8-K - ACH - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 18, 2022

OWENS & MINOR, INC.

(Exact name of Registrant as specified in charter)

Virginia	001-09810	54-1701843
(State or other jurisdiction<br> <br>of incorporation)	(Commission<br> <br>file number)	(I.R.S. employer<br> <br>identification no.)
9120 Lockwood Blvd.,<br> <br>Mechanicsville, Virginia	23116
---	---
(Address of principal executive offices)	(Zip code)
Post Office Box 27626,<br> <br>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<br> <br>Symbol(s)	Name of each exchange<br> <br>on which registered
Common Stock, $2 par value per share	OMI	New York Stock Exchange

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
---	---
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
---	---
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
---	---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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. ☐

Item 7.01.	Regulation FD Disclosure.

Notes Offering

On March 18, 2022, Owens & Minor, Inc. (the “Company”) issued a press release to announce the launch of its offer to sell $500,000,000 aggregate principal amount of senior notes due 2030 (the “Notes”) in a private offering (the “Offering”) to persons reasonably believed to be “qualified institutional buyers” in the United States, as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons outside the United States in offshore transactions pursuant to Regulation S under the Securities Act.

Unless the Acquisition (as defined below) is consummated concurrently with or promptly following the closing of the Offering, the Company will deposit the gross proceeds from the Offering into a segregated escrow account until the date that certain escrow release conditions, including the consummation of the Acquisition, have been satisfied. The consummation of the Acquisition is subject to customary closing conditions, including the adoption of the Acquisition agreement by the affirmative vote of holders of a majority of the outstanding shares of Apria common stock.

Upon the closing of the Offering or, if applicable, upon satisfaction of the escrow conditions, the Company intends to use the net proceeds of the Offering, together with cash on hand and proceeds from expected borrowings under one or more new term loans, to finance the consummation of the previously announced acquisition (the “Acquisition”) of Apria, Inc. (“Apria”) and the other transactions contemplated by the Acquisition agreement, to repay Apria debt, and to pay related fees and expenses. Any remaining net proceeds will be used for general corporate purposes. A copy of the press release is filed hereto as Exhibit 99.1 and is incorporated by reference herein.

This Current Report on Form 8-K (“Current Report”) shall not constitute an offer to sell, a solicitation to buy or an offer to purchase or sell any securities. No offer, solicitation, purchase or sale will be made in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any offer, or solicitation to buy, if at all, will be made only by means of a confidential offering memorandum. The Offering is not conditioned on the consummation of the Acquisition, which, if consummated, may occur subsequent to the closing of the Offering. This Current Report does not constitute a notice of repayment of outstanding indebtedness of Apria. The terms and conditions of the new term loans have not been finalized and are therefore subject to change. The completion of the Offering is not conditioned upon our entering into the new term loans, and our entering into the new term loans is not conditioned upon completion of the Offering.

Financial Information

In connection with the Offering, the Company provided potential investors with unaudited pro forma condensed combined financial information as of and for the year ended December 31, 2021. The unaudited pro forma condensed combined financial information are based on the Company’s and Apria’s consolidated historical financial statements as adjusted to give effect to the Acquisition and Acquisition related transactions, including the Offering and use of proceeds therefrom. The pro forma adjustments reflecting the completion of the Acquisition are based upon the acquisition method of accounting in accordance with generally accepted accounting principles in the United States, and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements. The Company has made significant assumptions and estimates in determining the preliminary estimated purchase price consideration and the preliminary allocation of the estimated purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the estimated purchase price allocation period (not to exceed one year from the pending Acquisition date) as the Company finalizes the valuations of the net tangible assets and intangible assets. Differences between these preliminary estimates and the final acquisition accounting could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of preparing unaudited pro forma condensed combined financial statements.

Acquisition and related transactions been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of the combined company following the Acquisition.

The unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2021 are attached hereto as Exhibit 99.2 and are incorporated herein by reference.

The information furnished pursuant to this Item 7.01, including the exhibits, shall not be deemed to be “filed” for purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference into any filing under the Securities Act or in the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Forward-Looking Statements

This Current Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, uncertainties and assumptions, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements contained in this Current Report include, but are not limited to, statements related to the Offering and the use of proceeds therefrom, the entry into, and borrowings under the Company’s new term loans, the completion of the Acquisition, which may not be completed on a timely basis or at all, expected synergies and benefits relating to the Acquisition and the time to achieve such synergies, and expectations regarding the integration of the combined company. Unless legally required, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 9.01.	Financial Statement and Exhibits.
(d)	Exhibits.
---	---
99.1	Press Release issued by the Company on March 18, 2022
---	---
99.2	Excerpts from materials to be provided to prospective investors on March 18, 2022.
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: March 18, 2022

OWENS & MINOR, INC.
By:	/s/ Nicholas J. Pace
	Name: Nicholas J. Pace
	Title: Executive Vice President, General Counsel and Corporate Secretary

EX-99.1

Exhibit 99.1

OWENS & MINOR ANNOUNCES LAUNCH OF SENIOR NOTES OFFERING

RICHMOND, VA - (Business Wire) - March 18, 2022 - Owens & Minor, Inc. (NYSE:OMI) (the “Company”) announced today that it has launched a private offering (the “Offering”) of $500 million aggregate principal amount of senior notes due 2030 (the “Notes”), subject to customary and market conditions.

The Notes have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), any state securities laws or the securities laws of any other jurisdiction, and may not be offered or sold in the United States, or for the benefit of U.S. persons, except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities or blue sky laws. Accordingly, the Notes are being offered only to persons reasonably believed to be “qualified institutional buyers,” as that term is defined under Rule 144A of the Securities Act, or outside the United States to non-“U.S. persons” in accordance with Regulation S under the Securities Act.

A confidential offering memorandum for the Offering, dated as of today, is being made available to such eligible persons. The Offering is being conducted in accordance with the terms and subject to the conditions set forth in such confidential offering memorandum.

This press release shall not constitute an offer to sell, a solicitation to buy or an offer to purchase or sell any securities. No offer, solicitation, purchase or sale will be made in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any offer, or solicitation to buy, if at all, will be made only by means of a confidential offering memorandum. The Offering is not conditioned on the consummation of the Acquisition, which, if consummated, may occur subsequent to the closing of the Offering. This press release does not constitute a notice of repayment of outstanding indebtedness of Apria. The terms and conditions of the new term loans have not been finalized and are therefore subject to change. The completion of the Offering is not conditioned upon our entering into the new term loans, and our entering into the new term loans is not conditioned upon completion of the Offering.

About Owens & Minor, Inc.

Owens & Minor, Inc. (NYSE: OMI) is a global healthcare solutions company that incorporates product manufacturing, distribution support and innovative technology services to deliver significant and sustained value across the breadth of the industry – from acute care to patients in their home. Aligned to its Mission of Empowering Our Customers to Advance Healthcare^TM^, more than 15,000 global teammates serve over 4,000 healthcare industry customers. A vertically-integrated, predominantly Americas-based footprint enables Owens & Minor to reliably supply its self-manufactured surgical and PPE products. This seamless value chain integrates with a portfolio of products representing 1,200 branded suppliers. Operating continuously since 1882 from its headquarters in Richmond, Virginia, Owens & Minor has grown into a FORTUNE 500 company with operations located across North America, Asia, Europe and Latin America.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, uncertainties and assumptions, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements contained in this press release include, but are not limited to, statements related to the Offering and the use of proceeds therefrom, the entry into, and borrowings under the Company’s new term loans, the completion of the Acquisition, which may not be completed on a timely basis or at all, expected synergies and benefits relating to the Acquisition and the time to achieve such synergies, and expectations regarding the integration of the combined company. Unless legally required, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT:

Alex Jost, CPA

Director, Investor Relations

Investor.Relations@owens-minor.com

SOURCE: Owens & Minor, Inc. (NYSE: OMI)

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On January 7, 2022, Owens & Minor, Inc. (“we,” “our,” “us,” “the company”, “our company” and “Owens & Minor”) and StoneOak Merger Sub Inc., our indirect wholly owned subsidiary ( “Merger Sub”) entered into an Agreement and Plan of Merger (the “Acquisition Agreement”) with Apria, Inc. (“Apria”) pursuant to which Merger Sub will be merged with and into Apria (the “Apria Acquisition”) with Apria surviving the Apria Acquisition as our indirect wholly owned subsidiary. In connection with the Apria Acquisition, we intend to (i) enter into a new credit agreement for new term loan credit facilities in an aggregate principal amount anticipated to be $1,200 million (collectively, the “new term loan credit facilities”), (ii) amend our existing credit agreement to provide for borrowings in an aggregate principal amount anticipated to be up to $450 million (the “amended revolving credit facility” and, together with the new term loan credit facilities, the “new credit facilities”), and (iii) offer $500 million aggregate principal amount of new unsecured notes (the “notes”). We intend to use the net proceeds from the notes offering, together with cash on hand and proceeds from expected borrowings under the new term loan credit facilities, to finance the consummation of the Apria Acquisition and other transactions contemplated by the Acquisition Agreement, to repay Apria debt and to pay related fees and expenses. The term “Transactions” as used herein refers to the Apria Acquisition and the transactions contemplated by the Acquisition Agreement, the entry into the new credit facilities and the borrowings thereunder, the repayment of Apria debt, the offering of notes and the application of the net proceeds therefrom,

The unaudited pro forma condensed combined financial statements are based on our historical consolidated financial statements and Apria’s consolidated historical financial statements as adjusted to give effect to the Transactions. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2021 give effect to the Transactions as if they had occurred on January 1, 2021. The Unaudited Pro Forma Condensed Combined Balance Sheet at December 31, 2021 gives effect to the Transactions as if they had occurred on December 31, 2021.

The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X. The pro forma adjustments reflecting the completion of the Transactions are based upon the acquisition method of accounting in accordance with generally accepted accounting principles in the United States (U.S. GAAP), and upon the assumptions set forth in the notes to the unaudited pro forma condensed combined financial statements.

We have made significant assumptions and estimates in determining the preliminary estimated purchase price consideration and the preliminary allocation of the estimated purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the estimated purchase price allocation period (not to exceed one year from the pending Apria Acquisition date) as we finalize the valuations of the net tangible assets and intangible assets. Differences between these preliminary estimates and the final acquisition accounting could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position. Accordingly, the pro forma adjustments are preliminary and have been made solely for the purpose of preparing unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the Transactions been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of the combined company following the Transactions. The pro forma financial statements are based upon available information and certain assumptions that management believes are reasonable.

OWENS & MINOR, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(dollars in thousands, except per share data)	HistoricalOwens &Minor, Inc.			HistoricalApria, Inc.			Financing					TransactionAdjustments					Pro FormaCondensedCombined
Net revenue	$	9,785,315		$	1,145,275		$	—				$	—				$	10,930,590
Cost of goods sold		8,272,086			341,288			—					—					8,613,374
Gross margin		1,513,229			803,987			—					—					2,317,216
Distribution, selling and administrative expenses		1,116,871			697,149			—					83,891		3	(d)		1,897,911
Acquisition-related and exit and realignment charges		34,076			9,484			—					42,900		3	(c)		86,460
Other operating income, net		(6,191	)		—			—					—					(6,191	)
Operating income		368,473			97,354			—					(126,791	)				339,036
Interest expense and other, net		48,090			11,527			91,280		3	(a)		(11,527	)	3	(a)		139,370
Loss on extinguishment of debt		40,433			—			—					—					40,433
Other expense (income), net		3,196			(3,994	)		—					2,749		3	(e)		1,951
Income before income taxes		276,754			89,821			(91,280	)				(118,013	)				157,282
Income tax provision (benefit)		55,165			24,153			(24,646	)	3	(b)		(31,864	)	3	(b)		22,808
Loss from equity method investment		—			791			—					—					791
Net income	$	221,589		$	64,877		$	(66,634	)			$	(86,149	)			$	133,683
Net income per common share:
Basic	$	3.05															$	1.84		3	(f)
Diluted	$	2.94															$	1.77		3	(f)

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

OWENS & MINOR, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AT DECEMBER 31, 2021

(dollars in thousands, except per share data)			HistoricalApria, Inc.			Financing				TransactionAdjustments					Pro FormaCondensedCombined
Assets
Current assets
Cash and cash equivalents	55,712		$	219,561		$	1,667,900	4	(a)	$	(1,860,700	)	4	(b)	$	82,473
Accounts receivable, net	681,564			81,720			—				—					763,284
Merchandise inventories	1,495,972			8,754			—				—					1,504,726
Other current assets	88,564			23,242			—				—					111,806
Total current assets	2,321,812	****	****	333,277	****	****	1,667,900			****	(1,860,700	)			****	2,462,289	****
Property and equipment, net	317,235			21,281			—				3,192		4	(d)		341,708
Patient equipment	—			221,534			—				33,230		4	(d)		254,764
Operating lease assets	194,006			71,808			—				—					265,814
Goodwill	390,185			28,985			—				1,221,828		4	(e)		1,640,998
Intangible assets, net	209,745			71,651			—				224,349		4	(c)		505,745
Other assets, net	103,568			26,893			—				(4,338	)	4	(f)		126,123
Total assets	3,536,551	****	$	775,429	****	$	1,667,900			$	(382,439	)			$	5,597,441	****
Liabilities and equity
Current liabilities
Accounts payable	1,001,959			133,485			—				—					1,135,444
Accrued payroll and related liabilities	115,858			52,484			—				—					168,342
Other current liabilities	226,204			120,860		****	—				(36,458	)	4	(b)		310,606
Total current liabilities	1,344,021	****	****	306,829	****	****	—			****	(36,458	)			****	1,614,392	****
Long-term debt, excluding current portion	947,540			341,001			1,667,900	4	(a)		(341,001	)	4	(b)		2,615,440
Operating lease liabilities, excluding current portion	162,241			48,304		****	—			****	—	****				210,545
Deferred income taxes, net	35,310			7,312		****	—				66,070		4	(f)		108,692
Other liabilities	108,938			32,250		****	—			****	—	****				141,188
Total liabilities	2,598,050	****	****	735,696	****	****	1,667,900			****	(311,389	)			****	4,690,257	****
Commitments and contingencies
Equity
Common stock, par value 2 per share; authorized—200,000 shares; issued and<br>outstanding— 75,433 shares and 73,472 shares	150,865			355		****	—				(355	)	4	(g)		150,865
Paid-in capital	440,608			954,933		****	—				(954,933	)	4	(g)		440,608
Retained earnings	387,619			(915,555	)	****	—				884,238		4	(g)		356,302
Accumulated other comprehensive loss	(40,591	)	****	—	****	****	—				—					(40,591	)
Total equity	938,501	****	****	39,733	****	****	—			****	(71,050	)			****	907,184	****
Total liabilities and equity	3,536,551	****	$	775,429	****	$	1,667,900			$	(382,439	)			$	5,597,441	****

All values are in US Dollars.

See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.	Description of the Transaction and Basis of Presentation

Description of the Transaction

On January 7, 2022, Owens & Minor, Inc. entered into an Agreement and Plan of Merger to acquire Apria, Inc. for $37.50 in cash per share of common stock, representing an equity value of approximately $1.45 billion, as well as the assumption of debt, net of cash acquired, for a total transaction value of approximately $1.6 billion.

Basis of Presentation

The unaudited pro forma condensed combined financial statements are based on Owens & Minor’s historical consolidated financial statements and Apria’s historical consolidated financial statements as adjusted to give effect to the Transactions. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 gives effect to the Transactions as if they had occurred on January 1, 2021. The unaudited pro forma condensed combined balance sheet at December 31, 2021 gives effect to the Transactions as if they had occurred on December 31, 2021.

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting based on the historical financial information of Owens & Minor and the historical financial statements of Apria, Inc. The acquisition method of accounting in accordance with ASC 805, Business Combinations (ASC 805) requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair value as of the acquisition date, as defined in ASC 820, Fair Value Measurement (ASC 820). The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the unaudited pro forma condensed combined statement of operations, expected to have a continuing impact on the consolidated results.

Under ASC 805, acquisition-related transaction costs are not included as a component of consideration transferred but are accounted for as expenses in the periods in which such costs are incurred, or if related to the issuance of debt, recorded as debt issuance costs. Acquisition-related transaction costs expected to be incurred as part of the Apria Acquisition include estimated fees related to advisory, legal and accounting fees. Fees will also be incurred related to the issuance of long-term debt to finance the transaction which have been reflected as deferred financing costs and will be amortized.

The unaudited pro forma condensed combined financial statements have been compiled using the significant accounting policies as set forth in the Company Annual Report. During the preparation of the unaudited pro forma condensed combined financial information, our management performed an analysis of the accounting policies of Apria, and is not aware of any differences that could have a material impact on the unaudited pro forma condensed combined financial statements.

2.	Preliminary Estimate of Purchase Price Consideration and Related Allocation

The preliminary purchase price is based on a purchase price of approximately $1.6 billion, which is subject to adjustment as described below as well as adjustments for cash, indebtedness and net working capital transferred.

The preliminary purchase price allocation and the estimated fair value of the assets acquired and liabilities assumed is based on management’s best estimates of fair value. The final allocation of the purchase consideration will be determined after completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed but in no event later than one year following completion of the Apria Acquisition. Accordingly, the final acquisition accounting adjustments could differ materially from the unaudited pro forma adjustments presented herein. Any increase or decrease in the fair value of the assets acquired or liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase price consideration allocated to goodwill and could impact the operating results of the Company following the acquisition due to differences in depreciation and amortization.

Preliminary Allocation of Estimated Purchase Price to Assets Acquired and Liabilities Assumed

The following represents the preliminary allocation of the purchase consideration to the assets acquired and the liabilities assumed in the business combination.

Preliminary Allocation

(in thousands)	Fair ValueDecember 31, 2021
Purchase price	$	1,829,383
Net tangible & identifiable tangible assets acquired:
Cash and cash equivalents		219,561
Accounts receivable		81,720
Merchandise inventories		8,754
Other current assets		23,242
Patient equipment		254,764
Property and equipment		24,473
Operating lease assets		71,808
Equity method investment		2,809
Other noncurrent assets		19,746
Total identifiable assets acquired	****	706,877	****
Less: Liabilities assumed		424,307
Net tangible assets		282,570	^(a)^
Identifiable intangible assets		296,000	^(b)^
Net tangible & identifiable intangible assets	****	578,570	****
Goodwill allocation	$	1,250,813	****

(a) **Net tangible assets—**Represents all other acquired tangible assets, including cash and cash equivalents, accounts receivable, merchandise inventories, other current assets, property and equipment, operating lease assets, equity method investment and other noncurrent assets. Liabilities assumed are comprised of accounts payable, accrued payroll and related liabilities, other current liabilities, operating lease liabilities, other noncurrent liabilities, and deferred tax liabilities, net.

(b) **Intangible assets—**As of the effective date of the acquisition, identified intangible assets are required to be measured at fair value. For purposes of these unaudited pro forma condensed combined financial statements, it is assumed that all assets will be used and that all assets will be used in the manner that represents the highest and best use of those assets. The definite-lived intangible assets include capitated relationships, payor relationships, trade names, proprietary technology, and customer list and other.

The fair value and useful lives assigned to the identifiable intangible assets have been estimated based on a review of publicly available data for transactions involving companies deemed comparable to the Company. These estimated fair values and useful lives are considered preliminary and are subject to change at the closing date of the Apria Acquisition. Any change in the amount of the final purchase price allocated to amortizable, definite-lived intangible assets could materially affect the carrying amount and related amortization expense of such assets. The definite-lived acquired intangibles have an estimated weighted-average useful life of approximately six years and will be amortized using the straight-line method. Indefinite-lived intangible assets, apart from goodwill, included trade names and accreditations with commissions. Refer to Note 3(d) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations and Note 4(c) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet sections for additional information on the intangible assets adjustment.

3.	Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations
(a)	Financing costs
---	---

We plan to finance the Apria Acquisition with $1.2 billion principal amount of one or more New Term Loans, $500 million in new unsecured notes, and approximately $204 million in cash.

Sources & Uses

(in thousands)	December 31, 2021
New Term Loan(s)	$	1,200,000
New Unsecured Notes		500,000
Cash		204,383
Total sources	$	1,904,383	****
Purchase proceeds – equity value	$	(1,449,175	)
Repayment of Apria debt		(380,208	)
OMI incurred and to be incurred transaction expenses and financing fees		(75,000	)
Total uses	$	(1,904,383	)

Interest Expense, Net Adjustment – Debt

(in thousands)	Year-endedDecember 31, 2021
Additional interest expense – new debt	$	87,000	^(1)^
Amortization expense – new deferred financing costs		4,280	^(2)^
Total adjustment	$	91,280	****
(1)	Adds the additional interest expense incurred as a result of the new debt obtained. The interest rates used are<br>based on an assumed weighted-average interest rate of approximately 5.1% consisting of borrowings under the Term Loans in the aggregate principal amount of $1.2 billion and the issuance of the unsecured notes in the aggregate principal amount<br>of $500 million. For each 0.125 percentage point change in the weighted-average interest rate, annual interest expense would increase or decrease, as applicable, by approximately $2.1 million.
---	---
(2)	Adds the deferred financing costs amortization incurred as a result of the new debt obtained.<br>
---	---

Historical Apria, Inc. interest expense, which includes historical amortization of debt issuance costs, of $11.5 million associated with Apria’s historical indebtedness to be repaid in connection with the Apria Acquisition is eliminated in the Unaudited Pro Forma Condensed Combined Statement of Operations as a transaction adjustment.

(b)	Tax adjustment

The statutory tax rate was applied, as appropriate, to the Unaudited Pro Forma Condensed Combined Statement of Operations as an adjustment based on the jurisdiction in which the adjustment was expected to occur.

The adjustment reflects the impact on the Unaudited Pro Forma Condensed Combined Statement of Operations from the pro forma adjustment utilizing the effective tax rate of 27%.

Although not reflected in the Unaudited Pro Forma Condensed Combined Financial Statements, the effective tax rate of Owens & Minor could be significantly different depending on post-acquisition activities, such as geographical mix of taxable income affecting state taxes, among other factors.

(c)	Transaction related costs

We expect to incur approximately $42.9 million in additional non-recurring transaction costs associated with the Apria Acquisition subsequent to December 31, 2021. We do not expect these costs to affect our consolidated statement of operations beyond 12 months after the acquisition date.

(d)	Amortization and depreciation expense

Represents the adjustment to record the incremental intangible asset amortization expense, as well as incremental depreciation expense associated with the conveyed patient equipment and property and equipment. The adjustment for incremental intangible asset amortization is as follows:

Identifiable Intangibles and Amortization Adjustment

(in thousands)	PreliminaryFair Value		PreliminaryEstimatedUseful Life		AmortizationExpenseYear-endedDecember 31,2021
Intangible assets subject to amortization:
Payor and capitated relationships	$	74,000		15	$	4,933
Trade names		74,000		10		7,400
Customer contracts		148,000		2		74,000
Subtotal	****	296,000	****	6	****	86,333
Intangible assets per Apria historical financial statements		71,651				2,442
Step up adjustment	$	224,349			$	83,891

Amortization expense of intangible assets is reflected within distribution, selling and administrative expenses in the Unaudited Pro Forma Condensed Combined Statement of Operations. Refer to Note 4(c) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet section for additional detail as to the computation of the step up adjustment for intangible assets required.

Patient Equipment, Property and Equipment, and Depreciation Adjustment

(in thousands)	December 31, 2021
Preliminary fair value of patient equipment to be conveyed	$	254,764
Less: Patient equipment per Apria historical financial statements		221,534
Patient equipment Step Up Adjustment	$	33,230
Preliminary fair value of property and equipment to be conveyed		24,473
Less: Property and equipment per Apria historical financial statements		21,281
Property and equipment Step Up Adjustment	$	3,192
(in thousands)	December 31, 2021
---	---	---
Preliminary fair value of patient equipment to be conveyed	$	254,764
Preliminary fair value of property and equipment to be conveyed		24,473
Total preliminary fair value of patient equipment and property and equipment		279,237
Estimated useful life in years		4.0
Estimated depreciation expense per year	$	69,809
Patient equipment per Apria historical financial statements		221,534
Property and equipment per Apria historical financial statements		21,281
Total patient equipment and property and equipment per Apria financials		242,815
Approximate useful life used in Apria financials		3.5
Approximate depreciation expense per year	$	69,809
Property and equipment depreciation adjustment	$	—

Depreciation expense of patient equipment and property and equipment are reflected within distribution, selling and administrative expenses in the Unaudited Pro Forma Condensed Combined Statement of Operations. Refer to Note 4(d) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet for additional detail as to the computation of the step up adjustments for patient equipment and property and equipment required.

Pro Forma Depreciation and Amortization Adjustment

(in thousands)	Year-endedDecember 31, 2021
Definite-lived intangible step up amortization	$	83,891
Property and equipment depreciation adjustment		—
Total pro forma depreciation & amortization adjustment	$	83,891
(e)	Other expense (income), net
---	---

Reflects the write-off of debt issuance costs of $2.7 million, in connection with the repayment of Apria’s $380 million in debt, which have been reflected as if incurred on December 31, 2021.

(f)	Earnings per share

Net income attributable to common shareholders (basic and diluted) is adjusted in the Unaudited Pro Forma Combined Condensed Statement of Operations for the year ended December 31, 2021 to reflect the pro forma adjustments discussed above.

4.	Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet
(a)	Financing
---	---

Represents the liability associated with the additional debt incurred to finance the Apria Acquisition.

Debt Adjustment

(in thousands)	December 31, 2021
New Term Loan(s)	$	1,200,000
New Unsecured Notes		500,000
Less: New deferred financing costs		(32,100	)
Total change in debt	$	1,667,900	****

Refer to Note 3(a) for the interest expense and deferred financing costs amortization adjustments on the Unaudited Pro Forma Condensed Combined Statement of Operations.

(b)	Cash and cash equivalents

Cash and Cash Equivalents Adjustment

(in thousands)	December 31, 2021
Purchase proceeds – equity value	$	(1,449,175	)
Repayment of Apria debt		(380,208	)^(1)^
Transaction costs, net of tax		(31,317	)^(2)^
Net adjustments to cash and cash equivalents	$	(1,860,700	)
(1)	Includes current portion of debt of $36.5 million. Unamortized debt issuance costs of $2.7 million<br>are excluded from this total.
---	---
(2)	Represents $42.9 million in transaction costs, net of $11.6 million of tax expense.<br>
---	---
(c)	Intangible assets step up adjustment
---	---

Represents the adjustment to increase the intangible assets balance by $224 million to its preliminary fair value of $296 million.

Refer to Note 3(d) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations section for information on the amortization expense associated with the intangible assets.

(d)	Patient equipment and Property and equipment step up adjustments

Represents the adjustment to increase the patient equipment balance by $33.2 million to its preliminary fair value of $255 million and property and equipment by $3.2 million to $24.5 million.

Refer to Note 3(d) within the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations section for information on the depreciation expense associated with patient equipment and property and equipment.

(e)	Goodwill

Goodwill represents the excess of the aggregate preliminary purchase price over the preliminary estimated fair values of recorded tangible and intangible assets acquired and liabilities assumed in the Apria Acquisition. The actual amount of goodwill to be recorded in connection with the Apria Acquisition is subject to change once the valuation of the fair value of the tangible and intangible assets acquired and liabilities assumed has been completed. Any change in the amount of the final purchase price allocated to depreciable assets, including amortizable definite-lived intangible assets, could materially affect the carrying amount and related amortization expense of such assets. The final valuation of such assets and liabilities is expected to be completed as soon as practicable but no later than one year after the consummation of the Apria Acquisition. Refer to Note 2 for additional detail related to the purchase price calculation.

Goodwill Adjustment

(in thousands)	December 31, 2021
Goodwill from preliminary allocation of purchase consideration	$	1,250,813
Less: Goodwill per Apria historical financial statements		28,985
Net adjustment to goodwill	$	1,221,828
(f)	Deferred income taxes
---	---

Represents the adjustment to deferred income taxes based on the Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet related to the purchase price allocation adjustment for identifiable intangible assets, patient equipment and property and equipment, using the estimated effective tax rate for Owens & Minor of 27%.

Deferred Tax Liability Adjustment

(in thousands)	Step UpAdjustment as ofDecember 31, 2021
Fair value adjustment for identifiable intangible assets	$	224,349
Fair value adjustment for patient equipment		3,192
Fair value adjustment for property and equipment		33,230
Total fair value adjustment		260,771
Tax rate		27	%
Recorded deferred tax liability	****	70,408	****
Reclassification of deferred tax assets to deferred tax liability <br>as an offset of the deferred<br>tax liability created in the transaction		(4,338	)
Total deferred tax liability	$	66,070	****
(g)	Equity
---	---

Represents adjustments to record the elimination of Apria’s historical equity, including the elimination of common stock issued and outstanding, additional paid in capital, and accumulated deficit, and the adjustment for transaction related costs expected to be incurred associated with the Apria Acquisition subsequent to December 31, 2021.