EX-99.2 10 d339132dex992.htm EX-99.2

Exhibit 99.2

OWENS & MINOR, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On March 29, 2022 (the Closing Date), Owens & Minor, Inc. (Owens & Minor, OMI, we, us, our or the Company) completed the acquisition of Apria, Inc., a Delaware corporation (Apria), pursuant to the Agreement and Plan of Merger, dated as of January 7, 2022, by and among the Company, Apria and StoneOak Merger Sub Inc., a Delaware corporation and indirect wholly owned subsidiary of the Company (Merger Sub), pursuant to which Merger Sub merged with and into Apria, with Apria continuing as the surviving corporation and an indirect wholly owned subsidiary of the Company (Apria Acquisition). Apria is a provider of integrated home healthcare equipment and related services in the United States.

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

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

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

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

OWENS & MINOR, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2021

(dollars in thousands, except per share data)

|  | Historical Owens & Minor, Inc. |  |  | Historical Apria, Inc. |  |  | Financing |  |  | Note Reference |  | Transaction Adjustments |  |  | Note Reference |  | Pro Forma Condensed Combined |  |  | Note Reference
Net revenue |  | $ | 9,785,315 |  |  | $ | 1,145,275 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  | $ | 10,930,590 |  |  |
Cost of goods sold |  |  | 8,272,086 |  |  |  | 341,288 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 8,613,374 |  |  |
Gross margin |  |  | 1,513,229 |  |  |  | 803,987 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 2,317,216 |  |  |
Distribution, selling and administrative expenses |  |  | 1,116,871 |  |  |  | 697,149 |  |  |  | — |  |  |  |  |  | 83,891 |  |  | 3(d) |  |  | 1,897,911 |  |  |
Acquisition-related and exit and realignment charges |  |  | 34,076 |  |  |  | 9,484 |  |  |  | — |  |  |  |  |  | 42,900 |  |  | 3(c) |  |  | 86,460 |  |  |
Other operating income, net |  |  | (6,191 | ) |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | (6,191 | ) |  |
Operating income |  |  | 368,473 |  |  |  | 97,354 |  |  |  | — |  |  |  |  |  | (126,791 | ) |  |  |  |  | 339,036 |  |  |
Interest expense and other, net |  |  | 48,090 |  |  |  | 11,527 |  |  |  | 85,139 |  |  | 3(a) |  |  | (11,527 | ) |  | 3(a) |  |  | 133,229 |  |  |
Loss on extinguishment of debt |  |  | 40,433 |  |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 40,433 |  |  |
Other expense (income), net |  |  | 3,196 |  |  |  | (3,994 | ) |  |  | — |  |  |  |  |  | 2,749 |  |  | 3(e) |  |  | 1,951 |  |  |
Income before income taxes |  |  | 276,754 |  |  |  | 89,821 |  |  |  | (85,139 | ) |  |  |  |  | (118,013 | ) |  |  |  |  | 163,423 |  |  |
Income tax provision (benefit) |  |  | 55,165 |  |  |  | 24,153 |  |  |  | (22,988 | ) |  | 3(b) |  |  | (31,864 | ) |  | 3(b) |  |  | 24,466 |  |  |
Loss from equity method investment |  |  | — |  |  |  | 791 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 791 |  |  |
Net income |  | $ | 221,589 |  |  | $ | 64,877 |  |  | $ | (62,151 | ) |  |  |  | $ | (86,149 | ) |  |  |  | $ | 138,166 |  |  |
Net income per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 3.05 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1.90 |  |  | 3(f)
Diluted |  | $ | 2.94 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 1.83 |  |  | 3(f)

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

OWENS & MINOR, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AT DECEMBER 31, 2021

(dollars in thousands, except per share data)

|  | Historical Owens & Minor, Inc. |  |  | Historical Apria, Inc. |  |  | Financing |  |  | Note Reference |  | Transaction Adjustments |  |  | Note Reference |  | Pro Forma Condensed Combined |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 55,712 |  |  | $ | 219,561 |  |  | $ | 1,658,900 |  |  | 4(a) |  | $ | (1,860,700 | ) |  | 4(b) |  | $ | 73,473 |
Accounts receivable, net |  |  | 681,564 |  |  |  | 81,720 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 763,284 |
Merchandise inventories |  |  | 1,495,972 |  |  |  | 8,754 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 1,504,726 |
Other current assets |  |  | 88,564 |  |  |  | 23,242 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 111,806 |
Total current assets |  |  | 2,321,812 |  |  |  | 333,277 |  |  |  | 1,658,900 |  |  |  |  |  | (1,860,700 | ) |  |  |  |  | 2,453,289 |
Property and equipment, net |  |  | 317,235 |  |  |  | 21,281 |  |  |  | — |  |  |  |  |  | 3,192 |  |  | 4(d) |  |  | 341,708 |
Patient equipment |  |  | — |  |  |  | 221,534 |  |  |  | — |  |  |  |  |  | 33,230 |  |  | 4(d) |  |  | 254,764 |
Operating lease assets |  |  | 194,006 |  |  |  | 71,808 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 265,814 |
Goodwill |  |  | 390,185 |  |  |  | 28,985 |  |  |  | — |  |  |  |  |  | 1,221,828 |  |  | 4(e) |  |  | 1,640,998 |
Intangible assets, net |  |  | 209,745 |  |  |  | 71,651 |  |  |  | — |  |  |  |  |  | 224,349 |  |  | 4(c) |  |  | 505,745 |
Other assets, net |  |  | 103,568 |  |  |  | 26,893 |  |  |  | — |  |  |  |  |  | (4,338 | ) |  | 4(f) |  |  | 126,123 |
Total assets |  | $ | 3,536,551 |  |  | $ | 775,429 |  |  | $ | 1,658,900 |  |  |  |  | $ | (382,439 | ) |  |  |  | $ | 5,588,441 |
Liabilities and equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 1,001,959 |  |  | $ | 133,485 |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  | $ | 1,135,444 |
Accrued payroll and related liabilities |  |  | 115,858 |  |  |  | 52,484 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 168,342 |
Other current liabilities |  |  | 226,204 |  |  |  | 120,860 |  |  |  | — |  |  |  |  |  | (36,458 | ) |  | 4(b) |  |  | 310,606 |
Total current liabilities |  |  | 1,344,021 |  |  |  | 306,829 |  |  |  | — |  |  |  |  |  | (36,458 | ) |  |  |  |  | 1,614,392 |
Long-term debt, excluding current portion |  |  | 947,540 |  |  |  | 341,001 |  |  |  | 1,658,900 |  |  | 4(a) |  |  | (341,001 | ) |  | 4(b) |  |  | 2,606,440 |
Operating lease liabilities, excluding current portion |  |  | 162,241 |  |  |  | 48,304 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 210,545 |
Deferred income taxes, net |  |  | 35,310 |  |  |  | 7,312 |  |  |  | — |  |  |  |  |  | 66,070 |  |  | 4(f) |  |  | 108,692 |
Other liabilities |  |  | 108,938 |  |  |  | 32,250 |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | 141,188 |
Total liabilities |  |  | 2,598,050 |  |  |  | 735,696 |  |  |  | 1,658,900 |  |  |  |  |  | (311,389 | ) |  |  |  |  | 4,681,257 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock, par value $2 per share; authorized—200,000 shares; issued and outstanding—75,433 shares and 73,472 shares |  |  | 150,865 |  |  |  | 355 |  |  |  | — |  |  |  |  |  | (355 | ) |  | 4(g) |  |  | 150,865 |
Paid-in capital |  |  | 440,608 |  |  |  | 954,933 |  |  |  | — |  |  |  |  |  | (954,933 | ) |  | 4(g) |  |  | 440,608 |
Retained earnings |  |  | 387,619 |  |  |  | (915,555 | ) |  |  | — |  |  |  |  |  | 884,238 |  |  | 4(g) |  |  | 356,302 |
Accumulated other comprehensive loss |  |  | (40,591 | ) |  |  | — |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | (40,591 | )
Total equity |  |  | 938,501 |  |  |  | 39,733 |  |  |  | — |  |  |  |  |  | (71,050 | ) |  |  |  |  | 907,184 |
Total liabilities and equity |  | $ | 3,536,551 |  |  | $ | 775,429 |  |  | $ | 1,658,900 |  |  |  |  | $ | (382,439 | ) |  |  |  | $ | 5,588,441 |

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

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. | Description of the Transaction and Basis of Presentation

Description of the Transaction

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

Basis of Presentation

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

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

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

The unaudited pro forma condensed combined financial statements have been compiled using the significant accounting policies as set forth in our 2021 Annual Report on Form 10-K. During the preparation of the unaudited pro forma condensed combined financial information, Owens & Minor’s management performed an analysis of the accounting policies of Apria, and is not aware of any differences that could have a material impact on the unaudited pro forma condensed combined financial statements.

2. | Preliminary Estimate of Purchase Price Consideration and Related Allocation

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

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

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

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

PRELIMINARY ALLOCATION

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

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

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

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

3. | Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations

| (a) | Financing costs

We plan to finance the Apria Acquisition with $500 million principal amount of a New Term Loan A, $600 million principal amount of a New Term Loan B, and $600 million in new unsecured notes, and approximately $204 million in cash.

SOURCES & USES

(in thousands) |  | December 31, 2021 |
New Term Loan A |  | $ | 500,000 |
New Term Loan B |  |  | 600,000 |
New Unsecured Notes |  |  | 600,000 |
Cash |  |  | 204,383 |
Total sources |  | $ | 1,904,383 |
Purchase proceeds - equity value |  | $ | (1,449,175 | )
Repayment of Apria debt |  |  | (380,208 | )
OMI incurred and to be incurred transaction expenses and financing fees |  |  | (75,000 | )
Total uses |  | $ | (1,904,383 | )

INTEREST EXPENSE, NET ADJUSTMENT - DEBT

(in thousands) |  | Year-ended December 31, 2021 |  |  |  |
Additional interest expense - new debt |  | $ | 78,930 |  |  |  | (1 | )
Amortization expense - new deferred financing costs and original issue discount |  |  | 6,209 |  |  |  | (2 | )
Total adjustment |  | $ | 85,139 |  |  |  |  |

(1) | Adds the additional interest expense incurred as a result of the new debt obtained. The interest rates used are based on an assumed weighted-average interest rate of approximately 4.6% consisting of borrowings under the Term Loan A in the aggregate principal amount of $500 million, Term Loan B in the aggregate principal amount of $600 million and the issuance of the unsecured notes in the aggregate principal amount of $600 million. For each 0.125 percentage point change in the interest rate of our variable-rate debt, annual interest expense would increase or decrease, as applicable, by approximately $1.4 million.

(2) | Adds the deferred financing costs and original issue discount amortization incurred as a result of the new debt obtained.

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

| (b) | Tax adjustment

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

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

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

| (c) | Transaction related costs

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

| (d) | Amortization and depreciation expense

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

IDENTIFIABLE INTANGIBLES AND AMORTIZATION ADJUSTMENT

(in thousands) |  | Preliminary Fair Value |  |  | Preliminary Estimated Useful Life |  |  | Amortization Expense Year-ended December 31, 2021 |
Intangible assets subject to amortization: |  |  |  |  |  |  |  |  |  |  |  |
Payor and capitated relationships |  | $ | 74,000 |  |  |  | 15 |  |  | $ | 4,933 |
Trade names |  |  | 74,000 |  |  |  | 10 |  |  |  | 7,400 |
Customer contracts |  |  | 148,000 |  |  |  | 2 |  |  |  | 74,000 |
Subtotal |  |  | 296,000 |  |  |  | 6 |  |  |  | 86,333 |
Intangible assets per Apria historical financial statements |  |  | 71,651 |  |  |  |  |  |  |  | 2,442 |
Step up adjustment |  | $ | 224,349 |  |  |  |  |  |  | $ | 83,891 |

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

PATIENT EQUIPMENT, PROPERTY AND EQUIPMENT, AND DEPRECIATION ADJUSTMENT

(in thousands) |  | December 31, 2021 |
Preliminary fair value of patient equipment to be conveyed |  | $ | 254,764 |
Less: Patient equipment per Apria historical financial statements |  |  | 221,534 |
Patient equipment Step Up Adjustment |  | $ | 33,230 |
Preliminary fair value of property and equipment to be conveyed |  |  | 24,473 |
Less: Property and equipment per Apria historical financial statements |  |  | 21,281 |
Property and equipment Step Up Adjustment |  | $ | 3,192 |

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

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

PRO FORMA DEPRECIATION AND AMORTIZATION ADJUSTMENT

(in thousands) |  | Year-ended December 31, 2021 |
Definite-lived intangible step up amortization |  | $ | 83,891 |
Property and equipment depreciation adjustment |  |  | — |
Total pro forma depreciation & amortization adjustment |  | $ | 83,891 |

| (e) | Other expense (income), net

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

| (f) | Earnings per share

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

4. | Pro Forma Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet

| (a) | Financing

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

DEBT ADJUSTMENT

(in thousands) |  | December 31, 2021 |
New Term Loan A |  | $ | 500,000 |
New Term Loan B |  |  | 600,000 |
New Unsecured Notes |  |  | 600,000 |
Less: New deferred financing costs and original issue discount |  |  | (41,100 | )
Total change in debt |  | $ | 1,658,900 |

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

| (b) | Cash and cash equivalents

CASH AND CASH EQUIVALENTS ADJUSTMENT

(in thousands) |  | December 31, 2021 |  |  |  |
Purchase proceeds - equity value |  | $ | (1,449,175 | ) |  |  |  |
Repayment of Apria debt |  |  | (380,208 | ) |  |  | (1 | )
Transaction costs, net of tax |  |  | (31,317 | ) |  |  | (2 | )
Net adjustments to cash and cash equivalents |  | $ | (1,860,700 | ) |  |  |  |

(1) | Includes current portion of debt of $36.5 million. Unamortized debt issuance costs of $2.7 million are excluded from this total.

(2) | Represents $42.9 million in transaction costs, net of $11.6 million of tax expense.

| (c) | Intangible assets step up adjustment

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

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

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

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

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

| (e) | Goodwill

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

GOODWILL ADJUSTMENT

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

| (f) | Deferred income taxes

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

DEFERRED TAX LIABILITY ADJUSTMENT

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

| (g) | Equity

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