ACCENDRA HEALTH INC annual report, FY2023

Business context and reporting period

Registrant mismatch: The request identifies ACCENDRA HEALTH INC, but the supplied filing is Owens & Minor, Inc. (NYSE: OMI). This Form 10-K reports the fiscal year ended December 31, 2023—not a standalone 2023 fourth quarter.

Owens & Minor provides healthcare products, distribution and related services through Products & Healthcare Services and Patient Direct (home healthcare, including Apria and Byram). Apria was acquired in March 2022.

Financial results and liquidity

Capital expenditures were $207.9 million. Year-end current assets were $2.103 billion and current liabilities $1.892 billion. The company reported $450 million of undrawn receivables-facility capacity and $423 million available under its revolving credit facility. Debt-to-equity was 227%; the company said it was in compliance with debt covenants at year-end.

Material changes versus FY 2022

• Revenue increased 3.8%. Patient Direct revenue grew 24.1% to $2.553 billion, including $308 million from a full year of Apria results and $187 million of organic growth. Products & Healthcare Services revenue declined 1.5% to $7.781 billion, including an approximately $463 million fall in PPE revenue.
• Patient Direct segment operating income rose to $246.9 million from $193.7 million, while Products & Healthcare Services operating income fell to $57.8 million from $175.3 million.
• Net loss reflected the $118 million decline in Products & Healthcare Services operating income, $92.2 million of additional exit and realignment charges, and $29.0 million higher net interest expense. The absence of the prior-year $92.3 million PPE inventory valuation adjustment and improved Patient Direct results partly offset these impacts.
• Operating cash flow more than doubled, supported by inventory reductions and lower receivables. Receivables days were 20.5, but 24.8 excluding the effect of the receivables purchase program; inventory days improved to 49.0 from 57.2.
• Debt fell by approximately $403 million during the year, including repayments and note repurchases. Interest expense nevertheless rose to $157.9 million from $128.9 million, and the effective interest rate increased to 6.96% from 5.70%.

Outlook, risks and unusual items

• The filing provides no numerical FY 2024 earnings or revenue guidance. Management said cash from operations, cash on hand and available financing were expected to fund working capital, capital expenditures, debt service and other requirements in the foreseeable future.
• Management expects material additional costs from its Operating Model Realignment Program and IT initiatives, but said these costs could not yet be reasonably estimated. Related 2023 charges totaled $92.2 million; total exit and realignment charges were $99.1 million.
• Approximately $204 million of principal debt payments were identified as due within the next 12 months as of year-end, including $171 million of notes due in December 2024. Refinancing or repayment capacity is a key liquidity risk; debt agreements include restrictive covenants and cross-default provisions.
• In 2023 the company sold $1.4 billion of receivables under its limited-recourse RPA, received $124 million of net cash proceeds, and recorded $10.6 million of losses. Management’s liquidity and working-capital measures are materially affected by this program.
• The FDA’s 2023 N95 respirator recommendations were updated in September to permit use of the affected models according to labeling, except for one voluntarily recalled lot. The company said the matter did not materially affect 2023 results, but further recalls, claims or regulatory action could be costly.
• The Philips Respironics device recall continued to create patient-service, replacement-device availability and cost risks for Patient Direct; future financial impact remains uncertain.
• Goodwill impairment testing found no charge, but estimated fair value for Apria and Global Products was less than 10% above carrying value. Management said a roughly 100-basis-point adverse change in discount rate or terminal growth assumptions could indicate impairment in future periods.
• Other material exposures include reimbursement and regulatory changes, customer and GPO concentration, supplier and commodity costs, cybersecurity, and an IRS transfer-pricing dispute. Apria remains subject to a five-year HHS OIG Corporate Integrity Agreement arising from a pre-acquisition settlement.

Important facts investors should verify

• Confirm the intended issuer: the supplied filing is Owens & Minor, not Accendra Health.
• Review the 2024 notes maturity and management’s refinancing or repayment plan, together with covenant headroom and interest-rate exposure.
• Assess whether operating cash flow and improved working capital are sustainable, separating recurring collections and inventory performance from receivables-sale proceeds and related costs.
• Track segment margins, PPE demand, Patient Direct organic growth, and the timing and total cost of restructuring and IT initiatives.
• Monitor goodwill valuation headroom, the respiratory-device recall’s ongoing effects, and developments in reimbursement, regulatory and tax matters.