Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Except for as set forth below, there have been no material changes in our risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 pursuant to the Exchange Act.
The current tensions in international trade and rising international political tensions and uncertainties may materially adversely affect our business, financial condition, and results of operations, including our ability to continue to comply with the financial covenants of our outstanding indebtedness.
Our operations and performance are significantly impacted by global, regional and U.S. economic and geopolitical conditions and increased trade barriers, including tariffs, from the U.S., China, the European Union or other nations could materially adversely affect our business. The U.S. government announced changes to its trade policies, including increasing tariffs on imports, in some cases significantly, such as the April 2025 announcement of a universal baseline tariff and additional country-specific tariffs (which includes escalating tariffs on Chinese imports), and potentially negotiating or terminating existing trade agreements. The current tariff environment is dynamic and uncertain, as the U.S. government has imposed, modified and paused tariffs multiple times since the beginning of 2025. Changes to tariffs and other trade restrictions can be announced at any time with little or no notice. Additionally, potential tariffs or other U.S. trade policy measures have already prompted, and may prompt further, retaliatory actions by other countries, including by countries that are significant markets for our products, such as China. For example, in response to the recent tariffs announced by the U.S. government, on April 12, 2025, China imposed a 125% tariff on goods imported from the U.S., which could significantly increase our expenses on some of our products sold in China.
The use of tariffs as a policy tool has created significant uncertainty about the future trading relationship among the U.S., China, the European Union, Canada, Mexico and other exporting countries, including with respect to trade policies, treaties, government regulations and tariffs, and has led to concerns regarding the potential for extended trade barriers. The escalation of trade tensions could impact us in a variety of ways, including increases in manufacturing costs, disruptions or delays to our global supply chain, limitations on our ability to sell our products; and reductions in sales volumes and gross margins for our products, any of which could materially affect our business, financial condition and results of operations. Political uncertainty surrounding trade and other international disputes could also have a negative effect on customer confidence and spending, including capital equipment purchases by hospitals and some of our other customers. Changing our operations in accordance with new or changed trade restrictions may be expensive, time-consuming, disruptive to our operations and distracting to management Further, such trade barriers could also lead to fluctuations in both the U.S. dollar and foreign currencies and our financial results may be materially adversely affected by such fluctuations.
Tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and commodity markets and economic conditions which may ultimately reduce demand for our products and could have a materially adverse impact on our business, financial condition and results of operations. Also, disruptions and volatility in the financial markets may lead to adverse changes in the availability, terms and cost of capital. Such tariffs or other trade restrictions and a deterioration of economic conditions could make it more difficult to comply with the covenants of our existing outstanding indebtedness, including the Credit Agreement (as defined above), increase our costs of capital and limit our access to external financing sources to fund acquisitions, capital expenditures, or refinancing of debt maturities on similar terms, which could in turn reduce our cash flows and limit our ability to pursue growth opportunities.
The Credit Agreement requires us to, among other things, comply with certain financial covenants, including a requirement to maintain a maximum consolidated total leverage ratio and to deliver year-end financial statements with an audit opinion that is not subject to any “going concern” or like qualification. Failure to meet such covenant requirements would constitute an event of default (as defined in the Credit Agreement) and there is no certainty we would be able to obtain waivers or amendments with the requisite lenders party thereto in order to maintain compliance. Our ability to maintain compliance with such financial covenants can be affected by events beyond our control, including, for example, recent tariff changes imposed by the U.S. and China.
If an event of default occurs and we are unable to obtain necessary waivers or amendments, the requisite lenders may elect to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. Further, if an event of default occurs, the lenders will have the right to proceed against the collateral granted to them to secure that debt. If our debt were to be accelerated, our assets may not be sufficient to repay in full that debt that becomes due as a result of that acceleration. We could seek replacement financing at prevailing market rates or raise additional capital by issuing equity or debt securities; however, this may not be on terms favorable to us, or available at all.
We are required to assess our ability to continue as a going concern as part of our preparation of financial statements at each quarter-end. This assessment includes, among other things, our ability to comply with the financial covenants and other requirements under the Credit Agreement. A determination of substantial doubt about our ability to continue as a going concern may materially harm our business and reputation and may make it more difficult for us to obtain financing for the continuation
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of our operations, which, in turn, may adversely impact our financial condition, results of operations and cash flows. For more information concerning the Credit Agreement and our compliance with the financial covenants thereunder, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations ― Liquidity and Capital Resources” above.
As of the date of this quarterly report, there is still a high degree of uncertainty surrounding the tariff policy of the U.S., how it will be implemented, and how other countries will react to it. It also remains uncertain whether increased tariffs and trade tensions will create further disruptions and uncertainties to international trade and lead to a downturn to the global economy. The ultimate impact of any tariffs or other trade restrictions will depend on various factors, including the manner in which tariffs are implemented, the timing of implementation, exemptions, if any, to such tariffs and the amount, scope, and nature of retaliatory tariffs.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sale of Unregistered Securities:
None.
Purchases of Equity Securities:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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