,000		$	43,227		$	270,693		$	90,000		$	43,055
Accumulated amortization	(97,366		)	(18,611		)	(12,332		)	(92,947		)	(16,520		)	(9,263		)
Net intangible assets	$	169,229		$	71,389		$	30,895		$	177,746		$	73,480		$	33,792
Weighted average useful life	10 years			11 years			8 years			10 years			11 years			8 years

At March 31, 2020, $76.1 million in net intangible assets were held in the Global Solutions segment and $195.4 million were held in the Global Products segment. Amortization expense for intangible assets was $10.6 million and $10.0 million for the three months ended March 31, 2020 and 2019, respectively.

Based on the current carrying value of intangible assets subject to amortization, estimated amortization expense is $31.1 million for the remainder of 2020, $39.8 million for 2021, $38.9 million for 2022, $38.7 million for 2023, $33.9 million for 2024 and $28.2 million for 2025.

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, and IT restructuring charges. These charges also include costs associated with our strategic organizational realignment which include management changes, certain professional fees, and costs to streamline administrative functions and processes.

Exit and realignment charges by segment for the three months ended March 31, 2020 and 2019 were as follows:



	Three Months Ended March 31,
	2020		2019
Global Solutions segment	$	1,829	$	566
Global Products segment	—		138
Total exit and realignment charges	$	1,829	$	704

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The following table summarizes the activity related to exit and realignment cost accruals through March 31, 2020 and 2019:



	Total ⁽¹⁾
Accrued exit and realignment costs, December 31, 2019	$	8,162
Provision for exit and realignment activities:
Severance	1,391
Information system restructuring costs	183
Other	255
Change in estimate	—
Cash payments	(5,799		)
Accrued exit and realignment costs, March 31, 2020	$	4,192

Accrued exit and realignment costs, December 31, 2018	$	7,477
Provision for exit and realignment activities:
Severance	360
Information system restructuring costs	261
Other	83
Change in estimate	—
Cash payments	(2,206		)
Accrued exit and realignment costs, March 31, 2019	$	5,975

⁽¹⁾The accrued exit and realignment costs at March 31, 2020 and 2019 related primarily to information system restructuring costs and severance.

Acquisition-related and exit and realignment charges presented in our consolidated statements of operations includes acquisition-related charges of $4.2 million for the three months ended March 31, 2020 and 2019, respectively, and consisted primarily of transition costs for the Halyard acquisition.

Note 6—Debt

Debt consists of the following:



	March 31, 2020						December 31, 2019
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
3.875% Senior Notes, due September 2021	$	231,764		$	223,367		$	236,234		$	229,356
4.375% Senior Notes, due December 2024	274,041			184,140			273,978			212,086
Term A Loans, due July 2022	217,924			221,906			377,420			383,050
Term B Loan, due April 2025	479,332			340,751			480,337			442,217
Revolver	171,700			171,700			177,900			177,900
Accounts Receivable Securitization Program	147,209			150,000			—			—
Finance leases and other	13,557			13,557			13,783			13,783
Total debt	1,535,527			1,305,421			1,559,652			1,458,392
Less current maturities	(51,187		)	(51,187		)	(51,237		)	(51,237		)
Long-term debt	$	1,484,340		$	1,254,234		$	1,508,415		$	1,407,155

We have $233 million of 3.875% senior notes due 2021 (the “2021 Notes”) and $275 million of 4.375% senior notes due 2024 (the “2024 Notes”), with interest payable semi-annually. The 2021 Notes were sold at 99.5% of the principal amount with an effective yield of 3.951%. The 2024 Notes were sold at 99.6% of the principal with an effective yield of 4.422%. We have the option to redeem the 2021 Notes and 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 Treasury Rate plus 30 basis points. We used $4.4 million of cash to repurchase $4.6 million aggregate principal amount of the 2021 Notes during the first quarter of 2020.

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We have a Credit Agreement (amended February 2020) with a borrowing capacity of $400 million and $697 million outstanding in term loans. On February 13, 2020, we entered into a Fifth Amendment to the Credit Agreement.

The interest rate on our revolving credit facility and Term A loans is based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus an adjustment based on our Consolidated Total Leverage Ratio as defined by the Credit Agreement. Our credit spread at March 31, 2020 was Eurocurrency Rate plus 4.25%. Our Term B loan accrues interest based on the Eurocurrency Rate, the Federal Funds Rate or the Prime Rate, plus interest rate margin of 3.50% per annum with respect to Base Rate Loans (as defined in the Credit Agreement), and 4.50% per annum with respect to Eurocurrency Rate Loans (as defined in the Credit Agreement). We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the facility. The terms of the Credit Agreement requires us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition.

We also have a Security and Pledge Agreement (the Security Agreement) pursuant to which we granted collateral on behalf of the holders of the 2021 Notes and the 2024 Notes and parties secured on 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 (limited, in the case of controlled foreign corporations, to a pledge of 100% of the voting capital stock of each first-tier foreign subsidiary of each Credit Party) and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions. The Fifth Amendment to the Credit Agreement included additional collateral requirements related to the parties secured on the Credit Agreement, including the obligation to pledge the Company's owned U.S. real estate and remaining equity interests in foreign subsidiaries. Our Credit Agreement has a “springing maturity date” with respect to the revolving loans and the Term A loans and the Term B loans. If as of the date 91 days prior to the maturity date of our 2021 Notes all outstanding amounts under the 2021 Notes have not been paid in full, then the Termination Date (as defined in the Credit Agreement) of the revolving credit facility and the Term A loans shall be the date that is 91 days prior to the maturity date of the 2021 Notes. Likewise, if as of the date 91 days prior to the maturity date of our 2024 Notes, all outstanding amounts under the 2024 Notes have not been paid in full, the Termination Date of the Term B loan shall be the date that is 91 days prior to the maturity date of the 2024 Notes.

On February 19, 2020, we entered into an accounts receivable securitization program (the “Receivables Securitization Program”). Pursuant to the Receivables Securitization Program, the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $325 million outstanding at any time. The interest rate under the Receivables Securitization Program is based on a spread over the London Interbank Offered Rate (LIBOR) dependent on the tranche period thereto and any breakage fees accrued. 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 on February 17, 2023. In February 2020, $150 million in proceeds from the sale of accounts receivable pursuant to the Receivables Securitization Program were used to repay higher interest indebtedness under our Term A loans.

At March 31, 2020 and December 31, 2019, we had borrowings of $171.7 million and $177.9 million, respectively, under the revolver and letters of credit of $11.7 million and $11.7 million, respectively, outstanding under the Credit Agreement along with $508.1 million and $512.7 million, respectively, in Senior Notes. At March 31, 2020 and December 31, 2019, we had $215.5 million and $209.3 million, respectively, available for borrowing, which reflected the letters of credit associated with discontinued operations of $1.1 million and $1.1 million, respectively, against our borrowing capacity. We also had letters of credit and bank guarantees outstanding for $1.5 million as of March 31, 2020 and December 31, 2019, respectively, which supports certain facilities leased as well as other normal business activities in the United States and Europe.

The Credit Agreement and Senior Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement. We believe we were in compliance with our debt covenants at March 31, 2020.

As of March 31, 2020, scheduled future principal payments of debt were $37.2 million in 2020, $282.8 million in 2021, $320.5 million in 2022, $155.0 million in 2023, $280.0 million in 2024, and $468.8 million thereafter.

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 employees.

The components of net periodic benefit cost for the three months ended March 31, 2020 and 2019, respectively, were as follows:

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	Three Months Ended March 31,
	2020		2019
Service cost	$	351	$	329
Interest cost	494		600
Recognized net actuarial loss	214		260
Net periodic benefit cost	$	1,059	$	1,189

Note 8—Derivatives

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

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

We pay interest under our Credit Agreement which fluctuates based on changes in our benchmark interest rates. In order to mitigate the risk of increases in benchmark rates, we enter into interest rate swaps 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 agreements are included in interest expense.

We determine the fair value of our foreign currency derivatives and our interest rate swaps based on observable market-based inputs or unobservable inputs that are corroborated by market data. We do not view the fair value of our derivatives in isolation, but rather in relation to the fair values or cash flows of the underlying exposure. Our derivatives are over-the-counter instruments with liquid markets. All derivatives are carried at fair value in our consolidated balance sheets in other assets and other 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.

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of March 31, 2020:



				Derivative Assets			Derivative Liabilities
	Notional Amount		Maturity Date	Classification	Fair Value		Classification	Fair Value
Cash flow hedges
Interest rate swaps	$	450,000	May 2022 and May 2025	Other assets, net	$	—	Other liabilities	$	33,136

Economic (non-designated) hedges
Foreign currency contracts	$	21,000	April 2020	Other assets, net	$	280	Other liabilities	$	—

The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of December 31, 2019:

Derivative Assets

Derivative Liabilities

Notional Amount

Maturity Date

Classification

Fair Value

Classification

Fair Value

Cash flow hedges

Interest rate swaps

450,000

May 2022 and May 2025

Other assets, net

—

Other liabilities

17,436

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The following table summarizes the effect of cash flow hedge accounting on our consolidated statements of operations for the three months ended March 31, 2020:



	Amount of Gain/(Loss) Recognized in Other Comprehensive Loss			Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income	Total Amount of Income/(Expense) Line Items Presented in the Consolidated Statement of Operations in Which the Effects are Recorded			Amount of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
Interest rate swaps	$	(16,958	)	Interest expense, net	$	(23,342	)	$	(1,259	)

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

For the three months ended March 31, 2020 and 2019, we recognized a loss of $2.7 million and a gain of $0.5 million, respectively, 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) expense, net for our foreign exchange contracts.

Note 9—Income Taxes

The effective tax rate was 48.9% for the three months ended March 31, 2020, compared to 5.8% in the same quarter of 2019. The change in these rates resulted from an income tax benefit of $5.2 million recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax expense associated with the vesting of restricted stock. The liability for unrecognized tax benefits was $11.7 million at March 31, 2020 and $11.5 million at December 31, 2019. Included in the liability at March 31, 2020 and December 31, 2019 were $3.1 million of tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

Note 10—Net Loss per Common Share

The following summarizes the calculation of net loss per common share attributable to common shareholders for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
(in thousands, except per share data)	2020			2019
Weighted average shares outstanding - basic and diluted	60,571			60,376

Loss from continuing operations	$	(8,909	)	$	(10,918	)
Basic and diluted per share	$	(0.15	)	$	(0.18	)

Loss from discontinued operations	$	(2,415	)	$	(3,178	)
Basic and diluted per share	$	(0.04	)	$	(0.05	)

Net loss	$	(11,324	)	$	(14,096	)
Basic and diluted per share	$	(0.19	)	$	(0.23	)

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Note 11—Accumulated Other Comprehensive Loss

The following table shows the changes in accumulated other comprehensive loss by component for the three months ended March 31, 2020 and 2019:



	Retirement Plans			Currency Translation Adjustments			Derivatives and Other			Total
Accumulated other comprehensive loss, December 31, 2019	$	(14,691	)	$	(25,301	)	$	(12,715	)	$	(52,707	)
Other comprehensive loss before reclassifications	—			(28,178		)	(16,958		)	(45,136		)
Income tax	—			—			4,646			4,646
Other comprehensive loss before reclassifications, net of tax	—			(28,178		)	(12,312		)	(40,490		)
Amounts reclassified from accumulated other comprehensive income	214			—			1,259			1,473
Income tax	(44		)	—			(344		)	(388		)
Amounts reclassified from accumulated other comprehensive income, net of tax	170			—			915			1,085
Other comprehensive income (loss)	170			(28,178		)	(11,397		)	(39,405		)
Accumulated other comprehensive loss, March 31, 2020	$	(14,521	)	$	(53,479	)	$	(24,112	)	$	(92,112	)



	Retirement Plans			Currency Translation Adjustments			Derivatives and Other			Total
Accumulated other comprehensive loss, December 31, 2018	$	(8,146	)	$	(32,551	)	$	(4,915	)	$	(45,612	)
Other comprehensive loss before reclassifications	—			(4,207		)	(3,649		)	(7,856		)
Income tax	—			—			808			808
Other comprehensive loss before reclassifications, net of tax	—			(4,207		)	(2,841		)	(7,048		)
Amounts reclassified from accumulated other comprehensive income	266			—			578			844
Income tax	(69		)	—			(150		)	(219		)
Amounts reclassified from accumulated other comprehensive income, net of tax	197			—			428			625
Other comprehensive income (loss)	197			(4,207		)	(2,413		)	(6,423		)
Accumulated other comprehensive loss, March 31, 2019	$	(7,949	)	$	(36,758	)	$	(7,328	)	$	(52,035	)

We include amounts reclassified out of accumulated other comprehensive loss related to defined benefit pension plans as a component of net periodic pension cost. For the three months ended March 31, 2020 and 2019, we reclassified $0.2 million and $0.3 million, respectively, of actuarial net losses.

Note 12—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, 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, acquisition-related and exit and realignment charges, certain purchase price fair value adjustments, and other substantive items 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.

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The following tables present financial information by segment:



	Three Months Ended March 31,
	2020			2019
Net revenue:
Segment net revenue
Global Solutions	$	1,847,593		$	2,123,599
Global Products	391,192			347,085
Total segment net revenue	2,238,785			2,470,684
Inter-segment revenue
Global Products	(116,092		)	(119,844		)
Total inter-segment revenue	(116,092		)	(119,844		)
Consolidated net revenue	$	2,122,693		$	2,350,840

Operating income:
Global Solutions	$	7,691		$	21,642
Global Products	18,571			7,724
Inter-segment eliminations	1,169			1,746
Intangible amortization	(10,611		)	(10,026		)
Acquisition-related and exit and realignment charges	(6,064		)	(4,863		)
Other ⁽¹⁾	—			381
Consolidated operating income	$	10,756		$	16,604

Depreciation and amortization:
Global Solutions	$	10,636		$	10,500
Global Products	13,277			12,607
Discontinued operations	—			5,613
Consolidated depreciation and amortization	$	23,913		$	28,720

Capital expenditures:
Global Solutions	$	1,032		$	3,341
Global Products	3,017			2,903
Discontinued operations	1,664			8,035
Consolidated capital expenditures	$	5,713		$	14,279