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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-24 · 227 added, 180 removed, 126 unchanged (76% of the section changed)

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The outbreak has significantly increased uncertainty and unpredictability of global economic conditions and the demand for and supply of raw materials and finished goods required for our operations.

In addition, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions and the adoption of remote working, have impacted our operations.

In addition, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the adoption of remote working and vaccination mandates, have impacted or may in the future impact our operations.

In these challenging and dynamic circumstances, we continue to work to protect our teammates and the public, maintain business continuity and sustain our operations, including ensuring the safety and protection of the people who work in our production and distribution centers across the world, many of whom support the manufacturing and delivery of products that are critical in response to the global pandemic.

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Furthermore, COVID-19 has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, and interest rates.

For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital.

resulting from the spread of the COVID-19 and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, we are not able at this time to predict the extent to which the COVID-19 pandemic, or any future outbreaks or similar pandemics, may have a material effect on our financial or operational results.

For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which may increase the cost of capital and may adversely impact access to capital.

Due to the speed with which the situation is developing and the uncertainty of its duration, any future outbreaks, similar pandemics, the timing of recovery, travel restrictions, business closures or business disruptions, a recession, depression or other sustained adverse market event resulting from the spread of the COVID-19 and the effectiveness of actions taken in the United States and other countries to contain and treat the disease, we are not able at this time to predict the extent to which the COVID-19 pandemic, or any future outbreaks or similar pandemics, may have a material effect on our financial or operational results.

However, the following adverse risks exist:

• Actions by the United States government or other foreign government could affect our business.

These actions include purchasing products that we make or sell, imposing new product standards or allowing the use of alternative products, instituting regulatory requirements to purchase only locally manufactured products, exercising control over manufacturing or distribution operations, including use of the DPA, taking trade actions including the imposition or removal of tariffs or import / export controls, subsidizing the supply of products, or other actions;

• Quarantine decisions by public or private entities may influence our ability to operate or our ability to ship or receive products.

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• New competitors may enter our market, including both small and large scale manufacturers;

• COVID-19 illness among our workers in manufacturing or distribution operations could impact our operations or compel the closure of one or more facilities for an unknown period of time.

• COVID-19 illness among our teammates in manufacturing or distribution operations could impact our operations or compel the closure of one or more facilities for an unknown period of time.

Labor relations in our facilities related to COVID-19 could also negatively impact our operations;

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Our success is dependent on the ability to compete on the above factors, while managing internal costs and expenses.

These competitive pressures could have a material adverse effect on our results of operations and financial condition.In addition, in recent years, the healthcare industry in the United States has experienced and continues to experience significant consolidation in response to cost containment legislation and general market pressures to reduce costs.

This consolidation of our

customers and suppliers generally gives them greater bargaining power to reduce the pricing available to them, which may adversely impact our results of operations and financial condition.

We have concentration in and dependence on certain healthcare provider customers and Group Purchasing Organizations.

In 2020 , although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the United States represented approximately 21% of our consolidated net revenue.

In addition, in 2020, approximately 72% of our consolidated net revenue was from sales to member hospitals under contract with our largest group purchasing organizations (GPO):

Vizient, Premier and HPG.

We could lose a significant healthcare provider customer or GPO relationship if an existing contract expires without being replaced or is terminated by the customer or GPO prior to its expiration.

Although the termination of our relationship with a given GPO would not necessarily result in the loss of the member hospitals as customers, any such termination of a GPO relationship, or a significant individual healthcare provider customer relationship, could have a material adverse effect on our results of operations and financial condition.

These competitive pressures could have a material adverse effect on our results of operations and financial condition.

In addition, in recent years, the healthcare industry in the United States has experienced and continues to experience significant consolidation in response to cost containment legislation and general market pressures to reduce costs.

This consolidation of our customers and suppliers generally gives them greater bargaining power to reduce the pricing available to them, which may adversely impact our results of operations and financial condition.

Our operating income is dependent on certain significant domestic suppliers.

In North America, we distribute products from approximately 1,100 suppliers and are dependent on these suppliers for the continuing supply of products.

In the United States, we distribute products from approximately 1,100 suppliers and are dependent on these suppliers for the continuing supply of products.

In 2021, sales of products of our ten largest domestic suppliers accounted for approximately 40% of consolidated net revenue.

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Our ability to sustain adequate operating income has been, and will continue to be, dependent upon our ability to obtain favorable terms and incentives from suppliers, as well as suppliers continuing use of third-party distributors to sell and deliver their products.

A change in terms by a significant supplier, the decision of such a supplier to distribute its products directly to healthcare providers rather than through third-party distributors, or a key supplier’s failure to sell and deliver us products necessary to meet our customers’ demands could have a material adverse effect on our results of operations and financial condition.

A change in terms by a significant supplier, the decision of such a supplier to distribute its products

directly to healthcare providers rather than through third-party distributors, or a key supplier’s failure to sell and deliver us products necessary to meet our customers’ demands could have a material adverse effect on our results of operations and financial condition.

An interruption in the ability of our business to manufacture products may have a material adverse effect on our business.

We manufacture the majority of our products in nine facilities:

four in the United States, one each in Thailand, Ireland and Honduras and two in Mexico.

four in the United States, two in Mexico, and one each in Thailand, Ireland and Honduras.

If one or more of these facilities experience damage, or if these manufacturing capabilities are otherwise limited or stopped due to quality, regulatory or other reasons, including pandemic, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, it may not be possible to timely manufacture the relevant products at required levels or at all.

A reduction or interruption in any of these manufacturing processes could have a material adverse effect on our business, results of operations, financial condition and cash flows.

An inability to obtain key components, raw materials or manufactured products from third parties may have a material adverse effect on our Global Products segment.

Our Global Products segment depends on the availability of various components, raw materials and manufactured products supplied by others for its operations.

If the capabilities of suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including pandemic, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, or other reasons, that could negatively impact our ability to manufacture or deliver our products and could lead to exposure to regulatory actions.

An inability to obtain key components, raw materials or manufactured products from third parties may have a material adverse effect on our business.

We depend on the availability of various components, raw materials and manufactured products supplied by others for our operations.

If the capabilities of suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including pandemic, natural disasters, geopolitical events, prolonged power or equipment failures, labor disputes or unsuccessful imports/exports of products as well as supply chain transportation disruptions, or other reasons, that could negatively impact our ability to manufacture or distribute our products and could lead to exposure to regulatory actions.

Further, for quality assurance or cost effectiveness, we have purchased from sole suppliers certain components and raw materials such as polymers used in our products, and we expect to continue to purchase these components and raw materials from these sole suppliers.

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Food and Drug Administration (FDA) and other regulatory authorities regarding the manufacture of our products.

The loss of any sole supplier or any sustained supply interruption that affects the ability to manufacture or deliver our products in a timely or cost effective manner could have a material adverse effect on our business, results of operations, financial condition and cash flows.

The loss of any sole supplier or any sustained supply interruption that affects the ability to manufacture or distribute our products in a timely or cost effective manner could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our Global Products segment is exposed to price fluctuations of key commodities, which may negatively impact our results of operations.

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Furthermore, due to competitive dynamics, we may be unable to pass along commodity-driven cost increases through higher prices.

If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or

surcharges, we could experience lower margins and profitability which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

If we cannot fully offset cost increases through other cost reductions, or recover these costs through price increases or surcharges, we could experience lower margins and profitability which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our business and operations depend on the proper functioning of critical facilities, supply chain and distribution networks.

Damage or disruption to our supply chain and distribution capabilities due to pandemic, weather, natural disaster, fire, terrorism, strikes, the financial and/or operational instability of key suppliers, geo-political events or other reasons could impair our ability to distribute products and conduct our business.

To the extent that we are unable, or it is not financially feasible, to mitigate the likelihood or potential impact of such events, or to manage effectively such events if they occur, there could be a material adverse effect on our business, financial condition or results of operations.

For example, COVID-19 has caused supply chain disruptions for certain manufacturers of medical products and an increased demand for these products resulting in the implementation of product allocations by certain manufacturers.

Interruption of our supply chain could affect our ability to produce or distribute our products and could negatively impact our business and profitability.

Any material interruption in our supply chain, such as disruption of raw material supplies or manufacturing capabilities, interruptions in service by our service providers or common carriers that ship goods within our distribution channels, trade restrictions, such as increased tariffs or quotas, embargoes or customs restrictions, pandemics (such as the COVID-19 pandemic), social or labor unrest, labor shortages, natural disasters or political disputes and military conflicts that cause a disruption in our supply chain could materially adversely affect our business operations and our financial position or results of operations.

We depend on third-party manufacturers for certain products that we distribute.

Our operations are also dependent on various raw materials supplied by others.

We purchase many of these raw materials from numerous suppliers in various countries.

For certain products, we may rely on one or very few suppliers.

The failure of third parties on which we rely to meet

their obligations to us, deliver quality products, or significant disruptions in their ability to do so, may negatively impact our operations.

Disputes with significant suppliers, including disputes regarding pricing or performance, could adversely affect our ability to supply products to our customers and could materially adversely affect our financial condition and results of operations.

Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location or supplier, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain.

We may continue to experience higher supply chain costs, particularly related to international freight and commodities.

Due to competitive dynamics and contractual limitations, we may be unable to pass along these cost increases through higher prices.

Short-term or sustained increases in demand for our products may exceed our production capacity or otherwise strain our supply chain.

These and other supply chain issues can increase our costs, disrupt or reduce our production, delay our product shipments, prevent us from meeting customer demand, damage our customer relationships, and could materially adversely affect our business operations and our financial position or results of operations.

Our profitability and cash flow may vary based on the impacts of rising inflationary pressures.

Inflation could materially impact the costs to source materials or produce and distribute finished goods to customers.

Inflationary pressures could result in market pressures on our customers to reduce costs, which could impact our profitability and cash flows.

Additionally, there is uncertainty that we will be able to pass elevated costs onto customers in an effort to offset inflationary pressures.

Our operations depend on the proper functioning of information systems, and our business or results of operations could be adversely affected if we experience a cyberattack or other systems breach or failure.

We and our external service providers use and rely on information systems to perform our business operations including receiving, processing, analyzing, and managing data in distributing thousands of products to customers from numerous distribution centers.

These systems are also relied upon for receiving and filling orders for customers, billings to and collections from customers, the purchase of and payment for inventory and related transactions from our suppliers, and the secure electronic transmission, processing, storage, and hosting of sensitive information, including protected health information and other types of personal information, confidential financial information, proprietary information, and other sensitive information relating to our customers, company, and teammates.

In addition, the success of our long-term growth strategy is dependent upon the ability to continually monitor and upgrade our information systems to provide better service to customers

Despite physical, technical, and administrative security measures, our technology systems and operations may be subject to cyberattacks from sources beyond our control.

In recent months, cyberattacks in our industry have increased and become more sophisticated and, as a result, the risk of a cyberattack on our systems has increased.

Cyberattacks include actual or attempted unauthorized access, tampering, malware insertion, ransomware attacks, or other system integrity events.

A cybersecurity incident could involve a material data breach or other material impact to the operations of our technology systems, which could result in failure of our systems to operate properly for an extended period of time, litigation or regulatory action, loss of customers or revenue, and increased expense, any of which might have a material adverse impact on our business operations, reputation, our growth and strategic initiatives, and our financial position or results of operation.

Our ability to attract and retain talented and qualified teammates is critical to our success and competitiveness.

The success of our business depends on our ability to attract, engage, develop and retain qualified and experienced teammates, including key executives.

We may not be able to successfully compete for, attract, or retain qualified and experienced teammates.

Competition among potential employers, labor shortages, and inflationary pressures might result in increased salaries, benefits or other teammate-related costs, or in our failure to recruit and retain teammates.

We may experience sudden loss of key personnel due to a variety of causes, including illness, and must adequately plan for succession of key executive roles.

Teammates might not successfully transition into new roles.

Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations.

We have concentration in and dependence on certain healthcare provider customers and Group Purchasing Organizations.

In 2021 , although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the United States represented approximately 20% of our consolidated net revenue.

In addition, in 2021, approximately 71% of our consolidated net revenue was from sales to member hospitals under contract with our largest GPOs:

Vizient, Premier and HPG.

We could lose a significant healthcare provider customer or GPO relationship if an existing contract expires without being replaced or is terminated by the customer or GPO prior to its expiration.

We cannot assure you that the proposed Apria Acquisition will be completed.

There are a number of risks and uncertainties relating to the Apria Acquisition.

For example, the Apria acquisition may not be completed, or may not be completed in the timeframe, on the terms or in the manner currently anticipated, as a result of a number of factors, including, among other things, the failure of one or more of the conditions to closing in the Agreement and Plan of Merger.

There can be no assurance that the conditions to closing of the Apria Acquisition will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the Apria Acquisition.

The Agreement and Plan of Merger may be terminated by the parties thereto under certain circumstances, including, without limitation, if the Apria Acquisition has not been completed by July 7, 2022.

Any delay in closing the Apria Acquisition or a failure to close the Apria Acquisition could have a negative impact on our business and the trading prices of our securities, including the notes.

We may fail to realize the anticipated benefits of the Apria Acquisition or those benefits may take longer to realize than expected.

We may also encounter significant difficulties in integrating the Apria business into our operations.

Our ability to realize the anticipated benefits of the Apria Acquisition will depend, to a large extent, on our ability to integrate the Apria business into ours.

We may devote significant management attention and resources preparing for and then integrating the business practices and operations of the Apria business with ours.

This integration process may be disruptive to our and the Apria businesses, and, if implemented ineffectively, could restrict realization of the expected benefits.

In addition, we may fail to realize some of the anticipated benefits of the Apria Acquisition if the integration process takes longer than expected or is more costly than expected.

Potential difficulties we may encounter in the integration process include:

• The inability to successfully combine operations in a manner that would result in the anticipated benefits of the Apria Acquisition in the time frame currently anticipated or at all;

• Complexities associated with managing the expanded operations;

• Integrating personnel;

• Creation of uniform standards, internal controls, procedures, policies and information systems;

• Unforeseen increased expenses, delays or regulatory issues associated with integrating the operations;

• Performance shortfalls as a result of the diversion of management attention caused by completing the integration of the operations.

Even if we are able to integrate the Apria business successfully, this integration may not result in the realization of the full benefits that we currently expect, nor can we give assurances that these benefits will be achieved when expected or at all.

Moreover, the integration of the Apria business may result in unanticipated problems, expenses, liabilities, regulatory risks and competitive responses that could have material adverse consequences.

We and the Apria business will be subject to business uncertainties while the Apria Acquisition is pending that could adversely affect our business and the Apria business.

Uncertainty about the effect of the Apria Acquisition on teammates, customers and suppliers may have an adverse effect on us and the Apria business.

Although we and Apria intend to take actions to reduce any adverse effects, these uncertainties could cause customers, suppliers and others that deal with us and/or the Apria business to seek to change existing business relationships.

In addition, teammate retention could be negatively impacted during the pendency of the Apria Acquisition.

If key teammates depart because of concerns relating to the uncertainty and difficulty of the integration process, our business could be harmed.

The pendency of the Apria Acquisition could adversely affect our business, financial results, and operations.

The announcement and pendency of the Apria Acquisition could cause disruptions and create uncertainty surrounding our business and affect our relationships with our customers, suppliers and teammates.

In addition, we have diverted, and will continue to divert, significant management resources to complete the Apria Acquisition, which could have a negative impact on our ability to manage existing operations or pursue alternative strategic transactions, which could adversely affect our business, financial condition and results of operations.

Investor perceptions about the terms or benefits of the Apria Acquisition could have a negative impact on our business and the trading prices of our securities, including the notes.

Our inability to adequately integrate acquisitions could have a material adverse effect on our operations.

In connection with our growth strategy, we from time to time acquire other businesses, that we believe will expand or complement our existing businesses and operations.

The integration of acquisitions involves a number of significant risks, which may include but are not limited to, the following:

• Expenses and difficulties in the transition and integration of operations and systems;

• Retention of current customers and the ability to obtain new customers;

• The assimilation and retention of personnel, including management personnel, in the acquired businesses;

• Accounting, tax, regulatory and compliance issues that could arise;

• Difficulties in implementing uniform controls, procedures and policies in our acquired companies;

• Unanticipated expenses incurred or charges to earnings based on unknown circumstances or liabilities;

• Failure to realize the synergies and other benefits we expect from the acquisition or at the pace we anticipate;

• General economic conditions in the markets in which the acquired businesses operate;

• Difficulties encountered in conducting business in markets where we have limited experience and expertise;

• Failure to fully integrate information technology;

• Inadequate indemnification from the seller;

• Failure of the seller to perform under any transition services agreement.

If we are unable to successfully complete and integrate our strategic acquisitions in a timely manner, our business, growth strategies and results of operations could be adversely affected.

Our results of operations may suffer upon the bankruptcy, insolvency, or other credit failure of a customer that has a substantial amount owed to us.

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The bankruptcy, insolvency or other credit failure of one or more customers with substantial balances due to us could have a material adverse effect on our results of operations, financial condition and cash flows.

Changing conditions in the United States healthcare industry may impact our results of operations.

A large percentage of our revenue is derived in the United States.

We, along with our customers and suppliers, are subject to extensive federal and state regulations relating to healthcare as well as the policies and practices of the private healthcare insurance industry.

In recent years, there have been a number of government and private initiatives to reduce healthcare costs and government spending.

These changes have included an increased reliance on managed care;

reductions in Medicare and Medicaid reimbursement levels;

consolidation of competitors, suppliers and customers;

a shift in healthcare provider venues from acute care settings to clinics, physician offices and home care;

and the development of larger, more sophisticated purchasing groups.

All of these changes place additional financial pressure on healthcare provider customers, who in turn seek to reduce the costs and pricing of products and services provided by us.

We expect the healthcare industry to continue to change significantly and these potential changes, which may include a reduction in government support of healthcare services, adverse changes in legislation or regulations, and further reductions in healthcare reimbursement practices, could have a material adverse effect on our business, results of operations and financial condition.

We may not be able to generate sufficient cash to service our debt and other obligations.

As of December 31, 2020, on a consolidated basis we had approximately $1.0 billion of aggregate principal amount of secured indebtedness as well as approximately $211 million in contractual obligations under our operating leasing arrangements and $283 million of undrawn availability under our credit facilities.

Our ratio of total debt to total shareholders’ equity as of December 31, 2020 was 144%.

Our ability to make payments on our indebtedness and our other obligations will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.

We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness.

These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

We cannot assure you that we would be able to implement any of these alternatives on satisfactory terms or at all.

In the absence of such operating results and resources, we could face substantial liquidity problems and may be required to dispose of material assets or operations to meet our debt service and other obligations.

We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them, and these proceeds may not be adequate to meet any debt service obligations then due.

If we are unable to service our debt obligations from cash flows, we may need to refinance all or a portion of our debt obligations prior to maturity.

Our ability to refinance or restructure our debt will depend upon our financial condition or the condition of the capital markets at such time.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

We may not be able to refinance any of our indebtedness on commercially reasonable terms or at all.

We may not be able to refinance, extend or repay our substantial indebtedness which would have a material adverse affect on our financial condition.

Our 2024 Notes become due and payable in December 2024.

We may need to raise capital in order to repay the 2024 Notes.

As of December 31, 2020, we owed $246 million in principal under our 2024 Notes.

If we are unable to raise sufficient capital to repay this obligation at maturity and we are otherwise unable to extend the maturity dates or refinance this obligation, we would be in default.

Additionally, our Credit Agreement has a “springing maturity date” with respect to the Term B Loan.

If as of the date 91 days prior to the maturity date of our 2024 Notes, all outstanding amounts under the 2024 Notes have not been paid in full, 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.

We cannot provide any assurances that we will be able to raise the necessary amount of capital to repay this obligation or that we will be able to extend the maturity dates or otherwise refinance this obligation.

Upon a default, our lenders would have

the right to exercise its rights and remedies to collect, which would include foreclosing on our assets.

Accordingly, a default would have a material adverse effect on our business and financial condition.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Certain borrowings under our Credit Agreement and Receivables Securitization Program bear interest at variable rates and expose us to interest rate risk.

If interest rates were to increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our earnings and cash flows will correspondingly decrease.

Our credit facilities and our existing notes have restrictive covenants that could limit our financial flexibility.

Our Credit Agreement, including our Term Loans and Revolver, Receivables Securitization Program, as well as the indentures that govern our existing senior notes, contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests.

Our credit facilities and the indentures governing our existing notes include restrictions that, among other things, limit our ability to:

incur indebtedness;

engage in acquisitions, mergers, consolidations and liquidations;

use of proceeds from asset dispositions for general corporate purposes, restricted payments, or investments;

enter into transactions with affiliates;

make capital expenditures;

and amend, modify or prepay certain indebtedness.

Under our credit facilities, we are subject to financial covenants that require us to maintain ratios for leverage and interest coverage, including on a pro forma basis in the event of an acquisition.

Our failure to comply with these restrictions or covenants could result in a default under the agreements governing the relevant indebtedness.

If a default under the credit facilities and the indentures governing our existing notes is not cured or waived, such default could result in the acceleration of debt or other payment obligations under our debt or other agreements that contain cross-acceleration, cross-default or similar provisions, which could require us to repurchase or pay debt or other obligations prior to the date it is otherwise due.

Our ability to comply with covenants contained in the credit facilities, including the Credit Agreement and Receivables Securitization Program, and the indentures governing our existing senior notes and any other debt or other agreements to which we are or may become a party, may be affected by events beyond our control, including prevailing economic, financial and industry conditions.

Even if we are able to comply with all of the applicable covenants, the restrictions on our ability to manage our business in our sole discretion could adversely affect our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities that we believe would be beneficial to us.

We may incur product liability losses, litigation liability, product recalls, safety alerts or regulatory action associated with the products that we source, assemble, manufacture and sell which can be costly and disruptive to our business.

The risk of product liability claims is inherent in the design, assembly, manufacture and marketing of the medical products of the types we sell.

A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to the products that we source, assemble, manufacture or sell, including physician technique and experience in performing the relevant surgical procedure, component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or information.

In addition to product liability claims and litigation, an unsafe condition or injury to, or death of, a patient associated with our products could lead to a recall of, or issuance of a safety alert relating to, our products, or suspension or delay of regulatory product approvals or clearances, product seizures or detentions, governmental investigations, civil or criminal sanctions or injunctions to halt manufacturing and distribution of our products.

Any one of these could result in significant costs and negative publicity resulting in reduced market acceptance and demand for our products and harm our reputation.

In addition, a recall or injunction affecting our products could temporarily shut down production lines or place products on a shipping hold.

All of the foregoing types of legal proceedings and regulatory actions are inherently unpredictable and, regardless of the outcome, could disrupt our business, result in substantial costs or the diversion of management attention and could have a material adverse effect on our results of operations, financial condition and cash flows.

We are subject to stringent regulatory and licensing requirements.

We are required to comply with extensive and complex laws and regulations at the federal, state and local government levels in the United States and other countries where we operate.

We also are required to hold permits and licenses and to comply with the operational and security standards of various governmental bodies and agencies.

Any failure to comply with these laws and regulations or any failure to maintain the necessary permits, licenses or approvals, or to comply with the required standards, could disrupt our operations and/or adversely affect our results of operations and financial condition.

Among the U.S.

healthcare related laws that we are subject to include the U.S.

federal Anti-kickback Statute, the U.S.

federal Stark Law, the False Claims Act and similar state laws relating to fraud, waste and abuse.

The requirements of these laws are complex and subject to varying interpretations, and it is possible that regulatory authorities could challenge our policies and practices.

If we fail to comply with these laws, we could be subject to federal or state government investigations or qui tam actions (false claims cases initiated by private parties purporting to act on behalf of federal or state governments), which could result in civil or criminal sanctions, including the loss of licenses or the ability to participate in Medicare, Medicaid and other federal and state healthcare programs.

Such sanctions and damages could adversely affect our results of operations and financial condition.

Our global operations are also subject to risks of violation of laws, including those that prohibit improper payments to and bribery of government officials and other individuals and organizations.

These laws include the U.S.

Foreign Corrupt Practices Act, the U.K.

Bribery Act and other similar laws and regulations in foreign jurisdictions, any violation of which could result in substantial liability and a loss of reputation in the marketplace.

Failure to comply with these laws also could subject us to civil and criminal penalties that could adversely affect our business and results of operations.

Our Patient Direct business is a Medicare-certified supplier and participates in state Medicaid programs.

Failure to comply with applicable standards and regulations could result in civil or criminal sanctions, including the loss of our ability to participate in Medicare, Medicaid and other federal and state healthcare programs.

We collect, handle and maintain patient-identifiable health information and other sensitive personal and financial information, which are subject to federal, state and foreign laws that regulate the use and disclosure of such information.

Regulations currently in place continue to evolve, and new laws in this area could further restrict our ability to collect, handle and maintain personal or patient information, or could require us to incur additional compliance costs, either of which could have an adverse impact on our results of operations.

Violations of federal (such as the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA), state or foreign laws (such as the European Union’s General Data Protection Regulation, as amended, or GDPR) concerning privacy and data protection could subject us to civil or criminal penalties, breach of contract claims, costs for remediation and harm to our reputation.

We could be subject to adverse changes in the tax laws or challenges to our tax positions .

We operate throughout the United States and other countries.

As a result, we are subject to the tax laws and regulations of the United States federal, state and local governments and of various foreign jurisdictions.

From time to time, legislative and regulatory initiatives are proposed, including but not limited to proposals to repeal LIFO (last-in, first-out) treatment of inventory in the United States or changes in tax accounting methods for inventory, import tariffs and taxes, or other tax items.

It is not yet known what changes Congress, working with the President, will make to existing tax laws and how those changes (if any) will affect the economy, our business, results of operations, financial condition and cash flows.

These and other changes in tax laws and regulations could adversely affect our tax positions, tax rate or cash payments for taxes.

There can be no assurance that our effective tax rate will not be materially adversely affected by legislation resulting from these initiatives.

We must obtain clearance or approval from the appropriate regulatory authorities prior to introducing a new product or a modification to an existing product.

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Our success depends in part on our ability to protect our proprietary rights and intellectual property.

We rely on a combination of intellectual property rights, such as patents, trademarks, copyrights, trade secrets (including know-how) and domain names, in addition to employee and third-party confidentiality agreements, intellectual property licenses and other contractual rights, to establish, maintain, protect and enforce our rights in our technology, proprietary information and processes.

We rely on a combination of intellectual property rights, such as patents, trademarks, copyrights, trade secrets (including know-how) and domain names, in addition to teammate and third-party confidentiality agreements, intellectual property licenses and other contractual rights, to establish, maintain, protect and enforce our rights in our technology, proprietary information and processes.

For example, we rely on trademark protection to protect our rights to various marks as well as distinctive logos and other marks associated with our products and services.

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Any of these events could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our business and operations depend on the proper functioning of critical facilities, supply chain and distribution networks.

For example, COVID-19 has caused supply

chain disruptions for certain manufacturers of medical products and an increased demand for these products resulting in the implementation of product allocations by certain manufacturers.

Our operations depend on the proper functioning of information systems, and our business could be adversely affected if we experience a cyber-attack or other systems breach .

We rely on information systems to receive, process, analyze and manage data in distributing thousands of inventory products to customers from numerous distribution and outsourced logistics centers.

These systems are also relied upon for billings to and collections from customers, as well as the purchase of and payment for inventory and related transactions from our suppliers.

In addition, the success of our long-term growth strategy is dependent upon the ability to continually monitor and upgrade our information systems to provide better service to customers.

Our business and results of operations may be materially adversely affected if systems are interrupted or damaged by unforeseen events (including cyber-attacks) or fail to operate for an extended period of time, or if we fail to appropriately enhance our systems to support growth and strategic initiatives.

We are subject to stringent regulatory and licensing requirements.

We are required to comply with extensive and complex laws and regulations at the federal, state and local government levels in the United States and other countries where we operate.

We also are required to hold permits and licenses and to comply with the operational and security standards of various governmental bodies and agencies.

Among the U.S.

healthcare related laws that we are subject to include the U.S.

federal Anti-kickback Statute, the U.S.

federal Stark Law, the False Claims Act and similar state laws relating to fraud, waste and abuse.

The requirements of these laws are complex and subject to varying interpretations, and it is possible that regulatory authorities could challenge our policies and practices.

Such sanctions and damages could adversely affect our results of operations and financial condition.

Our global operations are also subject to risks of violation of laws, including those that prohibit improper payments to and bribery of government officials and other individuals and organizations.

These laws include the U.S.

Foreign Corrupt Practices Act, the U.K.

Bribery Act and other similar laws and regulations in foreign jurisdictions, any violation of which could result in substantial liability and a loss of reputation in the marketplace.

Failure to comply with these laws also could subject us to civil and criminal penalties that could adversely affect our business and results of operations.

Our Byram business is a Medicare-certified supplier and participates in state Medicaid programs.

Compliance with the terms and conditions of Byram’s Corporate Integrity Agreement requires significant resources and, if we fail to comply, we could be subject to penalties or excluded from participation in government healthcare programs, which could seriously harm our results of operations, liquidity and financial condition.

Prior to its acquisition by Owens & Minor, Byram entered into a five-year Corporate Integrity Agreement beginning April 2016 with the Office of Inspector General of the United States Department of Health and Human Services (“OIG”).

The Corporate Integrity Agreement provides that Byram shall, among other things, establish and maintain a compliance program, including a corporate compliance officer and committee, a code of conduct, comprehensive compliance policies and procedures, training and monitoring, a review process for certain arrangements between Byram and referral sources, a compliance hotline, an open door policy and a disciplinary process for compliance violations.

The Corporate Integrity

Agreement further provides that Byram shall provide periodic reports to the OIG, complete certain regular certifications and engage an Independent Review Organization to perform reviews of certain arrangements between Byram and referral sources.

Failing to meet the Corporate Integrity Agreement obligations could have material adverse consequences for Byram including monetary penalties for each instance of non-compliance.

In addition, in the event of an uncured material breach or deliberate violation of the Corporate Integrity Agreement, we could be excluded from participation in federal healthcare programs, or other significant penalties, which could seriously harm our results of operations, liquidity and financial results.

We could be subject to adverse changes in the tax laws or challenges to our tax positions .

We operate throughout the United States and other countries.

As a result, we are subject to the tax laws and regulations of the United States federal, state and local governments and of various foreign jurisdictions.

In addition, a new presidential administration and a new Congress recently took office in the United States.

These and other changes in tax laws and regulations could adversely affect our tax positions, tax rate or cash payments for taxes.

There can be no assurance that our effective tax rate will not be materially adversely affected by legislation resulting from these initiatives.

The risk of product liability claims is inherent in the design, assembly, manufacture and marketing of the medical products of the types we sell.

Any one of these could result in significant costs and negative publicity resulting in reduced market acceptance and demand for our products and harm our reputation.

In addition, a recall or injunction affecting our products could temporarily shut down production lines or place products on a shipping hold.

Audits by tax authorities could result in additional tax payments for prior periods, and tax legislation could materially adversely affect our financial results and tax liabilities.

The amount of income taxes we pay is subject to ongoing audits by U.S.

federal, state and local tax authorities and by non-U.S.

tax authorities.

In addition, tax laws and regulations are extremely complex and subject to varying interpretations.

Although we believe that our historical tax positions are sound and consistent with applicable laws, regulations and existing precedent, they can be no assurance that our tax positions will not be challenged by relevant tax authorities or that we would be successful in any such challenge.

If these audits result in assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities.

We may not be able to generate sufficient cash to service our debt and other obligations.

As of December 31, 2021, on a consolidated basis we had approximately $946 million of aggregate principal amount of indebtedness, excluding deferred financing costs and third party fees, as well as approximately $254 million in contractual obligations under our operating leasing arrangements and $291 million of undrawn availability under our revolving credit facilities.

Our ratio of total debt to total shareholders’ equity as of December 31, 2021 was 101%.