Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis describes results of operations and material changes in the financial condition of Owens & Minor, Inc. and its subsidiaries since December 31, 2019. 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, 2019.
Overview and Divestiture of Movianto
Owens & Minor, Inc., along with its subsidiaries, (we, us, or our) is a leading global healthcare solutions company. On June 18, 2020 (the Divestiture Date), we completed the previously announced divestiture of our European logistics business, Movianto (the Divestiture), as well as certain support functions in our Dublin office, to Walden Group SAS (the Buyer) and EHDH (as Buyer’s guarantor) for cash consideration of $133 million. The Divestiture provides us with a greater ability to focus on and invest in our di fferentiated products, services and U.S. distribution businesses. A portion of the net proceeds was used to repurchase $54.1 million of our 2021 Notes through a tender offer (see Note 6, “Debt”). We recorded losses of $56.4 million and $65.5 million, respectively, in connection with the Divestiture for the three and six months ended June 30, 2020.
We have entered into transition services agreements with a subsidiary of the Buyer, pursuant to which we and a subsidiary of the B uyer will provide to each other various transitional services. Transition service expenses and reimbursements were immaterial for the three and six months ended June 30, 2020.
As a result of the Divestiture, the results of operations from our Movianto business are reported as “Loss from discontinued operations, net of tax” through the Divestiture Date and the related assets and liabilities were classified as “held-for-sale” in the consolidated balance sheet as of December 31, 2019. See Note 3, “Discontinued Operations,” of the Notes to Consolidated Financial Statements for further information. Unless otherwise indicated, the following information relates to continuing operations.
Income (loss) from continuing operations per diluted share was $0.00 and $(0.14) for the three and six months ended June 30, 2020, respectively, as compared to $(0.16) and $(0.34) for the three and six months ended June 30, 2019, respectively. Global Solutions segment operating loss was $(10.1) million and $(2.5) million for the three and six months ended June 30, 2020, respectively, compared to operating income of $17.7 million and $39.4 million for the three and six months ended June 30, 2019, respectively. The declines were a result of lower revenues in part from a reduction in elective surgeries as compared to prior year. Global Products segment operating income was $51.8 million and $70.3 million for the three and six months ended June 30, 2020, respectively, compared to $17.9 million and $25.7 million for the three and six months ended June 30, 2019, respectively. The increases were a result of higher revenues from greater market demand for personal protective equipment and favorable product mix combined with continued operating efficiencies compared to 2019.
COVID-19 Update
We are closely monitoring the impact of COVID-19 on all aspects of our business, including how it impacts our customers, teammates, suppliers, vendors and distribution channels. We have taken actions to protect our teammates while maintaining business continuity as we respond to the needs from this global pandemic. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our teammates, customers, suppliers and shareholders.
22
T able of Contents
Revenue in the first six months of 2020 of $3.9 billion includes a significant overall impact from COVID-19 related to the reduction of surgical procedures beginning in mid-March through the end of the second quarter, which was partially offset by a greater demand for personal protective equipment (PPE). Operating income also benefited from improved productivity and increased manufacturing output related to PPE, favorable product mix and operating efficiencies.
We are evaluating various government-sponsored COVID-response stimulus, relief, and production initiatives such as under the Defense Production Act (DPA) and recent Coronavirus Aid, Relief and Economic Security (CARES) Act. In April 2020, under the DPA, the U.S. Department of Defense initiated a technology investment agreement with us involving up to $30 million of anticipated funding of assets to expand capacity to supply N-95 respirator masks to the U.S. government. The
nature of the agreement provides a program of expedited partial funding to begin expansion while final terms are completed. Through June 30, 2020, approximately $12 million had been expended and reimbursed in accordance with this arrangement. In addition, as allowed under the CARES Act, we have filed for a $13 million income tax refund with the IRS related to the carryback of net operating losses (NOL) incurred in 2018. This refund receivable was included in other current assets on our balance sheet as of June 30, 2020. In connection with this NOL carryback, we recorded a $5.2 million benefit to the income tax benefit for the six months ended June 30, 2020.
We are unable to predict with certainty the full impact that COVID-19 will have on our future financial position and operating results due to numerous variables.
Results of Operations
Net revenue.
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Global Solutions $ 1,548,639 $ 2,134,469 $ (585,830) (27.4) %
Global Products 370,401 363,889 6,512 1.8 %
Inter-segment (111,321) (121,653) 10,332 8.5 %
Net revenue $ 1,807,719 $ 2,376,705 $ (568,986) (23.9) %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Global Solutions $ 3,396,233 $ 4,258,068 $ (861,835) (20.2) %
Global Products 761,593 710,974 50,619 7.1 %
Inter-segment (227,414) (241,498) 14,084 5.8 %
Net revenue $ 3,930,412 $ 4,727,544 $ (797,132) (16.9) %
The change in net revenue for the three and six months ended June 30, 2020 reflected the impact of a reduction in elective surgical procedures, primarily due to the impact of COVID-19, and lower distribution revenues as a result of customer non-renewals that occurred in 2019. These were partially offset by revenue growth in Global Products from increased demand for personal protective equipment and growth in Byram, our Home Healthcare business. Foreign currency translation had an unfavorable impact on net revenue of $1.5 million and $3.6 million for the three and six months ended June 30, 2020, respectively, as compared to the prior year.
Cost of goods sold.
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Cost of goods sold $ 1,538,312 $ 2,090,187 $ (551,875) (26.4) %
23
T able of Contents
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Cost of goods sold $ 3,392,445 $ 4,164,407 $ (771,962) (18.5) %
Cost of goods sold includes the cost of the product (net of supplier incentives and cash discounts) and all costs incurred for shipments of products from manufacturers to our distribution centers for all customer arrangements where we are the primary obligor and bear risk of general and physical inventory loss. These are sometimes referred to as distribution contracts. Cost of goods sold also includes direct and certain indirect labor, material and overhead costs associated with our Global Products business. There is no cost of goods sold associated with our fee-for-service arrangements. Cost of goods sold compared to prior year reflects changes in sales activity, including sales mix.
Gross margin.
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Gross margin $ 269,407 $ 286,518 $ (17,111) (6.0) %
As a % of net revenue 14.90 % 12.06 %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Gross margin $ 537,967 563,137 $ (25,170) (4.5) %
As a % of net revenue 13.69 % 11.91 %
Gross margin in the three and six months ended June 30, 2020 were impacted by lower distribution revenues and unfavorable impact from foreign currency translation of $1.4 million and $4.2 million, respectively. The increase in gross margin as a percentage of revenue reflected an improved sales mix and productivity and operating efficiencies in Global Products.
Operating expenses.
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Distribution, selling and administrative expenses $ 241,734 $ 264,215 $ (22,481) (8.5) %
As a % of net revenue 13.37 % 11.12 %
Acquisition-related and exit and realignment charges $ 6,054 $ 5,390 $ 664 12.3 %
Other operating (income) expense, net $ (577) $ 1,014 $ (1,591) (156.9) %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Distribution, selling and administrative expenses $ 495,782 $ 519,326 $ (23,544) (4.5) %
As a % of net revenue 12.61 % 10.99 %
Acquisition-related and exit and realignment charges $ 12,118 $ 10,254 $ 1,864 18.2 %
Other operating (income) expense, net $ (2,886) $ 1,056 $ (3,942) (373.3) %
Distribution, selling and administrative (DS&A) expenses include labor and warehousing costs associated with our distribution and outsourced logistics services and all costs associated with our fee-for-service arrangements. Shipping and handling costs are primarily included in DS&A expenses and include costs to store, move, and prepare products for shipment, as well as costs to deliver products to customers.
24
T able of Contents
Overall DS&A expenses were affected by the revenue decline and change in mix and investments in the business, partially offset by operational efficiencies. DS&A expenses also included favorable impacts for foreign currency translation of $0.3 million and $0.6 million for the three and six months ended June 30, 2020, respectively.
Acquisition-related charges were $3.9 million and $8.1 million for the three and six months ended June 30, 2020,
compared to $3.7 million and $7.8 million for the same periods of 2019. Acquisition-related charges in 2020 and 2019 consist primarily of transition costs for the Halyard acquisition. Exit and realignment charges were $2.2 million and $4.0 million for the three and six months ended June 30, 2020, compared to $1.7 million and $2.4 million for the same periods of 2019. Amounts in 2020 were associated with severance from reduction in force and other costs related to the reorganization of the U.S. commercial, operations and executive teams. Amounts in 2019 were associated with severance costs, the establishment of our client engagement center, and IT restructuring charges.
The change in other operating (income) expense, net was attributed primarily to higher foreign currency transaction gains compared to prior year, gain on legal settlement, and lower software as a service implementation expenses due to the adoption of ASU No. 2018-15 as of January 1, 2020. See Note 14 in Notes to Consolidated Financial Statements.
Interest expense, net .
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Interest expense, net $ 21,605 $ 26,048 $ (4,443) (17.1) %
Effective interest rate 5.63 % 7.20 %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Interest expense, net $ 44,948 $ 51,506 $ (6,558) (12.7) %
Effective interest rate 6.50 % 6.86 %
Interest expense for the three and six months ended June 30, 2020 decreased primarily due to a reduction in debt and a decrease in our effective interest rate, which were partially offset by the amortization of additional deferred financing costs as a result of the Fifth Amendment to the Credit Agreement in February 2020. See Note 6 in Notes to Consolidated Financial Statements.
Other (income) expense, net .
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Other (income) expense, net $ (4,552) $ 731 $ (5,283) (722.7) %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Other expense, net $ 294 $ 3,464 $ (3,170) (91.5) %
Other (income) expense, net for the three months ended June 30, 2020 includes a gain from the surrender of company-owned life insurance policies and gain on extinguishment of debt related to the partial repurchase of our 2024 Notes, which was partially offset by the write-off of deferred financing costs, third party fees incurred, and interest cost and net actuarial losses related to the U.S. Retirement Plan. Other expense, net for the six months ended June 30, 2020 includes the write-off of deferred financing costs, third party fees incurred, and interest cost and net actuarial losses related to the U.S. Retirement Plan, offset by a gain from the surrender of company-owned life insurance policies and gain on extinguishment of debt related to the partial repurchase of our 2021 and 2024 Notes. Other (income) expense, net for the three and six months ended June 30, 2019 includes interest cost and net actuarial losses related to the U.S. Retirement Plan and the write-off of deferred financing costs.
25
T able of Contents
Income taxes.
Three Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Income tax provision (benefit) $ 4,982 $ (1,146) $ 6,128 534.7 %
Effective tax rate 96.9 % 10.5 %
Six Months Ended June 30, Change
(Dollars in thousands) 2020 2019 $ %
Income tax benefit $ (3,541) (1,816) $ (1,725) (95.0) %
Effective tax rate 28.8 % 8.1 %
The change in the effective tax rates compared to 2019 resulted from an income tax benefit recorded in the first quarter of 2020 associated with the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the mixture of income and losses in jurisdictions in which we operate, and the incremental income tax expense associated with the vesting of restricted stock.
Financial Condition, Liquidity and Capital Resources
Financial condition . We monitor operating working capital through days sales outstanding (DSO) and merchandise inventory turnover. 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 facility, or a combination thereof of approximately $20 million.
The majority of our cash and cash equivalents are held in cash depository accounts with major banks in the United States, Europe, and Asia. Changes in our working capital can vary in the normal course of business based upon the timing of inventory purchases, collections of accounts receivable, and payments to suppliers.
June 30, 2020 December 31, 2019 Change
(Dollars in thousands) $ %
Cash and cash equivalents $ 101,276 $ 67,030 $ 34,246 51.1 %
Accounts receivable, net of allowances $ 633,647 $ 674,706 $ (41,059) (6.1) %
Consolidated DSO (1)
29.0 27.1
Merchandise inventories $ 1,040,861 $ 1,146,192 $ (105,331) (9.2) %
Consolidated inventory turnover (2)
5.7 6.6
Accounts payable $ 824,131 $ 808,035 $ 16,096 2.0 %
(1) Based on period end accounts receivable and net revenue for the quarter
(2) Based on average inventory and annualized costs of goods sold for the quarter ended June 30, 2020 and year ended December 31, 2019
Liquidity and capital expenditures. The following table summarizes our consolidated statements of cash flows for the six months ended June 30, 2020 and 2019, which relates to continuing operations and discontinued operations:
(Dollars in thousands) 2020 2019
Net cash provided by (used for):
Operating activities $ 150,457 $ 29,014
Investing activities 126,959 (25,192)
Financing activities (171,062) (16,053)
Effect of exchange rate changes 5,412 203
Net increase (decrease) in cash, cash equivalents and restricted cash $ 111,766 $ (12,028)
Cash provided by operating activities in the first six months of 2020 reflected fluctuations in net income along with favorable changes in working capital.
26
T able of Contents
Cash provided by investing activities in the first six months of 2020 included cash consideration received of $133.0 million from the sale of Movianto, proceeds of $6.0 million from the surrender of company-owned life insurance policies, and capital expenditures of $12.1 million for our strategic and operational efficiency initiatives associated with property and equipment, investments for increased manufacturing capacity in the Americas, and capitalized software. Cash used for investing activities in 2019 included capital expenditures for our strategic and operational efficiency initiatives associated with property and equipment and capitalized software.
Cash used for financing activities in the first six months of 2020 included dividend payments of $0.3 million and repayments of $47.9 million under our revolving credit facility, compared to dividend payments of $4.9 million and proceeds from borrowings of $19.9 million for the same period of 2019. We also had proceeds from borrowings of $150.0 million related to the Accounts Receivable Securitization Program. Financing activities also included repayments of $258.0 million in the first six months of 2020 compared to $24.8 million in the same period of 2019 on our term loans (under the Credit Agreement) and 2021 Notes and 2024 Notes. We used $83.2 million of cash to repurchase $87.8 million aggregate principal amount of the 2021 and 2024 Notes during the first six months of 2020. We als o paid $10.4 million in financing costs related to the February 2020 Accounts Receivable Securitization Program and the Fifth Amendment to the February 2020 Credit Agreement, as compared to $4.3 million in financing costs related to the February 2019 Fourth Amendment to the Credit Agreement.
Capital resources . Our sources of liquidity include cash and cash equivalents and a revolving credit facility under our Credit Agreement with Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A., Bank of America, N.A. and a syndicate of financial institutions (the Credit Agreement). The Credit Agreement provides a revolving borrowing capacity of $400 million and $686 million in outstanding term loans. The interest rate on our revolving credit facility and Term A Loans is based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage which varies depending on Consolidated Total Leverage Ratio (each as defined in the Credit Agreement). Our credit spread on the revolving credit facility and Term A Loans at June 30, 2020 was Eurocurrency Rate plus 4.25%. Our Term B Loan accrues interest based on 1) either the Eurocurrency Rate or the Base Rate plus 2) an Applicable Percentage of 3.50% per annum for Base Rate Loans, and 4.50% per annum for Eurocurrency Rate Loans (each as defined in the Credit Agreement). Our credit spread on the Term B Loan at June 30, 2020 was Eurocurrency Rate plus 4.50%. We are charged a commitment fee of between 12.5 and 25.0 basis points on the unused portion of the revolving credit facility.
At June 30, 2020 and December 31, 2019, we had borrowings of $130.0 million and $177.9 million, respectively, under the revolver and letters of credit of $13.9 million and $11.7 million, respectively, outstanding under the Credit Agreement. At June 30, 2020 and December 31, 2019, we had $256.1 million and $209.3 million, respectively, available for borrowing. The December 31, 2019 availability reflected letters of credit associated with discontinued operations of $1.1 million. There were no letters of credit associated with discontinued operations as of June 30, 2020. We also had letters of credit and bank guarantees outstanding for $3.6 million, of which $2.0 million are in process of being transferred to the buyer of Movianto, and $1.5 million as of June 30, 2020 and December 31, 2019, respectively, which supports certain leased facilities as well as other normal business activities in the United States and Europe. These letters of credit and guarantees were issued independent of the Credit Agreement.
We also have a Security and Pledge Agreement (the Security Agreement) pursuant to which we granted collateral on behalf of the holders of the 2021 Notes, the holders of the 2024 Notes, and the parties secured under the Credit Agreement (the Secured Parties) including first priority liens and security interests in (a) all present and future shares of capital stock owned by the Credit Parties (as defined) in the Credit Parties’ present and future subsidiaries of each Credit Party and (b) all present and future personal property and assets of the Credit Parties, subject to certain exceptions. The Fifth Amendment to the Credit Agreement included additional collateral requirements if the Credit Parties, including an obligation to pledge our owned U.S. real estate and the remaining equity interests in foreign subsidiaries.
Our Credit Agreement has a “springing maturity date” with respect to the revolving credit facility, the Term A Loans, and the Term B Loan. If the outstanding balance of the 2021 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2021 Notes, then the Termination Date (as defined in the Credit Agreement) of the revolving credit facility, the Term A Loans, and the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2021 Notes. Likewise, if the outstanding balance of the 2024 Notes has not been paid in full as of the date 91 days prior to the maturity date of the 2024 Notes, the Termination Date of the Term B Loan shall be the date that is 91 days prior to the maturity date of the 2024 Notes.
On February 19, 2020, we entered into an accounts receivable securitization program (the Receivables Securitization Program). Pursuant to the Receivables Securitization Program the aggregate principal amount of the loans made by the Lenders (as defined) will not exceed $325 million outstanding at any time. The interest rate under the Receivables Securitization Program is based on a spread over the London Interbank Offered Rate (LIBOR) dependent on the tranche period thereto and any breakage fees accrued. Under the Receivables Securitization Program, certain of our subsidiaries sell substantially all of their accounts receivable balances to our wholly owned special purpose entity, O&M Funding LLC. The Receivables Securitization Program matures on February 17, 2023. In February 2020, we drew $150 million from the Receivables
27
T able of Contents
Securitization Program to repay portions of the Term A Loans, consistent with the terms of the Fifth Amendment to the Credit Agreement. The Fifth Amendment to the Credit Agreement requires that any additional draws on the Receivables Securitization Program are restricted for use to repay the 2021 Notes or Term A loans to the extent those instruments are outstanding.
The Credit Agreement and Senior Notes contain cross-default provisions which could result in the acceleration of payments due in the event of default of either agreement. The terms of the Credit Agreement also require the company 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 June 30, 2020.
In May 2020, we entered into an equity distribution agreement, pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50 million. We intend to use the net proceeds from the sale of our securities offered by this program for the repayment of indebtedness and/or for general corporate and working capital purpose. As of June 30, 2020, no shares were issued and $50 million of common stock remained available under the at-the-market equity financing program.
From time to time, 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.
The second quarter dividend of $0.0025 per share was paid in June 2020. The payment of future dividends remains within the discretion of the Board of Directors and will depend upon our results of operations, financial condition, capital requirements, current and future limitations under our Credit Agreement (as amended) and other factors.
We believe available financing sources, including cash generated by operating activities and borrowings under the Credit Agreement, will be sufficient to fund our working capital needs, capital expenditures, long-term strategic growth, payments under long-term debt and lease arrangements, payments of quarterly cash dividends, debt 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.
We earn a portion of our operating income in foreign jurisdictions outside the United States. Our cash and cash equivalents held by our foreign subsidiaries totaled $66.3 million and $52.9 million at June 30, 2020 and December 31, 2019, respectively. We continue to remain permanently reinvested in our foreign subsidiaries, with the exception of a subsidiary in Thailand. We have no specific plans to indefinitely reinvest the unremitted earnings of our foreign subsidiary located in Thailand as of June 30, 2020. As such, we have recorded withholding tax liabilities that would be incurred upon future distribution to the U.S. There are no unrecognized deferred taxes as there is no outside basis difference unrelated to unremitted earnings for Thailand. We will continue to evaluate our foreign earnings repatriation policy in 2020 for all our foreign subsidiaries.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see our Annual Report on Form 10-K for the year ended December 31, 2019 and Note 14 in the Notes to Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2020.
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 achieve revenue and operating income goals may be affected by: COVID-19 related factors, risks and challenges, including among others, the length of time that the pandemic continues, a decrease in revenue ultimately resulting in less cash flow, longer duration in receivables collection, the need to expedite payments to important suppliers may grow, shifts in demand away from certain products we manufacture and distribute, reduced workforces which may be caused by, but not limited to, the temporary inability of the workforce to work due to illness, quarantine, or government mandates, or temporary production and distribution center and office
28
T able of Contents
closures due to reduced workforces or government mandates, availability of raw materials, potential resulting labor negotiations or disputes, changes in the types and numbers of businesses that compete with us, including non-traditional competitors, and the aggressiveness of that competition, and trends in elective surgeries and other healthcare spending not directly associated with COVID-19;
• competitive pressures in the marketplace, including intense pricing pressure;
• our ability to retain existing and attract new customers in a market characterized by significant customer consolidation and intense cost-containment initiatives;
• our dependence on sales to certain customers or the loss or material reduction in purchases by key customers;
• our dependence on distribution of product of certain suppliers;
• our ability to successfully identify, manage or integrate acquisitions;
• our ability to successfully manage our international operations, including risks associated with changes in international trade regulations, foreign currency volatility, changes in regulatory conditions, deteriorating economic conditions, adverse tax consequences, and other risks of operating in international markets;
• uncertainties related to and our ability to adapt to changes in government regulations, including healthcare laws and regulations;
• risks arising from possible violations of legal, regulatory or licensing requirements of the markets in which we operate;
• uncertainties related to general economic, regulatory and business conditions;
• our ability to successfully implement our strategic initiatives;
• the availability of and modifications to existing supplier funding programs and our ability to meet the terms to qualify for certain of these programs;
• the effect of price volatility in the commodities markets, including fuel price fluctuations, on our operating costs and supplier product prices;
• our ability to adapt to changes in product pricing and other terms of purchase by suppliers of product;
• the ability of customers and suppliers to meet financial commitments due to us;
• changes in manufacturer preferences between direct sales and wholesale distribution;
• changing trends in customer profiles and ordering patterns and our ability to meet customer demand for additional value-added services;
• our ability to manage operating expenses and improve operational efficiencies in response to changing customer profiles;
• our ability to meet performance targets specified by customer contracts under contractual commitments;
• availability of and our ability to access special inventory buying opportunities;
• the ability of business partners and financial institutions to perform their contractual responsibilities;
• our ability to continue to obtain financing, 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;
• 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;
• the risk that a decline in business volume or profitability could result in an impairment of goodwill or other long-lived assets;
• our ability to timely or adequately respond to technological advances in the medical supply industry;
• the costs associated with and outcome of outstanding and any future litigation, including product and professional liability claims;
• adverse changes in U.S. and foreign tax laws and the outcome of outstanding tax contingencies and legislative and tax proposals;
29
T able of Contents
• our ability to successfully implement the expense reduction and productivity and efficiency increasing initiatives;
• our ability to continue to comply with the terms and conditions of Byram Healthcare’s Corporate Integrity Agreement;
• the potentially adverse impact of the United Kingdom’s withdrawal from the European Union; and
• other factors detailed from time to time in the reports we file with the SEC.
We undertake no obligation to update or revise any forward-looking statements, except as required by applicable law.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.