The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and the related notes thereto in the Company's Annual report on Form 10-K for the year ended
December 31, 2021filed with the Securities and Exchange Commission("SEC") on March 8, 2022("2021 Form 10-K Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled "Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements as well as the section titled "Risk Factors" for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in our 2021 Form 10-K Report.
Unless otherwise specified, the terms “we”, “our”, “us” and the “Company” refer
We believe we are one of the leading experts in the manufacturing, management, maintenance and mobilization of mission-critical, regulated, reusable medical devices. We offer healthcare providers a comprehensive suite of medical equipment management and service solutions that help reduce capital and operating expenses, optimize medical equipment utilization, reduce waste, enhance staff productivity and bolster patient safety.
We commenced operations in 1939, originally incorporated in
and reincorporated in
In our more than 80 years of experience ensuring healthcare providers have high-quality, expertly maintained equipment to serve their patients, we've established a nationwide operating footprint that supports our offering. This at-scale, local market service and logistics infrastructure positions us to reach customers across the entire healthcare continuum-from individual facilities to the largest and most complex healthcare systems. Our ability to rapidly mobilize, track, repair and redeploy equipment during times of peak need or emergent events has made us a service provider of choice for city, state and the federal government in the management of emergency equipment stockpiles. Our diverse customer base includes more than 9,000 national, regional and local acute care hospitals, health systems and integrated delivery networks and alternate site providers (such as surgery centers, specialty hospitals, home care providers, long-term acute care hospitals and skilled nursing facilities). We serve the federal government as well as a number of city and state governments providing management and maintenance of emergency equipment stockpiles, and we are an outsourced service provider to medical device manufacturers supporting critical device remediation and repair services. We deliver our solutions through our nationwide network of more than 150 service centers and 7 ISO 13485
Certified Centers of Excellence, among which we employ a team of more than 700 specialized biomed repair technicians, more than 4,000 field-based service operators who work onsite within customer facilities or in our local service centers, and over 200 field sales and account managers. Our fees are primarily paid directly by our customers rather than by direct reimbursement from third-party payors, such as private insurers, Medicare or Medicaid.
We deploy our solution offering across three primary service lines:
On-Site Managed Services: Onsite Managed Services are comprehensive programs that assume full responsibility for the management, reprocessing and logistics of medical equipment at individual facilities and integrated delivery networks ("IDNs"), with the added benefit of enhancing equipment utilization and freeing more clinician time for patient care. This solution monitors and adjusts equipment quantities and availability to address fluctuations in patient census and acuity. Our more than 1,600 onsite employees work 24/7 in customer facilities, augmenting clinical support by integrating proven equipment management processes, utilizing our proprietary management software and conducting daily rounds and unit-based training to ensure equipment is being used and managed properly, overall helping to optimize day-to-day operations and care outcomes. We assume full responsibility for ensuring equipment is available when and where it is needed, removing equipment when no longer in use, and decontaminating, testing and servicing equipment as needed between each patient use. Revenue attributable to such customers represented 23.8% and 27.9% of our total revenue for the three months ended
September 30, 2022and 2021, respectively, and 23.5% and 30.5% of our total revenue for the nine months ended September 30, 2022and 2021, respectively. 20
Table of Contents
Clinical Engineering Services: Clinical Engineering Services provides maintenance, repair and remediation solutions for all types of medical equipment, including general biomedical equipment, diagnostic imaging equipment and surgical equipment through supplemental and outsourced offerings. Our supplemental offering helps customers manage their equipment repair and maintenance backlog, assist with remediation and regulatory reporting and temporarily fill open biotechnical positions. With our outsourced offering, we assume full management, staffing and clinical engineering service responsibilities for individual or system-wide customer sites. The outsourced model deploys a dedicated, on-site team to coordinate the management of customer-owned equipment utilizing our proprietary information systems, third party vendors of services and parts, and a broad range of professional services for capital equipment planning and regulatory compliance. We leverage more than 700 technical resources from our over 150 local market service centers and 7 Centers of Excellence to flex staff in and out of customer facilities on an as-needed basis, ensuring customers pay only for time spent directly servicing their equipment by an appropriately qualified technician. We use flex staffing for our supplemental clinical engineering solution and to augment support when additional technicians are needed to supplement our outsourced services during peak workload. We contract our Clinical Engineering Services with acute care and alternate site facilities across the
U.S., as well as with the federal government and any medical device manufacturers that require a broad logistical footprint to support their large-scale service needs. Revenue attributable to such customers represented 38.2% and 42.5% of our total revenue for the three months ended September 30, 2022and 2021, respectively, and 37.0% and 38.5% of our total revenue for the nine months ended September 30, 2022and 2021, respectively. Equipment Solutions: Equipment Solutions primarily provides supplemental, peak need and per-case rental of general biomedical, specialty, and surgical equipment to acute care hospitals and alternate site providers in the U.S., including some of the nation's premier healthcare institutions and integrated delivery networks. We contract for Equipment Solutions services directly with customers or through our contractual arrangements with hospital systems and alternate site providers. We consistently achieve high customer satisfaction ratings by delivering patient-ready equipment within our contracted equipment delivery times and by providing technical support and educational in-servicing for equipment as-needed in clinical departments, including the emergency room, operating room, intensive care, rehabilitation and general patient care areas. We are committed to providing the highest quality of equipment to our customers, and we do so through the use of our comprehensive Quality Management System which is based on the quality standards recognized worldwide for medical devices: 21 CFR 820 and ISO 13485:2016. This commitment ensures that customers have access to patient-ready equipment with the confidence of knowing it has been prepared and maintained to the highest industry standard to deliver optimal patient safety and outcomes. Revenue attributable to such customers represented 38.0% and 29.6% of our total revenue for the three months ended September 30, 2022and 2021, respectively, and 39.5% and 31.0% of our total revenue for the nine months ended September 30, 2022and 2021, respectively. Many of our customers have multiple contracts and have revenue reported in multiple service lines. Our contracts vary based upon service offering, including with respect to term (with most being multi-year contracts), pricing (daily, monthly and fixed fee arrangements) and termination (termination for convenience to termination for cause only). Many of our contracts contain customer commitment guarantees and annual price increases tied to the consumer price index. Standard contract terms include payment terms, limitation of liability, force majeure provisions and choice of law/venue. Further, the infrastructure and capabilities required to provide connected, responsive equipment lifecycle management is typically cost-prohibitive, even for large IDNs. Our nationwide network of clinical engineers, storage and repair facilities, vehicles and analytics tools gives us scale to provide cost-effective services for individual facilities, systems, regional IDNs, governments and device manufacturers.
Impact of COVID-19 on our Business
We have taken proactive action to protect the health and safety of our employees, customers, partners and suppliers. There continues to be uncertainty related to the full extent of the impact of the COVID-19 outbreak on our future results, but we believe our business model and our available borrowings under our Revolving Credit Facility position us well to continue to manage our business through this crisis. We continue to monitor the evolving situation and guidance from federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our operating plan. As such, given the nature of this situation, we cannot reasonably estimate the future impacts of COVID-19 on our financial condition, results of operations or cash flows. 21
Table of Contents
Initial Public Offering
April 22, 2021, our registration statement on Form S-1 (File No. 333-253947) related to our initial public offering ("IPO") was declared effective by the SEC, and our common stock began trading on the New York Stock Exchange("NYSE") on April 23, 2021. Our IPO closed on April 27, 2021.
RESULTS OF OPERATIONS
The following discussion addresses:
•our financial condition as of
•the results of operations for the three and nine-month periods ended
This discussion should be read in conjunction with the consolidated financial
statements included elsewhere in this Quarterly Report on Form 10-Q and the
Management’s Discussion and Analysis of Financial Condition and Results of
Operations sections included in our 2021 Form 10-K Report.
The following tables provide our results of operations for the three and nine
Three Months Ended September 30, (in thousands) 2022 2021 $ % Consolidated Statement of % of total % of total Operations Data: revenue revenue Revenue
$ 271,185100.0 % $ 262,424100.0 % $ 8,7613.3 % Cost of revenue 169,582 62.5 158,990 60.6 10,592 6.7 Gross margin 101,603 37.5 103,434 39.4 (1,831) (1.8) Selling, general and administrative expense 86,044 31.7 75,052 28.6 10,992 14.6 Operating income 15,559 5.8 28,382 10.8 (12,823) (45.2) Interest expense 12,531 4.6 10,711 4.1 1,820 17.0 Tax indemnification expense 11,918 4.4 - - 11,918 100.0 Income (loss) before income taxes and noncontrolling interest (8,890) (3.2) 17,671 6.7 (26,561) (150.3) Income tax (benefit) expense (10,879) (4.0) 7,943 3.0 (18,822) (237.0) Consolidated net income $ 1,9890.8 $ 9,7283.7 $ (7,739)(79.6) 22
Table of Contents Nine Months Ended September 30, (in thousands) 2022 2021 $ % Consolidated Statement of % of total
% of total Operations Data: revenue revenue Revenue
$ 839,613100.0 % $ 748,212100.0 % $ 91,40112.2 % Cost of revenue 516,218 61.5 444,346 59.4 71,872 16.2 Gross margin 323,395 38.5 303,866 40.6 19,529 6.4 Selling, general and administrative expense 254,303 30.3 225,334 30.1 28,969 12.9 Operating income 69,092 8.2 78,532 10.5 (9,440) (12.0) Loss on extinguishment of debt 1,418 0.2 10,116 1.4 (8,698) (86.0) Interest expense 34,456 4.1 40,444 5.4 (5,988) (14.8) Tax indemnification expense 11,918 1.4 - - 11,918 100.0 Income before income taxes and noncontrolling interest 21,300 2.5 27,972 3.7 (6,672) (23.9) Income tax (benefit) expense (5,672) (0.7) 13,832 1.8 (19,504) (141.0) Consolidated net income $ 26,9723.2 $ 14,1401.9 $ 12,83290.7
Consolidated Results of Operations for the three months ended
compared to the three months ended
The following table presents revenue by service solution for the three months
Three Months Ended September 30, Change (in thousands) 2022 2021 % Equipment Solutions
$ 103,103 $ 77,70732.7 % Clinical Engineering 103,639 111,614 (7.1) Onsite Managed Services 64,443 73,103 (11.8) Total revenue $ 271,185 $ 262,4243.3 % Total revenue for the three months ended September 30, 2022was $271.2 million, compared to $262.4 millionfor the three months ended September 30, 2021, an increase of $8.8 millionor 3.3%. Equipment Solutions revenue increased 32.7% primarily driven by an increase in revenue of approximately $39.0 millionrelated to the Sizewise Acquisition which was partially offset by lower utilization of our medical equipment post-COVID. Clinical Engineering revenue decreased 7.1% primarily due to lower federal government contract revenue offset partially by new business growth. Finally, our Onsite Managed Services revenue decreased 11.8% primarily driven by lower revenue associated with the renewal of the federal government contract. See Note 15, Concentration, to the consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional information on the renewed federal government contract.
Cost of Revenue
Total cost of revenue for the three months ended
September 30, 2022was $169.6 millioncompared to $159.0 millionfor the three months ended September 30, 2021, an increase of $10.6 millionor 6.7%. On a percentage of revenue basis, cost of revenue increased from 60.6% of revenue in 2021 to 62.5% in 2022. The increase as a percentage of revenue was driven primarily from the federal government contract renewal and lower utilization of our medical equipment post-COVID offset partially by lower depreciation expense of approximately $7.0 million. Gross Margin
Total gross margin for the three months ended
total revenue, for the three months ended
Table of Contents
million or 1.8%. The decrease in gross margin as a percentage of revenue was
primarily impacted by the federal government contract renewal and lower
utilization of our medical equipment.
Selling, General and Administrative Expense
Selling, general and administrative expense increased
$11.0 million, or 14.6%, to $86.0 millionfor the three months ended September 30, 2022as compared to the same period of 2021. Selling, general and administrative expense as a percentage of total revenue was 31.7% and 28.6% for the three months ended September 30, 2022and 2021, respectively. The increase was primarily due to the increases in costs and amortization expense related to the acquisition of Sizewise in 2021.
Interest expense increased
$1.8 millionto $12.5 millionfor the three months ended September 30, 2022as compared to the same period of 2021 primarily due to rising interest rates partially offset by lower debt balances.
Tax Indemnification Expense
Tax indemnification expense increased
$11.9 millionfor the three months ended September 30, 2022as compared to the same period of 2021 due solely to non-recurring expense incurred from the release of the indemnification asset related to the Sizewise Acquisition.
Income taxes were a benefit of
$10.9 millionand expense of $7.9 millionfor the three months ended September 30, 2022and 2021, respectively. Income tax benefit increased $18.8 millionfor the three months ended September 30, 2022as compared to the same period of 2021. The increase is due to the release of the reserve and associated interest and penalties accrual related to the Sizewise Acquisition of $11.9 millionand a reduction in pretax income.
Consolidated Net Income
Consolidated net income decreased
quarter of 2022 as compared to the same period of 2021. The decrease in net
income was impacted primarily by lower margins.
Consolidated Results of Operations for the nine months ended
compared to the nine months ended
The following table presents revenue by service solution for the nine months
Nine Months Ended September 30, Change (in thousands) 2022 2021 % Equipment Solutions
$ 331,810 $ 232,31942.8 % Clinical Engineering 310,850 287,860 8.0 Onsite Managed Services 196,953 228,033 (13.6) Total revenue $ 839,613 $ 748,21212.2 % 24
Table of Contents
Total revenue for the nine months ended
September 30, 2022was $839.6 million, compared to $748.2 millionfor the nine months ended September 30, 2021, an increase of $91.4 millionor 12.2%. Equipment Solutions revenue increased 42.8% primarily driven by the an increase in revenue of approximately $120.0 millionrelated to the Sizewise Acquisition, which was partially offset by lower utilization of our medical equipment post-COVID. Clinical Engineering revenue increased 8.0% primarily due to new business growth offset partially by lower federal government revenue. Finally, our Onsite Managed Services revenue decreased 13.6% primarily driven by lower revenue associated with the renewal of the federal government contract.
Cost of Revenue
Total cost of revenue for the nine months ended
September 30, 2022was $516.2 millioncompared to $444.3 millionfor the nine months ended September 30, 2021, an increase of $71.9 millionor 16.2%. On a percentage of revenue basis, cost of revenue increased from 59.4% of revenue in 2021 to 61.5% in 2022. The increase as a percentage of revenue was driven primarily by the federal government contract renewal and lower utilization of our medical equipment post-COVID partially offset by lower depreciation expense of approximately $15.0 million.
Total gross margin for the nine months ended
total revenue, for the nine months ended
was primarily impacted by the federal government contract renewal, lower
utilization of our equipment, and the acquisitions completed in the prior year.
Selling, General and Administrative Expense
Selling, general and administrative expense increased
$29.0 million, or 12.9%, to $254.3 millionfor the nine months ended September 30, 2022as compared to the same period of 2021. Selling, general and administrative expense as a percentage of total revenue was 30.3% and 30.1% for the nine months ended September 30, 2022and 2021, respectively. The increase was primarily due to the increases in costs and amortization expense related to the acquisition of Northfieldand Sizewise in 2021, partially offset by the elimination of the management services agreement with our majority owner.
Loss on Extinguishment of Debt
Loss on extinguishment of debt for the nine months ended
September 30, 2022was $1.4 million, compared to $10.1 millionfor the nine months ended September 30, 2021, a decrease of $8.7 millionor 86.0%. Loss on extinguishment of debt for the nine months ended September 30, 2022consisted of the write-off of unamortized debt discount related to the paydown of our term loan. The loss in 2021 was the result of the write-off of the unamortized deferred financing cost and debt discount along with an additional 1% redemption price related to the repayment of our Second Lien Term Loan.
Interest expense decreased
$6.0 millionto $34.5 millionfor the nine months ended September 30, 2022as compared to the same period of 2021 primarily due to the repayment of our Second Lien Term Loan from the proceeds of the IPO in the second quarter of 2021 as well as the prepayment of $119.1 millionon our First Lien Term Loan during the first six months of 2022, partially offset by rising interest rates. Tax Indemnification Expense Tax indemnification expense increased $11.9 millionfor the nine months ended September 30, 2022as compared to the same period of 2021 due solely to non-recurring expense incurred from the release of the indemnification asset related to the Sizewise Acquisition.
Income taxes were a benefit of
$5.7 millionand expense of $13.8 millionfor the nine months ended September 30, 2022and 2021, respectively. The income tax benefit increased $19.5 millionprimarily due to the release of the reserve and associated interest and penalties accrual related to the Sizewise Acquisition of $11.9 millionand benefit from stock options and stock compensation offset by the effect of pre-tax income from operations plus addbacks for non-deductible expenses related to executive compensation disallowed under Internal Revenue Code Section 162(m). 25
Table of Contents
Consolidated Net Income
Consolidated net income increased
increase in net income was impacted by the 12.2% increase in revenue.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") was
$225.2and $245.8 millionfor the nine months ended September 30, 2022and 2021, respectively. Adjusted EBITDA for the nine months ended September 30, 2022was lower than in 2021 primarily due to the reduction in gross margin. EBITDA is defined as earnings attributable to Agiliti, Inc.before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding non-cash share-based compensation expense, management fees and other non-recurring gains, expenses or losses, transaction costs, remeasurement of tax receivable agreement and loss on extinguishment of debt. In addition to using EBITDA and Adjusted EBITDA internally as measures of operational performance, we disclose them externally to assist analysts, investors and lenders in their comparisons of operational performance, valuation and debt capacity across companies with differing capital, tax and legal structures. We believe the investment community frequently uses EBITDA and Adjusted EBITDA in the evaluation of similarly situated companies. Adjusted EBITDA is also used by the Company as a factor to determine the total amount of incentive compensation to be awarded to executive officers and other employees. EBITDA and Adjusted EBITDA, however, are not measures of financial performance under GAAP and should not be considered as alternatives to, or more meaningful than, net income as measures of operating performance or to cash flows from operating, investing or financing activities or as measures of liquidity. Since EBITDA and Adjusted EBITDA are not measures determined in accordance with GAAP and are thus susceptible to varying interpretations and calculations, EBITDA and Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. EBITDA and Adjusted EBITDA do not represent amounts of funds that are available for management's discretionary use. EBITDA and Adjusted EBITDA presented below may not be the same as EBITDA and Adjusted EBITDA calculations as defined in the First Lien Credit Facilities. A reconciliation of net income attributable to Agiliti, Inc.to Adjusted EBITDA is included below: Nine Months Ended September 30, (in thousands) 2022 2021
Net income attributable to
$ 14,023Interest expense 34,456
Income tax (benefit) expense (1) (5,672) 13,832 Depreciation and amortization 133,711 138,676 EBITDA 189,336 206,975 Non-cash share-based compensation expense 15,066
Management and other expenses (2) 13,877
Transaction costs (3) 5,465
Tax receivable agreement remeasurement -
Loss on extinguishment of debt (4) 1,418 10,116 Adjusted EBITDA
$ 225,162 $ 245,826Other Financial Data: Net cash provided by operating activities $ 161,901 $ 138,413Net cash (used in) investing activities (58,298)
Net cash provided by (used in) financing activities (145,717)
(1) Income tax (benefit) expense includes the
$11.9 milliontax benefit due to the release of the reserve and associated interest and penalties related to the Sizewise Acquisition. (2) Management and other expenses includes (a) tax indemnification expense related to the Sizewise Acquisition; (b) management fees and buyout termination fee under the Advisory Services Agreement, which was terminated in connection with the initial public offering in 2021; and (c) non-recurring expenses. 26
Table of Contents
(3) Transaction costs represent costs associated with potential and completed mergers and acquisitions and are primarily related to the
Northfieldand Sizewise acquisitions. (4) Loss on extinguishment of debt for the nine months ended September 30, 2022consists of the write-off of the unamortized debt discount related to the partial prepayment of the First Lien Term Loan. Loss on extinguishment of debt for the nine months ended September 30, 2021consists of the write-off of the unamortized deferred financing costs and debt discount and an additional 1% redemption price related to the repayment of our Second Lien Term Loan and the write-off of the unamortized deferred financing cost related to the amendment of our Revolving Credit Facility.
Quarterly operating results are typically affected by seasonal factors.
Historically, our first and fourth quarters are the strongest, reflecting
increased customer utilization during the fall and winter months. However,
COVID-19 has impacted the seasonality of our business.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are cash flows from operating activities and borrowings under our Revolving Credit Facility, which provides for loans in an amount of up to
$250.0 million. Our principal uses of liquidity are to fund capital expenditures related to purchases of medical equipment, provide working capital, meet debt service requirements and finance our strategic plans. We believe our existing balances of cash and cash equivalents, our currently anticipated operating cash flows and availability under our Revolving Credit Facility will be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months. If new financing is necessary, there can be no assurance that any such financing would be available on commercially acceptable terms, or at all. To date, we have not experienced difficulty accessing the credit market; however, future volatility in the credit market may increase costs associated with issuing debt instruments or affect our ability to access those markets. In addition, it is possible that our ability to access the credit market could be limited at a time when we would like, or need to do so, which could have an adverse impact on our ability to refinance debt and/or react to changing economic and business conditions. Net cash provided by operating activities was $161.9and $138.4 millionfor the nine months ended September 30, 2022and 2021, respectively. Net cash provided by operating activities during 2022 was favorably impacted by the timing of collections on accounts receivables. Net cash used in investing activities was $58.3and $481.5 millionfor the nine months ended September 30, 2022and 2021, respectively. The decrease in net cash used in investing activities was primarily due to the Northfield Acquisition completed on March 19, 2021. Net cash used in financing activities was $145.7 millionfor the nine months ended September 30, 2022compared to net cash provided by financing activities of $260.3 millionfor the nine months ended September 30, 2021. The change in net cash used in financing activities was primarily due to proceeds from the issuance of common stock from the IPO in 2021. In 2022, the change in net cash used in financing was driven by prepayment of the First Lien Term Loan of $119.1 million.
RECENT ACCOUNTING PRONOUNCEMENT
See Note 2, Recent Accounting Pronouncements, to the consolidated financial
statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.
OFF-BALANCE SHEET ARRANGEMENTS
As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities ("SPEs"), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of
September 30, 2022, we did not have any unconsolidated SPEs.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward- 27
Table of Contents
looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate", "estimate", "expect", "project", "plan", "intend", "believe", "may", "will", "should", "can have", "likely" and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including: •effects from political and policy changes that could limit our growth opportunities; •effects from the continued COVID-19 pandemic on our business and the economy; •our potential inability to maintain existing contracts or contract terms with, or enter into new contracts with, our customers; •cancellations by or disputes with customers; •our potential failure to maintain our reputation, including by protecting intellectual property; •effects of a global economic downturn on our customers and suppliers; •a decrease in our customers' patient census or services; •competitive practices by our competitors that could cause us to lose market share, reduce our prices or increase our expenditures; •the bundling of products and services by our competitors, some of which we do not offer; •consolidation in the healthcare industry, which may lead to a reduction in the prices we charge; •adverse developments with supplier relationships; •the potential inability to change the manner in which healthcare providers traditionally procure medical equipment; •our potential inability to attract and retain key personnel; •our potential inability to make attractive acquisitions or successfully integrate acquire businesses; •an increase in expenses related to our pension plan; •the fluctuation of our cash flow; •credit risks relating to home care providers and nursing homes; •potential claims related to the medical equipment that we outsource and service; •the incurrence of costs that we cannot pass through to our customers; •a failure of our management information systems; •limitations inherent in all internal controls systems over financial reporting; •social unrest; •our failure to keep up with technological changes; •our failure to coordinate the management of our equipment; •challenges to our tax positions or changes in taxation laws; •litigation that may be costly to defend; •uncertainty surrounding healthcare reform initiatives; •federal privacy laws that may subject us to more stringent penalties; •our relationship with healthcare facilities and marketing practices that are subject to federal Anti-Kickback Statute and similar state laws; •our contracts with the federal government that subject us to additional oversight; •the impact of changes in third-party payor reimbursement for healthcare items and services on our customers' ability to pay for our services; •the highly regulated environment our customers operate in; and •potential recall or obsolescence of our large fleet of medical equipment. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q and elsewhere in our filings with the
SEC. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SECfilings and public communications. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties. We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to 28
Table of Contents
update or revise any forward-looking statement as a result of new information,
future events or otherwise, except as otherwise required by law.
© Edgar Online, source