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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)
_______________________________________________________
Virginia54-1701843
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9120 Lockwood BoulevardMechanicsvilleVirginia23116
(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 (804723-7000
    Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $2 par value per shareOMINew 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 filerAccelerated 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.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
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)2021202020212020
Net revenue$2,502,175 $2,187,928 $7,318,169 $6,118,340 
Cost of goods sold2,173,336 1,843,589 6,146,511 5,236,035 
Gross margin328,839 344,339 1,171,658 882,305 
Distribution, selling and administrative expenses262,457 262,538 849,255 758,320 
Acquisition-related and exit and realignment charges6,380 6,382 20,967 18,500 
Other operating income, net(2,873)(134)(5,016)(3,020)
Operating income62,875 75,553 306,452 108,505 
Interest expense, net11,572 20,975 36,784 65,923 
Loss on extinguishment of debt 308 40,433 2,580 
Other expense (income), net799 785 2,397 (1,193)
Income from continuing operations before income taxes50,504 53,485 226,838 41,195 
Income tax provision6,375 7,404 47,224 3,863 
Income from continuing operations, net of tax44,129 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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Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
 
Three Months Ended
 September 30,
Nine Months Ended September 30,
(in thousands)2021202020212020
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 costs395 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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Owens & Minor, Inc. and Subsidiaries
Consolidated Balance Sheets
(unaudited)
 
September 30,December 31,
(in thousands, except per share data)20212020
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 inventories1,514,387 1,233,751 
Other current assets84,335 118,264 
Total current assets2,398,225 2,135,865 
Property and equipment, net of accumulated depreciation of $320,389 and $284,126
308,463 315,662 
Operating lease assets184,554 144,755 
Goodwill386,693 394,086 
Intangible assets, net209,789 243,351 
Other assets, net96,395 101,920 
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 liabilities100,171 109,447 
Other current liabilities206,094 236,094 
Total current liabilities1,425,018 1,345,727 
Long-term debt, excluding current portion959,485 986,018 
Operating lease liabilities, excluding current portion154,009 119,932 
Deferred income taxes37,093 50,641 
Other liabilities121,509 121,267 
Total liabilities2,697,114 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 capital434,952 436,597 
Retained earnings345,832 167,022 
Accumulated other comprehensive loss(44,637)(38,509)
Total equity887,005 712,054 
Total liabilities and equity$3,584,119 $3,335,639 
See accompanying notes to consolidated financial statements.
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Owens & Minor, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
 
Nine Months Ended September 30,
(in thousands)20212020
Operating activities:
Net income (loss)$179,614 $(20,871)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization68,142 69,494 
Share-based compensation expense19,078 15,275 
Loss on divestiture 65,472 
Loss on extinguishment of debt
40,433 2,580 
Provision for losses on accounts receivable19,270 9,583 
Deferred income tax (benefit) expense(18,286)25,017 
Changes in operating lease right-of-use assets and lease liabilities1,190 (1,328)
Changes in operating assets and liabilities:
Accounts receivable(84,381)(20,173)
Merchandise inventories(284,188)52,605 
Accounts payable120,821 136,156 
Net change in other assets and liabilities(8,341)(69,117)
Other, net20,484 3,503 
Cash provided by operating activities73,836 268,196 
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 equipment41 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 debt574,900 150,000 
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 period134,506 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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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, 202073,472 $146,944 $436,597 $167,022 $(38,509)$712,054 
Net income69,589 69,589 
Other comprehensive income7,903 7,903 
Dividends declared ($0.0025 per share)
(434)(434)
Share-based compensation expense, exercises and other1,628 3,256 (6,107)(2,851)
Balance, March 31, 202175,100 150,200 430,490 236,177 (30,606)786,261 
Net income65,896 65,896 
Other comprehensive loss(2,412)(2,412)
Dividends declared ($0.0025 per share)
(187)(187)
Share-based compensation expense, exercises and other295 591 (2,130)(1,539)
Balance, June 30, 202175,395150,791 428,360 301,886 (33,018)848,019 
Net income44,129 44,129 
Other comprehensive loss(11,619)(11,619)
Dividends declared ($0.0025 per share)
(183)(183)
Share-based compensation expense, exercises and other34 67 6,592 6,659 
Balance, September 30, 202175,429$150,858 $434,952 $345,832 $(44,637)$887,005 
Balance, December 31, 201962,843 $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 other42 84 4,956 5,040 
Balance, March 31, 202062,885 125,770 256,357 126,323 (92,112)416,338 
Net loss(55,627)(55,627)
Other comprehensive income30,527 30,527 
Dividends declared ($0.0025 per share)
(156)(156)
Share-based compensation expense, exercises and other852 1,704 2,376 4,080 
Balance, June 30, 202063,737 127,474 258,733 70,540 (61,585)395,162 
Net income46,081 46,081 
Other comprehensive income7,021 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, 202063,716$127,432 $262,002 $116,465 $(54,564)$451,335 
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 (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, 2021December 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, net16,323 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, 2020Nine 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 expenditures3,027

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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 SolutionsGlobal ProductsConsolidated
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, 2021December 31, 2020
Customer
Relationships
TradenamesOther
Intangibles
Customer
Relationships
TradenamesOther
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 life10 years11 years8 years10 years11 years8 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,
2021202020212020
Global Solutions segment$5,352 $2,714 $16,166 $6,255 
Global Products segment1,028 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 costs1,029 
Lease obligations347 
Other781 
Cash payments(2,915)
Accrued exit and realignment costs, March 31, 20212,388
Provision for exit and realignment activities:
Information system restructuring costs1,611 
Lease obligations(126)
Other989 
Cash payments(2,302)
Accrued exit and realignment costs, June 30, 20212,560
Provision for exit and realignment activities:
Information system restructuring costs1,506 
Lease obligations107 
Other3,142 
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:
Severance1,391 
Information system restructuring costs183 
Lease obligations202 
Other53 
Cash payments(5,799)
Accrued exit and realignment costs, March 31, 20204,192
Provision for exit and realignment activities:
Severance809
Information system restructuring costs671
Lease obligations219
Other501
Cash payments(2,072)
Accrued exit and realignment costs, June 30, 20204,320
Provision for exit and realignment activities:
Severance1,950 
Information system restructuring costs77 
Lease obligations848 
Other2,716 
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, 2021December 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 Program196,683 200,000 152,929 155,100 
4.375% Senior Notes, due December 2024
245,011 261,329 244,780 253,241 
Revolver12,300 12,300 103,200 103,200 
4.500% Senior Notes, due March 2029
491,430 507,075   
Finance leases and other15,677 15,677 13,668 13,668 
Total debt961,101 996,381 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
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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,
2021202020212020
Service cost$693 $362 $2,106 $1,073 
Interest cost443 498 1,337 1,488 
Recognized net actuarial loss353 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.
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The following table summarizes the terms and fair value of our outstanding derivative financial instruments as of September 30, 2021:
Derivative AssetsDerivative Liabilities
Notional AmountMaturity DateClassificationFair ValueClassificationFair Value
Economic (non-designated) hedges
Foreign currency contracts$14,400 October 2021Other 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 AssetsDerivative Liabilities
Notional AmountMaturity DateClassificationFair ValueClassificationFair Value
Cash flow hedges
Interest rate swaps$300,000 May 2022 and May 2025Other assets, net$ Other liabilities$17,872 
Economic (non-designated) hedges
Foreign currency contracts$30,300 January 2021Other 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 IncomeTotal Amount of Expense Line Items Presented in the Consolidated Statement of Operations in Which the Effects are RecordedAmount of Loss Reclassified from Accumulated Other Comprehensive Loss into Income
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021Three Months Ended September 30, 2021Nine Months Ended September 30, 2021Three Months Ended September 30, 2021Nine 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 IncomeTotal 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, 2020Nine Months Ended September 30, 2020Three Months Ended September 30, 2020Nine Months Ended September 30, 2020Three Months Ended September 30, 2020Nine 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)2021202020212020
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 - basic73,215 60,786 72,649 60,983
Dilutive shares2,743 137 2,754  
Weighted average shares outstanding - diluted