Item 1A. Risk Factors
Item 1A. Risk Factors
Certain risk factors that we believe could affect our business and prospects are described in our Annual Report on Form 10-K for the year ended December 31, 2024. Through March 31, 2025, there have been no material changes in the risk factors described in such Annual Report, with the exception of the following added risk factors:
Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition may have a material adverse effect on our business, financial condition, results of operations, cash flows, capital resources and liquidity.
Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition, including laws and policies in areas such as trade, manufacturing, government purchasing, healthcare, intellectual property, regulatory enforcement and investment/development, may adversely affect our business and financial statements. The U.S. has announced and/or implemented significant new tariffs on imports from a wide range of countries, which has prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the U.S. and other countries. In early April 2025, actions were taken by the U.S. and certain other countries to delay the effective date of certain of these tariffs, but as of the date of this report a number of new tariffs remain in effect, including significant tariffs between the U.S. and China. Collectively, these tariffs increase the cost to us of products we import, which in turn has required us to increase the price of certain of our products in our Products & Healthcare Services segment and may require us to make additional price increases on our products, which together with the surcharges and price increases may adversely impact demand for our products and our competitive positioning; could adversely impact the availability to us of certain products in certain countries and disrupt our supply chains, with related impacts to our operations; could exacerbate inflation, diminish investment and result in broader negative impacts, economic instability and capital markets dislocation that may adversely impact demand for our products; and could hinder collection efforts in our Products & Healthcare Services segment. In addition, whenever we are unable to fully recover higher costs, or whenever there is a time delay between the increase in costs and our ability to recover these costs, our margins and profitability may decline. The U.S. may implement additional tariffs and other measures, further retaliatory tariffs and other retaliatory actions may follow and the risks and adverse effects noted above may increase. Though the risks identified above in certain cases have already adversely impacted part of our business, the full impact of these tariffs and other actions on us and on our business partners remains highly uncertain and subject to rapid change. In addition, certain governments have implemented policies to induce re-shoring of supply chains, reduce reliance on imported supplies and promote national production.
Risks Related to a Sale of Our Products & Healthcare Services Segment
We may sell our Product & Healthcare Services segment, and there may be negative impacts on our business, financial results, and operations.
On February 28, 2025, we announced that we are actively engaged in discussions regarding the potential sale of our Products & Healthcare Services segment.
Although we are actively engaged in discussions regarding the potential sale of the Products & Healthcare Services segment, there is no set timetable for the potential sale, and we have not entered into any definitive documentation with respect to any such sale. Unanticipated developments, including disruptions to our business due to macro-economic factors or otherwise, market conditions, negotiating challenges, the uncertainty of the financial markets, changes in the law, and challenges in negotiation and consummation of a sale, could delay or prevent a sale of the Products & Healthcare Services segment. There can be no assurance that any current or future discussions will lead to a sale of the Products & Healthcare Services segment, or as to the timing, structure or terms of any such sale.
If we are able to negotiate and consummate a sale of the Products & Healthcare Services segment, then following any such sale, we will be a smaller, less diversified company with a single segment, Patient Direct. If we complete the sale of our Products & Healthcare Services segment, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, the diversification of revenue, costs, and cash flows will diminish, such that our results of
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operations, cash flows, working capital, effective tax rate, and financing requirements may be subject to increased volatility and our ability to fund capital expenditures and investments and service debt may be diminished.
Even if we are able to consummate a sale of the Products & Healthcare Services segment, we may be unable to achieve the full strategic and financial benefits that we believe we may be able to achieve through a sale of our Products & Healthcare Services segment, or such benefits may be delayed or may never occur at all. For example, we believe a sale could provide the following benefits, among others:
● directing capital toward the higher growth and higher margin Patient Direct segment;
● applying proceeds from any such sale to repay certain of our indebtedness; and
● deleveraging the business from any such sale to repay certain of our indebtedness.
We may not achieve these or other anticipated benefits for a variety of reasons, including, among others: (i) the possibility that the sale process will be abandoned, or will otherwise not be completed, (ii) the proceeds that we receive for our Products & Healthcare Services segment are less than we expected, (iii) the possibility that we may not benefit as expected from the increased focus on our Patient Direct segment and simpler business model made possible by the sale, (iv) the risk of litigation, injunctions or other legal proceedings relating to the sale, (v) unforeseen costs and expenses that will be incurred in connection with the sale process and (vi) the sale will require significant amounts of management time and effort, which may divert management attention from operating and growing the Patient Direct segment. If we fail to achieve some or all of the benefits we expect to achieve as a result of the sale of our Products & Healthcare Services segment, or if such benefits are delayed, our business, results of operations, financial condition and cash flows could be materially and adversely affected.
We have already incurred expenses in connection with exploring a sale of the Products & Healthcare Services segment and expect that the process of negotiating and ultimately consummating any ultimate sale will be time-consuming and involve significant additional costs and expenses. Furthermore, we expect that any sale of Products & Healthcare Services segment will result in division costs, which may be greater than we anticipate and/or may be significant.
Furthermore, the sale process could cause disruptions and create uncertainty surrounding our business and affect our relationships with our customers, suppliers and teammates. Although we intend to take actions to reduce any adverse effects, these uncertainties could cause customers, suppliers and others that deal with us to seek to change existing business relationships. In addition, teammate retention could be negatively impacted. If key teammates depart because of concerns relating to the uncertainty, our business could be harmed. Investor perceptions about the announcement could have a negative impact on the trading prices of our debt.
In connection with any sale of the Products & Healthcare Services segment, we may be required to provide certain transitional services which may divert management’s attention and harm our business.
In connection with any sale of the Products & Healthcare Services segment, we anticipate that we may be required to provide certain services to a buyer for a transitional period. Any such transitional services arrangements may be in exchange for fees that do not fully compensate us for the cost of providing such transitional services and may also divert management’s attention and resources, any of which could harm our business.
Certain contracts used in our business may need to be replaced in connection with any sale of the Products & Healthcare Services segment and failure to obtain such replacement contracts could increase our expenses or otherwise adversely affect our results of operations.
In connection with any sale of Products & Healthcare Services segment, we may be required to replace certain shared contracts. It is possible that, in connection with the replacement process, some parties may seek more favorable contractual terms from us. If we are unable to obtain such replacement contracts, the loss of these contracts could increase our expenses or otherwise materially adversely affect our business, results of operations and financial condition.
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