What changed in this filing

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Item 1A. Risk Factors

2024-02-20 compared with 2023-02-28 · 149 added, 122 removed, 322 unchanged (46% of the section changed)

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

In 2022, although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the United States represented approximately 26% of our consolidated net revenue.

In 2023, although no single customer accounted for 5% of our consolidated net revenue, our top ten customers in the U.S.

represented approximately 20% of our consolidated net revenue.

In addition, in 2023, approximately 64% of our consolidated net revenue was from sales to member hospitals under contract with our largest GPOs:

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If we are unable to successfully establish new referral sources and maintain strong relationships with our current referral sources, if there is an actual or perceived decrease in the quality of service and care levels we provide, or if efforts to increase the skill level and effectiveness of our sales force fail, our revenues may decline.

In addition, our relationships with referral sources are subject to federal and state healthcare laws such as U.S.

federal Anti-kickback Statute and the U.S.

federal Stark Law, and compliance with these laws limits the scope of our relationships with our referral sources.

In addition, our relationships with referral sources are subject to federal and state healthcare laws such as the U.S.

federal Anti-kickback Statute (Anti-kickback Statute) and the U.S.

federal Stark Law (Stark Law), and compliance with these laws limits the scope of our relationships with our referral sources.

Possible changes in customer and product mix could have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

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A shift towards customers with lower prices, or from higher gross margin products to lower gross margin products, would reduce our gross margins.

Changes in the mix of our customers, products and services provided and payment methodologies could have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

Our Products & Healthcare Services segment is dependent on certain significant suppliers.

In the United States, we distribute products from approximately 1,000 suppliers in our Products & Healthcare Services segment and are dependent on these suppliers for the continuing supply of products.

Changes in the mix of

our customers, products and services provided and payment methodologies could have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

Our business is dependent on certain significant suppliers.

In our Products & Healthcare Services segment in the U.S., we distribute products from approximately 1,000 suppliers and are dependent on these suppliers for the continuing supply of products.

In 2023, sales of products of our ten largest domestic suppliers accounted for approximately 37% 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.

to sell and deliver us products necessary to meet our customers’ demands could have a material adverse effect on our results of operations, financial condition and cash flows.

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, financial condition and cash flows.

In addition, 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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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.

The reliance of our Patient Direct segment on relatively few vendors for the majority of its patient equipment and supplies could adversely affect our ability to operate this business.

We currently rely on a relatively small number of vendors to provide us with the majority of our patient equipment and supplies for our home healthcare business.

From time to time, we also enter into certain exclusive arrangements with a given vendor for the provision of patient equipment and supplies.

In our Patient Direct segment, we currently rely on a relatively small number of suppliers to provide us with the majority of our patient service equipment and supplies for our home healthcare business.

From time to time, we also enter into certain exclusive arrangements with suppliers for the provision of patient service equipment and supplies.

Further, some of our supply agreements contain pricing scales that depend on meeting certain order volumes.

Our inability to procure certain equipment and supplies, including as a result of failure to maintain and renew certain agreements and access arrangements, could have a materially adverse effect on our results of operations and cash flows.

We often use vendors selectively for quality and cost reasons.

Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing vendors, such as the disruptions associated with the Philips Respironics recall as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, may force us to increase our prices (which we may be unable to do) or reduce our margins and could force us to use alternative vendors.

Any change in the existing vendors we use could cause delays in the delivery of products and possible losses in revenue, which could adversely affect our results of operations and cash flows.

In addition, alternative vendors may not be available, or may not provide their products and services at similar or favorable prices.

If we cannot obtain the patient equipment and supplies we currently use, or alternatives at similar or favorable prices, our ability to provide such products may be severely impacted, which could have an adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

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 17 facilities:

twelve 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.

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

Damage or disruption to any of our facilities or distribution capabilities due to pandemic, weather, natural disaster, fire, terrorism, strikes, trade restrictions, the financial and/or operational instability of key suppliers, geo-political events (such as the Russia-Ukraine conflict) or other reasons could impair our ability to offer services, 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, results of operations, financial condition and cash flows.

We often use suppliers selectively for quality and cost reasons.

Significant price increases, or disruptions in the ability to obtain such equipment and supplies from existing suppliers, such as the disruptions associated with the Philips Respironics recall as described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, may reduce our income and could force us to use alternative suppliers.

Any change in the existing suppliers we use could cause delays in the delivery of products and possible losses in revenue, which could adversely affect our results of operations and cash flows.

In addition, alternative suppliers may not be available, or may not provide their products and services at similar or favorable prices.

If we cannot obtain the patient service equipment and supplies we currently use, or alternatives at similar or favorable prices, our ability to provide such products may be severely impacted, which could have an adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

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.

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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 years, cyberattacks in our industry have increased and

become more sophisticated and, as a result, the risk of a cyberattack on our systems has increased.

As described in Item 1C, we have an integrated framework to prevent, identify and mitigate risks related to cybersecurity attacks on our systems.

Despite physical, technical, and administrative security measures by us and our external service providers and consultants, our technology systems and operations have in the past and may be in the

future subject to cyberattacks from sources beyond our control.

In recent years, cyberattacks in our industry have increased and become more sophisticated.

For instance, we expect threat actors may use more advanced tools and techniques, such as artificial intelligence, that are designed to circumvent security controls.

As a result, the risk of a cyberattack on our systems has increased.

We do not oversee or actively monitor cybersecurity risks related to our external service providers and we rely on these providers to inform us of risks, breaches or cyberattacks.

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, our results of operations, financial condition and cash flows.

A future cybersecurity incident could involve a material data breach or other material impact to the operations of our technology systems, or the third party service providers on which we rely, 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, results of our operations, financial condition and cash flows.

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 17 facilities:

12 in the U.S., 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 pandemics, 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.

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

Damage or disruption to any of our facilities or distribution capabilities due to pandemic, weather, natural disaster, fire, terrorism, strikes, trade restrictions, the financial and/or operational instability of key suppliers, geo-political events (such as the Russia-Ukraine conflict or the Israel-Hamas War ) or other reasons could impair our ability to offer services, distribute products and conduct our business.

Our capitation arrangements may prove unprofitable if actual utilization rates exceed our assumptions.

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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:

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;

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inadequate indemnification from the seller;

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

and failure of the seller to perform under any transition services agreement.

Even if we are able to integrate an acquired business successfully, this integration may not result in the realization of the full benefits that we expected or may be more costly than we expected.

For instance, the integration of Apria’s business may result in unanticipated problems, expenses, liabilities, regulatory risks and competitive responses that could have material adverse consequences and we may fail to realize the full expected synergies from this acquisition.

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

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Our goodwill may become impaired, which would require us to record a significant charge to earnings in accordance with generally accepted accounting principles.

Generally Accepted Accounting Principals (GAAP) requires us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist.

Generally Accepted Accounting Principles (GAAP) require us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist.

The testing required by GAAP involves estimates and judgments by management.

Although we believe our assumptions and estimates are reasonable and appropriate, any changes in key assumptions, including, but not limited to, a failure to meet our business plans or expected earnings, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain expense, commodities costs or inflationary pressures and our planned efforts to mitigate such impacts, further disruptions in the supply chain, estimated demand and selling prices for PPE or other products, a further increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends, may affect the accuracy or validity of such estimates and may result in goodwill impairment.

Although we believe our assumptions and estimates are reasonable and appropriate, any significant adverse changes in one or a combination of key assumptions, including, but not limited to, a failure to meet our business plans or expected earnings and cash flows, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain expense, commodities costs or inflationary pressures and our planned efforts to mitigate such impacts, disruptions in the supply chain, estimated demand and selling prices for personal protective equipment (PPE) or other products, an increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends, may affect the accuracy or validity of such estimates and may result in goodwill impairment.

No impairment charges to goodwill were recorded in 2023, 2022, or 2021.

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We compete with other national distributors and a number of regional and local distributors, as well as customer self-distribution models and, to a lesser extent, certain outsourced logistics companies.

In the United States, several of our distribution partners and GPOs directly compete with us by sourcing their own brands.

In the U.S., several of our distribution partners and GPOs directly compete with us by sourcing their own brands.

Competitive factors within the medical/surgical supply distribution industry include market pricing, the relative bargaining power of provider networks and GPOs, total delivered product cost, product availability, the ability to fill and invoice orders accurately, delivery time, range of services provided, efficient product sourcing, inventory management, information technology, electronic commerce capabilities, and the ability to meet customer-specific requirements.

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and Alphabet Inc., have disrupted other supply businesses and, in the case of Amazon.com, Inc.

and its new pharmacy offerings, entered the healthcare market.

and its emerging pharmacy offerings, entered the healthcare market.

In the event such providers enter the home healthcare market, we may experience a loss of referrals or revenue.

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The emergence of such competition and our inability to anticipate and effectively respond to changes on a timely basis could have a material adverse effect on our business.

Some of our competitors may now or in the future have greater financial or marketing resources than we do, or have more effective sales and marketing activities, which may increase pricing pressure and limit our ability to maintain or increase

our market share.

In addition, in certain markets, competitors may have other products and services that are or perceived to be superior to our own.

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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.

If the capabilities of suppliers and third-party manufacturers are limited or stopped, due to quality, regulatory or other reasons, including pandemics, 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.

In addition, any material interruption in our supply chain, including as a result of shipping or trade restrictions, could materially adversely affect our business operations and our results of operations, financial condition and cash flows.

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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, results of operations, financial condition and cash flows.

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

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

Continued 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, or that such increases may outpace the compensating inflation-based increase in Medicare payment rates or any other rate increases we may receive.

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, results of operations, financial condition and cash flows.

Uncertainty about current and future economic conditions and other adverse changes in general political conditions may adversely affect demand for our products and services and collectability of our accounts receivable.

Poor or deteriorating economic and political conditions in the U.S.

and the other countries in which we conduct business could adversely affect the demand for healthcare services and consequently, the demand for our products and services.

Such change in demand may result in further inventory valuation adjustments.

Poor economic conditions also could lead our suppliers to offer less favorable terms of purchase to distributors, which would negatively affect our profitability.

Further, the potential decline in federal and state revenues that may result from a deterioration in economic and political conditions may create additional pressures to contain or reduce reimbursements for our services from Medicare, Medicaid and other government sponsored programs.

Increases in job losses in the U.S.

as a result of adverse economic conditions could result in a smaller percentage of our patients being covered by an employer group health plan and a larger percentage being covered by lower paying Medicare and Medicaid programs.

Employers may also select more restrictive commercial plans with lower reimbursement rates.

To the extent that Payors are negatively impacted by a decline in the economy, we may experience further pressure on commercial rates, a slowdown in collections and a reduction in the amounts we expect to collect.

Furthermore, the collection of accounts receivable requires constant focus and involvement by management and ongoing enhancements to information systems and billing center operating procedures.

There can be no assurance that we will be able to improve upon or maintain current levels of collectability and DSO in future periods.

Worsening economic conditions have had and may continue to have an adverse impact on the businesses and financial health of many of our customers and hurt their creditworthiness.

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.

These and other possible consequences of financial and economic decline could have a material adverse effect on our business, results of operations, financial condition and cash flows.

and larger global economies experienced high inflation rates during 2023.

The Federal Reserve and other Central Banks have raised interest rates more aggressively and, as a result, the risk of a recession is considered by many to be elevated.

The present conditions and state of U.S.

and global economies make it difficult to predict whether and/or when and to what extent a recession has occurred or will occur in the near future.

Uncertainty about the effects of current and future economic and political conditions on us, our customers, suppliers and partners makes it difficult for us to forecast operating results and to make decisions about future investments.

Any significant downturn in the health of the general economy, or any recession, depression or other sustained adverse market event, including inflationary pressures, could have an adverse effect on our revenues and financial performance, resulting in impairment of assets.

Our Products & Healthcare Services segment is exposed to price fluctuations of key commodities, which may negatively impact our results of operations and cash flows.

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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 and cash flows.

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

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

Changing conditions in the U.S.

healthcare industry may impact our results of operations and cash flows.

A large percentage of our revenue is derived in the U.S.

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.

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and the development of larger, more sophisticated purchasing groups.

National and regional insurers and managed care organizations are regularly attempting to seek reductions in the prices we charge for our products and services to them and their members, including through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.

We have faced, and expect to continue

to face, pricing pressures due to reductions in provider reimbursement for our products and services.

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.

National and regional insurers and managed care organizations are regularly attempting to seek reductions in the prices we charge

for our products and services to them and their members, including through direct contracts with healthcare providers, increased oversight and greater enrollment of patients in managed care programs and preferred provider organizations.

We have faced, and expect to continue to face, pricing pressures due to reductions in provider reimbursement for our products and services.

In addition, in recent years, the healthcare industry in the U.S.

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, health insurers and suppliers generally gives them greater bargaining power to reduce the pricing available to them.

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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, financial condition and cash flows.

Uncertainty about current and future economic conditions and other adverse changes in general political conditions may adversely affect demand for our products and services.

Poor or deteriorating economic and political conditions in the United States and the other countries in which we conduct business could adversely affect the demand for healthcare services and consequently, the demand for our products and services.

Such change in demand may result in further inventory valuation adjustments.

Poor economic conditions also could lead our suppliers to offer less favorable terms of purchase to distributors, which would negatively affect our profitability.

Increases in job losses in the U.S.

Employers may also select more restrictive commercial plans with lower reimbursement rates.

Worsening economic conditions have had and may continue to have an adverse impact on the businesses and financial health of many of our customers and hurt their creditworthiness.

These and other possible consequences of financial and economic decline could have a material adverse effect on our business, results of operations, financial condition and cash flows.

and larger global economies experienced high inflation rates during 2022.

The Federal Reserve and other Central Banks already have raised interest rates more aggressively and, as a result, the prospect for a recession is high and considered by many to be likely.

The present conditions and state of our U.S.

and global economies make it difficult to predict whether and/or when and to what extent a recession has occurred or will occur in the near future.

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

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

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

Litigation & Regulatory Risks

We are subject to stringent regulatory and licensing requirements, and we have been, are and could become the subject of federal and state investigations and compliance reviews.

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 are required to comply with extensive and complex laws and regulations at the federal, state and local government levels in the U.S.

and other countries where we operate.

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

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Among the U.S.

healthcare related laws that we are subject to include the Anti-kickback Statute, the Stark Law, the False Claims Act and similar state laws relating to fraud, waste and abuse.

healthcare related laws that we are subject to include the Anti-kickback Statute, the Stark Law, the FCA 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.

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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.

FCPA, 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, results of operations, financial condition and cash flows.

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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 and cash flows.

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.

Violations of federal (such as

HIPAA), state or foreign laws (such as the EU GDPR or U.K.

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.

Our operations, including our billing practices and our arrangements with healthcare providers, are also subject to extensive federal and state laws and audits, inquiries and investigations from government agencies.

For example, in connection with the settlement agreements resolving the investigation conducted by the U.S.

Attorney’s Office for the Southern District of New York regarding civil investigative demands, Apria was required to enter into a five-year Corporate Integrity Agreement (CIA) with the Office of Inspector General for the U.S.

Department of Health and Human Services.

The CIA provides that Apria will, among other things, impose certain oversight obligations on Owens & Minor's board of directors, provide certain management certifications, and continue or implement, as applicable certain compliance training and education.

Attorney’s Office for the Southern District of New York regarding civil investigative demands, Apria was required to enter into a five-year CIA with the HHS OIG.

The CIA provides that Apria will, among other things, impose certain oversight obligations on Apria’s board of directors, provide certain management certifications, and continue or implement, as applicable certain compliance training and education.

The CIA also requires Apria to engage independent third parties to review compliance with the CIA, as well as certain reporting, certification, record retention and notification requirements.

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Certain of our operations engage in Ethylene Oxide (EtO) sterilization of medical products either directly or indirectly through third-parties.

In the United States, several regulators, including the EPA, FDA, and agencies at the state and local level, play a role in regulating the use of EtO sterilization.

In the U.S., several regulators, including the EPA, the FDA, and agencies at the state and local level, play a role in regulating the use of EtO sterilization.

Recent announcements of the temporary or permanent closure of sterilization facilities operated by others have been associated with state and/or local regulatory or other legal action related to EtO emissions at those facilities.

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However, no assurance can be given that current or future legislative or regulatory action, or current or future litigation to which we may become a party, will not significantly increase the costs of conducting sterilization operations or curtail or eliminate the use of EtO in our operations.

Further, we could be liable for damages and fines as a result of legislative or regulatory action or litigation, which could have a material adverse effect on our financial condition.

Further, we could be liable for damages and fines as a result of legislative or regulatory action or litigation, which could have a material adverse effect on our financial condition, results of operations, cash flows, capital resources and liquidity.

Accordingly, our arrangements and business practices may be the subject of government scrutiny or be found to violate applicable laws.

If federal or state government officials challenge our operations or arrangements with third parties that we have structured based upon our interpretation of these laws, rules, and regulations, such a challenge could potentially disrupt our business operations and we may incur substantial defense costs, even if we successfully defend our interpretation of these laws, rules, and regulations.

If the government or third parties successfully challenge our interpretation, such a challenge may have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

If the government or third parties successfully challenge our

interpretation, such a challenge may have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.

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

The regulatory clearance process may result in substantial costs, delays and limitations on the types and uses of products we can bring to market, any of which could have a material adverse effect on our business.

In the United States, before we can market a new product, or a new use of, or claim for, or significant modification to, an existing product, we generally must first receive clearance or approval from the FDA and certain other regulatory authorities.

Most major markets for medical products outside the United States also require clearance, approval or compliance with certain standards before a product can be commercially marketed.

In the U.S., before we can market a new product, or a new use of, or claim for, or significant modification to, an existing product, we generally must first receive clearance or approval from the FDA and certain other regulatory authorities.

Most major markets for medical products outside the U.S.

also require clearance, approval or compliance with certain standards before a product can be commercially marketed.

The process of obtaining regulatory clearances and approvals to market a medical product can be costly and time consuming, involve rigorous pre-clinical and clinical testing, require changes in products or result in limitations on the indicated uses of products.

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Our medical gas facilities and operations are subject to extensive regulation by the FDA and other federal and state authorities.

The FDA regulates medical gases, including medical oxygen, pursuant to its authority under the Federal Food, Drug, and Cosmetic Act.

The FDA regulates medical gases, including medical oxygen, pursuant to its authority under the FFDCA.

Among other requirements, the FDA’s cGMP regulations impose certain quality control, documentation, and recordkeeping requirements on the receipt, processing, and distribution of medical gas.

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operating restrictions or partial suspension or total shutdown of production;

delays in the introduction of products into the market;

delays in the introduction of products into

withdrawals or suspensions of current medical gas certifications or drug approvals, resulting in prohibitions on sales of our products;

and criminal prosecution.

There is also a risk that we may not adequately implement sustainable processes and

procedures to maintain regulatory compliance and to address future regulatory agency findings, should they occur.

There is also a risk that we may not adequately implement sustainable processes and procedures to maintain regulatory compliance and to address future regulatory agency findings, should they occur.

The FDA may change its policies, adopt additional regulations or revise existing regulations, each of which could prevent or delay certification of our medical gases, or could impact our ability to market a device that was previously certified or cleared by the FDA.

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Our management’s attention may be diverted by these attempts, and we may need to use funds in litigation to protect our proprietary rights against any infringement, misappropriation or other violation.

We may become subject to litigation brought by third parties claiming infringement, misappropriation or other violation by us of their intellectual property rights.

We may become subject to litigation, investigations, claims and other legal proceedings brought by regulatory agencies, third parties, or individuals.

Our commercial success depends in part on avoiding infringement, misappropriation or other violations of the intellectual property and proprietary rights of third parties.

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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.

We are subject to risks relating to asserted claims, litigation and other proceedings relating to employment and pay practices.

We are facing, or may face, claims or become a party to a variety of legal actions that affect our business, including breach of contract actions, employment and employment discrimination-related suits or employee benefit claims under California and Federal law.

We may also be subject to examination of our payroll practices from various federal and state taxation authorities from time to time.

While we believe that our employment and pay practices materially comply with relevant laws and regulations, interpretations of these laws may change.

There is a risk that we could be subject to payment of additional wages, insurance and employment, and payroll-related taxes and sizeable statutory penalties negatively impacting our financial position, results of operations and cash flows.

In addition, our

involvement in these matters and any related adverse rulings may result in increased costs and expenses, significant costs in defending such claims, even if groundless, reputational damage, cause us from time to time to significantly increase our legal expenses and/or modify our pay practices, all of which would likely have an adverse impact on our financial performance and profitability.

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

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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.

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.

In April 2023 the FDA recommended that consumers, health care providers and facilities not use certain models of O&M Halyard surgical N95 respirators when fluid resistance is required.

While there was no injury or damage to any individuals, as a result of the recommendation we voluntarily stopped the sale in the U.S.

of the affected respirators for a temporary period, until the FDA concluded testing and updated its recommendations for use.

While the FDA recommendation did not materially affect our results of operations for 2023, there is no guarantee that future recommendations or sanctions will be resolved on the same timeline, if at all.

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 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 last-in, first-out (LIFO) treatment of inventory in the United States or changes in tax accounting methods for inventory, import tariffs and taxes, or other tax items.

We operate throughout the U.S.

and other countries.

As a result, we are subject to the tax laws and regulations of the U.S.

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 last-in, first-out (LIFO) treatment of inventory in the U.S.

or changes in tax accounting methods for inventory, import tariffs and taxes, or other tax items.

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

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Such ratings are used by some investors to inform their investment and voting decisions, and thus unfavorable ESG ratings may have a negative impact on our reputation, stock price and access to and costs of capital.

Our amended and restated bylaws designates the United States District Court for the Eastern District of Virginia as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the United States District Court for the Eastern District of Virginia, (or, if United States District Court for the Eastern District of Virginia lacks subject matter jurisdiction, another state or federal court located within the Commonwealth of Virginia) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any director or officer or other employee of the Company to the Company or the Company’s shareholders, (iii) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Virginia Stock Corporation Act, our articles of incorporation or our amended and restated bylaws (as either, or (iv) any action asserting a claim against the Company or any director or officer or

other employee of the Corporation governed by the internal affairs doctrine.

In addition, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

Our amended and restated bylaws designates the U.S.

District Court for the Eastern District of Virginia as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the U.S.

District Court for the Eastern District of Virginia, (or, if U.S.

District Court for the Eastern District of Virginia lacks subject matter jurisdiction, another state or federal court located within the Commonwealth of Virginia) will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a duty owed by any director or officer or other employee of the Company to the Company or the Company’s shareholders, (iii) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Virginia Stock Corporation Act, our articles of incorporation or our amended and restated bylaws (as either, or (iv) any action asserting a claim against the Company or any director or officer or other employee of the Corporation governed by the internal affairs doctrine.

In addition, our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S.

of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

The forum selection clause in our amended and restated bylaws may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

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

As of December 31, 2022, on a consolidated basis we had approximately $2.5 billion of aggregate principal amount of indebtedness, excluding deferred financing costs and third party fees, as well as approximately $262 million in contractual obligations under our operating leasing arrangements due beyond the next twelve months, $354 million of undrawn availability under our accounts receivable securitization program, and $422 million of undrawn availability under our revolving credit facility.

As of December 31, 2023, on a consolidated basis we had approximately $2.1 billion of aggregate principal amount of indebtedness, excluding deferred financing costs and third party fees, $450 million of undrawn availability under our Receivables Financing Agreement, $423 million of undrawn availability under our revolving credit facility, as well as other contractual obligations due beyond the next twelve months.

Our ratio of total debt to total shareholders’ equity as of December 31, 2023 was 227%.

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

Our Credit Agreement, Receivables Securitization Program, and Revolver, 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 Agreement, Receivables Financing Agreement, and Revolver, 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:

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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.

Certain borrowings under our Credit Agreement and Receivables Financing Agreement 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.

Despite current indebtedness levels, we may continue to incur indebtedness in the future, and the amount of that additional indebtedness may be substantial, which could further exacerbate the risks described herein.

We and our subsidiaries may incur substantial additional indebtedness in the future.

We may incur substantial additional indebtedness in the future.

If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face to service debt levels and the risks associated with failure to adequately service our debt could intensify.

General Risk Factors

We are subject to risks related to public health crises or future outbreaks of health crises or other adverse public health developments such as the COVID-19 global pandemic.

As a global healthcare solutions company, we are impacted by public health crises.

For instance, COVID-19 affected the ability of suppliers and vendors to provide products and services to us or to do so at acceptable quality levels or prices.

Any worsening of the COVID-19 pandemic or any future outbreaks could further reduce demand for our products, which could have a material negative impact on our revenues and profit for future periods.

In addition, public health crises may cause health care professionals to prioritize the needs of impacted patients and access to other healthcare services may be limited, which could negatively impact new patient growth in our Patient Direct segment.

While we experienced growth in sales volumes for certain of our products (such as PPE) during the COVID-19 pandemic, as well as improved productivity and manufacturing output, there can be no assurance that such growth rates, increased sales volumes or other improvements will be maintained during or following the COVID-19 pandemic or any other public health crisis.

Adverse public health developments such as COVID-19 can also disrupt global capital markets, which can adversely impact our access to capital including deferred payment arrangements with key suppliers.

In addition, actions by the United States government or other foreign government in response to any such public health developments could adversely affect our business and operations, including by way of closure of one or more facilities for an unknown period of time.

We have incurred additional costs to ensure we meet the needs of our customers and protect our workforce and expect to continue to incur additional costs, which may be significant, as we continue to implement operational changes in response to the COVID-19 pandemic and any future pandemics.

If we do not respond appropriately to the pandemic, any future outbreaks or similar pandemics, or if customers do not perceive our response to be adequate for the United States or our international markets, we could suffer damage to our reputation and our brands, which could adversely affect our business.

We may also experience additional impacts that we are not aware of currently.

Due to the uncertainty of the COVID-19 pandemic’s duration, any future outbreaks, the timing of recovery, travel restrictions, business closures or business disruptions, a recession or other sustained adverse market event resulting from the spread of the COVID-19, 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.

Our continued success is substantially dependent on positive perceptions of our reputation.

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Reputational value is based in large part on perceptions of subjective qualities.

Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if

they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our brand and lead to adverse effects on our business, results of operations, financial condition and cash flows.

Even an isolated incident, or the aggregate effect of individually insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental investigations or litigation, and as a result, could tarnish our brand and lead to adverse effects on our business, results of operations, financial condition and cash flows.

We are subject to risks related to public health crises or future outbreaks of health crises or other adverse public health developments.

As a global healthcare solutions company, we are impacted by public health crises.

For instance, COVID-19 affected the ability of suppliers and vendors to provide products and services to us or to do so at acceptable quality levels or prices.

Any future outbreaks of COVID-19 could further affect demand for our products, which could have a material negative impact on our revenues and profit for future periods.

While we experienced growth in sales volumes for certain of our products (such as PPE) during the COVID-19 pandemic, as well as improved productivity and manufacturing output, there can be no assurance that such growth rates, increased sales volumes or other improvements would be achieved during or following any other public health crisis.

Adverse public health developments can also disrupt global capital markets, which can adversely impact our access to capital including deferred payment arrangements with key suppliers.

In addition, actions by the U.S.

government or other foreign government in response to any such public health developments could adversely affect our business and operations, including by way of closure of one or more facilities for an unknown period of time.

We incurred additional costs to ensure we met the needs of our customers and protected our workforce in response to the COVID-19 pandemic, and may similarly incur additional costs if we are required to implement operational changes in response to any future pandemics.

If we do not respond appropriately to any future outbreaks or similar pandemics, or if customers do not perceive our response to be adequate for the U.S.

or our international markets, we could suffer damage to our reputation and our brands, which could adversely affect our business.

We may also experience additional impacts that we are not aware of currently.

We are not able to predict at this time the extent to which any future outbreaks of COVID-19, or similar pandemics, would have a material effect on our financial or operational results.

The market price for our common stock and debt have been, and may continue to be, highly volatile.

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government debt and/or budget crises;

• changes in our board of directors or management;

changes in our Board or management;

our financial condition, results of operations and cash flows and prospects;

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general market and economic conditions;

• any worsening of the COVID-19 pandemic, or future outbreaks and any future pandemics;

• the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in the Ukraine and a wider European or global conflict);

• the other factors discussed in this Item 1A.

any future outbreaks or reemergence of the COVID-19 pandemic, and any future pandemics;

the threat or outbreak of war, terrorism or public unrest (including, without limitation, the war in the Ukraine and a wider European conflict, the conflict between Israel and Hamas, or any other global conflict);

and the other factors discussed in this Item 1A.

“Risk Factors,” any of which could have a material effect on us.

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local economic environments, recession, inflation, indebtedness, currency volatility and competition;

• Changes in trade protection laws and other laws affecting trade and investment, including import/export regulations in both the United States and foreign countries.

and changes in trade protection laws and other laws affecting trade and investment, including import/export regulations in both the U.S.

and foreign countries.

We may be adversely affected by global climate change or by legal, regulatory or market responses to such change.

The long-term effects of climate change are difficult to predict and may be widespread.

The impacts may include physical risks (such as rising sea levels or frequency and severity of extreme weather conditions), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or

technology changes) and other adverse effects.

The effects could impair, for example, the availability and cost of certain products, commodities and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require.

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These events and impacts could materially adversely affect our business operations and our financial position, results of operations and cash flows.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors