STRYKER CORP (SYK) Risk Factors

ITEM 1A. RISK FACTORS.

Our operations and financial results are subject to various risks

and uncertainties discussed below that could materially and

adversely affect our business, cash flows, financial condition and

results of operations. Additional risks and uncertainties not

currently known to us or that we currently deem not to be material

or that could apply to any company may also materially and

adversely affect our business, cash flows, financial condition or

results of operations. If any of the risks discussed below or other

risks actually occur or continue to occur, our business, financial

condition, operating results or cash flows could be materially

adversely affected. Accordingly, you should carefully consider the

following risk factors, as well as other information contained in or

incorporated by reference in this report.

BUSINESS AND OPERATIONAL RISKS

We use a variety of raw materials, components, devices and

third-party services in our global supply chains, production

and distribution processes; significant shortages, price

increases or unavailability of third-party services have in the

past increased, and could in the future increase, our

operating costs and could require significant capital

expenditures or adversely impact the competitive position of

our products: Our reliance on certain suppliers to secure raw

materials, components and finished devices, and on certain third-

party service providers, such as sterilization service providers,

exposes us to the risk of product shortages and unanticipated

increases in prices, whether due to inflationary pressure,

regulatory changes, litigation exposure, tariffs, geopolitical

tensions or otherwise. For example, in the past we have

experienced limited product availability due to an electronic

component shortage in certain product lines. If a similar shortage

occurs in the future with respect to any raw materials or

components, we may not be able to obtain them from our

suppliers on a timely basis, or at all, or identify alternative

suppliers. In addition, several raw materials, components,

finished devices and services are procured from a sole source

due to, among other things, the quality considerations, unique

intellectual property considerations or constraints associated with

regulatory requirements. If sole-source suppliers or service

providers are unable or unwilling to deliver these materials or

services as a result of financial difficulties, business disruptions,

acquisition by a third party, natural disasters, embargoes, tariffs

or otherwise, we may not be able to manufacture or have

available one or more products during such period of

unavailability and our business could suffer, possibly materially.

In certain cases, we may not be able to establish additional or

replacement suppliers for such materials or service providers for

such services in a timely or cost-effective manner, often as a

result of FDA and other regulations that require, among other

things, validation of materials, components and services prior to

their use in or with our products. In certain instances we have

been unable to meet demand due to supply chain challenges,

which has led to loss of sales. Although the impacts have not

been material to date, an inability to meet demand due to supply

chain challenges in the future could materially adversely impact

our reputation, the competitive position of our products and our

business. In addition, recently enacted tariffs by the United States

government and retaliatory measures by other governments

could adversely impact our supply chain or the availability of

certain components. Any of the foregoing risks could have a

material adverse impact on our profitability and results of

operations.

In addition, in recent years, the market has experienced

inflationary pressures in part due to global supply chain

disruptions, labor shortages and other impacts following the

COVID-19 pandemic. Inflation in the United States and in many

of the countries where we conduct business has resulted in, and

may in the future result in, high interest rates and increased

capital, energy, shipping and labor costs, weakening or

strengthening exchange rates against the United States Dollar

and other similar effects. We have continued to experience, and

may in the future experience, inflationary increases in

manufacturing costs and operating expenses, as well as negative

impacts from weakening or strengthening exchange rates against

the United States Dollar. Although we have been able to pass

certain cost increases on to our customers, we have not been

able to pass along all cost increases and we cannot guarantee

that we will be able to do so in the future, including in connection

with proposed or enacted tariffs. Inflation, high interest rates,

interest rate volatility or proposed or enacted tariffs may also

cause our customers to reduce or delay orders for our products

and services. Any of the foregoing could have a material adverse

impact on our sales, profitability and results of operations.

We are subject to pricing pressures as a result of cost

containment measures in the United States and other

countries and other factors, including changes in

reimbursement practices and coverage policies and third-

party payor cost containment measures: Initiatives to limit the

growth of general healthcare expenses and hospital costs are

ongoing and gaining increased attention in the markets in which

we do business. These initiatives are sponsored by government

agencies, legislative bodies and the private sector and include

price regulation and competitive pricing. For example, China has

implemented a volume-based procurement process designed to

decrease prices for medical devices and other products. Pricing

pressure has also increased due to pressures on healthcare

budgets, continued consolidation among healthcare providers,

trends toward managed care, the shift toward governments

becoming the primary payers of healthcare expenses, reduction

in coverage or reimbursement levels and medical procedure

volumes and government laws and regulations relating to sales

and promotion, reimbursement and pricing generally. Coverage

policies and reimbursement levels can vary across the payer

community globally, regionally, and locally, and may affect which

products customers purchase, the market acceptance rate for

new technologies and the prices customers are willing to pay for

those products in a particular jurisdiction. Furthermore, any

changes to the coverage or reimbursement landscape, or

adverse decisions relating to our products by administrators of

these systems could significantly reduce reimbursement for

procedures using our products or result in denial of

reimbursement for those products, which could adversely affect

customer demand, or the price customers are willing to pay for

such products. Public and private payers have challenged, and

are expected to continue to challenge, prices charged for medical

products and services. Such downward pricing pressures from

any or all of these payers may result in an adverse effect on our

business, results of operations, financial condition and cash

flows. We have also reduced prices for certain products due to

increased competition and if we further reduce prices, we could

become less profitable. In addition, due to healthcare industry

consolidation in recent years, competition to provide goods and

services to industry participants has become, and may continue

to become, more intense, and this consolidation has produced,

and may continue to produce, larger enterprises with more

bargaining power. Pricing pressures related to any of the

foregoing or other factors have impacted and could in the future

impact our results of operations and profitability.

We operate in a highly competitive industry in which

competition and the regulatory burden in the development

and improvement of new and existing products is

significant: The markets in which we compete are highly

competitive, and a significant element of our strategy is to

increase revenue growth by focusing on innovation, new product

development and improvement of existing products, including

connectivity solutions. New business models, products and

surgical procedures, as well as improvements to existing

products, are introduced on an ongoing basis and our present or

future products could be rendered obsolete or uneconomical by

internal or external technological advances, including by our

existing competitors and new market entrants, which could

adversely impact demand for certain of our existing products. The

success of our products and services depends on, among other

things, our ability to properly identify customer needs and predict

future needs, including connectivity solutions; innovate and

develop new technologies, services and applications at an

accelerated pace; and appropriately allocate our research and

development spending to products and services with higher

growth. Our existing competitors and new market entrants may

respond more quickly to or integrate new or emerging

technologies such as robotics, artificial intelligence (AI) and

machine learning in their product offerings, undertake more

extensive marketing campaigns, have greater access to clinical

information to support ongoing product position in the market,

have greater financial, marketing and other resources or be more

successful in attracting potential customers, employees and

strategic partners. There can be no assurance that any products

now in development, or that we may seek to develop in the

future, will achieve technological feasibility, obtain regulatory

approval or gain market acceptance. If we are unable to develop

and launch new products, our ability to maintain or expand our

market position in the markets in which we participate may be

negatively impacted.

We may be unable to maintain adequate working

relationships with healthcare professionals: We work with

healthcare professionals in a transparent and responsible

manner and seek to maintain these relationships with respected

physicians and medical personnel in healthcare organizations,

such as hospitals and universities, who assist in product research

and development. We rely on these professionals to assist us in

the development and improvement of proprietary products. If we

are unable to maintain these relationships due to regulatory

restrictions, hospital access restrictions for non-patients or for

other reasons, our ability to develop, market and sell new and

improved products could be adversely affected.

We rely on indirect distribution channels and major

distributors that are independent of Stryker: In many markets

we rely on indirect distribution channels to market, distribute and

sell our products. These indirect channels often are the main

point of contact for the healthcare professionals and healthcare

organization customers who buy and use our products. Our

ability to continue to market, distribute and sell our products may

be at risk if the indirect channels become insolvent, choose to sell

competitive products, choose to stop selling medical technology,

fail to adhere to Stryker requirements or are subject to new or

additional government regulation.

We are subject to risks associated with our extensive global

operations: We develop, manufacture and distribute our products

globally. Our global operations are subject to risks and costs

related to, among other things, changes in coverage or

reimbursement levels from third-party payors in the United States

and other countries; changes in regulatory requirements (such as

the staggered phase-in period for manufacturers to comply with

the European Union Medical Device Regulation (MDR) through

December 2028); differing local product preferences and product

requirements; diminished protection of intellectual property in

some countries; tariffs and other trade protection measures, as

well as increasing localization and protectionism policies in

certain jurisdictions; international trade disputes and import or

export requirements; difficulty in staffing and managing foreign

operations; introduction of new internal business structures and

programs; political and economic instability and uncertainty;

current or potential geopolitical conflicts, such as the tensions

between China and Taiwan and the wars in Ukraine and the

Middle East, and related sanctions and other developments;

disruptions of transportation, including port closures, increased

border controls or border closures or reduced transportation

availability, due to military conflicts, a global pandemic of

contagious diseases; increased energy or transportation costs;

fluctuations in currency exchange rates and financial markets;

and increased security threats to our supply chain. For example,

the United States has recently enacted and proposed to enact

new tariffs. These developments, the perception they could

occur, or changes to the existing exemption framework may have

a material adverse effect on global economic conditions and may

significantly reduce global trade. Many of these risks are rapidly

evolving and subject to an accelerating pace of change. Our

business could be adversely impacted if we are unable to

successfully manage these and other risks of global operations in

an increasingly volatile environment. In addition, in many

countries, the laws and regulations applicable to us or our

industry are evolving, and we have in certain cases become

subject to divergent and conflicting laws and regulations across

our operations, which has increased the risks we are subject to.

We may be unable to capitalize on previous or future

acquisitions: In addition to internally developed products, we

invest in new products and technologies through acquisitions,

including our acquisition of Inari in 2025. Such investments are

inherently risky, and we cannot guarantee that any acquisition will

be successful or will not have a material unfavorable impact on

us. The risks include the activities required and resources

allocated to integrate new businesses, a slower pace of

integration than initially projected, diversion of management time

that could adversely affect management’s ability to focus on other

projects, the inability to realize the expected benefits, savings or

synergies from the acquisition, the loss of key personnel,

litigation resulting from the acquisition and exposure to

unexpected liabilities of acquired companies. Certain acquisitions

are subject to antitrust and competition laws, and antitrust

scrutiny by regulatory agencies and changes to the regulatory

approval process in the United States and foreign jurisdictions

may cause approvals to take longer than anticipated to obtain,

not be obtained at all, or contain burdensome conditions, which

may jeopardize, delay or reduce the anticipated benefits of

acquisitions to us and could impede the execution of our

business strategy. In addition, we cannot be certain that the

businesses we acquire will become or remain profitable.

We, our business partners or our third-party vendors could

experience a material failure or breach of a key information

technology system, network, process or site: We rely

extensively on information technology (IT) systems to conduct

business. In addition, we rely on networks and services, including

internet sites, cloud and software-as-a-service solutions, data

hosting and processing facilities and tools and other hardware,

software (including open-source software) and technical

applications and platforms, some of which are managed, hosted,

provided and/or used by third parties or their vendors, to assist in

conducting our business. Furthermore, numerous and evolving

cybersecurity threats have posed, and will continue to pose, risks

to the security of our IT systems, networks and product offerings,

as well as the confidentiality, availability and integrity of our data.

Emerging technologies such as generative AI may be used by

malicious actors to create more targeted phishing narratives,

spread disinformation about us or our products or otherwise

strengthen social engineering capabilities. An increasing risk of

civil unrest, political tensions, wars or other military conflicts may

also impact the cybersecurity threat risk landscape. Some of our

products, services, and information technology systems contain

or use open-source software which poses particular risks,

including potential security vulnerabilities, licensing compliance

issues and quality issues. We, our customers and third-party

hosting services have experienced, and expect to continue to

experience, security breaches of, unauthorized access to, and

disruptions of, products or systems. While such breaches,

unauthorized access and disruptions have not had a material

effect on us to date, we cannot guarantee that any future breach

or unauthorized access will not be material and any breach or

unauthorized access could impact the use of such products and

systems and the security of information stored therein. Although

we have made investments and expect to continue to make

investments seeking to address these threats, including

monitoring of networks and systems, use of AI, hiring of experts,

employee training, security policies for employees and third-party

providers and designing, developing and maintaining processes

and procedures to come into compliance with regulatory and

legal enactments such as Section 524B of the Federal Food,

Drug, and Cosmetic Act in the United States, the techniques used

in these attacks change frequently and may be difficult to detect

for periods of time and we may face difficulties in anticipating and

implementing adequate preventative measures.

When cybersecurity or other technology related incidents occur,

we follow our incident response protocols and address them in

accordance with applicable governmental regulations and other

legal requirements. Our response to these incidents and our

investments to protect our product offerings and information

technology infrastructure and data may not shield us from

significant losses and potential liability or prevent any future

interruption or breach of our systems. Moreover, given the

increasing complexity and sophistication of the techniques used

by threat actors to obtain unauthorized access or disable or

degrade systems, a cyberattack could occur and persist for an

extended period of time before being detected, and we may not

anticipate these acts or mitigate them adequately or timely, which

may compound damages before the incident is discovered or

remediated. The extent of a particular cyber incident and the

steps that we may need to take to investigate the incident may

not be immediately clear, and it may take a significant amount of

time before such investigation can be completed and full and

reliable information about the incident is known. New regulations

may require us to disclose information about a material

cybersecurity incident before it has been resolved or fully

investigated. Additionally, as threats continue to evolve and

increase, and as the regulatory environment and customer

requirements related to information security, data collection and

use, and privacy become increasingly rigorous, we may be

required to devote significant additional resources to modify and

enhance our security controls and to identify and remediate any

security vulnerabilities, which could adversely impact our net

income. In addition, a significant number of our employees

working remotely has exposed us, and may continue to expose

us, to greater risks related to cybersecurity and cyber-liability.

Hardware and software failures or delays in our key information

technology systems, networks, processes or sites could disrupt

our operations, cause the loss of confidential information or

otherwise adversely impact our business. Our systems, networks,

processes and sites may be vulnerable to damage, disruptions

and shutdown from a variety of sources, including malfunctions in

maintenance updates or security patches, design defects, the

age of the technology, network failures, modernization or other

initiatives, human acts and natural disasters. For example, some

of our information technology systems contain legacy third-party

software components for which we depend on a layered security

approach to protect against exploitation, which may not be

effective. Any such damage or disruptions could also compromise

the security of our information systems and networks. These

issues can also arise as a result of failures by, or in the software

or hardware of, third parties, including networks or service

providers, with whom we do business and over whom we have

limited or no control. Any disruption or failure of our systems,

networks, processes or sites could have a material impact on our

business and operations.

If our IT systems, networks or processes are damaged or cease

to function properly for any reason, the networks, service

providers, hardware or software we rely upon fail to function

properly, or we or one of our third-party providers suffer a loss or

disclosure of our business or stakeholder information due to any

number of causes ranging from catastrophic events or power

outages to improper data handling or security breaches or

unauthorized access and our business continuity plans do not

effectively address these failures on a timely basis, we may be

exposed to reputational, competitive and business harm as well

as litigation and regulatory action and fines, penalties and

expenses related thereto.

An inability to successfully manage the implementation of

our new commercial global enterprise resource planning

(ERP) system could adversely affect our operations and

operating results: We are in the process of implementing a new

commercial ERP system. This system will replace many of our

existing operating and financial systems. The implementation is a

major undertaking, both financially and from a management and

personnel perspective. Any material disruptions, delays or

deficiencies in the design and implementation of our new ERP

system could adversely affect our ability to process orders, ship

products, provide services and customer support, send invoices

and track payments, fulfill contractual obligations or otherwise

operate our business.

We may be unable to attract, develop and retain executives

and key employees: Our sales, technical and other key

personnel play an integral role in the development, marketing and

selling of new and existing products. Our future performance also

depends in large part on the continued services of our senior

management. If we are unable to recruit, hire, develop and retain

a talented, competitive workforce in our highly competitive

industry, or if we are unable to plan effective succession for the

future, we may not be able to meet our strategic business

objectives. Inflationary pressures, labor demand and shortages

and other macroeconomic factors have increased and could

further increase the cost of labor and could harm our ability to

recruit, hire and retain talented employees. In addition, increased

unionization could negatively impact our labor costs and ability to

create an engaging, connected culture, which could adversely

affect our ability to recruit, hire, develop and retain a talented,

competitive workforce. Further, if we are unable to maintain

competitive and equitable compensation and benefit programs,

including incentive programs which reward financial and

operational performance, our ability to recruit, hire, engage,

motivate and retain talent could be negatively affected.

Additionally, if we are unable to maintain an inclusive culture that

aligns our workforce with our mission and values, it could

adversely impact our ability to recruit, hire, develop and retain

key talent. Further, our remote and hybrid work practices, and

ability to provide flexible and alternative work arrangements may

not meet the needs or expectations of our employees, including

senior management or other key employees, which could

negatively impact our ability to attract and retain highly skilled

employees, or may harm our culture and/or decrease employee

engagement, which could adversely impact our ability to recruit,

hire, develop and retain a talented, competitive workforce.

Effective succession planning is also important to our long-term

success. Failure to ensure effective transfer of knowledge and

smooth transitions involving executives and other key employees

could hinder our strategic planning and execution. Changes in

our management team may be disruptive to our business, and

any failure to successfully integrate key new hires or promoted

employees could adversely affect our business and results of

operations. The loss of the services of any of our senior

management or other key personnel, or our inability to attract

highly qualified senior management and other key personnel,

could harm our business. Our ability to execute our business

strategy could be impaired if we are unable to replace such

persons timely. In addition, recent legal and regulatory changes

affect our ability to enforce post-termination obligations from

certain employees with respect to non-competition, non-

solicitation and protection of confidential information. This may

negatively impact our ability to retain employees and protect our

information and relationships with customers and other third

parties.

Interruption of manufacturing operations could adversely

affect our business: We and our suppliers have manufacturing

and supply sites all over the world. However, the manufacturing

of certain of our product lines is concentrated in one or more

plants or geographic regions. We have principal manufacturing

and distribution facilities in the United States in Arizona,

California, Florida, Illinois, Indiana, Michigan, Minnesota, New

Jersey, Puerto Rico, Tennessee, Texas, Utah and Washington,

and outside the United States in China, France, Germany,

Ireland, Mexico, the Netherlands, Poland, Switzerland and

Turkey. Damage to our facilities, to our suppliers’ or service

providers’ facilities, or to our central distribution centers as a

result of natural disasters, fires, explosions or otherwise, as well

as issues in our manufacturing arising from a failure to follow

specific internal protocols and procedures, compliance concerns

relating to the quality systems regulation, equipment breakdown

or malfunction, IT system failures or cybersecurity incidents,

environmental hazard incidents or changes to environmental

regulations or other factors, could adversely affect the availability

of our products. In the event of an interruption in manufacturing,

we may be unable to move quickly to alternate means of

producing and distributing affected products to meet customer

demand. In the event of a significant interruption, we may

experience lengthy delays in resuming production or distribution

of affected products due to the need for regulatory approvals, and

we may experience loss of market share, additional expense and

harm to our reputation.

Our insurance program may not be adequate to cover future

losses: We maintain third-party insurance to cover our exposure

to certain property and casualty losses and are self-insured for

claims and expenses related to other property and casualty

losses, including product liability, intellectual property

infringement and enforcement, environmental, and cybersecurity

and data privacy losses. We manage a portion of our exposure to

self-insured losses through a wholly-owned captive insurance

company. Insurance coverage limits provided by third-party

insurers and/or our captive insurance company may not be

sufficient to fully cover certain losses we may experience.

We have experienced, and may continue to experience, a

significant and unpredictable need to adjust our operations

as market demand for certain of our products has shifted

and continues to shift or as may be mandated by

governmental authorities: Some of our products are particularly

sensitive to reductions in elective medical procedures. It is not

possible to predict whether elective medical procedures will be

suspended or reduced in the future and, to the extent individuals

and customers are required to delay or cancel elective

procedures, our business, cash flows, financial condition and

results of operations could be negatively affected. Further, our

customers have experienced, and may continue to experience,

staffing shortages that may result in decreased demand for our

products, which could negatively affect our business and financial

results.

Unpredictable increases in demand for certain of our products

have exceeded in the past, and could exceed in the future, our

capacity to meet such demand timely, which could adversely

affect our customer relationships and result in negative publicity.

In this regard, the accelerated development and production of

products and services to address medical and other requirements

could increase the risk of regulatory enforcement actions, product

defects or related claims or reputational harm, among other

things.

Our use of AI and other emerging technologies could

adversely impact our business and financial results: We

have begun to deploy AI and other emerging technologies in

various facets of our operations and products and we continue to

explore further use cases. The rapid advancement of these

technologies presents opportunities for us in research,

manufacturing, commercialization, and other business

endeavors, but also entails risks, including that AI-generated

content, analyses, or recommendations we utilize could be

deficient, that our competitors may more quickly or effectively

adopt AI capabilities, or that our use of AI or other emerging

technologies increases regulatory, cybersecurity and other

significant risks. In addition, any disruption or failure in the AI

functionality we incorporate into our business activities, products

or services could adversely impact our business or result in

delays or errors in our product offerings. The legal and regulatory

landscape surrounding AI technologies is rapidly evolving and

uncertain, including in the areas of intellectual property,

cybersecurity and privacy and data protection. Compliance with

new or changing laws, regulations or industry standards relating

to AI may impose significant costs on us and limit our ability to

effectively develop, deploy or use AI technologies. Furthermore, if

we are unable to effectively manage the use of AI technologies

by our employees and service providers, our confidential

information, intellectual property and reputation could be put at

risk.  Failure to appropriately respond to this evolving landscape

may result in reputational, competitive and business harm as well

as litigation and regulatory action and fines, penalties and

expenses related thereto.

Pandemics and public health emergencies, and the fear

thereof, have in the past materially adversely affected and

could in the future materially adversely affect, our

operations, supply chain, manufacturing, product

distribution, customers and other business activities:

Pandemics and public health emergencies, and the fear thereof,

have in the past materially adversely affected and could in the

future materially adversely affect, our operations, supply chain,

manufacturing, product distribution, customers and other

business activities:

In connection with prior pandemics, governmental authorities and

private enterprises implemented, and may in the future

implement in connection with another pandemic or public health

emergency (or in response to the fear thereof), measures, such

as travel bans and restrictions, quarantines, shelter-in-place

orders and shutdowns. Our customers, global suppliers,

distributors and manufacturing facilities have in the past been,

and could in the future be, materially affected by restrictive

measures implemented in response to a pandemic or public

health emergency, which has in the past caused and could in the

future cause them to be unable to hire and retain employees,

distribute or use our products or provide required services. We

have as a result experienced, and could in the future experience,

delays in, or the suspension of, our manufacturing operations,

sales activities, research and product development activities,

regulatory work streams, clinical development programs and

other important commercial functions, which may result in our

inability to satisfy consumer demand for our products in a timely

manner or at all and which could harm our reputation, future

sales and profitability. The extent of any future pandemic or

public health emergency’s effect on our business and industry will

depend on, among other things, the severity of the disease, the

successful development, distribution and acceptance of vaccines

for diseases, future resurgences and/or the spread of disease

variants, all of which are uncertain and difficult to predict. The

COVID-19 pandemic materially impacted us, and any future

pandemic or public health emergency could materially impact us

and would heighten many of the other risks described in this

report.

LEGAL AND REGULATORY RISKS

Current economic and political conditions make tax rules in

jurisdictions subject to significant change: Our future results

of operations could be affected by changes in the effective tax

rate as a result of changes in tax laws, regulations and judicial

rulings. We are continuing to evaluate the impact of tax reform in

the countries in which we operate as new guidance is published

and new regulations are adopted. In addition, further changes in

the tax laws could arise, including as a result of the base erosion

and profit shifting project undertaken by the Organisation for

Economic Cooperation and Development (OECD). The OECD,

which represents a coalition of member countries, has put forth

two proposed frameworks that revise the existing profit allocation

and nexus rules (Pillar 1) and ensure a minimal level of taxation

(Pillar 2), respectively, and several countries enacted tax

legislation based on these frameworks. In January 2026 the

OECD released Administrative Guidance containing the Side-by-

Side system (SbS System) and introduced two new Pillar 2 safe

harbors for multinationals headquartered in jurisdictions including

the United States with eligible tax systems. The safe harbors

must now be legislated domestically by each country with

enacted Pillar 2 legislation impacted by the new OECD

Administrative Guidance. These tax law changes and any

additional contemplated tax law changes could impact tax

expense in future periods.

We could be negatively impacted by future changes in the

allocation of income to each of the income tax jurisdictions

in which we operate: We operate in multiple income tax

jurisdictions both in the United States and internationally.

Accordingly, our management must determine the appropriate

allocation of income to each jurisdiction based on current

interpretations of complex income tax regulations. Income tax

authorities regularly perform audits of our income tax filings.

Income tax audits associated with the allocation of income and

other complex issues, including inventory transfer pricing and

cost sharing, product royalty and foreign branch arrangements,

may require an extended period to resolve and may result in

significant income tax adjustments including the assessment of

additional income taxes, interest and penalties. For example, we

received a final audit report and assessments from the German

Federal Central Tax Office ("FCTO") related to audits of tax years

2010 through 2017. Although we intend to defend our filing

positions through the FCTO independent appeals process and, if

necessary, litigation, there can be no assurance that we will be

successful. If the resolution of this matter results in additional

German income taxes, we intend to seek associated foreign tax

credits, but such credits may not be available on a timely basis or

at all, or may not fully offset any additional liability. Any such

outcome could materially adversely affect our business, financial

condition and results of operations. See Note 11 to our

Consolidated Financial Statements for more information.

The impact of healthcare reform legislation on our business

remains uncertain: Several markets where we sell our products

are making efforts to expand access to healthcare or health

insurance coverage while decreasing costs. These efforts may

have a direct or unintended negative impact on access to medical

technology and could have a significant effect on our business.

Both in the United States and internationally, governmental

authorities may make legislative or administrative reforms to

existing reimbursement programs, make adverse decisions

relating to our products’ coverage or reimbursement, or make

changes to patient access to healthcare, all of which could

adversely impact the demand for and usage of our products or

the prices that our customers are willing to pay for them. We

cannot predict what healthcare programs and regulations could

ultimately be implemented at the federal or state level or the

effect that any future legislation or regulation in the United States

may have on our business. Similarly, we cannot predict the

impact that healthcare reform legislation in other countries where

we sell our products may have on our business.

We are subject to extensive governmental regulation relating

to the classification, manufacturing, sterilization, licensing,

labeling, marketing and sale of our products: The

classification, manufacturing, sterilization, licensing, labeling,

marketing and sale of our products are subject to extensive and

evolving regulations and rigorous regulatory enforcement by the

FDA, state governments, European Union and other

governmental authorities in the United States and internationally.

These governmental authorities may impose additional

requirements or limits on the methods, procedures or agents we

use to manufacture and sterilize our products, which could have

a negative impact on our business. For example, governmental

authorities in the United States and internationally have or are

considering adopting regulations on the use of per- and

polyfluoroalkyl substances. In addition, the process of obtaining

licenses, regulatory clearances and/or approvals to market and

sell our products can be costly and time consuming and the

clearances and/or approvals might not be granted timely. We

have ongoing responsibilities under the laws and regulations

applicable to the manufacturing of products within our facilities

and those contracted by third parties that are subject to periodic

inspections by the FDA, state Boards of Pharmacy and other

governmental authorities to determine compliance with the quality

system, medical device reporting regulations and other

requirements. We may also be subject to legal obligations in

some countries that require disclosure or sharing of proprietary

information. We incur significant costs to comply with regulations,

including the MDR. If we fail to comply with applicable regulatory

requirements, we may be subject to a range of sanctions,

including substantial fines, warning letters that require corrective

action, product seizures, recalls, import restrictions, the

suspension of product manufacturing or sales, revocation of

approvals, exclusion from future participation in government

healthcare programs, substantial fines and criminal prosecution.

We are subject to federal, state and foreign healthcare

regulations, including anti-bribery, anti-corruption, anti-

kickback and false claims laws, globally and could face

substantial penalties if we fail to comply with such

regulations and laws: The relationships that we, and third

parties that market and/or sell our products, have with healthcare

professionals, such as physicians, hospitals, healthcare

organizations and others, are subject to scrutiny under various

state and federal laws often referred to collectively as healthcare

fraud and abuse laws. In addition, the United States and foreign

government regulators have increased the enforcement of the

Foreign Corrupt Practices Act (FCPA) and other anti-bribery and

anti-kickback laws. We also must comply with a variety of other

laws that impose extensive tracking and reporting related to all

transfers of value provided to certain healthcare professionals

and others. These laws and regulations are broad in scope and

are subject to evolving interpretation and we have in the past

been, and in the future could be, required to incur substantial

costs to investigate, audit and monitor compliance or to alter our

practices. Violations or alleged violations of these laws have in

the past resulted and could in the future result in investigations,

litigation or government proceedings, and we have been and may

in the future be subject to criminal or civil penalties and

sanctions, including substantial fines, imprisonment of current or

former employees and exclusion from participation in

governmental healthcare programs. For example, in 2013 and

2018 we settled claims brought by the SEC related to the FCPA.

Pursuant to these settlements, we paid fines and penalties and

retained an independent compliance consultant. We continue to

implement recommendations that resulted from the independent

compliance consultant’s review of our commercial practices to

enhance our commercial business practices. In addition, as

disclosed in our prior filings, we were previously contacted by the

SEC, the United States Department of Justice, and other

regulatory authorities involving whether certain business activities

in certain foreign countries violated provisions of the FCPA and

analogous local laws. We have completed our investigation into

these matters. On April 1, 2025, and December 16, 2025, we

were informed by the DOJ and SEC, respectively, that each

agency had closed its inquiry. We are currently responding to

inquiries by certain foreign authorities arising in the normal

course of business, however, we do not expect these matters to

have a material effect, if any, on our financial statements.

We are subject to privacy, data protection and data security

regulations and laws globally, and could face substantial

penalties if we fail to comply with such regulations and laws:

We are subject to a variety of laws and regulations globally

regarding privacy, data protection and data security, including

those related to the collection, storage, handling, use, disclosure,

transfer and security of personally identifiable healthcare

information and the development and use of AI in sharing certain

data. For example, in the United States, privacy and security

regulations under the Health Insurance Portability and

Accountability Act of 1996, including the expanded requirements

under the Health Information Technology for Economic and

Clinical Health Act of 2009, establish comprehensive standards

with respect to the use and disclosure of protected health

information (PHI), by covered entities, in addition to setting

standards to protect the confidentiality, integrity and security of

PHI. Regulators are also imposing new data privacy and security

requirements, including new and greater monetary fines for

privacy violations. For example, the European Union’s General

Data Protection Regulation (GDPR) established rules regarding

the handling of personal data. Non-compliance with the GDPR

may result in monetary penalties of up to 4% of total company

revenue. Various government authorities within the United States

and around the world have imposed or are considering similar

types of laws and regulations, data breach reporting and

penalties for non-compliance or unauthorized disclosure and

increasing security requirements. These laws and regulations are

broad in scope and are subject to evolving interpretation and

enforcement and we have in the past been, and in the future

could be, required to incur substantial costs to monitor

compliance or to alter our practices. As new privacy-related laws

and AI-related regulations are implemented, the time and

resources needed for us to comply with such laws and

regulations, as well as our potential liability for non-compliance

and reporting obligations in the case of data breaches, have

increased and may further increase.

We may be adversely affected by product liability claims,

unfavorable court decisions or legal settlements: We are

exposed to potential product liability risks inherent in the design,

manufacture and marketing of medical devices, many of which

are implanted in the human body for long periods of time or

indefinitely. We are currently defendants in a number of product

liability matters, including those relating to our Rejuvenate and

ABGII Modular-Neck hip stems, LFIT Anatomic CoCr V40

Femoral Heads and the product liability lawsuits and claims

relating to Wright Medical Group N.V. (Wright) legacy hip

products discussed in Note 7 to our Consolidated Financial

Statements. These matters are subject to uncertainties and

outcomes are not predictable. Further, the European

Representative Actions Directive (the Collective Redress

Directive) mandates a class action regime in each EU member

state to facilitate domestic and cross-border class actions in a

wide range of areas, including product liability claims with

medical devices. The European Product Liability Directive was

revised in 2024 and will become fully adopted into each member

state’s national laws by December 9, 2026. The revised Product

Liability Directive and Collective Redress Directive exposes us to

additional litigation risks and could result in significant legal

expenses. In addition, we may incur significant legal expenses or

reputational damage for product liability claims regardless of

whether we are found to be liable.

Intellectual property litigation and infringement claims could

cause us to incur significant expenses or prevent us from

selling certain of our products: The medical device industry is

characterized by extensive intellectual property litigation and,

from time to time, we are the subject of claims of infringement or

misappropriation. Regardless of the outcome, such claims are

expensive to defend and divert management and operating

personnel from other business issues. A successful claim or

claims of patent or other intellectual property infringement against

us could result in payment of significant monetary damages and/

or royalty payments or negatively impact our ability to sell current

or future products in the affected category.

Dependence on intellectual proprietary rights and failing to

protect such rights or to be successful in litigation related to

such rights may impact offerings in our product portfolios:

Our long-term success largely depends on our ability to market

technologically competitive products. If we fail to obtain or

maintain adequate intellectual property protection, it could allow

others to sell products that directly compete with proprietary

features in our product portfolio. Also, our issued patents may be

subject to claims challenging their validity and scope and raising

other issues. In addition, currently pending or future patent

applications may not result in issued patents and the expiration of

patents may lead to a loss of exclusive rights and/or increased

competition.

MARKET RISKS

We have exposure to exchange rate fluctuations on cross border

transactions and translation of local currency results into United

States Dollars: We report our financial results in United States

Dollars and approximately 24% of our net sales are denominated

in foreign currencies, including the Australian Dollar, British

Pound, Canadian Dollar, Euro and Japanese Yen. Cross border

transactions with external parties, financing transactions in

currencies other than the United States Dollar and intercompany

relationships result in increased exposure to foreign currency

exchange effects. While we use derivative instruments to

manage the impact of currency exchange, our hedging strategies

may not be successful, and our unhedged exposures continue to

be subject to currency fluctuations. In addition, the weakening or

strengthening of the United States Dollar results in favorable or

unfavorable translation effects when the results of our foreign

locations are translated into United States Dollars. Currency

exchange rates continue to be volatile, and these currency

fluctuations have affected, and may continue to affect, our results

of operations.

Additional capital that we may require in the future may not

be available to us or may only be available to us on

unfavorable terms, which could negatively affect our

liquidity: Our future capital requirements will depend on many

factors, including operating requirements, current and future

acquisitions and the need to refinance existing debt. Our ability to

issue additional debt or enter into other financing arrangements

on acceptable terms could be adversely affected by our debt

levels, unfavorable changes in economic conditions or

uncertainties that affect the capital markets. Changes in credit

ratings issued by nationally recognized credit rating agencies

could also adversely affect our access to and cost of financing.

Higher borrowing costs or the inability to access capital markets

could adversely affect our ability to support future growth and

operating requirements. In addition, we have experienced, and

could in the future experience, loss of sales and profits due to

delayed payments or insolvency of healthcare professionals,

hospitals and other customers and suppliers facing liquidity

issues due to the current macroeconomic environment, type and

number of conditions being treated or for other reasons. As a

result, we may be compelled to take additional measures to

preserve our cash flow, including through the reduction of

operating expenses or suspension of dividend payments.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE RISKS

We could be negatively impacted by evolving requirements

and expectations related to corporate responsibility and

sustainability-related matters, including those related to

climate: Governments, investors, customers, employees and

other stakeholders have been focused on corporate responsibility

practices and disclosures, and expectations in this area continue

to rapidly evolve, including in diverging directions. On occasion,

we announce new initiatives and make disclosures, including

goals, relating to various corporate responsibility matters.

Implementation of these initiatives involves risks and

uncertainties, requires investments and depends in part on third-

party performance or data that is outside our control. We cannot

guarantee that we will achieve our announced corporate

responsibility initiatives. If we fail or are perceived to have failed

to achieve previously announced initiatives or goals, comply with

corporate responsibility laws and regulations, meet evolving

expectations or accurately disclose our progress, we could face

legal and regulatory proceedings and our reputation, business,

financial condition and results of operations could be adversely

impacted. Furthermore, there is no guarantee that we will satisfy

the evolving and diverging expectations of our various

stakeholders on corporate responsibility matters, and a failure to

satisfy the expectations of any key stakeholder group could result

in, among other things, reduced demand for our products,

reduced profits, increased investigations and litigation and an

increased risk of reputational damage. If we are unable to satisfy

evolving and diverging expectations on these matters, certain

investors and other stakeholders may conclude that our policies

and/or actions with respect to corporate responsibility matters are

inadequate or undesirable.

Physical weather events, as well as legal, regulatory or

market measures related to environmental, climate and other

sustainability matters, could adversely affect our operations

and operating results: Weather-related events and evolving

environmental conditions may result in operational, supply chain

and infrastructure disruptions. Such events, including hurricanes,

tornadoes, wildfires, droughts, extreme temperatures, flooding,

and other natural disasters, could damage our facilities and

products, or those of our suppliers, disrupt manufacturing and

distribution, reduce workforce availability, increase raw material

and component costs, increase liabilities, or adversely affect the

operations of hospitals, medical care facilities and other

customers, any of which could negatively impact our results of

operations. In addition, sustainability-related matters continue to

be the subject of regulatory, legal and market attention.

Regulatory requirements and enforcement approaches may

evolve, differ by jurisdiction, or change over time, including

through the adoption, modification, interpretation, or enforcement

of environmental laws and regulations. Such developments may

increase compliance costs, create uncertainty, affect raw material

availability and sourcing, require operational changes, or

otherwise adversely affect our manufacturing, supply chain,

distribution activities or operating results.