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Item 1A. Risk Factors

2023-02-27 compared with 2022-02-25 · 255 added, 244 removed, 428 unchanged (54% of the section changed)

In evaluating an investment in our common stock, investors should consider carefully, among other things, the following risk factors, as well as the other information contained in this Annual Report and our other reports and registration statements filed with the SEC.

Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, detail below.

These risks include, among others, the following:

• We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.

• The COVID-19 pandemic has had a material impact on the global economy and has disrupted our operations and could continue to have an adverse impact on our employees, suppliers and customers, which could adversely and materially impact our business, financial condition and results of operations.

• We operate in a highly competitive industry, our ability to compete effectively to maintain or gain market share depends upon numerous factors, such as product innovation, the quality, convenience and reliability of our products, access to distribution channels and patent protection and pricing.

We can give no assurance that we will be successful in implementing any of our competitive strategies.

• We are dependent on certain key suppliers;

any supply interruptions could materially harm our business, financial condition and results of operations.

• Damage to our manufacturing facilities or any other supply chain restrictions could materially impact our business, financial condition and results of operations.

• Changes in or failure to comply with certain federal, state, foreign, legal and health regulations may harm our business and financial condition.

• We depend on the leadership of our executive management team and other key personnel;

the loss of one or more of our key employees could disrupt our business.

• Our stock price may be volatile and you may be unable to sell your shares at or above your purchase price.

Risks Related to our Strategic Transactions

We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.

The Smiths Medical acquisition that closed on January 6, 2022 was a significant transaction for us and the Smiths Medical business significantly expands our global presence.

The success of our business will depend, in part, on our ability to realize our anticipated benefits, opportunities and synergies from combining the businesses of our company and the Smiths Medical business.

We can provide no assurance that the anticipated benefits of the Smiths Medical transaction will be fully realized in the time frame anticipated or at all.

Integrating the operations of the Smiths Medical business with that of our own is a complex, costly and time-consuming process and the nature of a carve out acquisition makes it inherently more difficult to assume operations on closing day as well as to integrate activities, as certain systems, processes and people may not all have transferred with the acquired business to support such activities.

The integration process may disrupt the businesses and, if implemented ineffectively, would restrict the realization of the full expected benefits.

The failure to meet the challenges involved in integrating the two businesses could cause an interruption of, or a loss of momentum in, the activities of the combined businesses and could adversely affect the results of operations of the combined businesses.

Potential difficulties that may be encountered in the integration process include the following:

• challenges in preserving important strategic customer and other third-party relationships of both businesses;

• the diversion of management’s attention to integration matters;

• challenges in maintaining employee morale and retaining or attracting key employees;

• potential incompatibility of corporate cultures;

• costs, delays and other difficulties consolidating corporate and administrative infrastructures and information systems and implementing common systems and procedures including, in particular, our internal controls over financial reporting;

• coordinating and integrating a geographically dispersed organization, including operations in jurisdictions we did not operate in prior to the Smiths Medical transaction.

Any one or all of these factors may increase operating costs or lower anticipated financial performance.

Achieving the anticipated benefits and the potential benefits underlying our reasons for the Smiths Medical business acquisition will depend on successful integration of the businesses.

Because of the significance of the Smiths Medical business acquisition to us, our failure to successfully integrate the Smiths Medical business with that of our own could have a material adverse impact on our business, financial condition and results of operations.

The Smiths Medical business acquisition has resulted in organizational change and significant growth to our business.

If we fail to effectively manage this growth and change to our business in a manner that preserves our reputation with customers and the key aspects of our corporate culture, our business, financial condition and results of operations could be harmed.

The Smiths Medical business has resulted in significant growth in our personnel and operations.

We will continue to incur significant expenditures and the allocation of management time to assimilate the Smiths Medical business employees in a manner that preserves the key aspects of our corporate culture, including a focus on strong customer satisfaction, but there can be no assurance that we will be successful in our efforts.

If we do not effectively integrate, train and manage our combined employee base and maintain strong customer relationships, our corporate culture could be undermined, the quality of our products and customer service could suffer, and our reputation could be harmed, each of which could adversely impact our business, financial condition and results of operations.

The actual impact of the Smiths Medical acquisition on our financial results may be worse than the assumptions we have used.

We have made certain assumptions relating to the impact on our financial results of the Smiths Medical acquisition.

These assumptions relate to numerous matters, including the acquisition costs, transaction and integration costs, and other financial and strategic risks of the acquisition.

If one or more of these assumptions are incorrect, it could have an adverse effect on our business and operating results, and the perceived benefits from the acquisition may not be realized.

If we are unable to effectively manage our internal growth or growth through acquisitions of companies, assets or products, our financial performance may be adversely affected.

We intend to continue to expand our marketing and distribution capability, which may include external expansion through acquisitions both in the U.S.

and foreign markets.

We may also consider expanding our product offerings through acquisitions of companies or product lines.

We can provide no assurance that we will be able to identify, acquire, develop or profitably manage additional companies or operations or successfully integrate such companies or operations into our existing operations without substantial costs, delays or other problems.

We recently acquired the Smiths Medical business, which

includes syringe and ambulatory infusion devices, vascular access, and vital care products, but we have significant integration efforts to achieve the anticipated benefits.

See “We may not realize the anticipated benefits of the Smiths Medical Transaction, which could adversely impact our business and our operating results.”

We have additional production facilities outside the U.S.

to reduce labor costs.

The expansion of our marketing, distribution and product offerings both internally and through acquisitions or by contract may place substantial burdens on our management resources and financial controls.

Decentralization of assembly and manufacturing could place further burdens on management to manage those operations and maintain efficiencies and quality control.

The increasing burdens on our management resources and financial controls resulting from internal growth and acquisitions could adversely affect our operating results.

In addition, acquisitions may involve a number of special risks in addition to the difficulty of integrating cultures and operations and the diversion of management’s attention, including adverse short-term effects on our reported operating results, dependence on retention, hiring and training of key personnel, risks associated with unanticipated problems or legal liabilities and amortization of acquired intangible assets, some or all of which could materially and adversely affect our operations and financial performance.

As a result of the Smiths Medical acquisition, we have used a significant portion of our cash on hand and incurred a substantial amount of debt to finance the cash consideration portion and certain other amounts paid in connection with the Smiths Medical transaction, which could adversely affect our business, including by restricting our ability to engage in additional transactions or incur additional indebtedness.

Following the financing of the Smiths Medical acquisition transaction, we have significantly less cash, cash equivalents and investment securities on hand than the approximately $571.9 million of cash, cash equivalents and investment securities we had as of December 31, 2021.

Although our management believes that we continue to have sufficient access to cash to meet our business objectives and capital needs, we do have a decreased availability of cash, cash equivalents and investment securities and we expect to have such decreased availability of cash for a period of time following the consummation of the Smiths Medical transaction which could constrain our ability to grow our business.

In connection with the Smiths Medical transaction and the payment of the cash consideration, we entered into Senior Secured Credit Facilities (the "Senior Secured Credit Facilities") of $2.2 billion consisting of a term loan A facility of $850.0 million, a term loan B facility of $850.0 million and a revolving credit facility of $500.0 million.

As a result of the credit facilities, we incurred additional borrowing costs.

Our more leveraged financial position following the Smiths Medical transaction could make us vulnerable to general economic downturns and industry conditions, and place us at a competitive disadvantage relative to our competitors.

In the event that we do not have adequate capital to maintain or develop our business, additional capital may not be available to us on a timely basis, on favorable terms, or at all.

Moreover, our senior secured credit facilities have certain restrictions that may limit how we operate our business, including limiting our ability to engage in certain transactions and to incur additional indebtedness, and our business may be materially and adversely affected if these restrictions prevent us from implementing our business plan.

We have and may continue to acquire businesses, form strategic alliances or make investments in businesses or technologies that could adversely impact our business and our operating results and such transactions could result in unforeseen operating difficulties, expenditures and require significant management resources, charges or write-downs.

We have and may continue to seek to supplement our internal growth through acquisitions of complementary businesses, technologies, services, or products, as well as investments and strategic alliances.

We compete for those opportunities with others including our competitors, some of which have greater financial or operational resources than we do.

We may not be able to identify suitable acquisition candidates or strategic partners, we may have inadequate access to information or insufficient time to complete due diligence, and we may not be able to complete such transactions on favorable terms, if at all.

Such transactions are inherently risky, and the integration of any newly-acquired business requires significant effort and management attention that otherwise would be available for ongoing development of our other businesses.

The success of any acquisition, investment or alliance may be affected by a number of factors, including our ability to properly assess and value the potential business opportunity or to successfully integrate any business we may acquire into our existing business.

Integration of an acquired business also may disrupt our ongoing operations and require management resources that we would otherwise focus on developing our existing business.

For example, we acquired the HIS business in February 2017, which includes IV pumps, solutions, and devices in order to create a leading pure-play infusion therapy company and we acquired Smiths Medical in January 2022, which includes syringe and ambulatory infusion devices, vascular access, and vital care products.

We invested significant time and resources into the HIS integration in order to achieve the anticipated benefits of the transaction and we intend to do the same with the Smiths Medical integration.

In addition, any acquisition could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our financial condition, results of operations

and cash flows.

We may also experience losses related to investments in other companies, which could have an adverse effect on our results of operations and financial condition.

As such, there can be no assurance that any past or future transactions will be successful.

In evaluating an investment in our common stock, investors should consider carefully, among other things, the following risk factors, as well as the other information contained in this Annual Report on Form 10-K and our other reports and registration statements filed with the SEC.

Any of the following risks could materially and adversely affect our results of operations or financial condition.

Business and Operating Risks

We are dependent on single and limited source third-party suppliers, which subjects our business and results of operations to risks of supplier business interruptions, and a loss or degradation in performance in our suppliers could have an adverse effect on our business and financial condition.

Although we have risk mitigation plans in place with key suppliers, we have materials (such as resins) that are critical to our ability to manufacture our products, the supply of which is currently from a sole supplier.

Our risk mitigation plans employed with key suppliers of materials (such as resins) that are critical to our ability to manufacture our products, the supply of which is currently from a sole supplier, may not suffice to ensure that we are able to receive requisite materials as and when needed an in sufficient quantity.

We cannot be certain that our current suppliers will continue to provide us with the quantities of materials that we require or satisfy our anticipated specifications and quality requirements on a timely basis or at all.

Any supply interruption in limited or sole sourced raw materials could materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified.

Although we believe there are other suppliers of these raw materials, we may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.

Upon identification, the qualification process of new suppliers and component materials can take a considerable amount of time.

We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms.

The price and supply of these materials may be impacted or disrupted for reasons beyond our control including supplier shutdowns, transportation delays, inflationary pricing pressures, work stoppages, labor shortages and governmental regulatory actions.

We have experienced, and may continue to experience, significant challenges to our global transportation channels and other aspects of the global supply chain network, including to the cost and availability of raw materials and components due to shortages and resulting cost inflation.

Additionally, the COVID-19 pandemic continues to impact supply channels resulting in raw material shortages and supply chain disruptions generally.

We have experienced, and may continue to experience, significant challenges to our global transportation channels and other aspects of the global supply chain network, including the cost and availability of raw materials and components due to shortages and resulting cost inflation.

The COVID-19 pandemic continues to impact supply channels resulting in raw material shortages and supply chain disruptions generally.

Furthermore, our contract manufacturers could require us to move to another one of their production facilities.

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Any performance failure on the part of our suppliers could delay the development and manufacture of our products, which could have a material adverse effect on our business.

Due to the highly competitive nature of the healthcare industry and the cost controls of our customers and third party payors, we may be unable to pass along cost increases for any key components or raw materials increases through higher prices to our customers.

Due to the highly competitive nature of the healthcare industry and the cost controls of our customers and third party payors, as well as entering into long-term fixed price contracts we may be unable to pass along cost increases for any key components or raw materials through higher prices to our customers.

If the cost of key components or raw materials increases and we are unable to fully recover those increased costs through price increases or offset these increases through other cost reductions, we could experience an adverse effect on our financial condition.

Damage to any of our manufacturing facilities or disruption to our supply chain network could impair our ability to produce our products.

A severe weather event, other natural or man-made disaster, or any other significant disruption, such as outbreak of disease (including the COVID-19 pandemic), work stoppages, labor shortages and similar interruptions affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.

The COVID-19 pandemic has caused us to temporarily shut down some of our facilities, to date these shut downs have not had a material impact on our business.

Additionally, in 2021, we have experienced supply chain disruptions and general supply constraints as a result of the continued economic uncertainty and in part due to COVID-19 infections and quarantine protocols.

A severe weather event, other natural or man-made disaster, or any other significant disruption, such as outbreak of disease (including the COVID-19 pandemic), the impact of war or political instability (such as the conflict in the Ukraine), work stoppages, labor shortages and similar interruptions affecting our manufacturing facilities or our suppliers and logistics partners could materially and adversely impact our business, financial condition and results of operations.

The COVID-19 pandemic caused us to temporarily shut down some of our facilities.

Additionally, in 2021, we experienced supply chain disruptions and general supply constraints as a result of the continued economic uncertainty and, in part, due to COVID-19 infections and quarantine protocols.

In 2022, we continued to experience these supply chain disruptions, as well as an increase in raw material costs and shipping costs, as prices on several commodities, including oil and gas, increased as a result of the conflict in the Ukraine and it's impact on the global economy.

We have a single manufacturing facility for our Clave products located in Salt Lake City, Utah.

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Our IV Solutions are manufactured at our manufacturing facility in Austin, Texas and by a third party manufacturer, Pfizer, in Rocky Mount, North Carolina or our suppliers’ facilities.

If our facilities are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective manner, and our ability to make product sales.

We have also added various other manufacturing facilities with the acquisition of Smiths Medical in the U.S., Mexico, Italy and Czech Republic.

If our facilities are inoperable, for even a short period of time, it could adversely affect our ability to manufacture and distribute our products in a timely or cost-effective

manner, and our ability to make product sales.

Furthermore, our facilities and the equipment we use to perform our manufacturing processes could be unavailable or costly and time-consuming to repair or replace.

Damage to any of our facilities, work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at our facilities.

Two of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.

We carry insurance for damage to our property and

disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our facilities and business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.

Prolonged periods of inflation could have a material adverse effect on our results of operations.

We have also experienced a significant increase in material component inflation in 2021, as well as inflation in other costs, such as freight and labor prices.

Continued supply chain disruptions and delays, as well as continued heightened inflation, could lead to continued inefficiencies and heightened costs that could negatively impact our performance and our results of operations.

Damage to any of our facilities or interruptions at our facilities due to work stoppages or labor shortages could render us unable to manufacture our products or require us to reduce the output of products at our facilities.

Several of our manufacturing facilities are located near known earthquake fault zones and are vulnerable to damage from earthquakes.

We carry insurance for damage to our property and disruption of our business, but this insurance may not be adequate to cover all of the risks associated with damage or disruption to our facilities and business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.

Prolonged periods of inflation, rising interest rates and the impact of foreign currency exchange rates as a result of the current global macroeconomic and geopolitical conditions have had and could in the future have a material adverse effect on our results of operations.

Global supply chain disruptions as a result of COVID-19 and, more recently, the war in the Ukraine has resulted in, and may continue to result in, a challenging macroeconomic environment with higher interest rates and capital costs, increased raw material costs, higher shipping costs, higher labor costs, and the negative impacts from weakening foreign exchange rates.

We have experienced and may continue to experience these inflationary increases in our manufacturing costs and operating expenses, including higher materials and labor costs, as well as negative impacts on our operating results from the strengthening of the U.S.

dollar relative to foreign currencies weakening exchange rates.

See the risk factor titled “ Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates ” under the “Geographic Risks” subsection for a discussion of risks related to foreign currency exchange rates.

Additionally, the majority of our sales are conducted pursuant to long-term contracts.

Although we have attempted to minimize the effect of inflation on our business through contractual protections, the presence of longer pricing periods within our contracts along with sustained or higher than anticipated inflation increases the likelihood that the contract protections do not adequately mitigate the financial impact of inflation.

Our efforts to minimize the impact of inflation on our business through contractual protections may not prove effective, and the presence of longer pricing periods within our contracts along with sustained or higher than anticipated inflation increases the likelihood that the contract protections do not adequately mitigate the financial impact of inflation.

If our contractual protections do not adequately protect us in the context of substantial cost increases and inflationary pressures, it could have a material adverse effect on our results of operations.

The COVID-19 pandemic has disrupted how we, our suppliers and our customers operate and the duration and extent to which this will impact our business, future results of operations, liquidity and overall financial performance remains uncertain.

Prolonged inflation may also reduce or delay orders for our products and for certain products we may be unable to satisfy demand, both of which could have a material adverse impact on our sales and results of operations.

The inflationary cost increases during 2022 caused by COVID -19 and the war in the Ukraine impacted our freight rates as well as, labor and materials costs.

The COVID-19 pandemic has disrupted how we, our suppliers and our customers operate and the duration, and the extent to which this will impact our business, future results of operations, liquidity and overall financial performance remains uncertain.

The COVID-19 pandemic has created significant volatility, uncertainty, and economic disruption.

We operate globally and the COVID-19 pandemic and its adverse effects have impacted most of the locations where we, our customers and our suppliers conduct business and, as a result, we have experienced some disruption to our operations, most notably due to reduced demand for our disposable product portfolio.

Many hospitals are limiting access to their facilities to essential personnel and prioritizing their time and attention to COVID patients, which may negatively affect demand for our products by limiting the ability of our sales personnel to negotiate new and maintain existing contracts with customers.

We have also experienced significant reductions in demand for certain products as our health care customers re-prioritize the treatment of patients, delay elective procedures and shift resources and operations to fight COVID-19 and the complications it causes.

For example, during 2020, we have experienced lower demand from hospital customers for our Infusion Consumables non-dedicated sets and lower demand for our Infusion Systems dedicated sets.

We have also experienced significant reductions in demand for certain products as our health care customers re-prioritized the treatment of patients, delay elective procedures and shift resources and operations to fight COVID-19 and the complications it causes.

For example, during 2020, we experienced lower demand from hospital customers for our Infusion Consumables non-dedicated sets and lower demand for our Infusion Systems dedicated sets.

Additionally, the COVID-19 pandemic could potentially adversely affect our distributors if they are not able to maintain their historical levels of sales.

Our manufacturing, distribution and pump service facilities are operating under our business continuity plan due to the need for our critical healthcare products;

however, we have taken certain precautionary measures including the following to maximize the safety of our employees and to mitigate disruption to our operations:

• implemented physical distancing measures;

• enhanced hygiene protocols and increased frequency of cleaning procedures;

• acquired additional personal protective equipment;

• developed contingency plans and protocols to assess employee illness;

• helped employees with childcare issues due to school and daycare closures;

• initiated a visitor pre-entry questionnaire to limit potential exposure in our facilities.

While we anticipate that the foregoing measures are temporary, we cannot predict the specific duration for which these precautionary measures will stay in effect, and we may elect to take additional measures as the information available to us continues to develop.

These actions, and any future actions we may take in response to the COVID-19 pandemic, could negatively impact our business, financial condition and results of operations.

The duration and extent of the impact on our business from the COVID-19 pandemic depends on future developments that cannot be fully predicted at this time, as such, the impact of the COVID-19 pandemic on our future results of operations and overall financial performance remain uncertain and cannot as yet be quantified.

The extent to which the COVID-19 pandemic continues to impact our business depends on future developments that cannot be fully predicted at this time.

Accordingly, the impact of the COVID-19 pandemic on our future results of operations and overall financial performance remains uncertain and cannot as yet be quantified.

Additional factors that have contributed or may contribute to the adverse impact of the COVID-19 pandemic on our business, results of operations, financial condition and liquidity include, without limitation, the following:

• lost revenue or additional costs associated with either disruptions at our production and distribution facilities or interruptions in our supply chain, including shortages of raw materials or components for our product;

• labor shortages as a result of COVID-19 infections and quarantine protocols;

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In addition, in light of the COVID-19 pandemic and the measures taken to limit its spread, our historical information regarding our business, results of operations, financial condition or liquidity may not be representative of the future results of operations, financial condition, liquidity or other financial or operating results of us or our business.

We may be unable to realize any benefit from our cost reduction and restructuring efforts and our profitability may be hurt or our business otherwise might be adversely affected.

Significant sales through distributors expose us to risks that could have a material effect on our results of operations.

For the year ended December 31, 2022, business from one distributor, Medline, accounted for 15% of our consolidated revenues.

We may rely on one or more key distributors for a product, and the loss of these distributors could reduce our revenue.

Additionally, distributors may face financial difficulties, including bankruptcy, which could harm our collection of accounts receivable and financial results.

Failure to manage risks related to our use of distributors may reduce sales, increase expenses, and weaken our competitive position, any of which could have a material adverse effect on our results of operations.

We may not be successful in achieving expected operating efficiencies or expense reductions associated with cost reduction and restructuring efforts and may experience a decline in our profitability, business disruptions or other adverse consequences to our business as a result.

We have engaged in restructuring activities in the past and may engage in other restructuring activities in the future.

For example, since the Smiths Medical acquisition, we have taken realignment and cost reduction initiatives to achieve operating efficiencies for the combined company.

These types of cost reduction and restructuring activities are complex.

If we do not successfully manage our current restructuring activities, or any other restructuring activities that we may take in the future, any expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted.

If we do not successfully manage our current restructuring activities, or any other restructuring activities that we may take in the future, any expected efficiencies and benefits might be delayed or not fully realized, and our operations and business could be disrupted.

In addition, the costs associated with implementing restructuring activities might exceed expectations, which could result in additional future charges.

We are subject to risks associated with debt financing.

The credit agreements governing our Credit Facility and Senior Secured Credit Facilities contain, among other things, certain customary restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, make certain investments, pay dividends, enter into certain transactions with affiliates, and transfer or dispose of assets as well as financial covenants.

While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreements, there can be no guarantee that we will not breach these covenants in the future.

Additionally, our ability to comply with these covenants may be affected by events beyond our control, including the COVID-19 pandemic, supply chain interruptions or general economic environment, including increases in inflation and interest rates.

The agreements governing our debt contain a number of restrictive covenants which limit our flexibility in operating our business, finance future operations or pursue our business strategies.

The credit agreement governing our Senior Secured Credit Facilities contains, among other things, certain customary restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, make certain investments, pay dividends, enter into certain transactions with affiliates, and transfer or dispose of assets as well as financial covenants.

While we have not previously breached and are not currently in breach of these or any other covenants contained in our credit agreement.

Our ability to comply with these covenants may be affected by events beyond our control, including the COVID-19 pandemic, the conflict in the Ukraine, supply chain interruptions or general economic environment, including increases in inflation and interest rates.

These covenants could also limit our ability to seek capital through the incurrence of new indebtedness or, if we are unable to meet our obligations, require us to repay any outstanding amounts with sources of capital we may otherwise use to fund our business.

As such, these restrictive covenants contained in our Credit Facility and our Senior Secured Credit Facilities may restrict our ability to pursue our business strategies.

As such, these restrictive covenants contained in our Senior Secured Credit Facility may restrict our ability to pursue our business strategies.

Our operating results may be adversely affected by unfavorable economic conditions that affect our customers’ ability to buy our products and could affect our relationships with our suppliers.

Disruptions in financial markets worldwide and other worldwide macro-economic challenges have caused and may in the future cause our customers and suppliers to experience cash flow concerns.

If job losses and the resulting loss of health insurance and personal savings cause individuals to forego or postpone treatment, the resulting decreased hospital use could affect the demand for our products.

As a result, customers may modify, delay or cancel plans to purchase our products and suppliers may increase their prices, reduce their output or change terms of sales.

Additionally, if customers’ or suppliers’ operating and financial performance deteriorates, or if they are unable to make scheduled payments or obtain credit, customers may not be able to pay, or may delay payment of, accounts receivable owed to us and suppliers may impose different payment terms that are less favorable to us.

Any inability of current and/or potential customers to pay us for our products or any demands by suppliers for different payment terms may adversely affect our earnings and cash flow.

Market and Other External Risks

If we are unable to compete successfully with our competitors, we may be unable to maintain market share, in which case our sales may not grow and our profitability may be adversely affected.

The consumable medical device segment of the health care industry and in particular the infusion products market is intensely competitive and is experiencing both horizontal and vertical consolidation.

The consumable medical device segment of the health care industry and in particular the infusion products market is intensely competitive and continues to experience both horizontal and vertical consolidation.

We believe that our ability to compete depends upon numerous factors including, among other things, continued product innovation, the quality, convenience and reliability of our products, access to distribution channels, patent protection and pricing.

The ability to compete effectively depends on our ability to differentiate our products based on these factors, as well as our ability to perceive and respond to

changing customer needs.

The ability to compete effectively depends on our ability to differentiate our products based on these factors, as well as our ability to perceive and respond to changing customer needs.

We encounter significant competition in our markets both from large established medical device manufacturers and from smaller companies.

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The research and development process is time-consuming and costly, and may not result in products or applications that we can successfully commercialize.

We can give no assurance that any such new products will be successful or that they will be accepted in the marketplace.

We can give no assurance that we will be able to successfully develop and commercialize enhanced or new products or that they will be accepted in the marketplace.

Product development requires substantial investment that may be difficult for us to fund and may be challenging to

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We have been and will be ordering production molds and equipment for our new products.

We expect to order semi-automated or fully automated assembly machines for other new Infusion Consumables products in 2021.

We also are adding additional IV Solutions capacity as we transition certain product lines to our Austin manufacturing facility from Rocky Mount.

We expect to order semi-automated or fully automated assembly machines for certain products in 2023.

If we do not achieve significant sales of these new/transitioned products, it might be necessary for us to recognize an impairment charge for the value of the production tooling because its costs may not be recovered through production of saleable product, which could adversely affect our financial condition.

Continuing pressures to reduce healthcare costs and inadequate coverage and reimbursement may adversely affect our prices.

If we cannot reduce manufacturing costs of existing and new products, our sales may not grow and our profitability may decline.

If we cannot reduce manufacturing costs of existing and new products to counteract such pricing pressures, our sales may not grow and our profitability may decline.

Increasing awareness of healthcare costs, public interest in healthcare reform and continuing pressure from Medicare, Medicaid, GPOs and other payors, both domestic and international, to reduce costs in the healthcare industry, as well as increasing competition from other protective products, could make it more difficult for us to sell our products at current prices.

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additional prior authorization requirements.

Third-party coverage and reimbursement for procedures using our products or any of our products in development for which we may receive regulatory approval or certification may not be available or adequate, which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

which could have an adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

Implementation of further legislative or administrative reforms in the reimbursement system in the U.S.

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Any of these results would adversely affect our future results of operations.

Failure to protect our information systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to suffer.

Failure to protect our information technology systems against security breaches, service interruptions, or misappropriation of data could disrupt operations, compromise sensitive data, and expose us to liability, possibly causing our business and reputation to suffer.

We depend heavily on information technology infrastructure and systems to achieve our business objectives.

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Any such events could result in the loss of customers, revenue, or both, and could require us to incur significant expense to remediate, including legal claims or proceedings.

Further, as cyber

security related incidents continue to evolve, and regulatory focus on these issues continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.

Further, as cyber security related incidents continue to evolve, and regulatory focus on these issues continues to expand, additional investment in protective measures, and vulnerability remediation, may be required.

Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology systems, which support our operations.

Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from, among others, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization or similar disruptive problems.

Despite the implementation of security measures, our information technology systems, and those of third parties on which we rely, are vulnerable to attack and damage from, among others, computer viruses, malware (e.g.

ransomware), malicious code, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization or similar disruptive problems.

The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

If an actual or perceived breach of our security occurs, public perception of the effectiveness of our security measures and brand could be harmed and our results of operations could be negatively affected.

We may also experience security breaches that may remain undetected for an extended period.

Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.

We and certain of our service providers are from time to time subject to cyberattacks and security incidents.

While we do not believe that we have experienced any significant system failure, accident or security breach to date, if such event were to occur, public perception of the effectiveness of our security measures and brand could be harmed and our results of operations could be negatively affected.

Data security breaches and other incidents may also result from non-technical means (e.g., actions by employees or contractors).

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Any of these effects could materially and adversely affect our business, financial condition and results of operations.

Changes in and failures to comply with foreign, federal, and state data privacy and security laws, regulations and standards may adversely affect our business, operations and financial performance.

Our cyber liability insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.

If we cannot obtain additional custom tooling and equipment on a timely basis to enable us to meet demand for our products, we might be unable to increase our sales or might lose customers, in which case our sales could decline.

We expanded our manufacturing capacity substantially in recent years, and we expect that continued expansion may be necessary.

Molds and automated assembly machines generally have a long lead-time with vendors, often nine months or longer.

Inability to secure such tooling in a timely manner, or unexpected increases in production demands, could cause us to be unable to meet customer orders.

Such inability could cause customers to seek alternatives to our products, which would adversely affect our sales.

Cost volatility or loss of supply of our raw materials could have an adverse effect on our profitability.

Most of the materials used in our products are resins, plastics and other material that depend upon oil or natural gas as their raw material.

Crude oil markets have historically been affected by political uncertainty in the Middle East and more recently, by the conflict in the Ukraine, and there is no assurance that crude oil supplies will not be interrupted in the future.

New laws or regulations adopted in response to climate change could also increase energy costs as well as the costs of certain raw materials and components.

Any such regulations or interruptions could have an adverse effect on our ability to produce, or the cost to produce, our products.

Also, crude oil and natural gas prices have been volatile in recent years.

Our suppliers have historically passed some of their cost increases on to us, and if such prices are sustained or increase further, our suppliers may pass further cost increases on to us.

In addition to the effect on resin prices, transportation costs have increased because of the effect of higher crude oil prices, and we believe most of these costs have been passed on to us.

Our ability to recover these increased costs may depend upon our ability to raise prices on our products.

In the past, we have rarely raised prices and it is uncertain that we would be able to raise them to recover higher prices from our suppliers.

Our inability to raise prices in those circumstances, or to otherwise recover these costs, could have an adverse effect on our profitability.

Our business could suffer if we lose the services of key personnel.

We are dependent upon the management and leadership of our executive team, as well as other members of our senior management team.

If one or more of these individuals were unable or unwilling to continue in his or her present position, our business would be disrupted and we might not be able to find replacements on a timely basis or with the same level of skill and experience, which could have an adverse effect on our business.

We do not have "key person" life insurance policies on any of our employees.

The price of our common stock has been and may continue to be highly volatile due to many factors.

The public equity market can be highly volatile, and we have experienced significant volatility in the price of our common stock in the past.

We believe that factors such as quarter-to-quarter fluctuations in financial results, differences between stock analysts’ expectations and actual quarterly and annual results, new product introductions by us or our competitors, acquisitions or divestitures, changing regulatory environments, litigation, changes in healthcare reimbursement policies, sales or the perception in the market of possible sales of common stock by insiders, market rumors, general economic trends (including macroeconomic challenges related to the COVID-19 pandemic and the conflict in the Ukraine) and substantial product orders could contribute to the volatility in the price of our common stock.

Most of our common stock is held by, or included in accounts managed by, institutional investors or managers.

Several of those institutions own or manage a significant percentage of our outstanding shares, with the ten largest interests accounting for approximately 65% of our outstanding shares at the end of 2022.

If one or more of the institutions or if our other large stockholders should decide to reduce or eliminate their position in our common stock, it could cause a significant decrease in the price of our common stock.

Disruptions at the FDA, other government agencies or notified bodies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared, approved, certified, or commercialized in a timely manner, or at all, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes.

Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA, foreign regulatory authorities and notified bodies to review and approve or certify new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, a government agency's ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the government's ability to perform routine functions.

Average review times at the FDA, other government agencies, foreign regulatory authorities and notified bodies have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

For example, over the last several years, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to the COVID-19 pandemic, the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points.

Even though the FDA has since resumed standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and any resurgence of the virus or emergence of new variants may lead to further inspectional delays.

Regulatory authorities and notified bodies outside the U.S.

have adopted similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities or notified bodies from conducting their regular inspections, audits, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities or notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

For instance, in the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation.

While several notified bodies have been designated under the EU Medical Devices Regulation the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests with the new regulation as a consequence of which review times have lengthened.

This situation could impact our ability to grow our business in the EU and EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits.

Legal, Compliance, and Regulatory Risks

Actual or perceived failures to comply with foreign, federal, and state data privacy and security laws, regulations and standards may adversely affect our business, operations and financial performance.

We are subject to various federal, state and foreign laws that govern the collection, use, disclosure, retention and security of personal information, including patient health information.

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Penalties for failure to comply with a requirement of HIPAA vary significantly depending on the nature of violation and could include civil monetary or criminal penalties.

HIPAA authorizes state attorneys general to file suit on behalf of their

residents for violations.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations.

Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases.

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Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners.

For example, California enacted the California Consumer Privacy Act of 2018 (the "CCPA") went into effect on January 1, 2020.

For example, California enacted the California Consumer Privacy Act of 2018 (the "CCPA"), which went into effect on January 1, 2020.

The CCPA applies to certain businesses that collect personal information from California residents.

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Further, the California Privacy Rights Act ("CPRA") recently passed in California.

The CPRA will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia, Connecticut, Utah and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the U.S.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

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The FTC expects a company's data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

Foreign data protection laws, including the GDPR, which became effective in May 2018, and EU and EEA member state data protection legislation, may also apply to health-related and other personal data obtained outside of the U.S.

Foreign data protection laws, including the General Data Protection Regulation (the "GDPR"), which became effective in May 2018, and EU and EEA member state data protection legislation, may also apply to health-related and other personal data obtained outside of the U.S.

The GDPR imposes strict requirements for processing the personal data of individuals within the EEA.

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by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on use of the standard contractual clauses ("SCCs").

In March 2022, the US and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities.

While the CJEU upheld the adequacy of the SCCs, it made clear that reliance on them alone may not necessarily be sufficient in all circumstances.

Use of the SCCs must now be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain.

The CJEU went on to state that if a competent supervisory authority believes that the SCCs cannot be complied with in the destination country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.

The CJEU went on to state that if a competent supervisory authority believes that the SCCs cannot be complied with in the destination country and the required level of protection cannot be secured by

other means, such supervisory authority is under an obligation to suspend or prohibit that transfer.

The European Commission issued revised SCCs on June 4, 2021 to account for the decision of the CJEU and recommendations made by the European Data Protection Board.

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existing standard contractual clauses arrangements must be migrated to the revised clauses by December 27, 2022.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to

non-EEA entities subject to the GDPR.

There is some uncertainty around whether the revised clauses can be used for all types of data transfers, particularly whether they can be relied on for data transfers to non-EEA entities subject to the GDPR.

The revised SCCs apply only to the transfer of personal data outside of the EEA and not the UK.

the UK's Information Commissioner's Office launched a public consultation on its draft revised data transfers mechanisms in August 2021.

The UK’s Information Commissioner’s Office has published new data transfer standard contracts for transfers from the UK under the UK GDPR.

This new documentation will be mandatory for relevant data transfers from September 21, 2022;

existing standard contractual clauses arrangements must be migrated to the new documentation by March 21, 2024.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

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However, the UK adequacy decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/extends that decision, and remains under review by the Commission during this period.

In September 2021, the UK government launched a consultation on its proposals for wide-ranging reform of UK data protection laws following Brexit and the response to this consultation was published in June 2022.

There is a risk that any material changes which are made to the UK data protection regime could result in the European Commission reviewing the UK adequacy decision, and the UK losing its adequacy decision if the European Commission deems the UK to no longer provide adequate protection for personal data.

The relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the UK will be regulated in the long term.

We expanded our manufacturing capacity substantially in recent years, and we expect that continued expansion may be necessary.

Molds and automated assembly machines generally have a long lead-time with vendors, often nine months or longer.

Inability to secure such tooling in a timely manner, or unexpected increases in production demands, could cause us to be unable to meet customer orders.

Such inability could cause customers to seek alternatives to our products.

Cost volatility or loss of supply of our raw materials could have an adverse effect on our profitability.

Most of the materials used in our products are resins, plastics and other material that depend upon oil or natural gas as their raw material.

Crude oil markets are affected by political uncertainty in the Middle East, and there is no assurance that crude oil supplies will not be interrupted in the future.