What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-03-11 · 28 added, 76 removed, 311 unchanged (25% of the section changed)

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A disruption in pharmaceutical and medical supply could adversely impact our business.

For the year ended December 31, 2020, approximately 70% of our pharmaceutical and medical supply purchases are from three vendors.

For the year ended December 31, 2021, approximately 74% of our pharmaceutical and medical supply purchases are from four vendors.

Most of the pharmaceuticals that we purchase are available from multiple sources, and we believe they are available in sufficient quantities to meet our needs and the needs of our patients.

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Any failure to comply with applicable regulatory requirements could result in significant legal and financial exposure, damage our reputation, and have a material adverse effect on our business operations, financial condition and results of operations.

The Affordable Care Act and other healthcare reform efforts could have a material adverse effect on our business.

In recent years, healthcare reform efforts at federal and state levels of government have resulted in sweeping changes to the delivery and funding of health care.

The Affordable Care Act is the most prominent of these efforts.

However, there is substantial uncertainty regarding its net effect and its future.

The Affordable Care Act has been subject to legislative and regulatory changes and court challenges.

Effective January 2019, Congress eliminated the financial penalty associated with the individual mandate to maintain health insurance coverage.

Because the penalty associated with the individual mandate was eliminated, a federal court in Texas ruled in December 2018 that the entire Affordable Care Act was unconstitutional.

However, the law remains in place pending appeal.

It is impossible to predict the full impact of the Affordable Care Act and related regulations or the impact of its modification on our operations in light of the uncertainty regarding whether, when or how the law will be changed and what alternative reforms, such as single-payer proposals, may be enacted.

Health reform efforts may adversely affect our customers, which may cause them to reduce or delay use of our products and services.

As such, we cannot predict the impact of the Affordable Care Act on our business, operations or financial performance.

Federal actions and legislation may reduce reimbursement rates from governmental payers and adversely affect our results of operations.

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The Affordable Care Act provides for material reductions in the growth of Medicare program spending.

More recently, the Cures Act significantly reduced the amount paid by Medicare for drug costs, while delaying the implementation of a clinical services payment, although Congress also passed a temporary transitional service payment that took effect January 1, 2019.

More recently, the 21st Century Cures Act (the “Cures Act”) significantly reduced the amount paid by Medicare for drug costs, while delaying the implementation of a clinical services payment, although Congress also passed a temporary transitional service payment that took effect January 1, 2019.

In addition, from time to time, CMS revises the reimbursement systems used to reimburse health care providers, which may result in reduced Medicare payments.

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Furthermore, we cannot predict the overall impact of increased scrutiny on compounding pharmacies.

Our ability to use net operating loss carryforwards to offset future taxable income for U.S.

federal tax purposes is subject to limitation and risk that could further limit our ability to utilize our net operating losses.

federal income tax law, a corporation’s ability to utilize its net operating losses (“NOLs”) to offset future taxable income may be significantly limited if it experiences an “ownership change” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).

In general, an ownership change will occur if there is a cumulative change in a corporation’s ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period.

A corporation that experiences an ownership change will generally be subject to an annual limitation on the use of its pre-ownership change NOLs equal to the value of the corporation immediately before the ownership change, multiplied by the long-term tax-exempt rate (subject to certain adjustments).

At December 31, 2020, we had U.S.

federal NOLs of approximately $577.9 million, of which $139.8 million are expected to expire unutilized due to limitations under Section 382 of the Code.

We also had $600.1 million of cumulative gross state NOL carryforwards available to offset future taxable income in various states.

Any limitation to our annual use of NOLs could require us to pay a greater amount of U.S.

federal (and in some cases, state) income taxes, which could reduce our after-tax income from operations for future taxable years and adversely impact our financial condition.

At December 31, 2020, we maintained a full valuation allowance against all of our net U.S.

federal and state deferred tax assets with the exception of $0.4 million of estimated state NOLs.

Risks Relating to Our Indebtedness

Our existing indebtedness could adversely affect our business and growth prospects.

As of December 31, 2020, we had $1,161.5 million of outstanding borrowings, including (i) $915.8 million under our First Lien Term Loan and (ii) $245.8 million under our Second Lien Notes.

All obligations under the credit agreements and indenture governing these facilities and notes are secured by first-priority perfected security interests in substantially all of our assets and the assets of our subsidiaries, subject to permitted liens and other exceptions.

As of December 31, 2021, we had $1,100 million of outstanding borrowings, including (i) $600 million under our First Lien Term Loan (as defined herein) and (ii) $500 million under our 4.375% Senior Unsecured Notes due 2029 (the “Senior Notes”).

All obligations under the First Lien Term Loan are secured by first-priority perfected security interests in substantially all of our assets and the assets of our subsidiaries, subject to permitted liens and other exceptions.

Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position.

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The ability to make these payments depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control.

Despite our substantial indebtedness, we may still need to incur significantly more debt.

Despite our indebtedness, we may still incur significantly more debt.

This could exacerbate the risks associated with our substantial leverage.

We may need to incur substantial additional indebtedness, including additional secured indebtedness, in the future, in connection with future acquisitions, strategic investments and strategic relationships.

We may incur additional indebtedness, including additional secured indebtedness, in the future, in connection with future acquisitions, strategic investments and strategic relationships.

Although the financing documents governing our indebtedness contain covenants and restrictions on the incurrence of additional debt, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions, including secured debt, could be substantial.

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In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service obligations.

The financing documents governing our First Lien Term Loan, our ABL Facility and our Second Lien Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales.

The financing documents governing our First Lien Term Loan, ABL Facility (as defined herein) and our Senior Notes restrict our ability to conduct asset sales and/or use the proceeds from asset sales.

We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair and any proceeds that we do receive may not be adequate to meet any debt service obligations then due.

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Risks Relating to Our Common Stock

We are a “controlled company” within the meaning of the rules of Nasdaq and, as a result, qualify for and rely on, exemptions from certain corporate governance standards, which limit the presence of independent directors on our board of directors or board committees.

As of December 31, 2020, approximately 64% of the outstanding shares of our common stock is held by HC Group Holdings I, LLC.

As a result, we are a “controlled company” for purposes of the Nasdaq listing rules and are exempt from certain governance requirements otherwise required by Nasdaq, including requirements that:

• a majority of our board of directors consist of independent directors;

• we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

• we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

• we conduct annual performance evaluation of the nominating and corporate governance and compensation committees.

Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the Nasdaq.

A significant portion of our total outstanding shares may be sold into the market in the near future.

This could cause the market price of our common stock to drop significantly, even if our business is doing well.

The shares of our common stock issued in the Merger to HC Group Holdings I, LLC as Merger consideration, or approximately 64% of the outstanding shares of our common stock as of December 31, 2020, are generally eligible for resale.

The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market or even the perception that these sales could occur.

Subsequent to December 31, 2020, HC Group Holdings I, LLC completed a secondary offering of 17,250,000 shares of common stock.

Following the offering, HC Group Holdings I, LLC holds approximately 54% of the Company’s common stock.

As of December 31, 2020, Madison Dearborn Partners is our largest stockholder, controlling approximately 64% of our common stock, and has the ability to exercise significant influence over decisions requiring our stockholders’ approval.

As of December 31, 2020, Madison Dearborn Partners controls approximately 64% of our common stock through its control of HC Group Holding I, LLC, with an economic interest in approximately 31% of our common stock.

As a result, Madison Dearborn Partners has the ability to exercise significant influence over decisions requiring approval of our stockholders including the election of directors, amendments to our certificate of incorporation and approval of significant corporate transactions, such as a Merger or other sale of us or our assets.

This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of us and may negatively affect the market price of our common stock.

Also, Madison Dearborn Partners is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete with us.

Madison Dearborn Partners or its affiliates may also pursue acquisition opportunities that are complementary to our business and, as a result, those acquisition opportunities may not be available to us.

As of December 31, 2021, Walgreens Boots Alliance, Inc.

(“Walgreens”) is our largest stockholder and has the ability to exercise significant influence over decisions requiring our stockholders’ approval.

As of December 17, 2021, Madison Dearborn Partners transferred control of HC Group Holding I, LLC (“HC Group”) to Walgreens.

As of December 31, 2021, Walgreens controls approximately 20.7% of our common stock through its control of HC Group Holding I, LLC (“HC Group”).

As a result, Walgreens has the ability to exercise significant influence over decisions requiring approval of our stockholders including the election of directors, amendments to our certificate of incorporation and approval of significant corporate transactions, such as a merger, or change in control of the Company.

Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

In addition to HC Group Holding I, LLC’s beneficial ownership of approximately 64% of our common stock, our third amended and restated certificate of incorporation contains provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders.

In addition to Walgreens’ beneficial ownership of approximately 20.7% of our common stock, our third amended and restated certificate of incorporation contains provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders.

Among other things:

• these provisions allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of stockholders;

• these provisions provide that, at any time when HC Group Holdings I, LLC beneficially owns, in the aggregate, less than 50% in voting power of our stock entitled to vote generally in the election of directors, directors may be removed with or without cause only by the affirmative vote of holders of at least 66 2∕3% in voting power of all the then-outstanding vote thereon, voting together as a single class;

• these provisions prohibit stockholder action by written consent from and after the date on which HC Group Holding I, LLC beneficially owns, in the aggregate, less than 50% in voting power of our stock entitled to vote generally in the election of directors;

• these provisions provide that for as long as HC Group Holdings I, LLC beneficially owns, in the aggregate, 50% or more in voting power of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws or certificate of incorporation by our stockholders will require the affirmative vote of at least a majority in voting power of the outstanding shares of our stock and at any time when HC Group Holdings I, LLC beneficially owns, in the aggregate, less than 50% in voting power of all outstanding shares of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws or certificate of incorporation by our stockholders will require the affirmative vote of the holders of at least 66 2∕3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class.

• these provisions provide that directors may be removed with or without cause only by the affirmative vote of holders of at least 66 2∕3% in voting power of all the then-outstanding vote thereon, voting together as a single class;

• these provisions prohibit stockholder action by written consent;

• these provisions provide that any amendment, alteration, rescission or repeal of our bylaws or certificate of incorporation by our stockholders will require the affirmative vote of the holders of at least 66 2∕3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class.

These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for shareholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by our then-current Board, including delay or impede a merger, tender offer or proxy contest involving our company.

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General Risk Factors

The recent COVID-19 pandemic and other potential pandemic events could adversely impact our business operations, results of operations, cash flows and financial position.

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China.

The World Health Organization has declared COVID-19 a pandemic and public health emergency of international concern.

In March 2020, the President of the United States declared a State of National Emergency due to the COVID-19 outbreak.

Other countries affected by the outbreak took similar measures.

Consequently, the COVID-19 pandemic has had a material impact on the U.S.

and global economies.

The COVID-19 pandemic and other potential pandemic events could adversely impact our business operations, results of operations, cash flows and financial position.

The COVID-19 pandemic has continued to significantly impact the global economy.

Throughout 2021, COVID-19 has persisted as a significant public health concern and impacted the general economy and consumer behaviors.

The impacts of the pandemic are unpredictable and volatile, with varying impacts to business operations.

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our patients, teammates, suppliers, vendors, referral sources, and third party payers.

The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may adversely affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.

While we cannot predict the impact that COVID-19 will have on our patients, suppliers, vendors, and third party payers and each of their financial conditions, we believe the following factors could lead to a material adverse impact on the Company’s business:

• Variability in acute therapy patient referrals from hospitals based on changes in hospital-based procedures and treatment patterns;

• Variability in chronic therapy patient referrals based on disruptions in the diagnosis of chronic conditions requiring infusion therapy;

• Inefficiencies in clinical labor expenses and higher labor costs from staffing disruptions and availability, potential overtime due to inefficient clinical staffing and utilization of contract labor;

• Higher costs to procure, and potential unavailability of, critical personal protection equipment, pharmaceuticals and medical supplies given a constrained supply environment;

• Heightened operational risks from an extended period of remote work arrangements, which could strain our business continuity plans, including but not limited to cybersecurity risks, and could impair our ability to manage our business.

The situation is changing rapidly and additional consequences may arise that we are not aware of currently.

The situation is changing rapidly considering the impacts of new variants of the virus, public health guidance, regulatory mandates and additional consequences may arise that we are not aware of currently.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including:

the severity and duration of the outbreak;

the severity and duration of the pandemic;

the potential of new virus variants;

governmental, business and other actions;

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any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions;

and the potential effects on our internal controls including those over financial reporting as a result of changes in working environments such as shelter-in-place and similar orders that are applicable to our teammates.

and the effect on our internal controls including those over financial reporting.

In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, or impacts our credit ratings or stock price, it could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.

Other factors including reduced employment pools, federal subsidies offered in response to the COVID-19 pandemic and other government regulations, including any potential vaccine mandate, could exacerbate staffing challenges, create increased labor shortages and/or lead to employee turnover within our organization.

An overall or prolonged labor shortage, lack of skilled labor, increased turnover or continued labor inflation could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

In addition, we cannot predict the impact that COVID-19 will have on our patients, suppliers, vendors, and third party payers, and each of their financial conditions;

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However, these safeguards do not ensure that a significant cyber-attack could not occur.

Although we have taken steps to protect the security of our information systems and the data maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.

Although we have taken steps to protect the security of our information systems and the data

maintained in those systems, it is possible that our safety and security measures will not prevent the systems’ improper functioning or damage or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.

Security breaches, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches can create system disruptions or shutdowns or the unauthorized use or disclosure of confidential information.

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In addition, acts of God and other force majeure events may cause a reduction in our business or increased costs, such as increased costs in our operations as we incur overtime charges or redirect services to other locations, delays in our ability to work with payers, hospitals, physicians and other strategic partners on new business initiatives, and disruption to referral patterns as patients are moved out of facilities affected by such events or are unable to return to sites of service in the home.

The transition from the London Interbank Offered Rate (“LIBOR”) could negatively affect our interest rates and results of operations.

In 2017, the U.K.

Financial Conduct Authority announced that it intends to phase out LIBOR by the end of 2021.

In addition, other regulators have suggested reforming or replacing other benchmark rates.

The discontinuation, reform, or replacement of LIBOR or any other benchmark rates may result in fluctuating interest rates that may have a negative impact on our interest expense and our profitability.

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