UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer | ||
(Address of principal executive offices) | (Zip Code) | ||
Post Office Box 27626, | 23261-7626 | ||
(Mailing address of principal executive | (Zip Code) |
Registrant’s telephone number, including area code (
10900 Nuckols Road, Suite 400, Glen Allen, Virginia, 23060
(Former name, former address and former fiscal year, if changes since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
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.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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 “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the Company’s common stock outstanding as of March 31, 2026 was
Accendra Health, Inc. and Subsidiaries
Index
2
Part I. Financial Information
Item 1. Financial Statements
Accendra Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
| Three Months Ended | |||||
March 31, | ||||||
(in thousands, except per share data) | 2026 | | 2025 | |||
Net revenue | $ | | $ | | ||
Operating costs and expenses: | ||||||
Cost of net revenue |
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Selling, general and administrative expenses |
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Acquisition-related charges and intangible amortization |
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Exit and realignment (income) charges, net | ( | | ||||
Total operating costs and expenses | | | ||||
Operating income |
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Interest expense, net |
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Other expense, net |
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Loss from continuing operations before income taxes |
| ( |
| ( | ||
Income tax benefit |
| ( |
| ( | ||
Loss from continuing operations, net of tax | ( | ( | ||||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
Basic loss per common share: |
| |||||
Loss from continuing operations, net of tax | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
Diluted loss per common share: | ||||||
Loss from continuing operations, net of tax | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
See accompanying notes to unaudited condensed consolidated financial statements.
3
Accendra Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
| Three Months Ended | |||||
March 31, | ||||||
(in thousands) | 2026 | | 2025 | |||
Net loss | $ | ( | $ | ( | ||
Other comprehensive income (loss), net of tax: |
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Currency translation adjustments |
| ( |
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Change in unrecognized net periodic pension costs |
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Change in gains and losses on derivative instruments |
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| ( | ||
Total other comprehensive income, net of tax |
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Comprehensive loss | $ | ( | $ | ( | ||
See accompanying notes to unaudited condensed consolidated financial statements.
4
Accendra Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
| March 31, | December 31, | ||||
(in thousands, except per share data) | 2026 | | 2025 | |||
Assets |
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Current assets |
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Cash and cash equivalents | $ | | $ | | ||
Accounts receivable, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Patient service equipment and other fixed assets, net of accumulated depreciation and amortization of $ |
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Operating lease assets |
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Goodwill |
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Intangible assets, net |
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Other assets, net |
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Total assets | $ | | $ | | ||
Liabilities and (deficit) equity |
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Current liabilities |
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Accounts payable | $ | | $ | | ||
Accrued payroll and related liabilities |
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Current portion of long-term debt | | | ||||
Other current liabilities |
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Total current liabilities |
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Long-term debt, excluding current portion |
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Operating lease liabilities, excluding current portion |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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(Deficit) equity |
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Common stock, par value $ |
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Paid-in capital |
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Accumulated deficit |
| ( |
| ( | ||
Accumulated other comprehensive loss |
| ( |
| ( | ||
Total deficit |
| ( |
| ( | ||
Total liabilities and (deficit) equity | $ | | $ | | ||
See accompanying notes to unaudited condensed consolidated financial statements.
5
Accendra Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Three Months Ended March 31, | |||||
(in thousands) | 2026 | | 2025 | |||
Operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | | | ||||
Adjustments to reconcile net loss to cash used for operating activities: |
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Depreciation and amortization |
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Share-based compensation expense |
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Deferred income tax expense (benefit) |
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| ( | ||
Changes in operating lease right-of-use assets and lease liabilities |
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Gain from sale and dispositions of patient service equipment |
| ( |
| ( | ||
Changes in operating assets and liabilities: |
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Accounts receivable, net |
| ( |
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Inventories, net |
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| ( | ||
Accounts payable |
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Net change in other assets and liabilities |
| ( |
| ( | ||
Other, net |
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Cash used for operating activities from discontinued operations | | ( | ||||
Cash used for operating activities |
| ( |
| ( | ||
Investing activities: |
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Additions to patient service equipment ($ |
| ( |
| ( | ||
Proceeds from sale of patient service equipment |
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Additions to computer software |
| ( |
| ( | ||
Other, net |
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| ( | ||
Cash used for investing activities from discontinued operations | | ( | ||||
Cash provided by (used for) investing activities |
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| ( | ||
Financing activities: |
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Borrowings under Revolving Credit Facility |
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Repayments under Revolving Credit Facility |
| ( |
| ( | ||
Repurchase of common stock |
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| ( | ||
Other, net |
| ( |
| ( | ||
Cash used for financing activities from discontinued operations | | ( | ||||
Cash provided by financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
| ( |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: |
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Income taxes paid, net | $ | | $ | | ||
Interest paid | $ | | $ | | ||
Noncash investing activity: |
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Unpaid purchases of patient service equipment and other fixed assets at end of period | $ | | $ | | ||
See accompanying notes to unaudited condensed consolidated financial statements.
6
Accendra Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in (Deficit) Equity
(unaudited)
| | Common | | | | Accumulated | | ||||||||||
Common | Stock | Retained | Other | ||||||||||||||
Shares | ($ | Paid-In | Earnings | Comprehensive | Total | ||||||||||||
(in thousands, except per share data) | Outstanding | value) | Capital | (Accumulated Deficit) | Loss | (Deficit) Equity | |||||||||||
Balance, December 31, 2025 |
| | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Other comprehensive income |
| — |
| — |
| — |
| — |
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Share-based compensation expense, exercises and other |
| |
| |
| |
| — |
| — |
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Balance, March 31, 2026 |
| | $ | | $ | | $ | ( | $ | ( | $ | ( | |||||
Balance, December 31, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
Net loss |
| — |
| — |
| — |
| ( |
| — |
| ( | |||||
Other comprehensive income |
| — |
| — |
| — |
| — |
| |
| | |||||
Share-based compensation expense, exercises and other | | | | — | — | | |||||||||||
Shares repurchased and retired |
| ( |
| ( |
| — |
| ( |
| — |
| ( | |||||
Balance, March 31, 2025 |
| | $ | | $ | | $ | | $ | ( | $ | | |||||
See accompanying notes to unaudited condensed consolidated financial statements.
7
Accendra Health, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
(in thousands, except per share data, unless otherwise indicated)
Note 1—Summary of Significant Accounting Policies
Basis of Presentation and Consolidation. The unaudited condensed consolidated financial statements include the accounts of Accendra Health, Inc. (f/k/a Owens & Minor, Inc.) and the subsidiaries it controls (collectively, the Company, we, us, or our) and contain all adjustments necessary to conform with U.S. generally accepted accounting principles (GAAP). All significant intercompany accounts and transactions have been eliminated. Our continuing operations’ business activities comprise a single operating and reporting segment. This determination is in accordance with ASC No. 280, Segment Reporting.
Reclassifications. Certain prior period amounts have been reclassified to conform to current year presentation.
Discontinued Operations and Assets Held-for-Sale. On February 28, 2025, we announced that we were actively engaged in discussions regarding the anticipated sale of our Products and Healthcare Services (P&HS) business. On October 7, 2025, we entered into an Equity Purchase Agreement (the Purchase Agreement) by and among the Company, Dominion Healthcare Acquisition Corporation, a Delaware corporation (the Purchaser), and Dominion Healthcare Holdings, L.P., a Delaware limited partnership (Purchaser Parent) to sell the P&HS business, for an aggregate of $
The P&HS business was initially classified as discontinued operations and assets held for sale as of June 30, 2025. In accordance with GAAP, the financial position and results of operations of the P&HS business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 2, the Notes to the Condensed Consolidated Financial Statements reflect the continuing operations of the Company unless otherwise noted. See Note 2 for additional information regarding discontinued operations and assets held for sale.
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. Significant estimates are used for, but are not limited to, variable consideration, depreciation and amortization, goodwill valuation, valuation of intangible assets and other long-lived assets, self-insurance liabilities, tax liabilities, defined benefit obligations, share-based compensation and other contingencies. Actual results may differ from these estimates.
Accounts Receivable, Net. Due to the nature of our industry and the reimbursement environment in which we operate, certain estimates are required to record net revenues and accounts receivable at their net realizable values, including estimating variable consideration. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements, contractual terms, and the uncertainty of reimbursement amounts for certain services may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim amount or account review.
Included in accounts receivable were earned but unbilled receivables of $
8
Receivables Sale Program. On October 18, 2024, we entered into a Receivables Purchase Agreement (the Receivables Sale Program) with persons from time to time, as Purchasers, PNC Bank, National Association, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $
Proceeds from the sales of accounts receivable were recorded as an increase to cash and cash equivalents and a reduction to accounts receivable, net in the condensed consolidated balance sheets. Cash received from the sales of accounts receivable is reflected in the change in accounts receivable within cash provided by operating activities in the condensed consolidated statements of cash flows. Total accounts receivable sold and net cash proceeds under the Receivables Sale Program were $
Amended Receivables Sale Program. On December 31, 2025, we entered into an Amended and Restated Receivables Purchase Agreement (the Amended Receivables Sale Program) with persons from time to time party thereto, as Purchasers, PNC Bank, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable are sold, on a limited-recourse basis, to the Purchasers in exchange for cash in an aggregate outstanding amount not to exceed $
Transactions under this agreement are accounted for as sales in accordance with ASC 860, Transfers and Servicing, with the sold receivables removed from our condensed consolidated balance sheets. Under the Amended Receivables Sale Program, we provide certain servicing and collection actions on behalf of the Purchasers; however, we do not maintain any beneficial interest in the accounts receivable sold. The Amended Receivables Sale Program has a Scheduled Termination Date of October 18, 2027.
Total accounts receivable sold under the Amended Receivables Sale Program were $
Revenue Recognition. Revenues are generated through fee-for-service and capitation arrangements with large government and commercial payors (each, a Payor and collectively Payors) for equipment, supplies, services and other items rented and sold to patients. Revenue for sales of products, including equipment and supplies, is recognized when control of the promised goods is transferred to customers and is presented net of applicable sales taxes. Revenue generated from equipment that we rent to customers is primarily recognized as earned on a straight-line basis over the non-cancellable rental period, typically one month, and commences on delivery of the equipment to the customers.
Certain revenues are recognized under arrangements with third-party payors for which we stand ready to provide all necessary healthcare services to members for the period of the stand ready obligation which generally
9
extends beyond one year. These agreements are generally referred to as capitation arrangements. Revenue is recognized over the month that the members are entitled to healthcare services using the monthly contractual rate for each covered member. The actual number of covered members may vary each month. Capitation payments are typically received in the month members are entitled to healthcare services. Revenue for these agreements amounted to $
Fee-for-service arrangement revenues are recorded only to the extent it is probable that a significant reversal will not occur in the future as amounts may include implicit price concessions under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, Medicare, Medicaid and customers. Revenue is recognized under a portfolio approach, as we expect that this approach would not differ materially from considering each contract or performance obligation separately. We use the expected value method in determining the variable consideration as part of determining the sales transaction price using historical reimbursement experience, historical sales returns, and other operating trends. Payment terms and conditions vary by contract. Sales of equipment and supplies inclusive of amounts recognized under capitation arrangements for the three months ended March 31, 2026 and 2025 were $
The following table summarizes net revenue by product category for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
2026 | 2025 | |||||
Diabetes | $ | | $ | | ||
Sleep therapy | | | ||||
Home respiratory therapy | | | ||||
Ostomy | | | ||||
Wound care | | | ||||
Urology | | | ||||
Other |
| | | |||
Net revenue | $ | | $ | | ||
The following table summarizes net revenue by payor type for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
2026 | 2025 | |||||
Commercial payors (1) | $ | | $ | | ||
Medicare | | | ||||
Medicaid | | | ||||
Net revenue | $ | | $ | | ||
(1) Commercial payors includes revenue from Medicare Advantage plans.
Cost of Net Revenue. Cost of net revenue includes the cost of products sold, patient service equipment depreciation expense, and other costs which are primarily personnel costs related to the set-up and utilization of equipment. Cost of product sold includes non-cash expenses primarily for equipment converted from rental to sales in the amount of $
10
The following table summarizes cost of net revenue for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
2026 | | 2025 | ||||
Cost of product sold | $ | | $ | |||
Patient service equipment depreciation | | |||||
Other costs | | |||||
Cost of net revenue | $ | | $ | | ||
Acquisition-Related Charges and Intangible Amortization. Acquisition-related charges consist primarily of one-time costs related to the terminated acquisition of Rotech Healthcare Holdings Inc. (Rotech), which consisted primarily of legal and professional fees. For the three months ended March 31, 2026, we incurred
Fair Value. Fair value is determined based on assumptions that a market participant would use in pricing an asset or liability. The assumptions used are in accordance with a three-tier hierarchy, defined by GAAP, that draws a distinction between market participant assumptions based on (i) observable inputs such as quoted prices in active markets (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the use of present value and other valuation techniques in the determination of fair value (Level 3).
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued payroll and related liabilities reported in the condensed consolidated balance sheets approximate fair value due to the short-term nature of these instruments. When a quantitative goodwill test is performed, the estimated fair value of our reporting unit is determined with the use of unobservable inputs (Level 3).The fair value of debt is estimated based on quoted market prices or dealer quotes for the identical liability when traded as an asset in an active market (Level 1) or, if quoted market prices or dealer quotes are not available, on the borrowing rates currently available for loans with similar terms, credit ratings, and average remaining maturities (Level 2). See Note 5 for the fair value of debt. The fair value of our derivative contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. See Note 6 for the fair value of derivatives.
Note 2—Discontinued Operations
As described in Note 1, in accordance with GAAP, the financial position and results of operations of the P&HS business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. The P&HS business was initially classified as discontinued operations and assets held for sale as of June 30, 2025. Accordingly, the results of operations from our P&HS business are reported in the accompanying condensed consolidated statements of operations as “loss from discontinued operations, net of tax” for the three months ended March 31, 2025. We have allocated interest expense, net to discontinued operations as a ratio of net assets and total debt in accordance with ASC 205, Presentation of Financial Statements.
On December 31, 2025, we received cash proceeds of $
11
$
During the three months ended March 31, 2026, we incurred $
We and the Purchaser will provide certain transition services to the other party pursuant to a certain customary transition services agreement (TSA). Pursuant to the terms of the TSA, we have agreed that, in certain circumstances, we may be obligated to provide up to $
The following table summarizes the financial results of our discontinued operations for the three months ended March 31, 2025:
Three Months Ended | |||
March 31, 2025 | |||
Net revenue | $ | | |
Cost of goods sold | | ||
Gross profit | | ||
Distribution, selling, and administrative expenses | | ||
Acquisition-related charges and intangible amortization | | ||
Exit and realignment charges, net | | ||
Other operating expense, net | | ||
Operating loss | ( | ||
Interest expense, net | | ||
Other expense | | ||
Loss from discontinued operations before income taxes | ( | ||
Income tax benefit for discontinued operations | ( | ||
Loss from discontinued operations, net of tax | $ | ( | |
Total accounts receivable sold and net cash proceeds under the Receivables Sale Program were $
12
Note 3—Goodwill and Intangible Assets, Net
At March 31, 2026 and December 31, 2025, we had goodwill of $
Intangible assets, net subject to amortization, at March 31, 2026 and December 31, 2025 were as follows:
March 31, 2026 | December 31, 2025 | ||||||||||||||||||
| Customer | | | Other | | Customer | | | Other | ||||||||||
Relationships | Tradenames | Intangibles | Relationships | Tradenames | Intangibles | ||||||||||||||
Intangible assets, gross | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Accumulated amortization |
| ( |
| ( |
| ( |
| ( |
| ( |
| ( | |||||||
Intangible assets, net | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Weighted average useful life |
|
|
|
|
|
| |||||||||||||
Amortization expense for intangible assets was $
As of March 31, 2026, based on the current carrying value of intangible assets subject to amortization and expected remaining useful life, estimated amortization expense was as follows:
Year | | ||
2026 (remainder) | $ | | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
2030 |
| | |
Thereafter | | ||
Total future amortization | $ | |
Note 4—Exit and Realignment (Income) Charges, Net
We incur exit and realignment and other charges associated with optimizing our operations which include IT strategic initiatives and other strategic actions. These charges include professional fees, severance and other costs to streamline functions and enhance processes and separation costs. Separation costs primarily consist of professional fees including costs reimbursable to the Purchaser as described below and other wind-down costs incurred after the divestiture of the P&HS business. These costs are not normal, cash operating expenses necessary for the Company to operate its business on an ongoing basis.
Exit and realignment (income) charges, net were $(
As a result of the sale of our P&HS business, we have incurred $
13
The following table summarizes the activity related to exit and realignment cost accruals, which are generally classified as other current liabilities or accounts payable in our condensed consolidated balance sheets, through March 31, 2026 and 2025:
| Total | ||
Accrued exit and realignment costs, December 31, 2025 | $ | | |
Provision for exit and realignment activities: |
| | |
| |||
| | ||
| | ||
Cash payments |
| ( | |
Accrued exit and realignment costs, March 31, 2026 | $ | | |
| Total | ||
Accrued exit and realignment costs, December 31, 2024 | $ | | |
Provision for exit and realignment activities: | |||
| |||
| |||
Cash payments | ( | ||
Accrued exit and realignment costs, March 31, 2025 | $ | | |
In addition to the exit and realignment accruals in the preceding table and the $
Note 5—Debt
Debt, net of unamortized deferred financing costs, as of March 31, 2026 and December 31, 2025 consisted of the following:
| March 31, 2026 | | December 31, 2025 | |||||||||
| Carrying | | Estimated | | Carrying | | Estimated | |||||
Amount | Fair Value | Amount | Fair Value | |||||||||
Term Loan A | $ | | $ | | $ | | $ | | ||||
Revolving Credit Facility | | | | | ||||||||
| |
| |
| |
| | |||||
Term Loan B |
| |
| |
| |
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| |
| |
| |
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Total debt |
| |
| |
| |
| | ||||
Less current maturities, including anticipated repayments |
| ( |
| ( |
| ( |
| ( | ||||
Long-term debt | $ | | $ | | $ | | $ | | ||||
On March 29, 2022, we entered into a term loan credit agreement with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (the Credit Agreement) that provides for
14
On March 10, 2021, we issued $
On March 29, 2022, we issued $
The 2029 Unsecured Notes and the 2030 Unsecured Notes are subordinated to any of our secured indebtedness, including indebtedness under our credit agreements.
On March 29, 2022, we entered into an amendment to our revolving credit agreement, dated as of March 10, 2021 with an administrative agent and collateral agent and a syndicate of financial institutions, as lenders (Revolving Credit Agreement). The amendment: (i) increased the aggregate revolving credit commitments under the Revolving Credit Agreement by $
At March 31, 2026 and December 31, 2025, we had $
As of March 31, 2026, the Term Loan A and the Revolving Credit Agreement are scheduled to mature within twelve months. Absent refinancing, extension, or repayment of these obligations, the Company would need additional liquidity to meet its obligations as they come due during the twelve-month period following the issuance of these financial statements. On May 11, 2026, we announced that we have received commitments from existing creditors to exchange and/or extend a substantial portion of our debt, which would extend the maturity of these obligations beyond twelve months from the balance sheet date (Balance Sheet Optimization Transaction), subject to satisfaction of certain customary conditions. Based on the signed commitments received and the actions planned and described below, management expects the Company will have sufficient liquidity to meet its obligations as they come due during the twelve-month period following the issuance of these financial statements.
We intend to amend and extend the Revolving Credit Agreement into a revolving credit facility maturing in 2030, subject to earlier maturity in December 2028 based on the amount of certain levels of future indebtedness, with aggregate commitments of up to $
We intend to refinance the Term Loan A through the proceeds from the new
In addition to the impacts to the Term Loan A and the Revolving Credit Agreement described above, the Balance Sheet Optimization Transaction will include offers to exchange the 2029 Unsecured Notes into a combination of new
15
The Revolving Credit Agreement, the Credit Agreement, the 2029 Unsecured Notes and the 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the applicable credit agreements also require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition or divestiture. We were in compliance with our debt covenants at March 31, 2026.
As of March 31, 2026, future principal payments due under our debt agreements or anticipated to be repaid within twelve months, excluding the impact of the Balance Sheet Optimization Transaction described above, were as follows:
Year | | ||
2026 | $ | | |
2027 |
| | |
2028 |
| — | |
2029 |
| | |
2030 |
| | |
|
Current maturities at March 31, 2026 include $
Note 6—Derivatives
We are directly and indirectly affected by changes in interest rates, 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 pay interest on our Credit Agreement at rates that fluctuate based on changes in benchmark interest rates. In order to mitigate the risk of increases in benchmark rates on our term loans, we entered into an interest rate swap agreement whereby we agree to exchange with the counterparty, at specified intervals, the difference between fixed and variable amounts calculated by reference to the notional amount. The interest rate swaps were designated as cash flow hedges. Cash flows related to the interest rate swap agreement are included in interest expense, net.
We determine the fair value of our 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. All derivatives are carried at fair value in our condensed consolidated balance sheets. We consider the risk of counterparty default to be minimal. We report cash flows from our hedging instruments in the same cash flow statement category as the hedged items.
The following table summarizes the terms and fair value of our outstanding cash flow hedges as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | | December 31, 2025 | |||
Notional Amount | $ | | $ | |||
Derivative Assets Fair Value | $ | | $ | |||
Derivative Liabilities Fair Value | $ | — | $ | — | ||
Maturity Date | March 2027 | March 2027 | ||||
Classification | other current assets | other assets, net | ||||
The notional amount of the interest rate swaps represents the amount in effect at the end of the period. Based on contractual terms, the notional amount will decrease in increments of $
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The following table summarizes the effect of cash flow hedge accounting on our condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
2026 | | 2025 | ||||
Amount of Gain Recognized in Other Comprehensive Income (Loss) | $ | | $ | ( | ||
Location of Gain Reclassified from Accumulated Other Comprehensive Loss into Income | Interest expense, net | Interest expense, net | ||||
Total Amount of Expense Line Items Presented in the Condensed Consolidated Statements of Operations in Which the Effects are Recorded | $ | | $ | | ||
Amount of Gain Reclassified from Accumulated Other Comprehensive Loss into Income | $ | | $ | | ||
The amount of ineffectiveness associated with these contracts was immaterial for the periods presented.
Note 7—Income Taxes
The effective tax rate was
The liability for unrecognized tax benefits was $
On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (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 U.S. in connection with our sourcing of products by our foreign subsidiaries for sale in the U.S. by our domestic subsidiaries. The transfer pricing methodology was consistently applied for all years subject to the NOPAs and 2019 into 2022, but is no longer employed.
In June 2024, the IRS and the relevant foreign taxing authority mutually agreed to proposed adjustments to our 2015 through 2018 consolidated tax returns. As a result, we remeasured the uncertain tax position for the 2015 through 2018 tax years, as well as the affected 2019 through 2022 tax years, to the amount expected to be paid upon a final agreement with the IRS. In June 2025, we received the final assessment from the IRS for the 2015 through 2018 tax years, including interest. The uncertain tax position for these years and related accrued interest have been remeasured to reflect the final amount to be paid. This matter does not impact our 2023, 2024 or future tax years. In March 2026, we paid $
On July 4, 2025, the U.S. Congress enacted budget reconciliation bill H.R. 1 referred to as the One Big Beautiful Bill (OBBB). The OBBB contains several changes to corporate taxation including modification to limitations on deductions for interest expense and accelerated fixed asset depreciation. We expect the legislation to decrease future U.S. cash taxes with no material impact to the effective tax rate.
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Note 8—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, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
(in thousands, except per share data) | | 2026 | | 2025 | ||
Loss from continuing operations, net of tax | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
Weighted average shares outstanding - basic |
| |
| | ||
Dilutive shares |
| |
| | ||
Weighted average shares outstanding - diluted |
| |
| | ||
Basic loss per common share: |
| |
| | ||
Loss from continuing operations, net of tax | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
Diluted loss per common share: | ||||||
Loss from continuing operations, net of tax | $ | ( | $ | ( | ||
Loss from discontinued operations, net of tax | — | ( | ||||
Net loss | $ | ( | $ | ( | ||
Share-based awards for the three months ended March 31, 2026 and 2025 of approximately
Note 9—Shareholders’ Equity
On February 26, 2025, our Board of Directors authorized a share repurchase program of up to $
During the three months ended March 31, 2026, we did
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Note 10—Accumulated Other Comprehensive (Loss) Income
The following table shows the changes in accumulated other comprehensive (loss) income by component for the three months ended March 31, 2026 and 2025:
| | Currency | | | ||||||||
Retirement | Translation | |||||||||||
Plans | Adjustments | Derivatives | Total | |||||||||
Accumulated other comprehensive (loss) income, December 31, 2025 | $ | ( | $ | — | $ | | $ | ( | ||||
Other comprehensive income (loss) before reclassifications |
| | ( | |
| | ||||||
Income tax |
| ( | | ( |
| ( | ||||||
Other comprehensive income (loss) before reclassifications, net of tax |
| |
| ( |
| |
| | ||||
Amounts reclassified from accumulated other comprehensive income (loss) |
| | | ( |
| ( | ||||||
Income tax |
| | | |
| | ||||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| |
| |
| ( |
| ( | ||||
Other comprehensive income (loss) |
| |
| ( |
| |
| | ||||
Accumulated other comprehensive (loss) income, three months ended March 31, 2026 | $ | ( | $ | ( | $ | | $ | ( | ||||
| | Currency | | | ||||||||
Retirement | Translation | |||||||||||
Plans | Adjustments | Derivatives | Total | |||||||||
Accumulated other comprehensive (loss) income, December 31, 2024 | $ | ( | $ | ( | $ | | $ | ( | ||||
Other comprehensive income (loss) before reclassifications |
| |
| |
| ( |
| | ||||
Income tax |
| ( |
| |
| |
| | ||||
Other comprehensive income (loss) before reclassifications, net of tax |
| |
| |
| ( |
| | ||||
Amounts reclassified from accumulated other comprehensive income (loss) |
| |
| |
| ( |
| ( | ||||
Income tax |
| ( |
| |
| |
| | ||||
Amounts reclassified from accumulated other comprehensive income (loss), net of tax |
| |
| |
| ( |
| ( | ||||
Other comprehensive income (loss) |
| |
| |
| ( |
| | ||||
Accumulated other comprehensive (loss) income, three months ended March 31, 2025 | $ | ( | $ | ( | $ | | $ | ( | ||||
We include amounts reclassified out of accumulated other comprehensive (loss) income related to defined benefit pension plans as a component of net periodic pension cost recorded in Other expense, net.
Note 11—Segment Information
As described in Note 1, the P&HS Sale was completed on December 31, 2025, and we no longer report the P&HS business within continuing operations. The P&HS business was initially classified as discontinued operations and assets held for sale as of June 30, 2025. Our President and Chief Executive Officer is the chief operating decision maker (CODM). The CODM reviews financial information about the continuing operations business at an enterprise-wide consolidated level when allocating resources and assessing business performance. Accordingly, we have determined that our business activities comprise a and reporting segment. Income (loss) from continuing operations, net of tax is the profit or loss measure used by the CODM that is most consistent with GAAP and therefore is the required measure of profitability.
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Note 12—Commitments, Contingent Liabilities, and Legal Proceedings
Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 for disclosure of other material contractual obligations.
We are party to various legal claims that are ordinary and incidental to our business, including claims related to commercial disputes, employment, workers’ compensation, product liability, regulatory and other matters. We maintain insurance coverage for employment, product liability, workers’ compensation and other personal injury litigation matters, subject to policy limits, applicable deductibles and insurer solvency. We establish reserves from time to time based upon periodic assessment of the potential outcomes of pending matters.
Based on current knowledge and the advice of counsel, we believe that the accrual as of March 31, 2026 for currently pending matters considered probable of loss, is sufficient. In addition, we believe that other currently pending matters are not reasonably possible to result in a material loss, as payment of the amounts claimed is remote, the claims are immaterial, individually and in the aggregate, or the claims are expected to be adequately covered by insurance, subject to policy limits, applicable deductibles, exclusions and insurer solvency.
Note 13—Recent Accounting Pronouncements
Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 for disclosure of recent accounting pronouncements.
Note 14—Subsequent Events
On May 11, 2026, subsequent to March 31, 2026 but prior to the issuance of these condensed consolidated financial statements, the Company announced the Balance Sheet Optimization Transaction with commitments from existing creditors. We intend to refinance the Term Loan A through the proceeds from the issuance of new
In addition to the impacts to the Term Loan A and the Revolving Credit Agreement described above, the Balance Sheet Optimization Transaction will include offers to exchange the 2029 Unsecured Notes into a combination of new
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Sale of Products & Healthcare Services Business
On February 28, 2025, we announced that we were actively engaged in discussions regarding the anticipated sale of our Products & Healthcare Services (P&HS) business. On October 7, 2025, we entered into an Equity Purchase Agreement (the Purchase Agreement) by and among the Company, Dominion Healthcare Acquisition Corporation, a Delaware corporation (the Purchaser), and Dominion Healthcare Holdings, L.P., a Delaware limited partnership (Purchaser Parent) to sell the P&HS business, for an aggregate of $375 million in cash, subject to certain adjustments for cash, indebtedness, net working capital and transaction expenses. On December 31, 2025, we completed the sale of the P&HS business pursuant to the Purchase Agreement. We retained a 5% equity interest in the P&HS business.
In accordance with GAAP, the financial position and results of operations of the P&HS business are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. With the exception of Note 2, the Notes to Condensed Consolidated Financial Statements reflect the continuing operations of Accendra Health, Inc. unless otherwise noted. See Note 2 in the Notes to Condensed Consolidated Financial Statements for additional information regarding discontinued operations.
Overview
Accendra Health, Inc., along with its subsidiaries, (collectively, the Company, we, us, or our) is a leading nationwide provider of products, technology, and services that supports health beyond the hospital for millions of people each year. As discussed within Note 1 in the Notes to Condensed Consolidated Financial Statements, our business activities comprise a single operating and reporting segment.
Net loss from continuing operations per common share was ($0.08) for the three months ended March 31, 2026 as compared to ($0.05) for the three months ended March 31, 2025. Our financial results for the three months ended March 31, 2026 as compared to the prior year were impacted by lower net revenue of $46 million and an increase in interest expense, net of $8.1 million, partially offset by a decrease in exit and realignment (income) charges, net of $37 million and an increased income tax benefit of $8.2 million.
Refer to “Results of Operations” for further detail of quantitative and qualitative drivers of our results.
Balance Sheet Optimization Transaction
On May 11, 2026, we announced that we have received commitments from existing creditors to exchange and/or extend a substantial portion of our debt, which would extend the maturity of these obligations beyond twelve months from the balance sheet date (Balance Sheet Optimization Transaction), subject to satisfaction of certain customary conditions. Based on the signed commitments received and the actions planned and described below, management expects the Company will have sufficient liquidity to meet its obligations as they come due during the twelve-month period following the issuance of these financial statements.
We intend to amend and extend the Revolving Credit Agreement into a revolving credit facility maturing in 2030, subject to earlier maturity in December 2028 based on the amount of certain levels of future indebtedness, with aggregate commitments of up to $300 million, for which, subsequent to the balance sheet date, we received commitments from existing lenders under the Revolving Credit Agreement. We anticipate repaying the existing Revolving Credit Agreement using the proceeds from the P&HS business sale.
We intend to refinance the Term Loan A through the proceeds from the new 9.000% senior secured first lien notes due 2032 to be issued in connection with the Balance Sheet Optimization Transaction, for which subsequent to the balance sheet date, we received commitments from certain holders of the 2029 Unsecured Notes and 2030 Unsecured Notes, subject to satisfaction of certain customary conditions. While we have the intent and ability to refinance the Term Loan A beyond the next twelve months, these commitments expire within twelve months of the balance sheet date and therefore, the outstanding balance of the Term Loan A has been classified as a current liability as of March 31, 2026.
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In addition to the impacts to the Term Loan A and the Revolving Credit Agreement described above, the Balance Sheet Optimization Transaction will include offers to exchange the 2029 Unsecured Notes into a combination of new 9.000% senior secured first lien notes due 2032 and new 9.750% senior secured second lien notes due 2033, as well as the 2030 Unsecured Notes into new 9.750% senior secured second lien notes due 2033.
Contract Termination with a Commercial Payor and Equipment Sales
A commercial Payor, with which we have multiple separately managed contracts, has terminated, or is in the process of terminating, certain of our contracts with them. This termination resulted in minimal impacts to our operating income for the year ended December 31, 2025, as the transitions of agreements and services started late in the fourth quarter of 2025. While such transitions of agreements and services are expected to continue throughout the first half of 2026, the specific timing of when these agreements and services will wind down is highly dependent on the Payor’s successor provider’s ability to successfully transition customers among other factors. The terminated portion of this relationship reflected $37 million or 6% of our net revenue including nearly all of our capitation revenue, for the three months ended March 31, 2026. We do not anticipate material impacts to our operating income from such Payor's remaining contract terminations for periods ending beyond March 31, 2026.
In connection with this contract termination, we sold $82 million of patient service equipment during the three months ended March 31, 2026, which resulted in $52 million of gains on sales of patient service equipment within exit and realignment (income) charges, net on our condensed consolidated statements of operations. The proceeds from the sale are reflected within the proceeds from sale of patient service equipment line item within the investing activities section of our condensed consolidated statements of cash flows.
Results of Operations
The following discussion and analysis describes results of operations and material changes in the financial condition of Accendra Health, Inc. and its subsidiaries since December 31, 2025. Trends of a material nature are discussed to the extent known and considered relevant. This discussion should be read in conjunction with the consolidated financial statements, related notes thereto, and management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Net revenue.
| Three Months Ended |
| |||||||||||
March 31, | Change |
| |||||||||||
(Dollars in thousands) | | 2026 | | 2025 | | $ | | % |
| ||||
Diabetes | $ | 185,786 | $ | 187,360 |
| $ | (1,574) | (0.8) | % | ||||
Sleep therapy |
| 166,922 |
| 181,859 |
| (14,937) | (8.2) | % | |||||
Home respiratory therapy | 97,179 | 108,606 | (11,427) | (10.5) | % | ||||||||
Ostomy | 51,336 | 49,499 | 1,837 | 3.7 | % | ||||||||
Wound care | 39,402 | 46,646 | (7,244) | (15.5) | % | ||||||||
Urology | 29,790 | 28,143 | 1,647 | 5.9 | % | ||||||||
Other | 57,365 | 71,771 | (14,406) | (20.1) | % | ||||||||
Net revenue | $ | 627,780 | $ | 673,884 |
| $ | (46,104) | (6.8) | % | ||||
The decrease in net revenue for the three months ended March 31, 2026 was primarily driven by a $42 million decrease in revenue from the terminated commercial Payor contracts described above, which drove declines in several product categories, including sleep therapy and home respiratory therapy.
Cost of net revenue.
| Three Months Ended | | |||||||||||
March 31, | Change | ||||||||||||
(Dollars in thousands) | | 2026 | | 2025 | | $ | | % | |||||
Cost of products sold | $ | 315,392 | $ | 317,389 | $ | (1,997) | (0.6) | % | |||||
Patient service equipment depreciation | 28,889 | 31,683 | (2,794) | (8.8) | % | ||||||||
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Other costs | 5,471 | 5,570 | (99) | (1.8) | % | ||||||||
Cost of net revenue | $ | 349,752 | $ | 354,642 | $ | (4,890) | (1.4) | % | |||||
As a % of net revenue | 55.7% | 52.6% |
The decrease in cost of net revenue for the three months ended March 31, 2026 reflects the lower cost associated with net revenue decline of 6.8%, partially offset by manufacturer price increases.
Operating expenses.
| Three Months Ended | | | | |
| |||||||
March 31, | Change | ||||||||||||
(Dollars in thousands) | 2026 | | 2025 | $ | | % |
| ||||||
Selling, general and administrative expenses | $ | 255,226 | $ | 262,370 | $ | (7,144) | (2.7) | % | |||||
As a % of net revenue |
| 40.7 | % | 38.9 | % |
| | | |||||
Acquisition-related charges and intangible amortization | $ | 29,229 | $ | 23,456 | $ | 5,773 | 24.6 | % | |||||
Exit and realignment (income) charges, net | $ | (23,552) | $ | 13,625 | $ | (37,177) | (272.9) | % | |||||
The decrease in selling, general and administrative expenses (SG&A) for the three months ended March 31, 2026 was driven primarily from a reduction in net revenue of $46 million and realized personnel savings actions, partially offset by inflationary increases.
Acquisition-related charges were $16 million for the three months ended March 31, 2025 related to the terminated acquisition of Rotech, which consisted primarily of legal and professional fees. Intangible amortization was $29 million and $7.6 million for the three months ended March 31, 2026 and 2025 relating to intangible assets acquired in the Apria and Byram acquisitions. The increase as compared to the prior year was driven by the remaining useful life for an intangible asset being modified as of June 30, 2025, as a result of a notice of a contract termination with the commercial Payor described above.
Exit and realignment (income) charges, net was $(24) million for the three months ended March 31, 2026 and primarily included a $(52) million gain on sales of patient service equipment in connection with the contract termination with the commercial Payor described above, net separation costs incurred after the P&HS Sale of $26 million and charges related to IT and other strategic initiatives of $2.0 million. Exit and realignment (income) charges, net were $14 million for the three months ended March 31, 2025. These charges primarily included professional fees associated with strategic initiatives of $6.2 million and wind-down costs of Fusion5 of $6.8 million.
Non-operating expenses.
| Three Months Ended | | | | |
| |||||||
March 31, | Change | ||||||||||||
(Dollars in thousands) | 2026 | | 2025 | $ | | % |
| ||||||
Interest expense, net | $ | 32,348 | $ | 24,214 | $ | 8,134 | 33.6 | % | |||||
Effective interest rate | 6.8 | % | 6.9 | % | |||||||||
Other expense, net | $ | 1,023 | $ | 975 | $ | 48 | 4.9 | % | |||||
Interest expense, net for the three months ended March 31, 2026 increased compared to the prior year period during which we allocated interest expense, net to discontinued operations as a ratio of net assets and total debt in accordance with ASC 205, Presentation of Financial Statements. See Note 2 in the Notes to Condensed Consolidated Financial Statements for additional information regarding discontinued operations interest expense, net for the three months ended March 31, 2025.
Other expense, net for the three months ended March 31, 2026 and 2025 includes interest cost and net actuarial losses related to our U.S. retirement plan.
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Income taxes.
| Three Months Ended | | | | |
| |||||||
March 31, | Change | ||||||||||||
(Dollars in thousands) | 2026 | | 2025 | $ | | % |
| ||||||
Income tax benefit | $ | (9,778) | $ | (1,588) | $ | (8,190) | (515.7) | % | |||||
Effective tax rate |
| 60.2 | % | 29.4 | % |
| | | |||||
The change in these rates was primarily from changes in results of operations and changes in forecasted results reflected in the tax rates.
Non-GAAP Financial Measures
The following financial measures, Adjusted EBITDA and Free Cash Flow (FCF), are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). In general, non-GAAP measures exclude items and charges that (i) management does not believe reflect the Company’s core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred in multiple or prior periods without predictable trends.
Management provides these non-GAAP financial measures to investors as supplemental metrics because management believes it is useful to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered substitutes for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.
We use Adjusted EBITDA, a financial measure that is not in accordance with GAAP, to analyze our financial results and as one of our incentive metrics and to provide an understanding of underlying operating results and trends by excluding items that are not closely related to ongoing operations. We use FCF, a financial measure that is not in accordance with GAAP, to evaluate the capacity of our operations to generate free cash flow. We utilize FCF as a performance metric.
The costs of the P&HS business that are classified as discontinued operations include only direct operating expenses. Indirect costs, such as those related to corporate and shared services previously allocated to the P&HS business, do not meet the criteria for discontinued operations and are reported within continuing operations. These costs (stranded costs) are reported within continuing operations and are included within Adjusted EBITDA.
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The following tables present the reconciliations of loss from continuing operations, net of tax to Adjusted EBITDA and FCF for the three months ended March 31, 2026 and 2025:
Three Months Ended March 31, | ||||||
| 2026 | | 2025 | |||
Loss from continuing operations, net of tax, as reported (GAAP) | $ | (6,468) | $ | (3,810) | ||
Income tax benefit |
| (9,778) |
| (1,588) | ||
Interest expense, net |
| 32,348 |
| 24,214 | ||
Acquisition-related charges and intangible amortization (1) | 29,229 | 23,456 | ||||
Exit and realignment (income) charges, net (2) | (23,552) | 13,625 | ||||
Litigation and related charges (3) | 64 | 270 | ||||
Other depreciation and amortization (4) | 32,513 | 35,336 | ||||
Stock compensation (5) | 3,604 | 4,091 | ||||
Other (6) |
| 409 |
| 424 | ||
Adjusted EBITDA (non-GAAP) | 58,369 | 96,018 | ||||
Non-cash convert to sale write off expense (7) |
| 10,416 |
| 11,531 | ||
Patient service equipment capital expenditures |
| (41,343) |
| (44,484) | ||
Interest paid | (29,446) | (27,487) | ||||
Free cash flow (non-GAAP) | $ | (2,004) | $ | 35,578 | ||
The following items have been excluded in our non-GAAP financial measure:
(1) Acquisition-related charges and intangible amortization for the three months ended March 31, 2025 includes $16 million of acquisition-related costs related to the terminated acquisition of Rotech, which consisted primarily of legal and professional fees. Acquisition-related charges and intangible amortization also includes amortization of intangible assets established during acquisition method of accounting for business combinations. Acquisition-related charges consist primarily of one-time costs related to acquisitions, including transaction costs necessary to consummate acquisitions, which consist of investment banking advisory fees and legal fees, director and officer tail insurance expense, as well as transition costs, such as severance and retention bonuses, IT integration costs and professional fees. These amounts are highly dependent on the size and frequency of acquisitions and are being excluded to allow for a more consistent comparison with forecasted, current and historical results.
(2) During the three months ended March 31, 2026 exit and realignment (income) charges, net was $(24) million and primarily included a $(52) million gain on sales of patient service equipment in response to the contract termination with a commercial Payor, net separation costs incurred after the P&HS Sale of $26 million and charges related to IT and other strategic initiatives of $2.0 million. Exit and realignment charges, net were $14 million for the three months ended March 31, 2025 and primarily included professional fees associated with strategic initiatives of $6.2 million and wind-down costs of Fusion5 of $6.8 million. These costs are not normal recurring, cash operating expenses necessary for the Company to operate its business on an ongoing basis.
(3) Litigation and related charges includes settlement costs and related charges of legal matters. These costs do not occur in the ordinary course of our business and are inherently unpredictable in timing and amount.
(4) Other depreciation and amortization relates to patient service equipment and other fixed assets, excluding such amounts captured within exit and realignment (income) charges, net or acquisition-related charges and intangible amortization.
(5) Stock compensation includes share-based compensation expense related to our share-based compensation plans, excluding such amounts captured within exit and realignment (income) charges, net or acquisition-related charges and intangible amortization.
(6) For the three months ended March 31, 2026 and 2025, other includes interest costs and net actuarial losses related to our frozen noncontributory, unfunded retirement plan for certain retirees in the U.S.
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(7) Non-cash convert to sale write off expense includes non-cash charges primarily for equipment converted from rental to sales, excluding such amounts captured within in exit and realignment (income) charges, net. This reflects the non-cash write-off of the remaining book value of patient service equipment at the time of sale. The purchase of patient service equipment is captured within capital expenditures and is subsequently charged to our statements of operations through normal depreciation and this non-cash convert to sale write off expense. This line item does not include non-cash write off expense associated with sales of patient service equipment in connection with the contract termination with a commercial Payor, as such amounts are captured within exit and realignment (income) charges, net.
Financial Condition, Liquidity and Capital Resources
Financial condition. We monitor operating working capital through days sales outstanding (DSO). We estimate a hypothetical increase (decrease) in DSO of one day would result in a decrease (increase) in our cash balances, an increase (decrease) in borrowings against our Revolving Credit Agreement, or a combination thereof of approximately $7.0 million.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in the U.S. Changes in our working capital can vary in the normal course of business based upon the timing of capital expenditures, inventory purchases, collections of accounts receivable and payments to suppliers.
Change |
| ||||||||||||
(Dollars in thousands) | | March 31, 2026 | | December 31, 2025 | | $ | | % |
| ||||
Cash and cash equivalents | $ | 336,880 | $ | 281,989 | $ | 54,891 | 19.5 | % | |||||
Accounts receivable, net | $ | 103,703 | $ | 95,907 | $ | 7,796 | 8.1 | % | |||||
DSO (1) | 14.9 | 12.4 | |||||||||||
Accounts payable |
| $ | 374,824 |
| $ | 363,565 |
| $ | 11,259 |
| 3.1 | % |
|
Liquidity and capital expenditures. The following table summarizes our condensed consolidated statements of cash flows for the three months ended March 31, 2026 and 2025:
Three Months Ended | ||||||
March 31, | ||||||
(Dollars in thousands) | | 2026 | | 2025 | ||
Net cash provided by (used for): |
| |
| | ||
Operating activities from continuing operations | $ | (50,077) | $ | 31,478 | ||
Operating activities from discontinued operations | — | (66,544) | ||||
Operating activities | (50,077) | (35,066) | ||||
Investing activities from continuing operations | 53,925 | (31,648) | ||||
Investing activities from discontinued operations | — | (16,552) | ||||
Investing activities |
| 53,925 |
| (48,200) | ||
Financing activities from continuing operations | 51,084 | 95,851 | ||||
Financing activities from discontinued operations | — | (3,073) | ||||
Financing activities |
| 51,084 |
| 92,778 | ||
Effect of exchange rate changes |
| (41) |
| 542 | ||
Net increase in cash and cash equivalents | $ | 54,891 | $ | 10,054 | ||
Cash used for operating activities in the first three months of 2026 reflected a net loss and unfavorable changes in working capital, including $20 million in payments related to professional and closing costs of the P&HS Sale, a $19 million tax payment as described in Note 7 in the Notes to Condensed Consolidated Financial Statements and payments of teammate incentives. Cash used for operating activities in the first three months of 2025 reflected a net loss, unfavorable changes in working capital and cash used from discontinued operations of $67 million. Unfavorable
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working capital is typical during the first quarter of the year due to the nature of our business and the annual payment of teammate incentives.
Cash used for investing activities in the first three months of 2026 included capital expenditures of $42 million, primarily for patient service equipment and our strategic and operational efficiency initiatives associated with other fixed assets and capitalized software, offset by $96 million in proceeds from sales of patient service equipment and other fixed assets including $82 million in proceeds from sales as a result of the Payor contract termination. Cash used for investing activities in the first three months of 2025 included capital expenditures of $48 million, primarily for patient service equipment and $17 million in cash used from discontinued operations, offset by $17 million in proceeds from sales of patient service equipment.
Cash provided by financing activities in the first three months of 2026 included net borrowings of $52 million under our Revolving Credit Facility. Cash provided by financing activities in the first three months of 2025 included net borrowings of $98 million under our Revolving Credit Facility.
Capital Resources. Our primary sources of liquidity include cash and cash equivalents, our Amended Receivables Sale Program, and our Revolving Credit Agreement. These funds are used to meet our cash obligations which primarily consist of debt service costs, capital expenditures including patient service equipment, inventory purchases, teammate costs, and other operating and non-operating costs.
On December 31, 2025, we entered into an Amended and Restated Receivables Purchase Agreement (the Amended Receivables Sale Program) with persons from time to time party thereto, as Purchasers, PNC Bank, as Administrative Agent, and PNC Capital Markets LLC, as Structuring Agent, pursuant to which accounts receivable with an aggregate outstanding amount not to exceed $150 million are sold, on a limited-recourse basis, to the Purchasers in exchange for cash. Transactions under this agreement are accounted for as sales in accordance with ASC 860, Transfers and Servicing, with the sold receivables removed from our consolidated balance sheets.
Total accounts receivable sold under the Amended Receivables Sale Program were $246 million during the three months ended March 31, 2026. We collected $231 million of the sold accounts receivable during the three months ended March 31, 2026. The losses on sale of accounts receivable recorded in SG&A were $1.5 million for the three months ended March 31, 2026. As of March 31, 2026 and December 31, 2025 there was a total of $148 million and $134 million of uncollected accounts receivable sold and removed from our consolidated balance sheet under the Amended Receivables Sale Program.
The Revolving Credit Agreement provides a revolving borrowing capacity of $450 million. We have $837 million in outstanding term loans under a term loan credit agreement (the Credit Agreement). The interest rate on our Revolving Credit Agreement is based on a spread over a benchmark rate (as described in the Revolving Credit Agreement). The Revolving Credit Agreement matures in March 2027.
At March 31, 2026 and December 31, 2025, we had $255 million and $204 million in outstanding borrowings on our Revolving Credit Agreement. At March 31, 2026 and December 31, 2025 we had letters of credit, which reduce Revolving Credit Agreement availability, totaling $29 million and $30 million, leaving $166 million and $217 million available for borrowing.
The interest rate on the Term Loan A is based on either the Term SOFR or the Base Rate plus an Applicable Rate which varies depending on the current Debt Ratings or Total Leverage Ratio, determined as to whichever shall result in more favorable pricing to the Borrowers (each as defined in the Credit Agreement). The interest rate on the Term Loan B is based on either the Term SOFR or the Base Rate plus an Applicable Rate. The Term Loan A matures in March 2027 and the Term Loan B matures in March 2029.
The Revolving Credit Agreement, the Credit Agreement, the Amended Receivables Sale Program, the 2029 Unsecured Notes, and the 2030 Unsecured Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of any of the related agreements. The terms of the applicable credit agreements
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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 March 31, 2026.
We regularly evaluate market conditions, our liquidity profile and various financing alternatives to enhance our capital structure. We have from time to time, entered into, and from time to time in the future, we may enter into transactions to repay, repurchase or redeem our outstanding indebtedness (including by means of open market purchases, privately negotiated repurchases, tender or exchange offers and/or repayments or redemptions pursuant to the debt’s terms). Our ability to consummate any such transaction will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. We cannot provide any assurance as to if or when we will consummate any such transactions or the terms of any such transaction.
On February 26, 2025, our Board of Directors authorized a share repurchase program of up to $100 million through February 2027. Under the program, we may repurchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions and 10b5-1 trading plans. During the three months ended March 31, 2026, we did not repurchase any shares. During the period from February 26, 2025 (the date the share repurchase program was authorized) through December 31, 2025, we repurchased shares in open-market transactions and retired approximately 2.0 million shares of our common stock for an aggregate of $10 million, or a weighted average price per share of $5.19. The timing and amount of future common stock repurchases will depend on various factors, including our capital structure, available liquidity, market conditions, regulatory considerations and opportunities for growth.
We believe cash generated by operating activities, including available cash proceeds from the Amended Receivables Sale Program, available financing sources inclusive of the Balance Sheet Optimization Transaction expected to be completed during the second quarter of 2026, and borrowings under the Revolving Credit Agreement, as well as cash on hand, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, debt repurchases, share repurchases and other cash requirements. While we believe that we will have the ability to meet our financing needs in the foreseeable future, changes in economic conditions may impact (i) the ability of financial institutions to meet their contractual commitments to us, (ii) the ability of our customers and suppliers to meet their obligations to us or (iii) our cost of borrowing.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see our Annual Report on Form 10-K for the year ended December 31, 2025 and Note 13 in the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the period ended on March 31, 2026.
Forward-looking Statements
Certain statements in this discussion constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, all forward-looking statements involve risks and uncertainties and, as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including, but not limited to:
| ● | our ability to successfully separate from the P&HS business; |
| ● | our ability to successfully transition off of transition services timely; |
| ● | increasing competitive and pricing pressures in the marketplace; |
| ● | our ability to retain existing and attract new customers and our dependence on sales to certain customers; |
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| ● | our dependence on certain vendors, suppliers and third-parties; |
| ● | our ability to successfully identify, close, manage or integrate acquisitions; |
| ● | our ability to successfully implement our strategic initiatives; |
| ● | our ability to successfully complete the Balance Sheet Optimization Transaction; |
| ● | uncertainties related to, and our ability to adapt to and comply with, changes in government regulations, including healthcare, tax and product licensing laws and regulations; |
| ● | uncertainties related to general economic, regulatory and business conditions and our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product; |
| ● | uncertainties related to reimbursement qualification for non-invasive ventilation products; |
| ● | the ability of customers and suppliers to meet financial commitments due to us; |
| ● | changing trends in customer profiles and ordering patterns; |
| ● | our ability to manage operating expenses and improve operational efficiencies; |
| ● | availability of, and our ability to access, special inventory buying opportunities; |
| ● | our ability to continue to obtain financing at reasonable rates and to manage financing costs and interest rate risk, and our ability to refinance, extend or repay our substantial indebtedness; |
| ● | our ability to attract and retain talented and qualified teammates; |
| ● | recalls of any products, or safety risks or the discovery of serious safety issues with the products we sell; |
| ● | changes, delays and uncertainties in the reimbursement process; |
| ● | our ability to meet the terms to qualify for supplier incentives; |
| ● | our ability to avoid infringement, misappropriation or other violations of the intellectual property and proprietary rights of third parties; |
| ● | our ability to engage in transactions that may be limited by the restrictive covenants in our credit facilities and existing notes; |
| ● | the risk that information systems are interrupted or damaged or fail for any extended period of time, that new information systems are not successfully implemented or integrated, or that there is a data security breach in our information systems or a third party’s information systems that impacts our business; |
| ● | risks related to public health crises or future outbreaks of health crises or other adverse public health developments such as the novel coronavirus (COVID-19) global pandemic; |
| ● | the risk of an impairment to goodwill or other long-lived assets; |
| ● | our ability to timely or adequately respond to technological advances; |
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| ● | our failure to adequately insure against losses, including from substantial claims and litigation; |
| ● | our ability to meet performance targets specified by customer contracts under contractual commitments; |
| ● | our capitation arrangements may prove unprofitable if actual utilization rates exceed our assumptions; |
| ● | the outcome of outstanding and any future litigation, including product and professional liability claims; |
| ● | volatility in the price of our common stock and securities; and |
| ● | other factors detailed from time to time in the reports we file with the SEC, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025. |
We undertake no obligation to update or revise any forward-looking statements, except as required by applicable law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Certain quantitative and qualitative market risk disclosures are described in our Annual Report on Form 10-K for the year ended December 31, 2025. Through March 31, 2026, there have been no material changes in the quantitative and qualitative market risk disclosures described in such Annual Report.
Item 4. Controls and Procedures
We carried out an evaluation, with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2026. There was no change in our internal control over financial reporting that occurred during the period of this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
Certain legal proceedings pending against us are described in our Annual Report on Form 10-K for the year ended December 31, 2025. Through March 31, 2026, there have been no material developments in any legal proceedings reported in such Annual Report.
Item 1A. Risk Factors
Certain risk factors that we believe could affect our business and prospects are described in our Annual Report on Form 10-K for the year ended December 31, 2025. Through March 31, 2026, there have been no material changes in the risk factors described in such Annual Report.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 26, 2025, our Board of Directors authorized a share repurchase program of up to $100 million and expires in February 2027. Under the program, we may repurchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions and 10b5-1 trading plans.
(in thousands, except per share data) | ||||||||||
Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program (1) | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (2) | ||
February 26-February 28, 2025 | — | $ | — | — | $ | 100,000 | ||||
March 1-March 31, 2025 | 173 | $ | 8.66 | 173 | $ | 98,500 | ||||
April 1-April 30, 2025 | 653 | $ | 7.87 | 653 | $ | 93,360 | ||||
May 1-May 31, 2025 | — | $ | — | — | $ | 93,360 | ||||
June 1-June 30, 2025 | — | $ | — | — | $ | 93,360 | ||||
July 1-July 31, 2025 | — | $ | — | — | $ | 93,360 | ||||
August 1-August 31, 2025 | — | $ | — | — | $ | 93,360 | ||||
September 1-September 30, 2025 | — | $ | — | — | $ | 93,360 | ||||
October 1-October 31, 2025 | — | $ | — | — | $ | 93,360 | ||||
November 1-November 30, 2025 | 1,129 | $ | 3.10 | 1,129 | $ | 89,860 | ||||
December 1-December 31, 2025 | — | $ | — | — | $ | 89,860 | ||||
January 1-January 31, 2026 | — | $ | — | — | $ | 89,860 | ||||
February 1-February 28, 2026 | — | $ | — | — | $ | 89,860 | ||||
March 1-March 31, 2026 | — | $ | — | — | $ | 89,860 | ||||
Total (3) | 1,955 | 1,955 | ||||||||
| (1) | On February 26, 2025, our Board of Directors authorized a share repurchase program of up to $100 million. The program expires in February 2027. Under the program, we may repurchase shares of common stock on a discretionary basis from time to time through open market repurchases, privately negotiated transactions and 10b5-1 trading plans. |
| (2) | During the period from February 26, 2025 (the date the share repurchase program was authorized) through March 31, 2026, we repurchased shares in open-market transactions and retired approximately 2.0 million shares of our common stock for an aggregate of $10 million, or a weighted average price per share of $5.19. |
| (3) | Represents the period from February 26, 2025 (the date the share repurchase program was authorized) through March 31, 2026. |
Item 5. Other Information.
During the three months ended March 31, 2026, none of our directors or officers informed us of the
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Item 6. Exhibits
| (a) | Exhibits |
3.1 | Composite Amended and Restated Articles of Incorporation of Accendra Health, Inc. – filed herewith | |
10.1 | Form of 2026 cash settled Performance Unit Award Agreement – filed herewith** | |
10.2 | Form of 2026 share settled Performance Unit Award Agreement – filed herewith** | |
31.1 | | |
31.2 | | |
32.1 | | |
32.2 | | |
101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Definition Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101) | |
** Management contract or compensatory plan or arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Accendra Health, Inc. | |
(Registrant) | |
Date: May 11, 2026 | /s/ Edward A. Pesicka |
Edward A. Pesicka | |
President, Chief Executive Officer & Director | |
Date: May 11, 2026 | /s/ Jonathan A. Leon |
Jonathan A. Leon | |
Executive Vice President & Chief Financial Officer |
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Exhibit 3.1
THIS COMPOSITE ARTICLES OF INCORPORATION OF ACCENDRA HEALTH, INC. REFLECTS THE PROVISIONS OF ITS AMENDED AND RESTATED ARTICLES OF INCORPORATION AS AMENDED AND RESTATED ON JULY 29, 2008, AND ALL AMENDMENTS THERETO FILED WITH THE VIRGINIA STATE CORPORATION COMMISSION THEREAFTER, BUT IS NOT AN AMENDMENT AND/OR RESTATEMENT THEREOF.
COMPOSITE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ACCENDRA HEALTH, INC.
Article I
Name
The name of the Corporation shall be Accendra Health, Inc.
Article II
Purposes
The purposes for which the Corporation is formed are:
1.To buy, sell, distribute and trade in medical and surgical supplies and equipment, pharmaceuticals, drugs and merchandise of every sort, class and description at wholesale or at retail, as principal or as agent, alone or in partnership with any other person, firm or corporation within and without the Commonwealth of Virginia and the United States of America and to do and perform every act and to carry on every business which shall be incidental thereto.
2.In addition, the Corporation shall have the power to transact any and all lawful business not required to be stated specifically in the articles of incorporation for which corporations may be incorporated under Chapter 9 of Title 13.1 of the Code of Virginia of 1950 as in effect on the effective date of these Articles or as amended subsequently thereto.
Article III
Capital Stock
The maximum number of authorized shares of the capital stock of the Corporation shall be Two Hundred Million (200,000,000) shares of Common Stock of the par value of Two Dollars ($2.00) per share, and Ten Million (10,000,000) shares of Cumulative Preferred Stock of the par value of One Hundred Dollars ($100.00) per share, issuable in series as is hereinafter provided.
The description of the Cumulative Preferred Stock and of the Common Stock and the designations, preferences and voting powers of such classes of stock, or restrictions or qualifications thereof and the terms upon which such stock is to be issued are as follows:
Part A.
Cumulative Preferred Stock
1.Issuance in Series. The Cumulative Preferred Stock shall be divided into and issued from time to time in one or more series, each which series shall be so designated as to distinguish the shares thereof from all other series and classes. The Board of Directors shall have the authority to divide the Cumulative Preferred Stock into series
by resolution setting forth the designation and number of shares of each series and the relative rights and preferences thereof in the following respects, as to which there may be variation between different series:
(a)The rate of dividend, the time of payment and the dates from which any dividends shall be cumulative and the extent of participation rights, if any;
(b)Any right to vote with holders of shares of any other series or class and any right to vote as a class either generally or as a condition to specified corporate action, subject to the limitations of Section 4 of Part A of this Article III;
(c)The price at which and the terms and conditions upon which shares may be redeemed;
(d)The amount payable upon shares in the event of involuntary liquidation;
(e)The amount payable upon shares in the event of voluntary liquidation;
(f)Sinking fund provisions of the redemption or purchase of shares, if any;
(g)The terms and conditions upon which shares may be converted, if the shares of any series are issued with the privilege of conversion.
The Board of Directors shall have the further authority to redesignate any shares of any series theretofore established which have not been issued or which have been issued and retired as shares of some other series or to change the designation of outstanding shares when desired to prevent confusion.
All shares of Cumulative Preferred Stock of any one series shall be identical with each other in all respects except, if so determined by the Board of Directors, as to the dates from which dividends thereon shall be cumulative. The shares of Cumulative Preferred Stock shall be equal in rank with each other regardless of series and shall be identical with each other in all respects except as hereinabove provided.
2.Preferences over Common Stock. The Cumulative Preferred Stock as a class shall have preference over the Common Stock as to the payment of dividends and in the distribution of the assets of the Corporation in the event of any liquidation and dissolution, whether voluntary or involuntary. All shares of Cumulative Preferred Stock of every series shall share ratably in the distribution of assets upon dissolution if the assets of the Corporation are insufficient to pay the full liquidation price of all shares of Cumulative Preferred Stock of every series.
So long as any dividend on any series of Cumulative Preferred Stock shall be in arrears, no dividend shall be declared and paid on the Common Stock except dividends payable in shares of Common Stock, nor shall the Corporation purchase or otherwise acquire for a consideration any shares of Common Stock.
3.Redemption of Cumulative Preferred Stock. Subject to any other provision of these Articles of Incorporation to the contrary and to the right of the Board of Directors to fix in any resolution of serial designation adopted by it the terms and conditions upon which shares of any series may be redeemed, in the event of any redemption of shares of Cumulative Preferred Stock by the Corporation, it may at the option of the Board of Directors redeem the whole or any part of the Cumulative Preferred Stock at any time outstanding upon not less than thirty (30) nor more than sixty (60) days previous notice by mail to the holders of record of the shares to be redeemed. If less than the whole of a series shall be redeemed, the shares to be so redeemed shall be determined by lot or in such other manner as the Board of Directors may determine. If such notice of redemption shall have been duly given, and if on or before the redemption date specified in such notice, the funds necessary for such redemption shall have been deposited in trust with any bank or trust company in the City of Richmond, Virginia, having capital and unrestricted surplus aggregating at least TEN MILLION DOLLARS ($10,000,000) named in such notice, to be applied to the redemption of the Cumulative Preferred Stock so called for redemption, then from the time of such deposit all shares of Cumulative Preferred Stock for the redemption of which such deposit shall have been made shall be deemed no longer to be outstanding for any purpose and all rights with respect to such shares shall thereupon terminate, except the right to receive the redemption price on deposit, without interest thereon. Any interest accrued upon or earned by
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such deposit shall be paid to the Corporation. At the end of five (5) years from the redemption date named in such notice, any funds so deposited which then remain unclaimed shall be paid to the Corporation free of any trust. Any holder of Cumulative Preferred Stock so called for redemption as shall not have received the redemption price prior to such repayment to the Corporation shall be deemed to be an unsecured creditor of the Corporation for the amount of the redemption price and shall look only to the Corporation for the payment thereof, without interest.
4.Voting Rights of Cumulative Preferred Stock. Except as set forth elsewhere in these Articles of Incorporation and as shall be provided in any resolution of serial designation adopted by the Board of Directors, the holders of the Cumulative Preferred Stock shall not be entitled to any vote except as to matters in respect of which they shall at the time be indefeasibly vested by statute with such right. The Board of Directors may grant to holders of any series of Cumulative Preferred Stock the right to vote as a class for the election of Directors only upon the following terms and conditions and subject to the following limitations:
(a)Such right to vote as a class for the election of Directors shall not be exercisable unless and until the Corporation shall be in arrears for the payment of four (4) or more dividends on any series of Cumulative Preferred Stock.
(b)The number of Directors elected by holders of Cumulative Preferred Stock of all series shall not exceed two (2) in the aggregate.
(c)Such power to elect Directors, if granted to more than one series, shall apply to all series as a class, and not separately.
(d)Any Directors elected by the Cumulative Preferred Stock, if such power be conferred upon any series of such stock, shall serve as a separate class to be elected annually and shall serve in addition to the number of Directors elected by the Common Stock as provided in the bylaws of the Corporation. They, together with the Directors elected by the Common Stock as provided in the bylaws, shall constitute the Board of Directors.
(e)Immediately upon the payment of all dividends in arrears, any Director or Directors so elected by the Cumulative Preferred Stock shall cease to act and shall no longer be Directors of the Corporation.
5.Series A Participating Cumulative Preferred Stock.
There is hereby established a series of the Corporation’s authorized Cumulative Preferred Stock, to be designated as the “Series A Participating Cumulative Preferred Stock, par value $100 per share.” The designation and number, and relative rights, preferences and limitations of the Series A Participating Cumulative Preferred Stock, insofar as not already fixed by any other provision of the Articles of Incorporation, shall be as follows:
Section 1.Designation and Number of Shares
The shares of such series shall be designated as “Series A Participating Cumulative Preferred Stock” (the “Series A Preferred Stock”), par value $100 per share. The number of shares initially constituting the Series A Preferred Stock shall be 70,000; provided, however, that, if more than a total of 70,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the “Rights”) issued pursuant to the Rights Agreement dated as of April 30, 2004, between the Corporation and The Bank of New York, as Rights Agent (the “Rights Agreement”), the Board of Directors of the Corporation, pursuant to Section 13.1-639 of the Virginia Stock Corporation Act, as amended from time to time (the “VSCA”), shall direct by resolution or resolutions that articles of amendment of the Articles be properly executed and filed with the State Corporation Commission of Virginia providing for the total number of shares of Series A Preferred Stock authorized to be issued to be increased (to the extent that the Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights.
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Section 2.Dividends or Distributions
(a)Subject to the prior and superior rights of the holders of shares of any other series of Preferred Stock or other class of capital stock of the Corporation ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of the Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of the assets of the Corporation legally available therefor, (i) quarterly dividends payable in cash on the last day of each fiscal quarter in each year, or such other dates as may be required by Section 2(b) or as the Board of Directors of the Corporation shall approve (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or a fraction of a share of Series A Preferred Stock, in the amount of $.01 per whole share (rounded to the nearest cent), less the amount of all cash dividends declared on the Series A Preferred Stock pursuant to the following clause (ii) since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock (the total of which shall not, in any event, be less than zero) and (ii) dividends payable in cash on the payment date for each cash dividend declared on the Common Stock in an amount per whole share (rounded to the nearest cent) equal to the Formula Number (as hereinafter defined) then in effect multiplied by the cash dividends then to be paid on each share of Common Stock. In addition, if the Corporation shall pay any dividend or make any distribution on the Common Stock payable in assets, securities or other forms of non-cash consideration (other than dividends or distributions solely in shares of Common Stock), then, in each such case, the Corporation shall simultaneously pay or make on each outstanding whole share of Series A Preferred Stock a dividend or distribution in like kind equal to the Formula Number then in effect times such dividend or distribution on each share of the Common Stock. As used herein, the “Formula Number” shall be 1,000; provided, however, that, if at any time after April 30, 2004, the Corporation shall (x) declare or pay any dividend on the Common Stock payable in shares of Common Stock or make any distribution on the Common Stock in shares of Common Stock, (y) subdivide (by a stock split or otherwise) the outstanding shares of Common Stock into a larger number of shares of Common Stock or (z) combine (by a reverse stock split or otherwise) the outstanding shares of Common Stock into a smaller number of shares of Common Stock, then, in each such event, the Formula Number shall be adjusted to a number determined by multiplying the Formula Number in effect immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock that are outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event (and rounding the result to the nearest whole number); and provided further, that, if at any time after April 30, 2004, the Corporation shall issue any shares of its capital stock in a merger, reclassification, or change of the outstanding shares of Common Stock, then, in each such event, the Formula Number shall be appropriately adjusted to reflect such merger, reclassification or change so that each share of Preferred Stock continues to be the economic equivalent of a Formula Number of shares of Common Stock prior to such merger, reclassification or change.
(b)The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in Section 2(a) immediately prior to or at the same time it declares a dividend or distribution on the Common Stock (other than a dividend or distribution solely in shares of Common Stock); provided, however, that, in the event no dividend or distribution (other than a dividend or distribution in shares of Common Stock) shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $.01 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a dividend or distribution declared thereon, which record date shall be the same as the record date for any corresponding dividend or distribution on the Common Stock.
(c)Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from and after the Quarterly Dividend Payment Date next preceding the date of original issue of such shares of Series A Preferred Stock; provided, however, that dividends on such shares that are originally issued after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and on or prior to the next succeeding Quarterly Dividend Payment Date shall begin to accrue and be cumulative from and after such Quarterly Dividend Payment Date.
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Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock that are originally issued prior to the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend on the first Quarterly Dividend Payment Date shall be calculated as if cumulative from and after the last day of the fiscal quarter next preceding the date of original issuance of such shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.
(d)So long as any shares of the Series A Preferred Stock are outstanding, no dividends or other distributions shall be declared, paid or distributed, or set aside for payment or distribution, on the Common Stock, unless, in each case, the dividend required by this Section 2 to be declared on the Series A Preferred Stock shall have been declared.
(e)The holders of the shares of Series A Preferred Stock shall not be entitled to receive any dividends or other distributions, except as provided herein.
Section 3.Voting Rights
The holders of shares of Series A Preferred Stock shall have the following voting rights:
(a)Each holder of Series A Preferred Stock shall be entitled to a number of votes equal to the Formula Number then in effect, for each share of Series A Preferred Stock held of record on each matter on which holders of the Common Stock or shareholders generally are entitled to vote, multiplied by the maximum number of votes per share that any holder of the Common Stock or shareholders generally then have with respect to such matter (assuming any holding period or other requirement to vote a greater number of shares is satisfied).
(b)Except as otherwise provided in this Section 3 or by the VSCA, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one voting group for the election of directors of the Corporation and on all other matters submitted to a vote of shareholders of the Corporation.
(c)If, at the time of any annual meeting of shareholders at which the election of directors is to be considered, the equivalent of six quarterly dividends (whether or not consecutive) payable on any share or shares of Series A Preferred Stock are in default, the number of directors constituting the Board of Directors of the Corporation shall be increased by two. In addition to voting together with the holders of Common Stock for the election of other directors of the Corporation, the holders of record of the Series A Preferred Stock, voting, together with the holders of any one or more other series of the Cumulative Preferred Stock that at the time have the right to elect directors pursuant to provisions of the articles of amendment creating such series under circumstances similar to those described in this Section 3(c), as a single voting group, to the exclusion of the holders of Common Stock, shall be entitled at said meeting of shareholders (and at each subsequent annual meeting of shareholders), unless all dividends in arrears have been paid or declared and set apart for payment prior thereto, to vote for the election of two directors of the Corporation, the holders of any Series A Preferred Stock being entitled to cast a number of votes per share of Series A Preferred Stock equal to the Formula Number. Until the default in payments of all dividends that permitted the election of said directors shall cease to exist, any director who shall have been so elected pursuant to the next preceding sentence may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares of Series A Preferred Stock at the time entitled to cast a majority of the votes entitled to be cast for the election of any such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders. If and when such default shall cease to exist, the holders of the Series A Preferred Stock shall be divested of the foregoing special voting rights, subject to revesting in the event of each and every subsequent like default in payments of dividends. Upon the termination of the foregoing special voting rights, the terms of office of all persons who may have been elected directors pursuant to said special voting rights shall forthwith terminate, and the number of directors constituting the Board of Directors shall be reduced by two. The voting rights granted
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by this Section 3(c) shall be in addition to any other voting rights granted to the holders of the Series A Preferred Stock in this Section 3.
(d)Except as provided in this Section 3, in Section 11 or by the VSCA, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for authorizing or taking any corporate action.
Section 4.Certain Restrictions
(a)Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not
(i)declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii)declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;
(iii)redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock; provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv)purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.
(b)The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.
Section 5.Liquidation Rights
Upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (i) $.01 per whole share or (ii) an aggregate amount per share equal to the Formula Number then in effect times the aggregate amount to be distributed per share to holders of Common Stock or (b) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up)
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with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up.
Section 6.Consolidation, Merger, etc.
In case the Corporation shall enter into any consolidation, merger, statutory share exchange, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash or any other property, then, in any such case, the then outstanding shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share equal to the Formula Number then in effect times the aggregate amount of stock, securities, cash or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is exchanged or changed. In the event both this Section 6 and Section 2 appear to apply to a transaction, this Section 6 will control.
Section 7.Redemption; No Sinking Fund
The outstanding shares of the Series A Preferred Stock may be redeemed, at the option of the Corporation, as a whole, but not in part, at any time, or from time to time, at a cash price per share equal to (i) the par value thereof, plus (ii) all dividends that on the redemption date have accrued on the shares to be redeemed and have not been paid or declared and a sum sufficient for the payment thereof set apart, without interest. In addition, subject to clause (a)(iv) of Section 4, the Corporation may purchase or otherwise acquire outstanding shares of Series A Preferred Stock in the open market or by offer to any holder or holders of shares of Series A Preferred Stock. The shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
Section 8.Ranking
The Series A Preferred Stock shall rank junior to all other series of Preferred Stock of the Corporation, unless the Board of Directors shall specifically determine otherwise in fixing the powers, preferences and relative, participating, optional and other special rights and the qualifications, limitations and restrictions of any such other series.
Section 9.Fractional Shares
The Series A Preferred Stock shall be issuable upon exercise of the Rights issued pursuant to the Rights Agreement in whole shares or in any fraction of a share that is one-thousandth (1/1,000) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder’s fractional shares, to receive dividends, exercise voting rights, participate in distributions and have the benefit of all other rights of holders of Series A Preferred Stock. In lieu of fractional shares, the Corporation, prior to the first issuance of a share or a fraction of a share of Series A Preferred Stock, may elect (a) to make a cash payment as provided in the Rights Agreement for fractions of a share other than one-thousandth (1/1,000) of a share or any integral multiple thereof or (b) to issue depository receipts evidencing such authorized fraction of a share of Series A Preferred Stock pursuant to an appropriate agreement between the Corporation and a depository selected by the Corporation; provided that such agreement shall provide that the holders of such depository receipts shall have all the rights, privileges and preferences to which they are entitled as holders of the Series A Preferred Stock.
Section 10.Reacquired Shares
Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock, undesignated as to series, and may thereafter be reissued as part of a new series of such Preferred Stock as permitted by the VSCA.
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Section 11.Amendment
None of the powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock as provided herein or in the Articles of Incorporation shall be amended in any manner that would alter or change the powers, preferences, rights or privileges of the holders of Series A Preferred Stock so as to affect such holders adversely without the affirmative vote of the holders of more than two-thirds of the outstanding shares of Series A Preferred Stock, voting as a single voting group.
Part B.
Common Stock.
1.Voting Rights. The holders of Common Stock shall to the exclusion of the holders of Cumulative Preferred Stock have the sole and full power to vote for the election of directors and for all other purposes without limitation except only as otherwise provided under the applicable sections of these Articles of Incorporation or by any applicable provision of law.
2.Dividends. Dividends may be declared and paid and distributions may be made on the Common Stock and shares of Common Stock may be purchased or otherwise acquired for value out of any funds of the Corporation legally available therefore without limit in any amount except as provided in the sections of these Articles of Incorporation applicable to cumulative preferred stock. The Corporation may hold or dispose of shares so purchased from time to time for its corporate purposes or may retire such shares as provided by law.
3.Distribution of Assets. The holders of the Common Stock in the event of any dissolution, liquidation or winding up of the affairs of the Corporation shall be entitled to receive all assets of the Corporation remaining after satisfaction of the full preferential amounts to which holders of the Cumulative Preferred Stock are entitled under the provisions of these Articles of Incorporation, including rights conferred by any articles of serial designation.
Part C.
Provisions Applicable to all Classes of Stock.
1.Voting Rights. Each shareholder of record of shares of any class shall be entitled in any meeting of shareholders in which such shares are entitled to be voted to cast one (1) vote for each share of stock so held by such shareholder as shown by the stock books of the Corporation and may cast such vote in person or by proxy.
2.Certain Required Votes. Except as expressly otherwise required by these Articles of Incorporation or by the Board of Directors acting pursuant to Section 13.1-707 of the Virginia Stock Corporation Act or any successor provision, the vote required to approve an amendment or restatement of these Articles that requires shareholder approval, other than an amendment or restatement that (i) amends or affects the shareholder vote required by the Virginia Stock Corporation Act to approve a merger, statutory share exchange, sale of all or substantially all of the Corporation’s assets or the dissolution of the Corporation or (ii) amends or affects this Part C or Article IV of these Articles of Incorporation, shall be a majority of the votes entitled to be cast by each voting group that is entitled to vote on the matter.
3.Preemptive Rights. No holder of shares of stock of the Corporation of any class shall have any preemptive right with respect to shares of that class of stock or of any other class of stock of the Corporation. Nothing contained herein shall, however, prevent the Board of Directors in its discretion without any action by the shareholders in connection with the issuance of any obligations or stock of the Corporation to grant rights or options for the purchase of shares of the Corporation, either preferred or common, or to provide for the conversion of shares of one class of stock of the Corporation into shares of another class having prior or superior rights and preferences as to dividends or distribution of assets upon liquidation.
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Article IV
Number of Directors, Term of Office and Classification
The Board of Directors shall consist of such number of directors (but not less than three (3) and not more than fifteen (15)) as shall from time to time be fixed by the bylaws of the Corporation, provided that in the event the holders of Cumulative Preferred Stock shall become entitled to and shall elect not to exceed two (2) additional directors as provided in Article III, Part A, Section 4 above, such director or directors shall be in addition to the number of directors permitted and subsisting under this section and bylaws adopted pursuant hereto.
At the 2008 annual meeting of shareholders, the successors of the directors whose terms expire at that meeting shall be elected to serve until the 2010 annual meeting of shareholders and until his or her successor is elected. At the 2009 annual meeting of shareholders, the successors of the directors whose terms expire at that meeting shall be elected to serve until the 2010 annual meeting of shareholders and until his or her successor is elected. At the 2010 annual meeting of shareholders, all directors shall be elected to serve until the 2011 annual meeting of shareholders and until his or her successor is elected. At each annual meeting of shareholders thereafter, the directors shall be elected to serve until the next annual meeting of shareholders and until his or her successor is elected.
Article V
Limit on Liability and Indemnification
1.Definitions. For purposes of this Article V, the following terms shall have the meanings indicated:
(a)“applicant” means the person seeking indemnification pursuant to this Article V;
(b)“expenses” includes counsel fees;
(c)“liability” means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding;
(d)“party” includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding; and
(e)“proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.
2.Limitation of Liability. In any proceeding brought by a shareholder of the Corporation in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article V, except for liability resulting from such person’s having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law.
3.Indemnification. The Corporation shall indemnify (i) any person who was or is a party to any proceeding, including a proceeding brought by a shareholder in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, by reason of the fact that he is or was a director or officer of the Corporation, and (ii) any director or officer who is or was serving at the request of the Corporation as a director, trustee, partner or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by him in connection with such proceeding unless he engaged in willful misconduct or a knowing violation of the criminal law. A person is considered to be serving an employee benefit plan at the Corporation’s request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. The Board of Directors is hereby empowered, by a majority vote of a
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quorum of disinterested directors, to enter into a contract to indemnify any director or officer in respect of any proceedings arising from any act or omission, whether occurring before or after the execution of such contract.
4.Application; Amendment. The provisions of this Article shall be applicable to all proceedings commenced after the adoption hereof by the shareholders of the Corporation, arising from any act or omission, whether occurring before or after such adoption. No amendment or repeal of this Article V shall have any effect on the rights provided under this Article V with respect to any act or omission occurring prior to such amendment or repeal. The Corporation shall promptly take all such actions, and make all such determinations, as shall be necessary or appropriate to comply with its obligation to make any indemnity under this Article V and shall promptly pay or reimburse all reasonable expenses incurred by any director or officer in connection with such actions and determinations or proceedings of any kind arising therefrom.
5.Termination of Proceeding. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the applicant did not meet the standard of conduct described in section 2 or 3 of this Article V.
6.Determination of Availability. Any indemnification under this Article V (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the applicant is proper in the circumstances because he has met the applicable standard of conduct set forth in section 3 of this Article V.
The determination shall be made:
(a)By the Board of Directors by a majority vote of a quorum consisting of Directors not at the time parties to the proceeding;
(b)If a quorum cannot be obtained under subsection (a) of this section, by a majority vote of a committee duly designated by the Board of Directors (in which designation Directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding;
(c)By special legal counsel:
(i)Selected by the Board of Directors or its committee in the manner prescribed in subsection (a) or (b) of this section; or
(ii)If a quorum of the Board of Directors cannot be obtained under subsection (a) of this section and a committee cannot be designated under subsection (b) of this section, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate;
(d)By the shareholders, but shares owned by or voted under the control of Directors who are at the time parties to the proceeding may not be voted on the determination. Any evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is appropriate, except that if the determination is made by special legal counsel, such evaluation as to reasonableness of expenses shall be made by those entitled under subsection (c) of this section 6 to select counsel. Notwithstanding the foregoing, in the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to this Article V shall be made by special legal counsel agreed upon by the Board of Directors and the applicant. If the Board of Directors and the applicant are unable to agree upon such special legal counsel, the Board of Directors and the applicant each shall select a nominee, and the nominees shall select such special legal counsel.
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7.Advances. (a) The Corporation shall pay for or reimburse the reasonable expenses incurred by any applicant who is a party to a proceeding in advance of final disposition of the proceeding or the making of any determination under section 3 of this Article V if the applicant furnishes the Corporation:
(i)a written statement of his good faith belief that he has met the standard of conduct described in section 3; and
(ii)a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet such standard of conduct.
(b)The undertaking required by paragraph (ii) of subsection (a) of this section 7 shall be an unlimited general obligation of the applicant but need not be secured and may be accepted without reference to financial ability to make repayment.
(c)Authorizations of payments under this section shall be made by the persons specified in section 6 of this Article V.
8.Indemnification of Others. The Board of Directors is hereby empowered, by majority vote of a quorum consisting of disinterested Directors, to cause the Corporation to indemnify or contract to indemnify any person not specified in section 2 or 3 of this Article V who was or is a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in section 3 of this Article V. The provisions of sections 4 through 7 of this Article V shall be applicable to any indemnification provided hereafter pursuant to this section 8.
9.Insurance. The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article V and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by him in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article V.
10.Further Indemnity. Every reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. The indemnification hereby provided and provided hereafter pursuant to the power conferred by this Article V on the Board of Directors shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters in relation to which the Corporation would not have the power to indemnify such person under the provisions of this Article V. Such rights shall not prevent or restrict the power of the Corporation to make or provide for any further indemnity, or provisions for determining entitlement to indemnity, pursuant to one or more indemnification agreements, bylaws, or other arrangements (including, without limitation, creation of trust funds or security interests funded by letters of credit or other means) approved by the Board of Directors (whether or not any of the directors of the Corporation shall be a party to or beneficiary of any such agreements, bylaws or arrangements); provided, however, that any provision of such agreements, bylaws or other arrangements shall not be effective if and to the extent that it is determined to be contrary to this Article V or applicable laws of the Commonwealth of Virginia.
11.Severability. Each provision of this Article V shall be severable, and an adverse determination as to any such provision shall in no way affect the validity of any other provision.
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Exhibit 10.1
2023 OMNIBUS INCENTIVE PLAN
CASH-SETTLED PERFORMANCE STOCK UNIT GRANT NOTICE
Pursuant to the terms and conditions of the Owens & Minor, Inc. 2023 Omnibus Incentive Plan, as amended from time to time (the “Plan”), Accendra Health, Inc., a Virginia corporation (the “Company”), hereby grants to the individual listed below (“you” or the “Participant”) the number of cash-settled performance-based stock units (the “Performance Stock Units”) set forth below. This award of Performance Stock Units (this “Award”) is subject to the terms and conditions set forth herein and in the Performance Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”), and the Plan, each of which is incorporated herein by reference. As a condition to accepting this Award, you have agreed to be bound by, and promised to abide by, the terms set forth in the Accendra Health Leadership Teammate Agreement (the “Teammate Agreement”). You expressly acknowledge and affirm that this Award would not be granted to you if you had not agreed to be bound by the Teammate Agreement. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan or the Agreement.
Type of Award: | Cash Settled Performance Stock Units |
Participant: | [●] |
Date of Grant: | [●] |
Target Number of Performance Stock Units (“Target PSUs”): | [●] |
Target Value of Performance Stock Units (“Target Value”): | [●] |
Performance Period: | The three fiscal-year period commencing as of [●] and ending on [●]. |
Vesting Schedule: | Subject to Section 2 and Section 5 of the Agreement, the Plan and the other terms and conditions set forth herein, the Performance Stock Units shall be earned based on achievement of the performance-vesting conditions set forth on Annex A to the Agreement, so long as you do not incur a Termination of Service prior to the Certification Date. |
By signing below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Cash-Settled Performance Stock Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice, and have had an opportunity to obtain the advice of counsel prior to executing this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations arising under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf), facsimile counterparts or similar means of electronic delivery), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
Notwithstanding any provision of this Grant Notice or the Agreement, if you have not executed and delivered the Teammate Agreement and this Grant Notice to the Company within 60 days following the Date of Grant, then this Award will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
ACCENDRA HEALTH, INC.
Name: [●]
Title: [●]
PARTICIPANT
Name: [●]
EXHIBIT A
PERFORMANCE STOCK UNIT AGREEMENT
This Performance Stock Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Accendra Health, Inc., a Virginia corporation (the “Company”), and [●] (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
[Remainder of Page Intentionally Blank]
Annex A
[ ]
Exhibit 10.2
2023 OMNIBUS INCENTIVE PLAN
PERFORMANCE STOCK UNIT GRANT NOTICE
Pursuant to the terms and conditions of the Owens & Minor, Inc. 2023 Omnibus Incentive Plan, as amended from time to time (the “Plan”), Accendra Health, Inc., a Virginia corporation (the “Company”), hereby grants to the individual listed below (“you” or the “Participant”) the number of performance-based stock units (the “Performance Stock Units”) set forth below. This award of Performance Stock Units (this “Award”) is subject to the terms and conditions set forth herein and in the Performance Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”), and the Plan, each of which is incorporated herein by reference. As a condition to accepting this Award, you have agreed to be bound by, and promised to abide by, the terms set forth in the Accendra Health Leadership Teammate Agreement (the “Teammate Agreement”). You expressly acknowledge and affirm that this Award would not be granted to you if you had not agreed to be bound by the Teammate Agreement. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan or the Agreement.
Type of Award: | Performance Stock Units |
Participant: | [●] |
Date of Grant: | [●] |
Target Number of Performance Stock Units (“Target PSUs”): | [●] |
Performance Period: | The three fiscal-year period commencing as of [●] and ending on [●]. |
Vesting Schedule: | Subject to Section 2 and Section 5 of the Agreement, the Plan and the other terms and conditions set forth herein, the Performance Stock Units shall be earned based on achievement of the performance-vesting conditions set forth on Annex A to the Agreement, so long as you do not incur a Termination of Service prior to the Certification Date. |
By signing below, you agree to be bound by the terms and conditions of the Plan, the Agreement and this Performance Stock Unit Grant Notice (this “Grant Notice”). You acknowledge that you have reviewed the Agreement, the Plan and this Grant Notice in their entirety and fully understand all provisions of the Agreement, the Plan and this Grant Notice, and have had an opportunity to obtain the advice of counsel prior to executing this Grant Notice. You hereby agree to accept as binding, conclusive and final all decisions or interpretations of the Committee regarding any questions or determinations arising under the Agreement, the Plan or this Grant Notice. This Grant Notice may be executed in one or more counterparts (including portable document format (.pdf), facsimile counterparts or similar means of electronic delivery), each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
Notwithstanding any provision of this Grant Notice or the Agreement, if you have not executed and delivered the Teammate Agreement and this Grant Notice to the Company within 60 days following the Date of Grant, then this Award will terminate automatically without any further action by the Company and will be forfeited without further notice and at no cost to the Company.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Grant Notice to be executed by an officer thereunto duly authorized, and the Participant has executed this Grant Notice, effective for all purposes as provided above.
ACCENDRA HEALTH, INC.
Name: [●]
Title: [●]
PARTICIPANT
Name: [●]
EXHIBIT A
PERFORMANCE STOCK UNIT AGREEMENT
This Performance Stock Unit Agreement (together with the Grant Notice to which this Agreement is attached, this “Agreement”) is made as of the Date of Grant set forth in the Grant Notice to which this Agreement is attached by and between Accendra Health, Inc., a Virginia corporation (the “Company”), and [●] (the “Participant”). Capitalized terms used but not specifically defined herein shall have the meanings specified in the Plan or the Grant Notice.
[Remainder of Page Intentionally Blank]
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Edward A. Pesicka, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 of Accendra Health, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 11, 2026 | |
| |
/s/ Edward A. Pesicka | |
Edward A. Pesicka | |
President, Chief Executive Officer & Director | |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jonathan A. Leon, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 of Accendra Health, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 11, 2026 | |
| |
/s/ Jonathan A. Leon | |
Jonathan A. Leon | |
Executive Vice President & Chief Financial Officer | |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Accendra Health, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Edward A. Pesicka, President, Chief Executive Officer & Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Edward A. Pesicka | |
Edward A. Pesicka | |
President, Chief Executive Officer & Director | |
Accendra Health, Inc. | |
May 11, 2026 | |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Accendra Health, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jonathan A. Leon, Executive Vice President & Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Jonathan A. Leon | |
Jonathan A. Leon | |
Executive Vice President & Chief Financial Officer | |
Accendra Health, Inc. | |
May 11, 2026 | |