Zimmer Biomet (NYSE: ZBH) details global ortho business, debt and risks
Rhea-AI Filing Summary
Zimmer Biomet Holdings, Inc. files its annual report describing a global orthopedic and musculoskeletal business built around knees, hips, S.E.T. (sports medicine, extremities, trauma, CMFT) and a growing digital and robotic ZBEdge platform. The company sells mainly through consignment, which represented about 85% of 2025 net sales, with no single customer over 2%.
Operations are organized into Americas, EMEA and Asia Pacific, with the U.S. dominating Americas and Japan leading Asia Pacific. As of February 10, 2026, there were 195,652,004 common shares outstanding, and non‑affiliate share value was about $18.0 billion as of June 30, 2025.
Zimmer Biomet highlights extensive R&D with roughly 2,000 employees, heavy regulation from FDA, EU MDR and other regimes, and growing scrutiny on data privacy, cybersecurity and AI. The report details risks around competition, pricing pressure, restructuring, product portfolio rationalization, supply chain, ERP implementation issues, cyber attacks, high leverage of about $7.5 billion of debt, tax changes and global macro uncertainty.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Documents Incorporated by Reference
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Form 10-K |
Portions of the Proxy Statement with respect to the 2026 Annual Meeting of Stockholders |
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Part III |
ZIMMER BIOMET HOLDINGS, INC.
ANNUAL REPORT
Cautionary Note Regarding Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of federal securities laws, including, among others, statements regarding sales and earnings guidance and any statements about our expectations, plans, intentions, strategies or prospects. We generally use the words “may,” “will,” “can,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “assumes,” “guides,” “targets,” “forecasts,” “sees,” “seeks,” “should,” “could,” “would,” “predicts,” “potential,” “strategy,” “future,” “opportunity,” “work toward,” “intends,” “guidance,” “confidence,” “position,” “design,” “strive,” “continue,” “look forward to” and similar expressions to identify forward-looking statements. All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements. Such statements are based upon the current beliefs, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to: competition; pricing pressures; dependence on new product development, technological advances and innovation; changes in customer demand for our products and services caused by demographic changes, obsolescence, development of different therapies or other factors; our ability to attract, retain, develop and maintain adequate succession plans for the highly skilled employees, senior management, independent agents and distributors we need to support our business; the transformation of our sales and distribution network in the U.S. and other markets; shifts in the product category or regional sales mix of our products and services; the risks and uncertainties related to our ability to successfully execute our restructuring plans; risks and uncertainties relating to our ability to successfully execute on our product portfolio rationalization plans; control of costs and expenses; risks related to the ability to realize the anticipated benefits of our acquisitions, including the possibility that the expected benefits from such transactions will not be realized or will not be realized within the expected time period; the risk that acquired businesses will not be integrated successfully; the effects of business disruptions affecting us, our suppliers, customers or payors, either alone or in combination with other risks on our business and operations; the risks and uncertainties related to our ability to successfully integrate the operations, products, service providers, agents, employees, sales representatives and distributors of acquired companies; the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; unplanned delays, disruptions and expenses attributable to our enterprise resource planning and other system updates; the ability to form and implement alliances; dependence on a limited number of suppliers for key raw materials and other inputs and for outsourced activities; the risk of disruptions in the supply of materials and components used in manufacturing or sterilizing our products; breaches or failures of our (or of our business partners’ or other third parties’) information technology systems or products, including by cyber attack, unauthorized access or theft; the outcome of government investigations; the impact of healthcare reform and cost containment measures, including efforts sponsored by government agencies, legislative bodies, the private sector and healthcare purchasing organizations, through reductions in reimbursement levels, repayment demands and otherwise; the effects of natural disasters, or of legal, regulatory or market measures to address natural disasters; the effects of our commitments, goals and disclosures relating to corporate responsibility matters; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; changes in tax obligations arising from examinations by tax authorities and from changes in tax laws in jurisdictions where we do business, including as a result of the “base erosion and profit shifting” project undertaken by the Organisation for Economic Co-operation and Development and otherwise; challenges to the tax-free nature of the ZimVie Inc. spinoff transaction and the subsequent liquidation of our retained interest in ZimVie Inc.; the risk of additional tax liability due to the recategorization of our independent agents and distributors to employees; changes in tariffs relating to imports to the U.S. and other countries; the risk that material impairment of the carrying value of our intangible assets, including goodwill, could negatively affect our operating results; changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; changes in general industry and market conditions, including domestic and international growth, inflation and currency exchange rates; the domestic and international business impact of political, social and economic instability, tariffs, trade restrictions and embargoes, sanctions, wars, disputes and other conflicts, including on our ability to operate in, export from or collect accounts receivable in affected countries; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration (“FDA”) and other government regulators relating to medical products, healthcare fraud and abuse laws and data privacy and cybersecurity laws; the success of our quality and operational excellence initiatives; the ability to remediate matters identified in inspectional observations issued by the FDA and other regulators, while
continuing to satisfy the demand for our products; product liability, intellectual property and commercial litigation losses; and the ability to obtain and maintain adequate intellectual property protection.
See also the section titled “Risk Factors” (refer to Part I, Item 1A of this report) for further discussion of certain risks and uncertainties that could cause actual results and events to differ materially from the forward-looking statements. Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This cautionary note is applicable to all forward-looking statements contained in this report.
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Business |
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Risk Factors |
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PART I
Item 1. Business
Overview
Zimmer Biomet is a global medical technology leader with a comprehensive portfolio designed to maximize mobility and improve health. We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; craniomaxillofacial and thoracic (“CMFT”) products; bone cement; surgical products; and a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. We collaborate with healthcare professionals around the globe to advance the pace of innovation. Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. Together with healthcare professionals, we help millions of people live better lives. In this report, “Zimmer Biomet,” “we,” “us,” “our,” “the Company” and similar words refer collectively to Zimmer Biomet Holdings, Inc. and its subsidiaries. “Zimmer Biomet Holdings” refers to the parent company only.
Zimmer Biomet Holdings was incorporated in Delaware in 2001. Our history dates to 1927, when Zimmer Manufacturing Company, a predecessor, was founded in Warsaw, Indiana. On August 6, 2001, we were spun off from our former parent and became an independent public company. In 2015, we acquired LVB Acquisition, Inc. (“LVB”), the parent company of Biomet, Inc. (“Biomet”), and LVB and Biomet became our wholly-owned subsidiaries. In connection with the merger, we changed our name from Zimmer Holdings, Inc. to Zimmer Biomet Holdings, Inc.
Customers, Sales and Marketing
Our primary customers include orthopedic surgeons, neurosurgeons, and other specialists, healthcare institutions, stocking distributors, healthcare dealers and, in their capacity as agents, healthcare purchasing organizations or buying groups. These customers range from large multinational enterprises to independent clinicians.
We market and sell products through two principal channels: 1) direct to healthcare institutions, such as hospitals and ambulatory surgery centers, referred to as direct channel accounts; and 2) through stocking distributors and healthcare dealers. With direct channel accounts and some healthcare dealers, inventory is generally consigned to sales agents or customers. With sales to stocking distributors, some healthcare dealers and some hospitals, and at times to some direct channel accounts, title to product typically passes upon shipment. Consignment sales represented approximately 85 percent of our net sales in 2025. No individual customer accounted for more than 2 percent of our net sales for 2025.
We stock inventory in our warehouse facilities and retain title to consigned inventory in an effort to have sufficient quantities available when products are needed for surgical procedures. Safety stock levels are determined based on a number of factors, including demand, manufacturing lead times and quantities required to maintain service levels.
We also carry trade accounts receivable balances based on credit terms that are generally consistent with local market practices.
We utilize a network of sales associates, sales managers and support personnel, some of whom are employed or contracted by independent distributors and sales agencies. We invest a significant amount of time and expense in training sales associates in how to use specific products and how to best inform surgeons of product uses and features. Sales force representatives must have strong technical selling and medical education skills to provide technical support for surgeons.
In response to the different healthcare systems throughout the world, our sales and marketing strategies and organizational structures differ by country and region. We utilize a global approach to sales force training, marketing and medical education to provide consistent, high quality service. Additionally, we keep current with key surgical developments and other issues related to orthopedic surgeons, neurosurgeons, other specialists, and the medical procedures they perform.
We allocate resources to achieve our operating profit goals through three regional operating segments. Our operating segments are comprised of the Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific. The following is a summary of our operating segments. See Note 18 to our consolidated financial statements for more information regarding our segments.
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Americas. The Americas operating segment is our largest operating segment. This segment is comprised principally of the U.S. and includes other North, Central and South American markets. The U.S. accounted for approximately 95 percent of net sales in this region in 2025. The U.S. sales force historically has consisted of a combination of employees and independent sales agents, most of whom sell products exclusively for Zimmer Biomet. We recently commenced a multi-year initiative to convert substantial portions of our U.S. sales force from their status as independent sales agents to becoming our employees. The sales force in the U.S. receives a commission on product sales and is responsible for many operating decisions and costs.
In this region, we contract with group purchasing organizations and managed care accounts and have promoted unit growth by offering volume discounts to customer healthcare institutions within a specified group. Generally, we are designated as one of several preferred purchasing sources for specified products, although members are not obligated to purchase our products. Contracts with group purchasing organizations generally have a term of three years, with extensions as warranted.
EMEA. The EMEA operating segment is our second largest operating segment. France, Germany, Italy, Spain and the United Kingdom (the “UK”) collectively accounted for approximately 50 percent of net sales in the region in 2025. This segment also includes other key markets, including Switzerland, Benelux, Nordic, Central and Eastern Europe, the Middle East and Africa. Our sales force in this segment is comprised of direct sales associates, commissioned agents, independent distributors and sales support personnel. In most European countries, healthcare is sponsored by the government and therefore government budgets impact healthcare spending, which can affect our sales in this segment.
Asia Pacific. The Asia Pacific operating segment includes key markets such as Japan, China, Australia, New Zealand, Korea, Taiwan, India, Thailand, Singapore, Hong Kong and Malaysia. Japan is the largest market within this segment, accounting for approximately 50 percent of the region’s net sales in 2025. In Japan and most countries in the Asia Pacific region, we maintain a network of dealers, who act as order agents on behalf of hospitals in the region, and sales associates, who build and maintain relationships with orthopedic surgeons and neurosurgeons in their markets. The knowledge and skills of these sales associates play a critical role in providing service, product information and support to surgeons. In certain countries of this region, healthcare is sponsored by governments.
Seasonality
Our business is seasonal in nature to some extent, as many of our products are used in elective procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.
Distribution
We distribute our products both through large, centralized warehouses and through smaller, market specific facilities, depending on the needs of the market. We maintain large, centralized warehouses in the U.S. and Europe to be able to efficiently distribute our products to customers in those regions. In addition to these centralized warehouses, we maintain smaller distribution facilities in the U.S. and in each of the countries where we have a direct sales presence. In many locations, our inventory is consigned to the healthcare institution.
We generally ship our orders via expedited courier. Since most of our sales occur at the time of an elective procedure, we generally do not have firm orders.
Products
Our products include orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; CMFT products; bone cement; surgical products; and a suite of integrated digital and robotic technologies.
KNEES
Total knee replacement surgeries typically include a femoral component, a patella (knee cap), a tibial tray and an articular surface (placed on the tibial tray). Knee replacement surgeries include first-time, or primary, joint replacement procedures and revision procedures for the replacement, repair or enhancement of an implant or component from a previous procedure. There are also procedures for partial reconstruction of the knee, which treat
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limited knee degeneration and involve the replacement of only one side, or compartment, of the knee with a unicompartmental knee prosthesis. Our significant knee brands include the Persona® Knee, NexGen® Knee Implants, Vanguard® Knee, and Oxford® Partial Knee. Additionally, our ROSA® Robot utilizes robotic technologies to assist a surgeon with implant positioning in total knee arthroplasty or partial knee arthroplasty.
HIPS
Total hip replacement surgeries replace both the head of the femur and the socket portion of the pelvis (acetabulum) of the natural hip. Hip procedures include first-time, or primary, joint replacement as well as revision procedures. Hip implant procedures involve the use of bone cement to attach or affix the prosthetic components to the surrounding bone, or are press-fit into bone, which means that they have a surface that bone affixes to through either ongrowth or ingrowth technologies. Our significant hip brands include the Taperloc® Hip System, Avenir Complete® Hip System, Z1® Hip Implant, Arcos® Modular Hip System, and G7® Acetabular System. Our ROSA® Robot is also utilized in hip procedures.
S.E.T.
Our S.E.T. product category includes sports medicine, biologics, foot and ankle, upper extremities, trauma and CMFT products. Our sports medicine products are primarily for the repair of soft tissue injuries, most commonly used in the knee and shoulder. Sports medicine products represented 12 percent of our S.E.T. product category net sales in 2025. Our biologics products are used as early intervention for joint preservation or to support surgical procedures. Biologics products represented 5 percent of our S.E.T. product category net sales in 2025. Our foot and ankle and upper extremities products are designed to treat arthritic conditions and fractures in the foot, ankle, shoulder, elbow and wrist. Our foot and ankle products represented 12 percent of our S.E.T. product category net sales in 2025. Our upper extremities products represented 30 percent of our S.E.T. product category net sales in 2025. Our trauma products are used to stabilize damaged or broken bones and their surrounding tissues to support the body’s natural healing process. Trauma products represented 20 percent of our S.E.T. product category net sales in 2025. Our CMFT product division includes face and skull reconstruction products as well as products that fixate and stabilize the bones of the chest in order to facilitate healing or reconstruction after open heart surgery, trauma or for deformities of the chest. CMFT products represented 21 percent of our S.E.T. product category net sales in 2025. Our significant S.E.T. brands include the JuggerKnot® Soft Anchor System, Gel-One® Cross-linked Hyaluronate, Gorilla® Ankle Fracture Plating System, Comprehensive® Shoulder, Natural Nail® System, and SternaLock® System. Gel-One® is a registered trademark of Seikagaku Corporation. Our ROSA® Robot is also utilized in shoulder procedures.
TECHNOLOGY & DATA, BONE CEMENT AND SURGICAL
Through our Technology & Data, Bone Cement and Surgical product category, we market a collective suite of our products and technologies as the ZBEdge® Platform. The ZBEdge Platform connects robotic and digital technologies together to collect data before, during and after surgery, that can deliver insights to surgeons to assist in making informed decisions on patient care. Bone cement is used to assist with implant fixation in orthopedic surgeries. We offer an assortment of bone cements and products for mixing and delivery. We also offer a portfolio of surgical solutions used by healthcare institutions.
Research and Development
We have extensive research and development activities to develop new surgical techniques, including robotic techniques, materials, biologics and product designs. The research and development teams work closely with our strategic brand marketing function. The rapid commercialization of new data solutions, surgical techniques, innovative new materials, biologics products, and implant and instrument designs remains one of our core strategies and continues to be an important driver of sales growth. We are broadening our offerings in certain of our product categories and exploring new technologies, including artificial intelligence and machine learning, with possible applications in multiple areas.
Our primary research and development facilities are located in Warsaw, Indiana; Montreal, Quebec, Canada; Denver, Colorado; Jacksonville, Florida; Austin, Texas; Zug, Switzerland and Beijing, China. We have other research and development personnel based in other locations both within and outside the U.S. As of December 31, 2025, we employed approximately 2,000 research and development employees worldwide.
We expect to continue to identify innovative technologies, which may include acquiring complementary products or businesses, establishing technology licensing arrangements or strategic alliances.
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Government Regulation and Compliance
Our operations, products and customers are subject to extensive government regulation by numerous government agencies, both within and outside the U.S. We are subject to national, state and other regulations affecting, among other things, the development, design, manufacturing, product standards, packaging, advertising, promotion, labeling, marketing and post-market surveillance of medical products and medical devices in many of the countries in which our products are sold. Our global regulatory environment is increasingly stringent, unpredictable and complex. There is a global trend toward increased regulatory activity related to medical products and medical devices.
Medical Product and Medical Device Regulation
In the U.S., numerous laws and regulations govern the processes by which our products are brought to market. These include the Federal Food, Drug and Cosmetic Act, as amended (“FDCA”), and associated regulations. U.S. Food and Drug Administration (“FDA”) regulations control all aspects of the development, manufacturing, advertising, promotion, marketing, distribution and post-market surveillance of medical products and medical devices. All of our devices marketed in the U.S. have been cleared or approved by the FDA, except for those exempt from FDA premarket clearance and approval and those in commercial distribution prior to May 28, 1976. The process of obtaining FDA clearance or approval to market a product is resource intensive, lengthy, and costly. The FDA review may involve substantial delays that adversely affect the marketing and sale of our products. Most of our new products fall into a classification that requires the submission of a Premarket Notification (510(k)) to the FDA before we can market the new device. This process requires us to demonstrate that the device to be marketed is at least as safe and effective as, that is, substantially equivalent to, a legally marketed device. Other devices we develop and market require stringent FDA clinical investigation and Premarket Approval (“PMA”) requirements, including submission of clinical and laboratory data that establishes that the new medical device is safe and effective. Additionally, certain of our new products incorporate innovations related to artificial intelligence, machine learning and software as a medical device, which are subject to emerging FDA oversight and regulation.
We are subject to FDA Quality Management System regulations governing design and manufacturing practices, testing, manufacturing quality assurance, labeling and record keeping and reporting requirements for our products, which apply both to our own and to our third-party manufacturers' operations. We are required to establish a quality system by which we monitor our (and our third-party manufacturers') manufacturing processes and maintain records that show compliance with FDA regulations and manufacturers' written specifications and procedures.
There are also requirements of state and local governments with which we must comply in the manufacture and marketing of our products.
The FDA conducts announced and unannounced periodic and on-going inspections of medical device manufacturers to determine compliance with its Quality System, and other applicable, regulations. If in connection with these inspections the FDA believes the manufacturer has failed to comply with applicable regulations and/or procedures, it may issue inspectional observations on Form FDA-483 (“Form 483”) that would necessitate prompt corrective action. If FDA inspectional observations are not addressed and/or corrective action is not taken in a timely manner and to the FDA’s satisfaction, the FDA may issue a warning letter (which would similarly necessitate prompt corrective action) and/or proceed directly to other forms of enforcement action, including the imposition of operating restrictions, including ceasing operations on one or more facilities, enjoining and restraining legal violations pertaining to products, seizing products, negotiating the entry of a consent decree and permanent injunction against us, recommending prosecution to the U.S. Department of Justice (the “DOJ”), and assessing civil or criminal penalties against our officers, employees or us. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.
The FDA, in cooperation with U.S. Customs and Border Protection (“CBP”), administers controls over the import of medical devices into the U.S. and can prevent the importation of products the FDA deems to violate the FDCA or its implementing regulations. CBP imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance. We are also subject to foreign trade controls administered by certain U.S. government agencies, including the Bureau of Industry and Security within the Commerce Department and the Office of Foreign Assets Control within the Treasury Department (“OFAC”). In addition, exported medical products are subject to the regulatory requirements of each country to which the medical product is exported.
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The European Union (the “EU”) has adopted the European Medical Device Regulation (the “EU MDR”), which created a single set of medical device regulations for products marketed in all member countries. The EU MDR took effect in May 2021, replacing the European Medical Device Directive (the “MDD”). The EU MDR imposes significant additional premarket and post-market requirements. Products currently certified per the MDD regulations must be certified to the new EU MDR regulation prior to December 2027 or December 2028, depending upon the device’s risk class. The UK additionally is in the process of creating secondary legislation to implement the future medical device regulations. The first piece of the Statutory Instrument (“SI”) for post-market surveillance requirements was released in January 2025 with further SIs planned to be released later in 2026 and in 2027. These SIs will form part of the new medical device regulatory framework (the “UK MDR”) following its exit from the European Union. The UK, in the meantime, continues to allow products meeting the current EU regulations to be marketed through June 2028 for EU MDD and EU Active Implantable Medical Devices or through June 2030 for EU MDR devices.
Our quality management system is based upon the requirements of ISO 13485, the FDA Quality Management System regulations, the MDD, the EU MDR and other applicable regulations for the markets in which we sell. Our principal manufacturing sites are certified to ISO 13485 and audited at regular intervals. Additionally, our principal sites are certified under the Medical Device Single Audit Program (“MDSAP”), a voluntary audit program developed by regulatory authorities in Australia, Brazil, Canada, Japan, and the United States to assess compliance with the quality management system regulatory requirements of those countries. MDSAP audits are conducted by an MDSAP-recognized auditing organization and can fulfill the needs of the participating regulatory jurisdictions, replacing standard surveillance audits by the regulatory authorities in those countries.
We are subject to international, national, state and other laws and regulations concerning healthcare cost containment, including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness reviews and other methods, including through efforts to reduce healthcare fraud and abuse, false claims and anti-kickback laws as well as the U.S. Physician Payments Sunshine Act and similar state and foreign healthcare professional payment transparency laws. Many authorities have increased their enforcement activities with respect to medical products manufacturers in recent years. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and exclusion from participation in certain government healthcare programs.
Foreign Corrupt Practices Act and Related Laws
Our operations outside the U.S. are subject to the extraterritorial application of the U.S. Foreign Corrupt Practices Act (the “FCPA”). Our global operations are also subject to non-U.S. anti-corruption laws, such as the United Kingdom Bribery Act. As part of our global compliance program, we seek to address anti-corruption risks proactively.
Environmental Laws
All of our facilities and operations are subject to complex national, state and local environmental and occupational safety laws and regulations, including those relating to discharges of substances in the air, water and land, the handling, storage and disposal of wastes and the clean-up of properties contaminated by pollutants. We do not expect that the ongoing costs of compliance with these environmental requirements will have a material impact on our consolidated earnings, capital expenditures or competitive position.
Data Privacy, Cyber and Artificial Intelligence Laws
We are subject to evolving national, state, international and other data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, location, storage, disposal and protection of health-related and other personal information, including laws and regulations that regulate and restrict cross-border data transfers. Certain of these laws and regulations impose time-sensitive notification requirements to governmental authorities or consumers. We are also subject to emerging regulations, directives, voluntary commitments and guidance governing data security and cyber risk management for medical devices as well as emerging regulations, directives, voluntary commitments and guidance relating to artificial intelligence. Failure to comply with any such data protection laws, regulations, directives, voluntary commitments and guidance could result in government enforcement actions (which could include civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Information regarding the risks associated with data privacy and protection laws may be found in Item 1A. Risk Factors – If we fail to comply with data privacy and
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security laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
Competition
The orthopedics and broader musculoskeletal care industry is highly competitive. In the global markets for our knees, hips, and S.E.T. products, our major competitors include Johnson & Johnson MedTech (formerly the DePuy Synthes Companies of Johnson & Johnson), Stryker Corporation and Smith & Nephew plc. There are smaller competitors in these product categories as well that focus on smaller subsegments of the industry.
Competition within the industry is primarily based on technology, innovation, quality, reputation, customer service and pricing. A key factor in our continuing success in the future will be our ability to develop new products and technologies and improve existing products and technologies.
Manufacturing and Raw Materials
We manufacture our products at various sites. We also strategically outsource some manufacturing to qualified suppliers who are highly capable of producing components.
The manufacturing operations at our facilities are designed to incorporate the cellular concept for production and to implement tenets of a manufacturing philosophy focused on continuous improvement efforts in product quality, lead time reduction and capacity optimization. Our continuous improvement efforts are driven by Lean and Six Sigma methodologies. In addition, at certain of our manufacturing facilities, many of the employees are cross-trained to perform a broad array of operations.
We generally target operating our manufacturing facilities at optimal levels of total capacity. We continually evaluate the potential to in‑source and outsource production as part of our manufacturing strategy to provide value to our stakeholders.
In most of our manufacturing network, we have improved our manufacturing processes to harmonize and optimize our quality systems and to protect our profitability and offset the impact of inflationary costs. We have, for example, employed computer-assisted robots and multi-axis grinders to precision polish medical devices; automated certain manufacturing and inspection processes, including on-machine inspection and process controls; purchased state-of-the-art equipment; in-sourced core products and processes; and negotiated cost reductions from third-party suppliers.
We use a diverse and broad range of raw materials in the manufacturing of our products. We purchase all of our raw materials and select components used in manufacturing our products from external suppliers. In addition, we purchase some supplies from single sources for reasons of quality assurance, sole source availability, cost effectiveness or constraints resulting from regulatory requirements. We work closely with our suppliers to assure continuity of supply while maintaining high quality and reliability.
Intellectual Property
Patents and other proprietary rights are important to the continued success of our business. We also rely upon trade secrets, know-how, continuing technological innovation and licensing opportunities to develop and maintain our competitive position. We protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with suppliers, employees, consultants and others who may have access to proprietary information. We own or control through licensing arrangements over 6,000 issued patents and patent applications throughout the world that relate to aspects of the technology incorporated in many of our products.
Human Capital
As of December 31, 2025, we employed approximately 17,000 employees worldwide, including approximately 2,000 employees dedicated to research and development. Approximately 7,000 employees are located within the U.S. and approximately 10,000 employees are located outside of the U.S., primarily throughout Europe and in Japan and China. We have approximately 6,000 employees dedicated to manufacturing our products worldwide.
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Our mission is to alleviate pain and improve the quality of life for people around the world. Our commitment to patients shapes all day-to-day decisions at Zimmer Biomet. To be able to accomplish our mission, we have established guiding principles. These guiding principles are central to our human capital management policies and practices. The guiding principles are:
Team Member Inclusion
Our team member inclusion efforts are intended to identify, attract and retain talent for our business. Our eight global employee resource groups (“ERGs”) are open to all team members and have substantial participation with membership representing approximately 15 percent of our workforce. Our ERGs also receive funding from the Zimmer Biomet Foundation, Inc. to support communities and partnerships aligned to our Mission.
Employee Engagement
We value our employees’ input and to that end, from time to time, we conduct comprehensive employee engagement surveys that ultimately inform our actions towards improving employee engagement. Surveys attempt to assess five drivers of engagement including purpose, culture, leadership, personal growth and belonging. The key results of surveys, and commensurate action plans, are shared with our Board of Directors and with our employee base. Employee engagement is the degree to which employees invest their cognitive, emotional, and behavioral energies toward positive organizational outcomes. While we strive for engagement scores to sequentially improve, the outcomes of the surveys can be influenced by many factors that are internal and external to the company.
We believe it is critical to keep our employees engaged through frequent and transparent communication. This is accomplished through town halls, video and written messages, news and recognition on our intranet site, and various other methods.
Health, Safety and Wellness
The physical and mental health, financial wellbeing, and work/life balance of our employees is vital to accomplishing our mission. We sponsor wellness programs designed to enhance physical, financial and mental wellbeing for our employees. We encourage participation in these programs through regular communications, educational sessions and other incentives.
We are also intensely focused on the health and safety of our team members in the workplace. Our environmental, health and safety team constantly monitors various metrics to ensure we are providing a safe environment in which to work. In 2025, our Total Recordable Incident Rate was 0.22 and our Lost Time Incident Rate was 0.10. These results are shared with relevant regulatory agencies as required and presented to our Board of Directors.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our executive officers as of February 13, 2026.
Name |
|
Age |
|
Position |
Ivan Tornos |
|
50 |
|
Chairman, President and Chief Executive Officer |
Jehanzeb Noor |
|
44 |
|
Senior Vice President, Chief Strategy, Business Development, Innovation and Transformation Officer |
Chad Phipps |
|
54 |
|
Senior Vice President, Chief Legal and Corporate Affairs Officer and Secretary |
Paul Stellato |
|
51 |
|
Vice President, Controller and Chief Accounting Officer |
Kevin Thornal |
|
52 |
|
Group President, Global Businesses and the Americas |
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Suketu Upadhyay |
|
56 |
|
Chief Financial Officer and Executive Vice President - Finance, Operations and Supply Chain |
Wilfred van Zuilen |
|
56 |
|
Group President, Europe, Middle East and Africa |
Lori Winkler |
|
64 |
|
Senior Vice President, Chief Human Resources Officer |
Sang Yi |
|
63 |
|
Group President, Asia Pacific |
Mr. Tornos was appointed Chairman of the Board in May 2025. He was appointed President and Chief Executive Officer and a member of the Board of Directors in August 2023. Previously, he served as the Company’s Chief Operating Officer since March 2021, as Group President, Global Businesses and the Americas from December 2019 until March 2021, and as Group President, Orthopedics from joining the Company in November 2018 until December 2019. Prior to joining Zimmer Biomet, Mr. Tornos served as Worldwide President of the Global Urology, Medical and Critical Care Divisions of Becton, Dickinson and Company (“BD”) (and previously, C. R. Bard, Inc. (“Bard”)) from June 2017 until October 2018. From June 2017 until BD’s acquisition of Bard in December 2017, Mr. Tornos also continued to serve as President, EMEA of Bard, a position to which he was appointed in September 2013. Mr. Tornos joined Bard in August 2011 and, prior to his appointment as President, EMEA, served as Vice President and General Manager with leadership responsibility for Bard’s business in Southern Europe, Central Europe and the Emerging Markets Region of the Middle East and Africa. Before joining Bard, Mr. Tornos served as Vice President and General Manager of the Americas Pharmaceutical and Medical/Imaging Segments of Covidien International from April 2009 to August 2011. Before that, he served as International Vice President, Business Development and Strategy with Baxter International Inc. from July 2008 to April 2009 and, prior to that, Mr. Tornos spent 11 years with Johnson & Johnson in positions of increasing responsibility. He has also served as a member of the board of directors at PHC Holdings Corporation since September 2021.
Mr. Noor was appointed Senior Vice President, Chief Strategy, Business Development, Innovation and Transformation Officer in January 2026, after being appointed Senior Vice President, Chief Strategy, Innovation and Business Development Officer in March 2025. In his role, he is responsible for leading strategy development and execution; overseeing all facets of M&A; identifying short- and long-term organic and inorganic growth opportunities; and leading enterprise-wide transformation. In addition, he oversees the research and product development organizations, inclusive of new product and service development, partnership and ecosystem development and platform technologies. Prior to joining Zimmer Biomet in March 2025, Mr. Noor served as President and Managing Director for Europe, Africa and Asia at Trivium starting in August 2022 and was CEO of Smiths Medical from July 2019 through January 2022. He also previously held roles of increasing responsibility at Amcor, McKinsey (Partner), Ford Motor Company and Constellation Energy Commodities Group. Mr. Noor holds a Master of Science with a focus on Product Design and Operations Management, a Bachelor of Science in Finance and a Bachelor of Science in Mechanical Engineering, all from the Massachusetts Institute of Technology.
Mr. Phipps was appointed Senior Vice President, Chief Legal and Corporate Affairs Officer and Secretary in January 2026. He has global responsibility for the Company’s Legal Affairs and he serves as Secretary to the Board of Directors. Mr. Phipps also oversees the Company’s compliance, communications, corporate social responsibility and government affairs activities. Previously, Mr. Phipps served as the Company’s Senior Vice President, General Counsel and Secretary from May 2007 to January 2026 and as Associate General Counsel and Corporate Secretary from December 2005 to May 2007. He joined the Company in September 2003 as Associate Counsel and Assistant Secretary. Prior to joining the Company, he served as Vice President and General Counsel of L&N Sales and Marketing, Inc. in Pennsylvania and he practiced law with the firm of Morgan, Lewis & Bockius in Philadelphia, focusing on corporate and securities law, mergers and acquisitions and financial transactions.
Mr. Stellato was appointed Vice President, Controller and Chief Accounting Officer in May 2022. Previously, he served as Vice President Finance, Global Business Services from March 2019 through April 2022, with Xylem Inc. (“Xylem”), a global provider of water technology products and services. He joined Xylem upon its spinoff from ITT Corporation (“ITT”) in October 2011 and served as Xylem’s Vice President Finance, Financial Planning and Analysis through August 2017. He was promoted to Vice President, Controller and Chief Accounting Officer in August 2017 after serving as Interim Corporate Controller starting in August 2016, and became Vice President Finance, Global Business Services in March 2019. Prior to Xylem’s spinoff from ITT in October 2011, Mr. Stellato served with ITT beginning in May 2003, having served most recently as ITT’s General Auditor and prior to that, as Manager - Investor Relations. He began his career in public accounting with Ernst & Young LLP and Arthur Andersen LLP and is a certified public accountant.
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Mr. Thornal was appointed Group President, Global Businesses and the Americas in July 2025. Prior to joining the Company, Mr. Thornal served as President and Chief Executive Officer of Nevro Corp. from April 2023, and as a member of its Board of Directors from May 2023, until the completion of its acquisition by Globus Medical, Inc. in April 2025. He previously served as the Group President of Global Diagnostic Solutions at Hologic, Inc. (“Hologic”) from April 2022 to April 2023. Mr. Thornal served in several leadership positions with increasing levels of responsibility at Hologic from 2014 to April 2023. Prior to Hologic, Mr. Thornal held several roles of increasing responsibility at Stryker Corp. from 2004 to 2014 in sales, marketing, and business development.
Mr. Upadhyay was appointed Chief Financial Officer and Executive Vice President - Finance, Operations and Supply Chain in August 2023. Previously, he served as our Executive Vice President and Chief Financial Officer since joining the Company in July 2019. Prior to joining Zimmer Biomet, Mr. Upadhyay served as Senior Vice President, Global Financial Operations at Bristol-Myers Squibb Company from November 2016 until June 2019. Before joining Bristol-Myers Squibb, he served as Executive Vice President and Chief Financial Officer of Endo International plc from September 2013 to November 2016. Prior to his tenure at Endo International, Mr. Upadhyay served as Interim Chief Financial Officer as well as Senior Vice President of Finance, Corporate Controller and Principal Accounting Officer of BD. Prior to his role as BD’s Interim Chief Financial Officer and Corporate Controller, Mr. Upadhyay was the Senior Vice President of Global Financial Planning and Analysis and also held the role of Vice President and Chief Financial Officer of BD’s international business. Before joining BD in 2010, Mr. Upadhyay held a number of leadership roles across AstraZeneca PLC and Johnson & Johnson. Mr. Upadhyay spent the early part of his career in public accounting with KPMG. He has also served as a member of the board of directors of Vertex Pharmaceuticals Incorporated since May 2022. He holds a B.S. in Finance from Albright College and an M.B.A. from the Fuqua School of Business at Duke University. He holds the inactive designations of C.P.A. and C.M.A.
Mr. van Zuilen was appointed Group President, Europe, Middle East and Africa in September 2023, after having served as President, Europe, Middle East and Africa since joining the Company in June 2021. He is responsible for the sales, marketing and distribution of products, services and solutions in the Europe, Middle East and Africa region. Prior to joining Zimmer Biomet, Mr. van Zuilen served in various roles for Medtronic plc, including as Vice President, North Western Europe from October 2020 to May 2021, as Vice President, Restorative Therapies Group EMEA from February 2017 through September 2020, and as Vice President, Advanced Surgical Technologies Europe, Surgical Solution Group, from October 2011 through January 2017. He served in other roles of increasing responsibility with Medtronic plc through January 1998. Before joining Medtronic, he spent more than five years in medical sales, most recently with Baxter BV (Edwards Lifesciences).
Ms. Winkler was appointed Senior Vice President, Chief Human Resources Officer in March 2021, after joining Zimmer Biomet as Group Vice President of Human Resources in February 2020. Prior to joining Zimmer Biomet, she served Cardinal Health, Inc. as a Worldwide Vice President of Human Resources in the Medical Segment from November 2016 through January 2020. Before joining Cardinal Health, Ms. Winkler served more than 20 years with Johnson and Johnson, including its subsidiary companies DePuy and Cordis, most recently as Global Head, Human Resources Global Finance from April 2011 through November 2016. She has served as an independent voting member of the board of directors of Family Promise, Inc., a 501(c)(3) charity focused on housing and homelessness, since August 2022.
Mr. Yi was appointed Group President, Asia Pacific, in March 2021. He is responsible for the sales, marketing and distribution of products, services and solutions in the Asia Pacific region. Mr. Yi joined the Company in March 2013 as Senior Vice President, Asia Pacific and was promoted to President, Asia Pacific, in June 2015. Prior to joining the Company, he served as Vice President and General Manager of St. Jude Medical for Asia Pacific and Australia from 2005 to 2013. Prior to that, Mr. Yi held several leadership positions over a ten-year period with Boston Scientific Corporation, ultimately serving as Vice President for North Asia.
AVAILABLE INFORMATION
Our Internet address is www.zimmerbiomet.com. We routinely post important information for investors on our website in the “Investor Relations” section, which may be accessed from our homepage at www.zimmerbiomet.com or directly at https://investor.zimmerbiomet.com. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public
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conference calls, presentations and webcasts. Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us, free of charge, including:
The information available on our website is not incorporated by reference in, or a part of, this or any other report we file with or furnish to the SEC.
Item 1A. Risk Factors
We operate in a rapidly changing competitive, economic and technological environment that presents numerous risks, many of which are driven by factors that we cannot control or predict. Our business, financial condition and results of operations may be impacted by a number of factors. In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm our business, financial condition or results of operations, including causing our actual results to differ materially from those projected in any forward-looking statements. The following list of material risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, also may materially adversely affect us in future periods. You should carefully consider these risks and uncertainties before investing in our securities.
Risks Related to our Business, Operations and Strategy
Our success depends on our ability to effectively develop and market our products against those of our competitors.
We operate in a highly competitive environment. Our present or future products could be rendered obsolete or uneconomical by technological advances by one or more of our present or future competitors. To remain competitive, we must continue to identify, prioritize, develop and acquire new products and technologies, as well as identify, prioritize and improve existing products and technologies. We must also obtain and maintain regulatory approvals for such products, accurately forecast demand, manufacture the correct mix of products, distribute products to multiple global markets and market those products profitably. For example, in the past we have experienced elevated charges for excess and obsolete inventory while also facing increased backorders due to unpredictable demand fluctuations across our various markets, and there can be no assurance that production mix planning or inventory allocation will match end market demand.
Competition within our markets is primarily on the basis of technology, innovation, quality, reputation, customer service and pricing. In markets outside of the U.S., other factors influence competition as well, including local distribution systems, complex regulatory environments, differing medical philosophies and differing product preferences, including policy-driven preferences for local manufacturers. Our competition may have, and at times does have, greater financial, marketing, technical and other resources than us; respond more quickly to new or emerging technologies; undertake more extensive marketing campaigns; operate more effective planning, manufacturing, sales and distribution channels; adopt more aggressive pricing policies; or be more successful in attracting potential customers, employees and strategic partners. Additionally, our customers’ needs often vary
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depending on their sites of care, such as hospitals, hospital systems, ambulatory surgical centers and doctors’ offices, and certain of our competitors have better capabilities to serve certain sites of care than we do. We also face competition from pharmaceutical and other therapies that may be more attractive than, or have other benefits over, our products, or that could affect the frequency, progressions or symptoms of diseases and conditions that our products treat. Any of these factors, alone or in combination, could cause us to have difficulty maintaining or increasing sales of our products or otherwise have an adverse effect on our business and financial results.
Our products may become obsolete, customers may not buy our products, and our revenue and profitability may decline without the timely introduction of new products and enhancements, due to changes in markets, changes in our strategy, or due to changes in applicable standards of care.
Demand for our products may change, in certain cases, in ways we may not anticipate because of evolving customer needs, changing demographics, changing industry growth rates, declines in the musculoskeletal implant market, the introduction of competing products and technologies, changes to our strategy, the emergence of alternative treatment methods, evolving surgical philosophies and evolving industry standards. Our products may become obsolete without the timely introduction of new products and enhancements or due to changes in applicable standards of care. If that happens, our revenue and operating results would suffer. The success of our new and enhanced product offerings will depend on several factors, including our ability to properly identify and anticipate customer needs; commercialize new products in a timely manner; manufacture and deliver instruments and products on time and in sufficient volumes; differentiate our offerings from competitors’ offerings; achieve positive clinical outcomes for new products; satisfy the increased demands by healthcare payors, providers and patients for shorter hospital stays, faster post-operative recovery and lower-cost procedures; innovate and develop new materials, product designs and surgical techniques; and provide adequate medical education relating to new products.
In addition, new materials, product designs, product enhancements and surgical techniques that we develop may not be accepted quickly or at all, or in some or all markets, because of, among other factors, the need for regulatory clearance, entrenched patterns of clinical practice, competitive factors and uncertainty with respect to third-party reimbursement.
Moreover, innovations generally require a substantial investment in research and development before we can determine their commercial viability, and we may not have the financial resources necessary to fund the research, development and production. In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce revenue in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.
Our success largely depends on our ability to attract, retain, develop and motivate our human capital, including our senior management, key employees and key third parties, and on our ability to have meaningful succession plans in place to prepare for foreseen and unforeseen changes.
Our future performance depends on the continued skills, experiences, competencies and services of our senior management, key employees and key third parties (including independent distributors and sales agents), and our ability to attract, retain, develop and motivate such talent. We rely on certain employees and third parties for research and development; operations; quality assurance; and the distribution, marketing and sales of our products. If we fail to retain our senior management, key employees and key third parties, our revenue and profitability may decline, and our business may be otherwise adversely affected.
Additionally, certain of our key employees and third parties have detailed knowledge of our products and instruments and have developed professional relationships with existing and potential customers due to this knowledge. Recent legal and regulatory changes may affect our ability to enforce post-termination obligations from certain employees and third parties with respect to non-competition, non-solicitation and protection of confidential information, which may negatively impact our ability to retain key employees and third-party distributors and to protect our information and relationships with our customers.
Competition for talent in our business is significant. Our ability to attract and retain key employee and third-party talent is dependent on a number of factors, including prevailing market conditions, our ability to offer competitive compensation packages, our ability to be perceived as a preferred place to work and the contract terms we offer to third parties. Changes in the terms and conditions of employment or engagement, such as the availability of remote and hybrid work programs, benefit and perquisite programs and engagement on an employee or independent contractor basis, may affect our ability to attract and retain key talent.
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Effective succession planning for senior management, key employees and key third parties (including independent distributors and sales agents) is also important to our long-term success. Failure to ensure orderly transitions involving senior management, key employees and key third parties, as well as inadequate transfer of knowledge, customer relationships and other know-how, could adversely affect our business and financial results.
We are transforming aspects of our sales and distribution network and go-to-market model in the U.S. and certain other markets, and these efforts may not be successful and they involve risks and challenges that may adversely impact our business, results of operations and financial condition.
We are converting substantial portions of our U.S. sales force from independent distributors and sales representatives to our employees in a multi-year initiative. We are also increasing product category specialization and focus across our U.S. sales force, which may lead to disruptions for our sales personnel. We may not successfully execute or manage this transformation and transition, which could materially and adversely affect our business, results of operations and financial condition. These transformative actions present significant operational, legal, financial and cultural challenges and require effective planning and execution across recruiting, onboarding, training, systems integration, compensation, compliance and management. We could experience operational disruptions, increased costs and reduced sales, and we may lose key sales personnel, including high-performing distributors, sales leaders and sales representatives, to competitors if they decline employment with us or depart following the transition. Any such departures could lead to loss of customer relationships, sales coverage gaps, diminished sales effectiveness and lower net sales. Even if we are able to retain key personnel, we expect to experience disruption to our U.S. sales force as roles, territories, product category sales coverage, compensation structures, incentive plans, reporting lines, systems and processes change, which could reduce morale, productivity and continuity in customer engagement, which could adversely affect our business, results of operations and financial condition. Additionally, competitors are attempting, and may continue to attempt, to recruit our sales personnel (whether independent or employed) and target our customer relationships during and after the transition. The magnitude and duration of these impacts are uncertain and may be exacerbated by macroeconomic conditions, competition or other factors.
We are additionally making certain changes to our sales force and go-to-market models in certain other countries in an effort to optimize our commercial strategies and improve our performance on a consistent basis in those markets. We are separately tailoring the nature, timing and scale of the changes to the requirements of individual markets, and do not expect the changes to be uniform. Throughout the transition to this new model in certain emerging markets, we expect revenue performance to be inconsistent as we negotiate with the displaced distributors, execute initial stocking orders with the new platform distributors and allow the platform distributors to coordinate with their sub-distributor network. Each market’s transformation efforts present significant operational, legal, financial and cultural challenges and risks that are similar to those found in our above-described U.S. sales force transformation efforts, which risks may be magnified by the complexity of implementing different changes across multiple markets in parallel. The change in go-to-market strategy, outcome of existing litigation and the potential for additional litigation could have a material adverse impact on our financial results in the impacted markets.
Our restructuring programs may not be successful or we may not fully realize the expected cost savings and/or operating efficiencies from our restructuring initiatives.
We have initiated a series of restructuring programs to reduce costs, improve efficiency, spin off certain businesses, and prioritize investments in higher-priority growth operations. Restructuring initiatives involve complex plans and actions that may include, or result in, workforce reductions, plant closures and/or consolidations, product portfolio rationalizations and asset impairments. Additionally, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiencies during transitional periods. Restructuring initiatives present risks that may impair our ability to achieve anticipated operating enhancements and/or cost reductions, or otherwise harm our business, including higher than anticipated costs in implementing our restructuring programs, as well as management distraction. For more information on our restructuring programs, see Note 4 to our consolidated financial statements. If we fail to achieve some or all of the expected benefits of our restructuring programs, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
Our product portfolio rationalization activities may not be successful or we may not fully realize the expected cost savings and/or operating efficiencies from our portfolio rationalization initiatives.
We are rationalizing our product portfolio to streamline our operations, enhance focus on strategic offerings, and improve cost efficiency. Effective management of our product portfolio is a complex process requiring
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consideration of different regulatory requirements and approvals, preferences for different surgical techniques, reimbursement rates and other factors. Product portfolio rationalization may lead to the loss of product breadth valued by customers, potential disruption in customer relationships, and reduced sales in affected categories. It may also create transitional inefficiencies, including supply chain adjustments, inventory imbalances and challenges in forecasting demand for remaining products. These activities can divert management attention and resources away from other strategic priorities and may result in higher-than-expected costs, higher-than-expected inventory obsolescence, asset impairments or delays in achieving anticipated benefits. If our product portfolio rationalization efforts do not yield the expected operational improvements, cost savings, or market focus, or if such changes are not well-received by customers, our competitive position, business, financial condition, results of operations, and cash flows could be adversely affected.
We may not be able to effectively integrate acquired businesses into our operations or achieve expected cost savings or profitability from our acquisitions.
Our acquisitions involve numerous risks, including:
As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of such acquisitions, and we may incur costs in excess of what we anticipate. These risks would likely be greater in the case of larger acquisitions.
Interruption of manufacturing or distribution operations could adversely affect our business, financial condition and results of operations.
We and our third-party manufacturers have manufacturing sites all over the world. In some instances, however, the manufacturing of certain of our product lines is concentrated in one or a few plants which are concentrated in a single country or region. Damage to one or more facilities or related operations from weather or natural disaster-related events, vulnerabilities in technology, cyber attacks against our or our business partners’ information systems, issues in manufacturing arising from failure to follow specific internal protocols and procedures, compliance concerns relating to the Quality System Regulation (“QSR”) and Good Manufacturing Practice requirements, equipment breakdown or malfunction, reductions in operations and/or worker absences, trade impediments, international sanctions, wars or other factors has in the past adversely affected, and could in the future adversely affect, the ability to manufacture and distribute our products. If we suffer, or a critical supplier suffers, a manufacturing interruption, we may be unable to move quickly to alternate means of producing or acquiring affected products or to meet customer demand, and alternative sources of supply may not be adequate to accommodate sudden increases in demand. We have experienced such interruptions previously (including in connection with our enterprise resource planning system implementation which negatively impacted distribution of our products in 2024), and we may experience such interruptions in the future. In the event of a significant interruption, for example, as a result of our or a supplier’s failure to follow regulatory protocols and procedures or as a result of a bankruptcy, we (or our suppliers) may experience lengthy delays in resuming production of affected products due primarily to the need for additional regulatory approvals. The global supply chain has been and continues to be negatively impacted by a variety of macro factors which have, in part, resulted in challenges to meet end market demand in some instances. As a result, we may experience lost sales, which we may be unable to recover, loss of market share, which we may be unable to recapture, and/or harm to our reputation, which could adversely affect our business, financial condition and results of operations.
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Challenges integrating, transitioning and implementing a new enterprise resource planning ("ERP") system have adversely affected our business and operations, and may in the future have further adverse effects.
As a result of technology initiatives, changes in our system platforms and the ongoing integration of business acquisitions, we have been consolidating and integrating the ERP systems that we operate. ERP consolidation and integration programs are highly complex, require substantial management and financial resources, and may adversely affect our ability to process and/or fulfill orders, provide customer service, send and collect invoices, manage our contracts, manage our distribution network, provide financial information or otherwise run our business, in a timely manner or at all, or without incurring additional expenses or disruption. For example, during 2024, we experienced unanticipated challenges during an Americas ERP transition that disrupted our ability to fulfill customer orders during the second half of fiscal 2024, which caused adverse consequences including disruption to our ability to distribute product, difficulty in meeting customer demand, productivity declines, delays in invoicing customers, increased ERP system costs and loss of customers and sales. Additional disruptions, delays or deficiencies in the transition, design, and implementation of our ERP systems, particularly any disruptions, delays or deficiencies that impact our operations, could again in the future have a material adverse effect on our business and financial condition and results of financial operations.
Disruptions in the supply of the materials and components used in manufacturing our products or the sterilization of our products by us or third-party suppliers could adversely affect our business, financial condition and results of operations.
We purchase many of the materials and components used in manufacturing our products from third-party suppliers, and we outsource some key manufacturing activities. Certain of these materials and components and outsourced activities can only be obtained from a single source or a limited number of sources due to quality considerations, expertise, costs or constraints resulting from regulatory requirements. In certain cases, we may not be able to establish additional or replacement suppliers for such materials or components or outsourced activities in a timely or cost effective manner, due to market constraints or as a result of FDA or other worldwide regulations that require validation of materials and components prior to their use in our products and the complex nature of our and many of our suppliers' manufacturing processes and the need for clearance or approval of significant changes by FDA and other worldwide regulatory bodies prior to implementation. A reduction or interruption in the supply of materials or components used in manufacturing our products, such as due to loss of access to one or more suppliers; an inability to timely develop and validate alternative sources if required; or a significant increase in the price of such materials or components, could adversely affect our business, financial condition and results of operations.
In addition, many of our products require sterilization prior to sale, and we utilize a mix of internal resources and contract sterilizers to perform this service. We also provide contract sterilization services to certain of our customers. To the extent we or our contract sterilizers are or may become unable to sterilize our products or provide sterilization services to us or to our customers, whether caused by insufficient capacity; unavailability of materials for sterilization; regulatory or other restrictions on the use of certain sterilizing methods such as use of ethylene oxide; the bankruptcy or other financial constraints of the sterilizer (as we experienced with respect to one sterilization supplier in 2024); or otherwise, we may be unable to transition to other contract sterilizers, sterilizer locations or sterilization methods in a timely or cost effective manner or at all, which could have a material impact on our results of operations and financial condition.
We and our business partners are dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems and data, including from cybersecurity events, our business could be adversely affected.
We are dependent on sophisticated information technology for our products and infrastructure. As a result of technology initiatives, expanding and evolving privacy and cybersecurity laws, changes in our system platforms and the ongoing integration of business acquisitions, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems and cybersecurity capabilities. In addition, some of our products and services incorporate software or information technology that collects data regarding patients and patient therapy, and some software and other products we provide to customers connect to our and third party systems for maintenance and other purposes. We also have outsourced elements of our operations to third parties (including suppliers, customers and other business partners), and, as a result, we manage a number of third parties who may now or could in the future have access to our confidential information, including, but not limited to, intellectual property, proprietary business information and personal information of patients, team members and customers (collectively “Confidential Information”).
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Our information systems, and those of third parties with whom we contract, require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information technology, evolving system and regulatory standards, changing threats and vulnerabilities, and the increasing need to protect data including patient, customer and Confidential Information. In addition, given their size and complexity, these systems are vulnerable to service interruptions and to security breaches from inadvertent or intentional actions by our employees, third party suppliers and/or business partners, and from cyber attacks by malicious third parties attempting to gain unauthorized access to our products, systems or Confidential Information.
Further, our use of artificial intelligence and machine learning in our infrastructure and products exposes us to a variety of threats, risks and uncertainties, including with respect to changing laws and regulations regarding the use of such technologies; the risks of inaccuracies, errors and interruptions affecting business processes supported by artificial intelligence; the risks of inaccuracies, errors and interruptions to our products and services using artificial intelligence, which could result in harm to patients or other adverse outcomes; and the variety of risks associated with any other use of information technology, including risks relating to data privacy and access, interruption, compliance, implementation and other factors.
Like other large multi-national corporations, we and the third parties with whom we contract regularly experience cyber attacks, certain of which (including email phishing attacks on our email systems) have been successful, and we expect to continue to be subject to such attacks. These attacks may include phishing, state-sponsored cyber attacks, industrial espionage, insider threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, payment fraud or other cyber incidents. Evolving artificial intelligence and machine learning tools continue to improve the capabilities of cyber attackers. In addition, as a result of our adoption of remote work arrangements in many positions, a significant number of our employees who are able to work remotely are doing so, which exposes us to additional cybersecurity risks. Our cybersecurity program, incident response efforts, business continuity procedures and disaster recovery planning may not be sufficient for all eventualities. If we (or third parties with whom we contract) fail to maintain or protect our information systems and data integrity effectively, we could:
Additionally, cybersecurity events suffered by health insurers and other third-party payors have delayed and otherwise adversely affected the demand and payment for surgical procedures and treatments involving our products and services, which adverse effects may continue, recur, and/or change in scope or magnitude in the future.
Cyber attacks are becoming more sophisticated, frequent and adaptive, and therefore, despite our efforts, we cannot assure that cybersecurity incidents or data breaches will not occur or that technology or information system issues will not arise in the future. Any significant breakdown, intrusion, breach, interruption, corruption or destruction of these systems could have a material adverse effect on our business and reputation and could materially adversely affect our results of operations and financial condition.
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Business interruptions and disruptions have adversely impacted, and may, either alone or in combination with other risks, in the future adversely impact, our business, results of operations and financial condition, the nature and extent of which impacts are uncertain and unpredictable.
Our operations expose us to risks from business interruptions that may arise from a variety of sources, including public health crises; supply chain disruptions; loss of or limitations on access to certain markets due to trade and tariff disputes and disruptions or national, regional and global conflicts; adverse economic developments; healthcare staffing challenges; government shutdowns; natural disasters; and other events that can, singly or in combination with other factors, adversely affect our business and financial results. There can be no assurance that we will successfully manage such risks without adverse impacts to our business or financial results.
If third-party payors decline to reimburse our customers for our products or reduce reimbursement levels, the demand for our products may decline and our ability to sell our products profitably may be harmed. In addition, we are subject to cost containment measures in the United States and other countries, resulting in pricing pressures, which could have a material adverse effect on our business, results of operations, and cash flows.
We sell our products and services to hospitals, doctors and other healthcare providers, which receive reimbursement for the healthcare services provided to their patients from third-party payors, such as domestic and international government programs, private insurance plans and managed care programs. These third-party payors may deny reimbursement if they determine that a product or service used in a procedure was not in accordance with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication. Third-party payors may also decline to reimburse for experimental procedures and products. In addition, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services. If third-party payors deny or decline reimbursement, reduce reimbursement levels or change reimbursement models for our products, demand for our products may decline, or we may experience increased pressure to reduce the prices of our products, which could have a material adverse effect on our sales and results of operations.
Many customers of our products have formed group purchasing organizations in an effort to contain costs. Group purchasing organizations negotiate pricing arrangements with medical supply manufacturers and distributors, and these negotiated prices are made available to a group purchasing organization’s affiliated hospitals and other members. If we are not one of the providers selected by a group purchasing organization, affiliated hospitals and other members may be less likely to purchase our products, and, if the group purchasing organization has negotiated a strict compliance contract for another manufacturer’s products, we may be precluded from making sales to members of the group purchasing organization for the duration of the contractual arrangement. Our failure to respond to the cost-containment efforts of group purchasing organizations may cause us to lose market share to our competitors and could have a material adverse effect on our sales and results of operations.
Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business, and we have experienced downward pressure on product pricing and other effects of healthcare reform in our international markets. 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 volume-based procurement (“VBP”) processes designed to reduce medical spending, which have in the past resulted in, and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges. “Buy local” initiatives have in the past resulted in, and could in the future result in, reduced demand for our products, as well as reduced margins on covered devices and products, required renegotiation of distributor arrangements and incurrence of inventory-related charges. Similarly, the Italian Public Administration implemented a “Pay Back” law to obtain reimbursement from the medical device industry to contribute to government overspending on medical devices beginning in 2015 and a “Fund for the Government of Medical Devices” applicable to revenues relating to medical devices, large medical equipment and in vitro diagnostic devices commencing in 2024. Additional cost reduction and recovery strategies are likely to be proposed in various jurisdictions, the effects of which are difficult to predict, but may have a material adverse effect on our sales and results of operations.
Pricing pressure continues due to consolidation among healthcare providers, trends toward managed care, the shift toward governments becoming the primary payors of healthcare expenses, reductions in reimbursement levels and government laws and regulations relating to reimbursement and pricing generally. If key participants in government healthcare systems reduce the reimbursement levels for our products, including through regulatory changes, elections and other political changes, our business, financial condition, results of operations and cash flows may be adversely affected.
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Natural disasters, or legal, regulatory or market measures to address natural disasters, could materially adversely affect our business and financial results.
Natural disasters present risks to our business and financial results which are difficult to predict and address. We face current and long-term operational risks and have in the past experienced business interruptions from severe weather events and other natural conditions, such as hurricanes, tornadoes, droughts, extreme temperatures, wildfires or flooding. Such severe weather events and other natural disasters have in the past and could in the future increase our operational costs, pose physical risks to our facilities, cause population dislocations and adversely impact our supply chain, manufacturing and distribution networks, and pose risks to the availability and cost of raw materials, components, energy, transportation or other inputs necessary for the operation of our business. Concerns over climate change and natural disasters have also resulted in, and may continue to result in, new laws or regulations that are more stringent than current legal or regulatory requirements, and we may experience increased compliance burdens and costs to meet the regulatory obligations as well as adverse impacts on raw material sourcing, manufacturing operations and the distribution of our products.
Our commitments, goals and disclosures related to corporate responsibility matters, and the perception of our activities in these areas, may adversely impact us.
Companies across all industries are facing increasing scrutiny, and potentially negative actions, from investors, regulators, customers, employees and other stakeholders related to their corporate responsibility commitments, performance, and disclosures, including those related to climate change, social matters and governance standards. Responding to and acting on these considerations involves risks and uncertainties, requires investments and depends in part on our relative performance against third parties that is beyond our control. Additionally, multiple organizations have developed differing ratings processes and standards to evaluate companies on their respective approaches to corporate responsibility matters, which ratings are increasingly being employed by investors, lenders and customers to inform their investment, financing and purchasing decisions. If we do not meet the evolving, varied and sometimes conflicting expectations of our investors, customers, regulators, employees and other stakeholders, we could experience reduced demand for our products, loss of customers and employees and suffer other negative impacts.
Financial, Credit and Liquidity Risks
We incurred substantial additional indebtedness in connection with previous mergers and acquisitions, may incur additional substantial indebtedness in connection with future mergers and acquisitions, and may not be able to meet all of our current and future debt obligations. In addition, interest rate risk could adversely affect our current and future indebtedness.
We incurred substantial indebtedness in connection with previous mergers and acquisitions, and may incur substantial additional indebtedness in connection with future mergers and acquisitions. At December 31, 2025, our total indebtedness was $7.5 billion. As of December 31, 2025, our debt service principal obligations (excluding interest, leases and equipment notes), during the next 12 months are expected to be $0.6 billion. As a result of the increase in our debt, demands on our cash resources have increased; such demand would further amplify if we fund future mergers and acquisitions using debt financing. Our current and future increased level of debt could, among other things:
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In addition, the interest rates applicable to certain of our debt obligations are based on a fluctuating rate of interest determined by reference to the Secure Overnight Financing Rate (“SOFR”) or other externally-determined rates. SOFR and such other rates have increased from pandemic-era lows, which has increased our cost of borrowing. Any further increase in interest rates applicable to our debt obligations would increase our cost of borrowing and could adversely affect our financial position, results of operations or cash flows.
Changes in tax laws in countries in which we do business are expected to negatively impact our effective tax rate; further changes in tax laws may have a further negative impact.
Changes in the tax laws and regulations of the jurisdictions where we do business, including an increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material increase in our tax expense and/or tax payments, could increase tax uncertainty and could have a material adverse impact on our business, financial condition or results of operations.
The Organisation for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenue and profits above certain thresholds (referred to as Pillar 2). Although the U.S. has not enacted legislation to implement Pillar 2, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar 2. The OECD issued new administrative guidance on January 5, 2026, with respect to Pillar 2 which modifies key aspects of the framework for countries to enact in their own laws. It remains uncertain whether or how countries will implement Pillar 2 and the OECD administrative guidance, which may have a further adverse effect on our tax liabilities.
We may have additional tax liabilities as a result of examinations and audits.
We are subject to income taxes in the U.S. and many foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our financial statements in the period or periods for which that determination is made.
If our independent agents and distributors are characterized as employees, we would be subject to additional tax and other liabilities.
We structure certain of our relationships with independent agents and distributors in a manner that we believe results in an independent contractor relationship, not an employee relationship. Although we believe that these independent agents and distributors are properly characterized as independent contractors, tax, labor or other regulatory authorities may in the future challenge our characterization of these relationships. Further, we have been subject to lawsuits challenging the characterization of these relationships. Changes in classification from independent contractor to employee can result in a change to various requirements associated with the payment of wages, tax withholding, and the provision of unemployment, health, and other traditional employer-employee related benefits. If regulatory authorities or state, federal or foreign courts were to determine our independent agents or distributors are employees and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes and to pay unemployment and other related payroll taxes, as well as provide other employer-employee related benefits. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that our independent agents and distributors are our employees could have a material adverse effect on our business, financial condition or results of operations.
Future material impairments in the carrying value of our intangible assets, including goodwill, would negatively affect our operating results.
Goodwill and intangible assets represent a significant portion of our assets. At December 31, 2025, we had $9.9 billion in goodwill and $4.7 billion of intangible assets. The goodwill results from our acquisition activity and represents the excess of the consideration transferred over the fair value of the net assets acquired. We assess at least annually whether events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable. There were no impairment charges during the years ended December 31, 2025 and 2024,
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but if the operating performance at one or more of our reporting units significantly declines, including if competing or alternative technologies or pharmacological treatments, emerge, if market conditions or future cash flow estimates for one or more of our businesses decline, or as a result of restructuring initiatives pursuant to which we reorganize our reporting units, we could be required to record additional impairment charges. Any write-off of a material portion of our goodwill or unamortized intangible assets would negatively affect our results of operations.
The spinoff of ZimVie Inc. and the divestiture of our retained interest in ZimVie Inc. could result in substantial tax liability.
We obtained Internal Revenue Service (“IRS”) rulings and an opinion as to the tax-free nature of the spinoff under the U.S. Internal Revenue Code of 1986, as amended. We subsequently obtained supplemental IRS rulings as to the tax-free nature of our divestiture of retained shares of ZimVie common stock following the spinoff, which divestiture completed in February 2023. The IRS rulings and opinion are based, among other things, on various factual assumptions and representations we made. If any of these assumptions or representations are, or become, inaccurate or incomplete, reliance on the opinion and rulings may be jeopardized. If the spinoff, or the subsequent divestiture of our retained interest in ZimVie, does not qualify for tax-free treatment for U.S. federal income tax purposes, the resulting tax liability to us, to our stockholders and to ZimVie stockholders could be substantial.
Global Operational Risks
We conduct a significant amount of our sales and manufacturing activities outside of the U.S., which subjects us to additional business risks and may cause our profitability to decline due to increased costs.
We sell our products in more than 100 countries and derived approximately 42 percent of our net sales in 2025 from outside the U.S. We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets, which could expose us to additional risks associated with international sales and operations. Our international operations are, and will continue to be, subject to a number of risks and potential costs, including:
Violations of foreign laws or regulations could result in fines; criminal sanctions against us, our directors, officers, employees, agents or distributors; prohibitions or restrictions relating to the conduct of our business; and damage to our reputation.
Furthermore, political tensions between the U.S., Canada, Mexico, China, Russia, Venezuela and certain other countries have escalated in recent years. Rising political tensions could reduce trade, investment and other
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economic activities between or among these economies. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.
The effects of emerging, expanding and new conflicts, such as a possible expansion of the Russian-Ukrainian conflict, conflicts in the Middle East, or a possible conflict involving China and Taiwan, may not be limited to the specific markets involved. Sanctions and other civil, political and economic effects of such conflicts are likely to have adverse impacts upon us. Additionally, other trade disruptions include supply chain continuity disruption; inflationary pressures and increased costs of raw materials and inputs; manufacturing or shipping delays; increased shipping costs and transit delays (such as experienced due to attacks on shipping transiting the Red Sea); and increased disruptions and delays affecting our ability to operate in and to collect payment for our products and services in particular markets.
Tariffs, trade restrictions and other trade measures have adversely affected, and could continue to adversely affect, our business and financial results.
We operate in multiple countries and maintain a complex global supply chain and distribution network which exposes us to a variety of risks from U.S. and other countries’ international trade and tariff policies. Changes to tariffs, trade restrictions and protection measures applicable to trade with certain countries, trade in certain types of goods, or otherwise; new import or export requirements; changes to trade agreements; new or increased tariffs, trade embargoes, sanctions and other trade barriers, have in the past and may in the future prevent us from shipping products to or from a particular market, restrict our access to certain sources of raw materials and other inputs, increase our operating costs and disrupt our ability to collect payment for our products and services in particular markets. For example, U.S. tariff and export controls policies have recently experienced rapid and extensive change, which in turn drove responsive or retaliatory changes to other countries’ tariff and export controls policies, many of which had adverse consequences on our cost of goods sold and revenue. We cannot predict how these dynamic developments will impact us or the bilateral and multilateral trade agreements upon which we rely. Existing or future tariffs and trade restrictions could have a material adverse effect on our business and financial results. Additionally, these and other tariffs and further retaliatory trade measures could result in an increase in supply chain costs that we may not be able to offset in full or in part or that may otherwise adversely impact our financial results.
We are subject to risks arising from currency exchange rate fluctuations, which can increase our costs, cause our profitability to decline and expose us to counterparty risks.
A substantial portion of our foreign revenues is generated in Europe and Japan. The U.S. Dollar value of our foreign-generated revenues varies with currency exchange rate fluctuations. Significant increases in the value of the U.S. Dollar relative to the Euro, the Japanese Yen, the Swiss Franc or other currencies could have a material adverse effect on our results of operations. Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective or may create additional financial obligations for us. Further, if the counterparties to the derivative financial instrument transactions fail to honor their obligations due to financial distress or otherwise, we would be exposed to potential losses or the inability to recover anticipated gains from those transactions.
Legal, Regulatory and Compliance Risks
We are subject to complex and expensive laws and governmental regulations relating to the development, design, product standards, packaging, advertising, promotion, post-market surveillance, manufacturing, labeling and marketing of our products, non-compliance with which could adversely affect our business, financial condition and results of operations.
Our global regulatory environment is increasingly stringent, unpredictable and complex. The products and services we design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other national, regional, state and other governmental authorities. The process of obtaining regulatory approvals and clearances to market these products can be costly and time consuming and approvals might not be granted for future products on a timely basis, if at all. Delays in receipt of, or failure to obtain, approvals for future products or product enhancements, or loss of approval for current products, could result in delayed realization of product revenues or in substantial additional costs. Emerging opportunities, including those presented by the use of machine learning and artificial intelligence in our current and future products, devices and services are expected to present new, complex and potentially inconsistent legal and regulatory requirements across the various jurisdictions in which we operate.
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Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations, the EU MDR, UK MDR and other national, regional, state and other requirements. These requirements relate to quality systems, recordkeeping, labeling, promotional and marketing requirements, adverse event reporting, monitoring and other regulations, which are subject to continual review and are monitored rigorously through periodic inspections by regulators, which may result in observations (such as on FDA Form 483), and in some cases warning letters, that require corrective action or other forms of enforcement. Furthermore, regulators strictly regulate the promotional claims that we may make about approved or cleared products.
If a regulator were to conclude that we are not in compliance with applicable laws or regulations, that any of our products are ineffective or pose an unreasonable health risk, that any of our products’ long-term statistical performance does not meet regulatory expectations, or that we have marketed or promoted a product for use other than as indicated in the product labelling approved by the regulator, the regulator may ban such products; detain or seize adulterated or misbranded products; order a recall, repair, replacement, or refund of payment of such products; refuse to grant pending premarket approval applications; refuse to provide certificates for exports; require us to notify healthcare professionals and others that the products present unreasonable risks of substantial harm to the public health; and subject us to fines, injunctions or other penalties. The regulator may also impose operating restrictions, including a ceasing of operations at one or more facilities, enjoining and restraining certain violations of applicable law pertaining to our products, seizing our products, and/or assessing civil or criminal penalties against our officers, employees or us. Regulators could also issue a corporate warning letter or a recidivist warning letter or negotiate the entry of a consent decree of permanent injunction with us, and/or recommend prosecution. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.
Our products and operations are also often subject to the rules of industrial standards bodies, such as the International Standards Organization. If we fail to adequately address any of these regulations, our business could be harmed.
If we fail to comply with healthcare fraud and abuse laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
The sales, marketing and pricing of products and relationships that medical products companies have with healthcare providers are under increased scrutiny around the world. Our industry is subject to various laws and regulations pertaining to healthcare fraud and abuse, including the False Claims Act, the Anti-Kickback Statute, the Stark law, the Physician Payments Sunshine Act, the Food, Drug, and Cosmetic Act and similar laws and regulations in the U.S. and around the world. In addition, we are subject to various laws concerning anti-corruption and anti-bribery matters (including the FCPA and the United Kingdom Bribery Act), sales to countries or persons subject to economic sanctions and other matters affecting our international operations. Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs. These laws are administered by, among others, the DOJ, the Office of Inspector General of the Department of Health and Human Services, the SEC, the OFAC, the Bureau of Industry and Security of the U.S. Department of Commerce and state attorneys general.
If we fail to comply with data privacy and security laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
We process personal and personal health data in our business, and certain of our products and services incorporate software or information technology that processes patient health data for treatment, maintenance and other purposes. Further, we obtain and process personal data related to our employees, individual business partners (such as physicians and consultants), and website visitors located around the world. These data and information-focused activities carry additional risk.
We are subject to laws and regulations that govern the collection, use, disclosure, transfer, storage, location, disposal, processing and protection of health-related, personal and other information. The FDA has issued guidance to which we are subject concerning data security for medical devices. In addition to U.S. federal laws and regulations, a number of U.S. states have also enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, medical and financial information, biometric data and other personal information. These laws and regulations may be more restrictive than, and not be preempted by, U.S. federal laws. The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving as countries continue to adopt
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privacy and data security laws that may apply to us, both because our operations are located in those countries and/or because we provide products and services to customers in those countries. In addition, certain of our suppliers, partners, affiliates and associates are subject to privacy, security and breach notification regulations established under these and other international, national, state and local laws. We, and certain of our suppliers, partners, affiliates and associates, are also subject to reporting requirements relating to certain data breaches and cybersecurity events.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and we expect to incur substantial costs to monitor for and comply with changing and additional requirements. In addition, new and more stringent multinational, national and state privacy legislation and regulations are likely to be adopted. We cannot predict all the jurisdictions in which new legislation, regulation or enforcement might arise, the scope of such legislation, regulation and enforcement, or the potential impact to our business and operations of any such changes. Failure to comply with U.S. and international data protection laws and regulations, and the disclosure of any data or related breach, could result in government enforcement actions (which could include substantial civil and/or criminal penalties and injunctive relief), private litigation and/or adverse publicity and could have a material adverse impact on our business, financial condition or results of operations.
Pending and future product liability claims and litigation could adversely impact our financial condition and results of operations and impair our reputation.
Our business exposes us to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices. In the ordinary course of business, we are the subject of product liability lawsuits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients. We are currently defending a number of product liability lawsuits and claims related to various products. Any product liability claim brought against us, with or without merit, can be costly to defend. Product liability lawsuits and claims, safety alerts or product recalls, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers.
We are substantially dependent on patent and other proprietary rights, and failing to protect such rights or to be successful in litigation related to our rights or the rights of others may result in the payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and other proprietary rights against others.
Claims of intellectual property infringement and litigation regarding patent and other intellectual property rights are commonplace in our industry and are frequently time consuming and costly. At any given time, we may be involved as either plaintiff or defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not possible to predict the outcome of patent and other intellectual property litigation, such litigation has in the past resulted in, and could in the future result in, our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and proprietary rights against others, which could have a material adverse effect on our business, finances and results of operations.
Our success depends in part on our proprietary technology, processes, methodologies and information. We rely on a combination of patent, copyright, trademark, trade secret and other intellectual property laws and nondisclosure, license, assignment and confidentiality arrangements to establish, maintain and protect our proprietary rights, as well as the intellectual property rights of third parties whose assets we license. However, the steps we have taken to protect our intellectual property rights, and the rights of those from whom we license intellectual property, may not be adequate to prevent unauthorized use, misappropriation or theft of our intellectual property. Further, our currently pending or future patent applications may not result in patents being issued to us, patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors, and such patents may be found invalid, unenforceable or insufficiently broad to protect our technology or to provide us with any competitive advantage. Third parties could obtain patents that may require us to negotiate licenses to conduct our business, and the required licenses may not be available on reasonable terms or at all. We also cannot be certain that others will not independently develop substantially equivalent proprietary information.
In addition, intellectual property laws differ in various jurisdictions in which we operate and are subject to change at any time, which could further restrict our ability to protect our intellectual property and proprietary rights. In particular, a portion of our revenues is derived from jurisdictions where adequately protecting intellectual property rights may prove more challenging or impossible. We may also not be able to detect unauthorized uses or take timely and effective steps to remedy unauthorized conduct. To prevent or respond to unauthorized uses of our
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intellectual property, we might be required to engage in costly and time-consuming litigation or other proceedings and we may not ultimately prevail. Any failure to establish, maintain or protect our intellectual property or proprietary rights could have a material adverse effect on our business, financial condition, or results of operations.
We are involved in legal proceedings that may result in adverse outcomes.
In addition to intellectual property and product liability claims and lawsuits, we are involved in various other litigation, claims and other proceedings that arise from time to time. Although we believe there are substantial defenses in these matters, litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. Given the uncertain nature of legal proceedings generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome. We could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our financial results in any particular period.
Risks Related to Our Organizational Documents and Jurisdiction of Incorporation
Anti-takeover provisions in our organizational documents could delay or prevent a change of control.
Certain provisions of our Restated Certificate of Incorporation, our Restated By-Laws and the Delaware General Corporation Law may have an anti-takeover effect and may delay, complicate, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction, including those that a stockholder might consider in its best interest, that might result in a premium over the market price for the shares held by our stockholders, or that may be considered beneficial by many of our stockholders. As a result, our stockholders may be limited in their ability to obtain a premium for their shares.
Our Restated By-Laws designate certain Delaware courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our Restated By-Laws provide that, unless we consent in writing to the selection of an alternative forum, a state court located within the State of Delaware (or, if no state court located in the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any stockholder (including any beneficial owner) to bring certain actions against us or on behalf of the Company. Any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have received notice of and consented to this provision. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
Item 1B. Unresolved Staff Comments
Not Applicable.
Item 1C. Cybersecurity
Risk Management and Strategy
We have established a cybersecurity program intended to protect the confidentiality, integrity and availability of our systems, data and products in a manner consistent with industry best practices and the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework. We are currently ISO 27001 certified for our surgery planning ecosystem and plan to continue to maintain this industry certification. We evaluate and monitor cybersecurity risk as part of our overall enterprise risk management framework. Our cybersecurity program includes a variety of processes to assess,
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our cybersecurity organization and other IT functional areas as well as established roles that define the responsibility of the cybersecurity team within our organization.
Under our program, cybersecurity issues are analyzed by subject matter experts, including those in information security, information technology, risk, and other areas, to evaluate potential security, financial, operational, reputational and other risks, as well as to identify any potential data breaches or other cybersecurity incidents. Matters involving potential data breaches and other cybersecurity incidents are considered against applicable escalation and notification requirements. We monitor and periodically enhance our cybersecurity program, processes, techniques and procedures to combat evolving and adaptive cybersecurity threats.
We
Like other large multi-national corporations, we regularly experience cybersecurity incidents, and we expect to continue to be subject to such incidents.
Governance
The Audit Committee of the Board of Directors oversees our cybersecurity program. It considers cybersecurity risk individually and within our overall risk management framework. We obtain periodic assessments of our cybersecurity program from independent third party experts, the results of which assessments are reported to the Audit Committee. Additionally, cybersecurity threats and incidents determined through our cybersecurity program to present potential material impacts to our financial results, operations, and/or reputation are required to be immediately reported to the Audit Committee in accordance with our escalation framework.
Item 2. Properties
We own or lease approximately 300 different facilities around the world, of which approximately half are in the U.S. Our corporate headquarters is in Warsaw, Indiana. Warsaw, Indiana is also home to our most significant manufacturing, research and development (“R&D”) and other business activities for our Knees, Hips and S.E.T.
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product divisions. Internationally, our EMEA regional headquarters is in Switzerland and our Asia Pacific regional headquarters is in Singapore.
We have approximately 25 manufacturing locations in the U.S. and internationally. Our most significant locations outside of the U.S. are in Switzerland, Ireland and China. We primarily own our manufacturing facilities in the U.S.; internationally, we occupy both owned and leased manufacturing facilities.
We maintain sales and administrative offices and warehouse and distribution facilities in more than 45 countries around the world. These local market facilities are primarily leased due to common businesses practices and to allow us to be more adaptable to changing needs in the market.
We distribute our products both through large, centralized warehouses and through smaller, market specific facilities, depending on the needs of the market. We maintain large, centralized warehouses in the U.S. and the Netherlands to be able to efficiently distribute our products to customers in the U.S. and EMEA.
We believe that all of the facilities and equipment are in good condition, well maintained and able to operate at present levels. We believe the current facilities, including manufacturing, warehousing, R&D and office space, provide sufficient capacity to meet ongoing demands.
Item 3. Legal Proceedings
Information pertaining to certain legal proceedings in which we are involved can be found in Note 20 to our consolidated financial statements included in Part II, Item 8 of this report and is incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not Applicable.
28
PART II
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for the Registrant’s Common Equity and Related Stockholder Matters
Our common stock is traded on the New York Stock Exchange and the SIX Swiss Exchange under the symbol “ZBH.” As of February 10, 2026, there were approximately 11,627 holders of record of our common stock. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions.
We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.
The information required by this Item concerning equity compensation plans is incorporated herein by reference to Item 12 of this report.
The graph below shows the cumulative total stockholder return on our common stock compared to the S&P 500 Stock Index and the S&P 500 Health Care Equipment Index. The chart assumes $100 was invested on December 31, 2020 in Zimmer Biomet common stock and each index and that dividends were reinvested. Returns over the indicated period should not be considered indicative of future returns.
|
|
December 31, |
|
|||||||||||||||||||||
Company/Index |
|
2020 |
|
|
2021 |
|
|
2022 |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
||||||
Zimmer Biomet Holdings, Inc. |
|
$ |
100.00 |
|
|
$ |
82.98 |
|
|
$ |
86.55 |
|
|
$ |
83.25 |
|
|
$ |
72.88 |
|
|
$ |
62.65 |
|
S&P 500 Stock Index |
|
|
100.00 |
|
|
|
128.71 |
|
|
|
105.40 |
|
|
|
133.10 |
|
|
|
166.40 |
|
|
|
196.16 |
|
S&P 500 Health Care Equipment Index |
|
|
100.00 |
|
|
|
119.35 |
|
|
|
96.84 |
|
|
|
105.60 |
|
|
|
117.15 |
|
|
|
126.87 |
|
29
Issuer Purchases of Equity Securities
The following table summarizes repurchases of common stock settled during the three months ended December 31, 2025:
Period |
|
Total Number of Shares Purchased |
|
|
Average Price Paid per Share |
|
|
Total Number of Shares Purchased as a Part of Publicly Announced Program(1) |
|
|
Maximum Approximate Dollar Value of Shares that may yet be |
|
||||
October 1–31, 2025 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
1,020,224,454 |
|
November 1–30, 2025 |
|
|
1,400,000 |
|
|
|
91.50 |
|
|
|
1,400,000 |
|
|
|
892,125,184 |
|
December 1–31, 2025 |
|
|
1,311,242 |
|
|
|
92.97 |
|
|
|
1,311,242 |
|
|
|
770,224,506 |
|
Total |
|
|
2,711,242 |
|
|
$ |
92.21 |
|
|
|
2,711,242 |
|
|
$ |
770,224,506 |
|
(1) In May 2024, our Board of Directors authorized a $2.0 billion share repurchase program effective May 29, 2024, with no expiration date. On February 9, 2026, our Board of Directors terminated this program and authorized a $1.5 billion share repurchase program effective February 9, 2026, with no expiration date.
Item 6. [Reserved]
30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the consolidated financial statements and the corresponding notes included elsewhere in this Annual Report on Form 10-K. Amounts reported in millions within this Annual Report on Form 10-K are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.
The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2025 and 2024. Discussion, analysis and comparisons of the years ended December 31, 2024 and 2023 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on February 25, 2025.
EXECUTIVE LEVEL OVERVIEW
2025 Financial Highlights
In 2025, our net sales increased 7.2 percent when compared to 2024. Net sales growth was driven by a combination of our acquisition of Paragon 28, Inc. (“Paragon 28”) on April 21, 2025, market growth, new product introductions, and lower net sales in the prior year due to operational challenges fulfilling customer orders as a consequence of a new enterprise resource planning ("ERP") software system implementation. Paragon 28 had a positive impact on our net sales growth of 2.5 percent in 2025. In addition, our net sales experienced a positive effect of 0.8 percent from changes in foreign currency exchange rates in 2025.
Our net earnings were $705.1 million in 2025 compared to $903.8 million in 2024. The decline in net earnings was driven by inventory and instrument charges of approximately $170 million related to certain product lines we intend to discontinue; costs related to the acquisition of Paragon 28 and the acquisition of Monogram Technologies Inc. (“Monogram”) on October 7, 2025, including acquisition-related costs and higher interest expense incurred for debt borrowed for the acquisitions; U.S. tariffs; higher performance-related compensation; and investments made to direct-to-patient marketing, medical education and information technology in the current year. These unfavorable items were partially offset by the net sales increase, a favorable mix shift to higher margin products and markets, favorable adjustments related to contingent consideration for acquisitions, gains recognized on our equity investments in 2025 compared to losses in 2024, lower restructuring costs due to the timing of our restructuring programs, and lower litigation-related charges.
2026 Outlook
We expect year-over-year net sales growth of 2.5 percent to 4.5 percent in 2026 to be driven by a combination of market growth, new product introductions, the Paragon 28 acquisition and positive effects of changes in foreign currency exchange rates, partially offset by the expected impact from changes to our go-to-market strategy and execution in the U.S. and certain other international markets, as well as price declines. These expected impacts, combined with the uncertain timing of incentivized stocking orders and capital sales, could cause fluctuations in our quarterly results. We estimate that the Paragon 28 acquisition will contribute an additional 1.0 percent to the year-over-year net sales growth until it eclipses the one year anniversary of deal closing in April 2026. Based on foreign currency exchange rates at the end of 2025, we expect foreign currency to have a 0.5 percent positive impact on year-over-year net sales growth. We estimate operating profit will increase in 2026 when compared to 2025 due to higher net sales, leverage from fixed operating expenses, ongoing savings from our restructuring plans, non-recurrence of inventory and instrument charges related to certain product lines we expect to discontinue and lower employee termination and other charges from our restructuring plans. However, we expect that these favorable items may be partially offset by the impact from inflation, investments in our U.S. commercial sales channel, higher net interest expense and a higher estimated effective tax rate due to favorable 2025 adjustments that are not expected to recur.
RESULTS OF OPERATIONS
We review sales by two geographies, the United States and International, and by the following product categories: Knees; Hips; S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic); and Technology & Data, Bone Cement and Surgical. This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. We review sales by these geographies because the underlying market trends in any particular
31
geography tend to be similar across product categories, because we primarily sell the same products in all geographies and because many of our competitors publicly report in this manner. Our business is seasonal in nature to some extent, as many of our products are used in elective surgical procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.
Net Sales by Geography
The following table presents net sales by geography and the percentage changes (dollars in millions):
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 vs. 2024 |
|
|
2024 vs. 2023 |
|
|
|||||
United States |
|
$ |
4,764.0 |
|
|
$ |
4,439.0 |
|
|
$ |
4,288.8 |
|
|
|
7.3 |
|
% |
|
3.5 |
|
% |
International |
|
|
3,467.5 |
|
|
|
3,239.6 |
|
|
|
3,105.4 |
|
|
|
7.0 |
|
|
|
4.3 |
|
|
Total |
|
$ |
8,231.5 |
|
|
$ |
7,678.6 |
|
|
$ |
7,394.2 |
|
|
|
7.2 |
|
|
|
3.8 |
|
|
Net Sales by Product Category
The following table presents net sales by product category and the percentage changes (dollars in millions):
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 vs. 2024 |
|
|
2024 vs. 2023 |
|
|
|||||
Knees |
|
$ |
3,322.3 |
|
|
$ |
3,173.5 |
|
|
$ |
3,038.4 |
|
|
|
4.7 |
|
% |
|
4.4 |
|
% |
Hips |
|
|
2,093.5 |
|
|
|
1,999.1 |
|
|
|
1,967.2 |
|
|
|
4.7 |
|
|
|
1.6 |
|
|
S.E.T. |
|
|
2,150.2 |
|
|
|
1,865.7 |
|
|
|
1,752.6 |
|
|
|
15.2 |
|
|
|
6.5 |
|
|
Technology & Data, Bone Cement and Surgical |
|
|
665.6 |
|
|
|
640.3 |
|
|
|
636.0 |
|
|
|
4.0 |
|
|
|
0.7 |
|
|
Total |
|
$ |
8,231.5 |
|
|
$ |
7,678.6 |
|
|
$ |
7,394.2 |
|
|
|
7.2 |
|
|
|
3.8 |
|
|
The following table presents net sales by product category by geography for our Knees and Hips product categories (dollars in millions):
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
|
|||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 vs. 2024 |
|
|
2024 vs. 2023 |
|
|
|||||
Knees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
United States |
|
$ |
1,867.5 |
|
|
$ |
1,814.7 |
|
|
$ |
1,770.6 |
|
|
|
2.9 |
|
% |
|
2.5 |
|
% |
International |
|
|
1,454.8 |
|
|
|
1,358.8 |
|
|
|
1,267.8 |
|
|
|
7.1 |
|
|
|
7.2 |
|
|
Total |
|
$ |
3,322.3 |
|
|
$ |
3,173.5 |
|
|
$ |
3,038.4 |
|
|
|
4.7 |
|
|
|
4.4 |
|
|
Hips |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
United States |
|
$ |
1,094.6 |
|
|
$ |
1,040.0 |
|
|
$ |
1,012.3 |
|
|
|
5.3 |
|
% |
|
2.7 |
|
% |
International |
|
|
998.8 |
|
|
|
959.1 |
|
|
|
954.9 |
|
|
|
4.1 |
|
|
|
0.4 |
|
|
Total |
|
$ |
2,093.5 |
|
|
$ |
1,999.1 |
|
|
$ |
1,967.2 |
|
|
|
4.7 |
|
|
|
1.6 |
|
|
Demand (Volume/Mix) Trends
Changes in volume and mix of product sales had a positive effect of 6.4 percent on year-over-year sales growth in 2025. The Paragon 28 acquisition contributed 2.5 percent to volume growth in 2025. In addition, market growth and new product introductions contributed positively to volume and mix trends. Market growth is being driven by an aging and active population, technological advancements, and data showcasing positive clinical outcomes, among other factors.
32
Pricing Trends
Global selling prices had a minimal effect on year-over-year sales growth in 2025. The majority of countries in which we operate continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts. However, we have had success in offsetting negative effects of pricing pressure due to internal initiatives and being able to pass some inflationary impacts on to customers.
Foreign Currency Exchange Rates
In 2025, changes in foreign currency exchange rates had a positive effect of 0.8 percent on year-over-year sales.
Geography
The 7.3 percent net sales growth in the U.S. in 2025 when compared to 2024 was driven by the Paragon 28 acquisition, market growth in our Knees, Hips and S.E.T. product categories, new product introductions, lower net sales in the prior year periods due to operational challenges fulfilling customer orders as a consequence of a new ERP software system implementation and opportunistic end-of-year customer purchases and capital sales above historic levels, partially offset by price reductions. The Paragon 28 acquisition contributed 3.6 percent to U.S. net sales growth in 2025. Internationally, net sales increased by 7.0 percent in 2025 when compared to 2024. The 2025 International net sales increase was similarly driven by the Paragon 28 acquisition, market growth in most of our international markets and changes in foreign currency exchange rates. The Paragon 28 acquisition contributed 1.1 percent and changes in foreign currency exchange rates contributed 1.8 percent to International net sales growth in 2025.
Product Categories
In 2025, our Knees and Hips net sales both increased by 4.7 percent when compared to 2024 due to market growth and new product introductions. Changes in foreign currency exchange rates had positive effects of 0.7 percent and 0.9 percent on 2025 Knees and Hips net sales, respectively. S.E.T. net sales increased by 15.2 percent in 2025 when compared to 2024. S.E.T. net sales growth was primarily driven by the Paragon 28 acquisition, which had a positive effect of 10.5 percent on net sales growth, as well as net sales growth in CMFT, upper extremities and sports medicine products of 12.5 percent, 8.2 percent and 5.5 percent, respectively. These increases were partially offset by declines of 14.2 percent and 0.7 percent in net sales of biologics and trauma products, respectively. Changes in foreign currency exchange rates had a positive effect of 0.6 percent on 2025 S.E.T. net sales. Technology & Data, Bone Cement and Surgical product category net sales increased by 4.0 percent in 2025 when compared to 2024, primarily due to new product introductions.
Expenses as a Percent of Net Sales
|
|
Year Ended December 31, |
|
|
|
|
|
||||
|
|
2025 |
|
2024 |
|
2023 |
|
2025 vs. 2024 |
|
2024 vs. 2023 |
|
Cost of products sold, excluding intangible asset amortization |
|
30.3 |
% |
28.5 |
% |
28.2 |
% |
1.8 |
% |
0.3 |
% |
Intangible asset amortization |
|
8.1 |
|
7.7 |
|
7.6 |
|
0.4 |
|
0.1 |
|
Research and development |
|
5.6 |
|
5.7 |
|
6.2 |
|
(0.1) |
|
(0.5) |
|
Selling, general and administrative |
|
39.6 |
|
38.2 |
|
38.4 |
|
1.4 |
|
(0.2) |
|
Restructuring and other cost reduction initiatives |
|
2.2 |
|
2.9 |
|
2.1 |
|
(0.7) |
|
0.8 |
|
Acquisition, integration, divestiture and related |
|
0.9 |
|
0.3 |
|
0.3 |
|
0.6 |
|
- |
|
Operating Profit |
|
13.3 |
|
16.7 |
|
17.3 |
|
(3.4) |
|
(0.6) |
|
Cost of Products Sold and Intangible Asset Amortization
Cost of products sold, excluding intangible asset amortization, increased in both amount and as a percentage of net sales in 2025 compared to 2024. The increase in amount was primarily due to a higher volume of net sales, excess and obsolete inventory charges on certain products we intend to discontinue by 2032, U.S. tariffs and Paragon 28 inventory sold being stepped-up to fair value on the acquisition date. The increase as a percentage of net sales was primarily due to the inventory charges, tariffs and inventory step-up, but was partially offset by a favorable mix shift to higher margin products and markets.
33
Intangible asset amortization expense increased in amount and as a percentage of net sales in 2025 when compared to 2024 due to the Paragon 28 acquisition, other acquisitions and technology-based asset purchases we made in 2024.
We calculate gross profit as net sales minus cost of products sold and intangible asset amortization. Our gross margin percentage is gross profit divided by net sales. The following table sets forth the factors that contributed to the gross margin changes in each of 2025 and 2024 compared to the prior year:
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Prior year gross margin |
|
|
63.8 |
% |
|
|
64.2 |
% |
Impact from selling prices |
|
|
- |
|
|
|
0.2 |
|
Manufacturing costs |
|
|
0.1 |
|
|
|
(1.2 |
) |
Volume, product and market mix and other |
|
|
1.0 |
|
|
|
0.7 |
|
Inventory charges |
|
|
(1.9 |
) |
|
|
0.1 |
|
Changes in foreign currency exchange rates |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Inventory step-up |
|
|
(0.4 |
) |
|
|
- |
|
U.S. tariffs |
|
|
(0.4 |
) |
|
|
- |
|
Intangible asset amortization |
|
|
(0.4 |
) |
|
|
(0.1 |
) |
Current year gross margin |
|
|
61.6 |
% |
|
|
63.8 |
% |
Operating Expenses
Research & development (“R&D”) expenses increased in amount, but decreased as a percentage of net sales in 2025 compared to 2024. The increase in amount was driven by Paragon 28-related R&D expenses and higher spending on certain technology-based projects, but were partially offset by lower spending on our initial compliance with the European Union Medical Device Regulation as we continue to make progress on the approvals of our products. The decrease in R&D expenses as a percentage of net sales was due to our restructuring programs as well as controlling spend as net sales increased.
Selling, general & administrative (“SG&A”) expenses increased in amount and as a percentage of net sales in 2025 compared to 2024. The increases were primarily due to selling and distribution costs that are variable expenses which increase as net sales increase, Paragon 28-related expenses, higher performance-related compensation, instrument-related charges on certain product lines we intend to discontinue by 2032 and investments made in direct-to-patient marketing, medical education and information technology. These higher expenses were partially offset by lower litigation-related expenses.
In February 2025 and then as further expanded in December 2025, and in December of each of 2023, 2021 and 2019, we initiated global restructuring programs intended to reduce costs and transform the way we operate. We also have other cost reduction and optimization initiatives that have the goal of reducing costs across the organization. We recognized expenses of $181.2 million and $219.0 million in 2025 and 2024, respectively, primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs and optimization initiatives. The expenses were lower in 2025 compared to 2024 primarily due to lower expenses related to our U.S. and Canada ERP implementation and other optimization projects. For more information regarding these expenses, see Note 4 to our consolidated financial statements.
Acquisition, integration, divestiture and related expenses increased in 2025 when compared to 2024 due to the acquisitions made in 2025. The Paragon 28 and Monogram acquisitions included $55.1 million of compensation expense related to the discretionary accelerated vesting of Paragon 28 and Monogram unvested restricted stock units and stock options as agreed upon as part of the acquisition agreements. These costs were partially offset by $77.1 million of net gains related declines in the estimated fair values of contingent consideration from acquisitions due to updated forecasts of net sales.
34
Other Income (Expense), net, Interest Expense, net, and Income Taxes
In 2025, we recognized a gain of $25.5 million in our other income (expense), net compared to a loss of $31.1 million in 2024. The year-over-year change was primarily due to gains recognized on equity investments in 2025 as compared to losses on debt and equity security investments in 2024.
Interest expense, net, increased in 2025 when compared to 2024, primarily due to higher average debt balances outstanding related to the Paragon 28 acquisition and new borrowings in late 2024 that replaced debt with lower interest rates.
Our effective tax rate (“ETR”) on earnings from continuing operations before income taxes was 15.1 percent and 12.7 percent for the years ended December 31, 2025 and 2024, respectively. In 2025, the ETR was primarily driven by the foreign rate differential as our foreign locations have lower corporate income tax rates and a net favorable impact of certain intercompany transactions and restructuring. In 2024, the ETR was primarily driven by the foreign rate differential and a net favorable impact of changes to unrecognized tax benefits.
Absent discrete tax events, we expect our future ETR will be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and foreign locations, which have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation, including the OECD framework to implement a global minimum corporate tax of 15% for companies with global revenue and profits above certain thresholds (referred to as Pillar 2); the outcome of various federal, state and foreign audits, appeals, and litigation; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of all these items on our financial results.
See Note 16 to our consolidated financial statements for additional information on our income taxes.
Segment Operating Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit as a |
|
|
|||||||||||||||
|
|
Net Sales |
|
|
Segment Profit |
|
|
Percentage of Net Sales |
|
|
|||||||||||||||||||||||||||
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
|||||||||||||||||||||||||||
(dollars in millions) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
|||||||||
Americas |
|
$ |
5,144.6 |
|
|
$ |
4,794.8 |
|
|
$ |
4,624.1 |
|
|
$ |
2,645.7 |
|
|
$ |
2,576.3 |
|
|
$ |
2,487.7 |
|
|
|
51.4 |
|
% |
|
53.7 |
|
% |
|
53.8 |
|
% |
EMEA |
|
|
1,828.8 |
|
|
|
1,691.1 |
|
|
|
1,592.4 |
|
|
|
595.0 |
|
|
|
594.3 |
|
|
|
545.0 |
|
|
|
32.5 |
|
|
|
35.1 |
|
|
|
34.2 |
|
|
Asia Pacific |
|
|
1,258.1 |
|
|
|
1,192.8 |
|
|
|
1,177.7 |
|
|
|
446.0 |
|
|
|
462.1 |
|
|
|
437.0 |
|
|
|
35.5 |
|
|
|
38.7 |
|
|
|
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Americas
In the Americas, operating profit increased, but operating profit as a percentage of net sales decreased, in 2025 compared to 2024. Operating profit increased primarily due to the acquisition of Paragon 28, which was partially offset by higher manufacturing costs included in segment operating profit. In addition, the Americas benefited from opportunistic end-of-year customer purchases and capital sales above historic levels. Operating profit as a percentage of net sales decreased because of the higher manufacturing costs as well as the fact that the operating profit contributed by Paragon 28 is at a lower operating profit margin.
EMEA
In EMEA, operating profit increased slightly, but operating profit as a percentage of net sales decreased, in 2025 when compared to 2024. The decrease in operating profit as a percentage of net sales was due to higher manufacturing costs included in segment operating profit, as well as the fact that the operating profit contributed by Paragon 28 is at a lower operating profit margin.
Asia Pacific
In Asia Pacific, operating profit and operating profit as a percentage of net sales decreased in 2025 when compared to 2024. The decreases were due to higher manufacturing costs included in segment operating profit and higher bad debt expense, as well as the fact that the operating profit contributed by Paragon 28 is at a lower operating profit margin.
LIQUIDITY AND CAPITAL RESOURCES
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As of December 31, 2025, we had $591.9 million in cash and cash equivalents. In addition, we had $1.0 billion available to borrow under a 364-day revolving credit agreement that matures on June 26, 2026, and $1.5 billion available under a five-year revolving facility that matures on June 27, 2030. The terms of the 364-day revolving credit agreement and the five-year revolving facility are described further in Note 12 to our consolidated financial statements.
We believe that cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our revolving credit facilities will be sufficient to meet our ongoing liquidity requirements for at least the next twelve months. However, it is possible our needs may change. Further, there can be no assurance that, if needed, we will be able to secure additional financing on terms favorable to us, if at all.
Sources of Liquidity
Cash flows provided by operating activities were $1,697.1 million in 2025 compared to $1,499.4 million in 2024. The increase in 2025 was primarily due to higher net sales, favorable timing of accounts payable relative to 2024 and lower bonus and restructuring-related payments. These favorable items were partially offset by costs related to closing the Paragon 28 and Monogram acquisitions, U.S. tariffs and higher interest and tax-related payments.
Cash flows used in investing activities were $1,975.7 million in 2025 compared to $888.1 million in 2024. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, including new product introductions and optimization of our manufacturing and logistics networks. In 2025 we paid $1,393.2 million, net of cash acquired, for the acquisitions of Paragon 28 and Monogram, as well as paid $52.4 million related to the ownership rights or to gain access to various technologies that were recognized as intangible assets.
Cash flows provided by financing activities were $326.0 million in 2025 compared to cash flows used in financing activities of $484.5 million in 2024. In 2025, we issued senior notes for proceeds of $2,492.1 million. We used these proceeds, along with cash on hand, for the acquisition of Paragon 28, to redeem $1,463.0 million of senior notes, and to repurchase $487.0 million of our common stock.
We place our cash and cash equivalents in highly-rated financial institutions and limit the amount of credit exposure to any one entity. We invest only in high-quality financial instruments in accordance with our internal investment policy.
As of December 31, 2025, $353.8 million of our cash and cash equivalents were held in jurisdictions outside of the U.S. Of this amount, $77.6 million is denominated in U.S. Dollars and, therefore, bears no foreign currency translation risk. The remaining amount is denominated in currencies of the various countries where we operate. As discussed in Note 16 to our consolidated financial statements, we generally intend to limit distributions from foreign subsidiaries earnings that were previously taxed in the U.S. These previously taxed earnings would not be subject to further U.S. federal tax.
Material Cash Requirements from Known Contractual and Other Obligations
At December 31, 2025, we had outstanding debt of $7,519.1 million, of which $587.1 million was classified as current debt that matures on December 13, 2026. We believe we can satisfy these debt obligations with cash on hand, cash generated from our operations, by issuing new debt and/or by borrowing on our committed revolving credit facilities.
For additional information on our debt, including types of debt, maturity dates, interest rates, debt covenants and available revolving credit facilities, see Note 12 to our consolidated financial statements.
In February, May, August and December 2025, our Board of Directors declared cash dividends of $0.24 per share. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.
In May 2024, our Board of Directors authorized a $2.0 billion share repurchase program effective May 29, 2024, with no expiration date. In 2025, we executed share repurchases under this repurchase program in an aggregate amount of $487.0 million to return cash to investors as well as to limit ownership dilution from the issuance of common stock under our share-based compensation programs. As of December 31, 2025, $770.2 million remained authorized under this program. On February 9, 2026, our Board of Directors authorized a $1.5 billion share
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repurchase program effective February 9, 2026, with no expiration date, and terminated the existing May 2024 share repurchase program.
As discussed in Note 4 to our consolidated financial statements, we are executing on a 2025 Restructuring Plan, 2023 Restructuring Plan, 2021 Restructuring Plan and a 2019 Restructuring Plan. The 2025 Restructuring Plan is expected to result in total pre-tax charges of approximately $155 million by the end of 2027, of which approximately $137 million was incurred through December 31, 2025. We expect to reduce gross annual pre-tax operating expenses by approximately $175 million relative to the 2024 baseline expenses by the end of 2027 as program benefits under the 2025 Restructuring Plan are realized. The 2023 Restructuring Plan, which was completed in 2025, resulted in total pre-tax charges of $115 million. We estimate gross annual pre-tax operating expenses were reduced by $175 million to $200 million relative to the 2023 baseline expenses by the end of 2025. The 2021 Restructuring Plan was completed by the end of 2024, resulting in $169 million of total pre-tax charges. We estimate gross annual pre-tax operating expenses were reduced by approximately $190 million relative to the 2021 baseline expenses by the end of 2024. The 2019 Restructuring Plan, which was substantially completed as of December 31, 2025, resulted in total pre-tax restructuring charges of $393 million. We estimate the program resulted in a reduction of gross annual pre-tax operating expenses of approximately $180 million relative to the 2019 baseline expenses by the end of 2025.
As discussed in Note 16 to our consolidated financial statements, the IRS has issued proposed adjustments for years 2013 through 2015 and for years 2016 through 2019. We have disputed these proposed adjustments and intend to continue to vigorously defend our positions. Although the ultimate timing for resolution of the disputed tax issues is uncertain, future payments may be significant to our operating cash flows.
Under the Tax Cuts and Jobs Act of 2017, we have a $85.9 million current liability remaining from a one-time tax on the mandatory deemed repatriation of post-1986 untaxed foreign earnings and profits (“transition tax”) for the deemed repatriation of unremitted foreign earnings. Our 2026 payment will be our last from this transition tax.
As discussed in Note 20 to our consolidated financial statements, we are involved in various litigation matters. We estimate the total liabilities for all litigation matters was $136.2 million as of December 31, 2025. However, litigation is inherently uncertain, and upon resolution of any of these uncertainties, we may incur charges in excess of these estimates, and may in the future incur other material judgments or enter into other material settlements of claims. We expect to pay these liabilities over the next few years.
In the normal course of business, we enter into purchase commitments, primarily related to raw materials. However, we do not believe these purchase commitments are material to the overall standing of our business or our liquidity.
For each of our acquisitions that include contingent consideration, there is a maximum payout. Accordingly, the range of our potential contingent consideration payments are $25 million to $795 million as of December 31, 2025, that may be paid out through 2031.
We have entered into development, distribution and other contractual arrangements that may result in future payments dependent upon various events such as the achievement of certain product R&D milestones, sales milestones, or exclusive rights to distribute a product. Since there is uncertainty on the timing or whether such payments will have to be made, they have not been recognized on our consolidated balance sheets. These estimated payments related to these agreements could range from $0 to $225 million.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements is affected by the selection and application of accounting policies and methods, and also requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. We believe that the accounting estimates and assumptions described below involve significant subjectivity and judgment, and changes to such estimates or assumptions could have a material impact on our financial condition or operating results.
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Excess Inventory and Instruments - We must determine as of each balance sheet date how much, if any, of our inventory may ultimately prove to be unsaleable or unsaleable at our carrying cost. Similarly, we must also determine if instruments on hand will be put to productive use or remain undeployed as a result of excess supply. Accordingly, inventory and instruments are written down to their net realizable value. To determine the appropriate net realizable value, we evaluate current stock levels in relation to historical and expected patterns of demand for all of our products and instrument systems and components. The basis for the determination is generally the same for all inventory and instrument items and categories except for work in process inventory, which is recorded at cost. Obsolete or discontinued items are generally destroyed and completely written off. Management evaluates the need for changes to the net realizable values of inventory and instruments based on market conditions, competitive offerings and other factors on a regular basis. For example, in December 2025, management decided on a plan to discontinue selling certain products by 2032. As a result of this decision, management estimated the amount of inventory and undeployed instruments on hand that would be utilized before discontinuance and recognized a charge of approximately $170 million to reduce such inventory and instruments to their net realizable value based upon the reduced demand.
Income Taxes - Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated future taxes to be paid. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgments and estimates are required in determining the consolidated income tax expense.
We estimate income tax expense and income tax liabilities and assets by taxable jurisdiction. Realization of deferred tax assets in each taxable jurisdiction is dependent on our ability to generate future taxable income sufficient to realize the benefits. We evaluate deferred tax assets on an ongoing basis and provide valuation allowances unless we determine it is “more likely than not” that the deferred tax benefit will be realized.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in numerous jurisdictions across our global operations. We are subject to regulatory review or audit in virtually all of those jurisdictions and those reviews and audits may require extended periods of time to resolve. We record our income tax provisions based on our knowledge of all relevant facts and circumstances, including existing tax laws, our experience with previous settlement agreements, the status of current examinations and our understanding of how the tax authorities view certain relevant industry and commercial matters.
We recognize tax liabilities in accordance with the Financial Accounting Standards Board (“FASB”) guidance on income taxes and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.
Commitments and Contingencies - We are involved in various ongoing proceedings, legal actions and claims, including product liability, intellectual property, stockholder matters, tax disputes, commercial disputes, employment matters, whistleblower and qui tam claims and investigations, governmental proceedings and investigations, and other legal matters that arise in the normal course of our business. We establish liabilities for loss contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Accruals for product liability and other claims are established with the assistance of internal and external legal counsel based on current information and historical settlement information for claims, related legal fees and for claims incurred but not reported.
Goodwill and Intangible Assets - We evaluate the carrying value of goodwill and indefinite life intangible assets annually, or whenever events or circumstances indicate that the fair value is below its carrying amount. We evaluate the carrying value of finite life intangible assets whenever events or circumstances indicate the carrying value may not be recoverable. Significant assumptions are required to estimate the fair value of goodwill and intangible assets, most notably estimated future cash flows generated by these assets and risk-adjusted discount rates. As such, these fair value measurements use significant unobservable inputs. Changes to these assumptions could require us to record impairment charges on these assets.
We have four reporting units with goodwill assigned to them. During our annual goodwill impairment testing in the fourth quarter of 2025, for the two reporting units we quantitatively tested, their estimated fair values exceeded their carrying values by more than 25 percent. We estimated the fair value of these reporting units using the income and market approaches. Fair value under the income approach was determined by discounting to present value the
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estimated future cash flows of the reporting unit. Fair value under the market approach utilized the guideline public company methodology, which uses valuation indicators determined from other businesses that are similar to our reporting unit. We performed a qualitative test on the other two reporting units and concluded it was more likely than not the fair value of each of these reporting units exceeded its carrying value.
Future impairment in our reporting units could occur if the estimates used in the income and market approaches change. If our estimates of profitability in the reporting unit decline, the fair value estimate under the income approach will decline. Additionally, changes in the broader economic environment could cause changes to our estimated discount rates and comparable company valuation indicators, which may impact our estimated fair values. Further, changes in foreign currency exchange rates could increase the cost of procuring inventory and services from foreign suppliers, which could reduce reporting unit profitability.
Business Combinations - In accordance with ASC Topic 805, Business Combinations, we use the acquisition method of accounting to allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the estimated fair value of assets and liabilities is recorded as goodwill. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition often requires the application of judgment regarding estimates and assumptions. These estimates include, but are not limited to, a market participant’s expectation of future cash flows from acquired technology and in-process research and development. All acquisition costs are expensed as incurred. During the measurement period, not to exceed one year from the acquisition date, we may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed if new information is obtained related to facts and circumstances that existed as of the acquisition date.
Contingent Consideration - In connection with an acquisition, we may be required to pay future consideration that is contingent upon the achievement of specified objectives, such as receipt of regulatory approval, commercialization of a product or achievement of revenue targets. In a business combination, we record a contingent consideration liability, as of the acquisition date, representing the estimated fair value of the contingent consideration we expect to pay. We determined the fair value of the contingent consideration related to the Monogram acquisition, which represented most of our contingent consideration at December 31, 2025, using a Monte Carlo valuation approach, which simulates future revenues during the earn out-period using management's best estimates. We determined the fair value of our other contingent consideration using a discounted cash flow analysis. Significant judgment is required in determining the assumptions used to calculate the fair value of the contingent consideration. Increases in projected revenues and probabilities of payment may result in significantly higher fair value measurements; decreases in these items may have the opposite effect. Increases in discount rates in the periods prior to payment may result in significantly lower fair value measurements; decreases may have the opposite effect. See Note 9 to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
We remeasure our contingent consideration each reporting period and recognize the change in the contingent consideration’s fair value “Acquisition, integration, divestiture and related” in our consolidated statement of income. As of December 31, 2025 and 2024, we recorded $299.2 million and $180.7 million of contingent consideration, respectively, related to completed business combinations.
If the transaction is determined to be an asset acquisition rather than a business combination, contingent consideration is recognized when the specified objective is deemed probable and is estimable.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to our consolidated financial statements for information on how recent accounting pronouncements have affected or may affect our financial position, results of operations or cash flows.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
MARKET RISK
We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in foreign currency exchange rates, interest rates and commodity prices that could affect our financial condition, results of operations and cash flows. We manage our exposure to these and other market risks through regular operating and financing activities and through the use of derivative financial instruments. We use derivative financial instruments solely as risk management tools and not for speculative investment purposes.
FOREIGN CURRENCY EXCHANGE RISK
We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. See Note 14 to our consolidated financial statements for further details on our foreign currency exchange risk exposure and management.
We maintain written policies and procedures governing our risk management activities. Our policy requires that critical terms of hedging instruments be the same as hedged forecasted transactions. On this basis, with respect to cash flow hedges, changes in cash flows attributable to hedged transactions are generally expected to be offset by changes in the fair value of hedge instruments. As part of our risk management program, we also perform sensitivity analyses to assess potential changes in revenue, operating results, cash flows and financial position relating to hypothetical movements in currency exchange rates. A sensitivity analysis of changes in the fair value of foreign currency exchange forward contracts outstanding at December 31, 2025 indicated that, if the U.S. Dollar uniformly strengthened or weakened in value by 10 percent relative to all currencies, with no change in the interest differentials, the fair value of those contracts would affect earnings in a range of a decrease of approximately $109 million to an increase of approximately $107 million before income taxes in periods through April 2028.
Any change in the fair value of foreign currency exchange forward contracts as a result of a fluctuation in a currency exchange rate is expected to be largely offset by a change in the value of the hedged transaction. Consequently, foreign currency exchange contracts would not subject us to material risk due to exchange rate movements because gains and losses on these contracts offset gains and losses on the assets, liabilities and transactions being hedged.
We had net assets, excluding goodwill and intangible assets, in legal entities with non-U.S. Dollar functional currencies of $1,490.4 million at December 31, 2025.
We enter into foreign currency forward exchange contracts with terms of one to three months to manage currency exposures for monetary assets and liabilities denominated in a currency other than an entity’s functional currency. As a result, foreign currency remeasurement gains/losses recognized in earnings are generally offset with gains/losses on the foreign currency forward exchange contracts in the same reporting period.
For details about these and other financial instruments, including fair value methodologies, see Note 14 to our consolidated financial statements.
COMMODITY PRICE RISK
We purchase raw material commodities such as cobalt chrome, titanium, tantalum, polymer and sterile packaging. We enter into supply contracts generally with terms of 12 to 24 months, where available, on these commodities to alleviate the effect of market fluctuation in prices. As part of our risk management program, we perform sensitivity analyses related to potential commodity price changes.
INTEREST RATE RISK
In the normal course of business, we are exposed to market risk from changes in interest rates that could affect our results of operations and financial condition. We manage our exposure to interest rate risks through our regular operations and financing activities.
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We invest our cash and cash equivalents primarily in highly-rated corporate commercial paper and bank deposits. The primary investment objective is to ensure capital preservation. Currently, we do not use derivative financial instruments in our investment portfolio.
The majority of our debt is fixed-rate debt and therefore is not exposed to changes in interest rates. Based upon our overall interest rate exposure as of December 31, 2025, a change of 10 percent in interest rates, assuming the principal amount outstanding remains constant, would not have a material effect on interest expense, net. This analysis does not consider the effect of the change in the level of overall economic activity that could exist in such an environment.
CREDIT RISK
Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, derivative instruments and accounts receivable.
We place our cash and cash equivalents and enter into derivative transactions with highly-rated financial institutions and limit the amount of credit exposure to any one entity. We believe we do not have any significant credit risk on our cash and cash equivalents or derivative instruments.
Our concentrations of credit risks with respect to trade accounts receivable is limited due to the large number of customers and their dispersion across a number of geographic areas and by frequent monitoring of the creditworthiness of the customers to whom credit is granted in the normal course of business. Substantially all of our trade receivables are concentrated in the public and private hospital and healthcare industry in the U.S. and internationally or with distributors or dealers who operate in international markets and, accordingly, are exposed to their respective business, economic and country specific variables. Our ability to collect accounts receivable in some countries depends in part upon the financial stability of these hospital and healthcare sectors and the respective countries’ national economic and healthcare systems. Most notably, in Europe healthcare is typically sponsored by the government. Since we sell products to public hospitals in those countries, we are indirectly exposed to government budget constraints and price reduction initiatives. To the extent the respective governments’ ability to fund their public hospital programs deteriorates, we may have to record significant bad debt expenses in the future.
While we are exposed to risks from the broader healthcare industry in Europe and around the world, there is no significant net exposure due to any individual customer. Exposure to credit risk is controlled through credit approvals, credit limits and monitoring procedures, and we believe that reserves for losses are adequate.
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Item 8. Financial Statements and Supplementary Data
Zimmer Biomet Holdings, Inc.
Index to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm (PCAOB ID: |
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Consolidated Statements of Earnings for the Years Ended December 31, 2025, 2024 and 2023 |
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Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023 |
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Consolidated Balance Sheets as of December 31, 2025 and 2024 |
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Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023 |
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Notes to Consolidated Financial Statements |
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Zimmer Biomet Holdings, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Zimmer Biomet Holdings, Inc. and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of earnings, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, 2025 appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded Paragon 28, Inc. (Paragon 28) from its assessment of internal control over financial reporting as of December 31, 2025, because it was acquired by the Company in a purchase business combination during 2025. We have also excluded Paragon 28 from our audit of internal control over financial reporting. Paragon 28 is a wholly-owned subsidiary whose total assets and total net sales excluded from management’s assessment and our audit of internal control over financial reporting represent 1.1% and 2.4%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2025.
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Tax Liabilities for Certain Unrecognized Tax Benefits
As described in Notes 2 and 16 to the consolidated financial statements, the Company has recorded tax liabilities for unrecognized tax benefits with a consolidated balance of $247.4 million as of December 31, 2025, of which a portion relates to certain unrecognized tax benefits. The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in numerous jurisdictions across the Company’s global operations. The Company’s income tax filings are regularly under audit in multiple federal, state, and foreign jurisdictions. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed.
The principal considerations for our determination that performing procedures relating to tax liabilities for certain unrecognized tax benefits is a critical audit matter are (i) the significant judgment by management when determining the tax liabilities for certain unrecognized tax benefits and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s identification of new or changes in information impacting the measurement of the tax liabilities for certain unrecognized tax benefits.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the identification of new or changes in information impacting the measurement of the tax liabilities for certain unrecognized tax benefits. These procedures also included, among others (i) testing the completeness and accuracy of the underlying data used in the calculation of the tax liabilities for certain unrecognized tax benefits by jurisdiction; (ii) testing the measurement of the tax liabilities for certain unrecognized tax benefits by recalculating these liabilities; (iii) assessing management’s identification of new or changes in information impacting the measurement of the tax liabilities for certain unrecognized tax benefits and evaluating the possible outcomes for these certain unrecognized tax benefits; and (iv) evaluating the status and results of income tax audits related to certain unrecognized tax benefits with the relevant tax authorities.
Acquisition of Paragon 28 – Valuation of a Certain Technology Intangible Asset
As described in Note 9 to the consolidated financial statements, on April 21, 2025, the Company completed the acquisition of Paragon 28 and the fair value of consideration transferred was $1,276.5 million. Of the assets
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acquired, $324.0 million relates to technology intangible assets that were recorded, of which a majority relates to a certain technology intangible asset. The fair value of acquired technology intangible assets was estimated by management using the multi-period excess earnings method. Management’s significant assumptions used in the valuation of technology intangible assets included revenue growth rates, obsolescence rate, gross margin, operating expenses, and contributory asset charge rate.
The principal considerations for our determination that performing procedures relating to the valuation of a certain technology intangible asset acquired in the acquisition of Paragon 28 is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of a certain technology intangible asset acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, obsolescence rate, gross margin, operating expenses, and contributory asset charge rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of a certain technology intangible asset acquired. These procedures also included, among others (i) reading the merger agreement; (ii) testing management’s process for developing the fair value estimate of a certain technology intangible asset acquired; (iii) evaluating the appropriateness of the multi-period excess earnings method used by management; (iv) testing the completeness and accuracy of the underlying data used in the multi-period excess earnings method; and (v) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, obsolescence rate, gross margin, operating expenses, and contributory asset charge rate. Evaluating management’s assumptions related to revenue growth rates, gross margin, and operating expenses involved considering (i) the current and past performance of the Paragon 28 business; (ii) the consistency with external market and industry data; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the multi-period excess earnings method and (ii) the reasonableness of the obsolescence rate and contributory asset charge rate assumptions.
Acquisition of Monogram Technologies Inc. – Valuation of a Certain Contingent Consideration Liability and the In-Process Research and Development Intangible Asset
As described in Note 9 to the consolidated financial statements, on October 7, 2025, the Company completed the acquisition of Monogram Technologies Inc. (Monogram) and the fair value of consideration transferred was $377.5 million, including contingent consideration. Management estimated the contingent consideration liability to be $211.3 million, of which $201.6 million was allocated to additional consideration to acquire Monogram if certain development, regulatory, and revenue milestones are achieved. A majority of the contingent consideration liability to acquire Monogram related to a certain contingent consideration liability. Of the assets acquired, $131.5 million relates to the in-process research and development (IPR&D) intangible asset that was recorded. The estimated fair value of the contingent consideration liability related to the revenue milestones was estimated by management using a Monte Carlo simulation method. The estimated fair value of the contingent consideration liability related to the development and regulatory milestones was calculated by management based on the probability of achieving the specified milestones and considered the time value of money. Management’s significant assumptions used in the Monte Carlo simulation method included revenue growth rates and discount rate. The fair value of the IPR&D intangible asset was estimated by management using the multi-period excess earnings method. Management’s significant assumptions used in the valuation of the IPR&D intangible asset included revenue growth rates, obsolescence rate, discount rate, and contributory asset charge rate.
The principal considerations for our determination that performing procedures relating to the valuation of a certain contingent consideration liability assumed and the IPR&D intangible asset acquired in the acquisition of Monogram is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of a certain contingent consideration liability assumed and the IPR&D intangible asset acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates and discount rate for a certain contingent consideration liability and revenue growth rates, obsolescence rate, discount rate, and contributory asset charge rate for the IPR&D intangible asset; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
45
controls relating to the acquisition accounting, including controls over management’s valuation of a certain contingent consideration liability assumed and the IPR&D intangible asset acquired. These procedures also included, among others (i) reading the merger agreement; (ii) testing management’s process for developing the fair value estimate of a certain contingent consideration liability assumed and the IPR&D intangible asset acquired; (iii) evaluating the appropriateness of the Monte Carlo simulation and multi-period excess earnings methods used by management; (iv) testing the completeness and accuracy of the underlying data used in the Monte Carlo simulation and multi-period excess earnings methods; and (v) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates and discount rate for a certain contingent consideration liability and revenue growth rates, obsolescence rate, discount rate, and contributory asset charge rate for the IPR&D intangible asset. Evaluating management’s assumption related to revenue growth rates involved considering (i) the current and past performance of the Monogram business; (ii) the consistency with external market and industry data; and (iii) whether the assumption was consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Monte Carlo simulation and multi-period excess earnings methods and (ii) the reasonableness of the discount rate assumption for a certain contingent consideration liability and the obsolescence rate, discount rate, and contributory asset charge rate assumptions for the IPR&D intangible asset.
/s/
February 19, 2026
We have served as the Company’s auditor since 2000.
46
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts)
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
sold, excluding intangible asset amortization |
|
|
|
|
|
|
|
|
|
|||
Intangible asset amortization |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
|
|
|
|
|
|
|
|||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|||
Restructuring and other cost reduction initiatives |
|
|
|
|
|
|
|
|
|
|||
Acquisition, integration, divestiture and related |
|
|
|
|
|
|
|
|
|
|||
Operating expenses |
|
|
|
|
|
|
|
|
|
|||
Operating Profit |
|
|
|
|
|
|
|
|
|
|||
Other income (expense), net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Earnings before income taxes |
|
|
|
|
|
|
|
|
|
|||
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|||
Net Earnings |
|
|
|
|
|
|
|
|
|
|||
Less: Net (loss) earnings attributable to noncontrolling interest |
|
|
( |
) |
|
|
|
|
|
|
||
Net Earnings of Zimmer Biomet Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Earnings Per Common Share |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
|
|
|||
Basic |
|
|
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
47
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net Earnings of Zimmer Biomet Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Other Comprehensive Income (Loss): |
|
|
|
|
|
|
|
|
|
|||
Foreign currency cumulative translation adjustments, net of tax |
|
|
|
|
|
( |
) |
|
|
|
||
Unrealized cash flow hedge gains (losses), net of tax |
|
|
( |
) |
|
|
|
|
|
|
||
Reclassification adjustments on hedges, net of tax |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Adjustments to prior service cost and unrecognized actuarial |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total Other Comprehensive Income (Loss) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Comprehensive Income Attributable to Zimmer Biomet Holdings, Inc. |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
48
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current Assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, less allowance for credit losses |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total Current Assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Assets |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
Current Liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Other current liabilities |
|
|
|
|
|
|
||
Current portion of long-term debt |
|
|
|
|
|
|
||
Total Current Liabilities |
|
|
|
|
|
|
||
Deferred income taxes, net |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Long-term debt |
|
|
|
|
|
|
||
Total Liabilities |
|
|
|
|
|
|
||
and Contingencies (Note 20) |
|
|
|
|
|
|
||
Stockholders' Equity: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Paid-in capital |
|
|
|
|
|
|
||
Retained earnings |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Treasury stock, |
|
|
( |
) |
|
|
( |
) |
Total Zimmer Biomet Holdings, Inc. stockholders' equity |
|
|
|
|
|
|
||
Noncontrolling interest |
|
|
|
|
|
|
||
Total Stockholders' Equity |
|
|
|
|
|
|
||
Total Liabilities and Stockholders' Equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
49
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions, except per share amounts)
|
|
Zimmer Biomet Holdings, Inc. Stockholders |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|||||||||
|
|
Common Shares |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury Shares |
|
|
Noncontrolling |
|
|
Stockholders' |
|
|||||||||||||||
|
|
Number |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
(Loss) Income |
|
|
Number |
|
|
Amount |
|
|
Interest |
|
|
Equity |
|
|||||||||
Balance January 1, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|||
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Stock compensation plans |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||||
Embody, Inc acquisition consideration |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Share repurchases |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Balance December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||||||
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|||
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Cash dividends to noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Stock compensation plans |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||||
Embody, Inc acquisition consideration |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Share repurchases |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
(844.8 |
) |
Balance December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||||||
Net earnings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
||
Other comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Cash dividends declared |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Stock compensation plans |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||||
Embody, Inc acquisition consideration |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Share repurchases |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Balance December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
|
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
50
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Cash flows provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net earnings |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net earnings to net cash provided by |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|||
Share-based compensation |
|
|
|
|
|
|
|
|
|
|||
Deferred income tax benefit |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities, net of acquired assets and liabilities |
|
|
|
|
|
|
|
|
|
|||
Income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Receivables |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
|
|
|
|
|
|
( |
) |
||
Accounts payable and accrued liabilities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other assets and liabilities |
|
|
( |
) |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
|||
Cash flows provided by (used in) investing activities: |
|
|
|
|
|
|
|
|
|
|||
Additions to instruments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Additions to other property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net investment hedge settlements |
|
|
( |
) |
|
|
|
|
|
|
||
Acquisition of intangible assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Business combination investments, net of acquired cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows provided by (used in) financing activities: |
|
|
|
|
|
|
|
|
|
|||
Net payments on revolving facilities |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Proceeds from senior notes |
|
|
|
|
|
|
|
|
|
|||
Redemption of senior notes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payments on term loans |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Dividends paid to stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from employee stock compensation plans |
|
|
|
|
|
|
|
|
|
|||
Business combination contingent consideration payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Effect of exchange rates on cash and cash equivalents |
|
|
|
|
|
( |
) |
|
|
|
||
Increase in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The accompanying notes are an integral part of these consolidated financial statements.
51
ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; craniomaxillofacial and thoracic products; bone cement; surgical products; and a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. We collaborate with healthcare professionals around the globe to advance the pace of innovation. Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. Together with healthcare professionals, we help millions of people live better lives.
The words “Zimmer Biomet,” “we,” “us,” “our,” “the Company” and similar words refer to Zimmer Biomet Holdings, Inc. and its subsidiaries. “Zimmer Biomet Holdings” refers to the parent company only.
We reclassified certain prior year amounts to conform to the current year presentation.
Use of Estimates - The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have made our best estimates, as appropriate under GAAP, in the recognition of our assets and liabilities. Such estimates include, but are not limited to, variable consideration to our customers, our allowance for doubtful accounts for expected credit losses, the net realizable value of our inventory, the fair value of our goodwill, the recoverability of other long-lived assets, contingent consideration that may be payable related to our business combinations and unrecognized tax benefits. Actual results could differ materially from these estimates.
Shipping and Handling - Amounts billed to customers for shipping and handling of products are reflected in net sales and are not significant. Expenses incurred related to shipping and handling of products are reflected in selling, general and administrative (“SG&A”) expenses and were $
Research and Development - We expense all research and development (“R&D”) costs as incurred except when there is an alternative future use for the R&D. R&D costs include salaries, prototypes, depreciation of equipment used in R&D, consultant fees, service fees paid to collaborative partners, and arrangements to gain access to or acquire third-party in-process R&D projects with no alternative future use. Where contingent milestone payments are due to third parties under R&D arrangements, we expense the milestone payment obligations when it is probable that the milestone results will be achieved.
Litigation - We record an undiscounted liability for contingent losses, including future legal costs, settlements and judgments, when we consider it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
52
Restructuring and other cost reduction initiatives - A restructuring is defined as a program that is planned and controlled by management, and materially changes either the scope of a business undertaken by an entity, or the manner in which that business is conducted. Restructuring charges include (i) employee termination benefits, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities.
In February 2025 and then further expanded in December 2025, and December 2023, 2021 and 2019, we approved separate global restructuring programs intended to further reduce costs and to reorganize our global operations. Restructuring charges for the years ended December 31, 2025, 2024 and 2023 were attributable to these programs. See Note 4 for additional information regarding these restructuring programs.
We have also initiated other cost reduction and optimization projects that have the goal of reducing costs across the organization. Costs related to these projects are included in our “Restructuring and other cost reduction initiatives” financial statement line item.
Acquisition, integration, divestiture and related – We use the financial statement line item, “Acquisition, integration, divestiture and related” to recognize expenses resulting from the consummation of business mergers and acquisitions and the related integration of those businesses, and expenses related to the divestiture of our businesses. Acquisition, integration, divestiture and related gains and expenses are primarily composed of:
Cash and Cash Equivalents - We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying amounts reported in the balance sheet for cash and cash equivalents are valued at cost, which approximates their fair value.
Accounts Receivable - Accounts receivable consists of trade and other miscellaneous receivables. We grant credit to customers in the normal course of business and maintain an allowance for expected credit losses. We determine the allowance for credit losses by geographic market and take into consideration historical credit experience, creditworthiness of the customer and other pertinent information. We make concerted efforts to collect all accounts receivable, but sometimes we have to write-off the account against the allowance when we determine the account is uncollectible. The allowance for credit losses was $
Inventories - Inventories are stated at the lower of cost and net realizable value, with cost determined on a first-in first-out basis.
Property, Plant and Equipment - Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives of to
53
recognized when estimated future undiscounted cash flows relating to the asset are less than its carrying amount. An impairment loss is measured as the amount by which the carrying amount of an asset exceeds its fair value.
Software Costs - We capitalize certain computer software and software development costs incurred in connection with developing or obtaining computer software for internal use when both the preliminary project stage is completed and it is probable that the software will be used as intended. Capitalized software costs generally include external direct costs of materials and services utilized in developing or obtaining computer software and compensation and related benefits for employees who are directly associated with the software project. Capitalized software costs are included in property, plant and equipment on our balance sheet and amortized on a straight-line or weighted average estimated user basis when the software is ready for its intended use over the estimated useful lives of the software, which approximate to
Instruments - Instruments are hand-held devices used by surgeons during total joint replacement and other surgical procedures. Instruments are recognized as long-lived assets and are included in property, plant and equipment. Undeployed instruments are carried at cost or net realizable value. Instruments that have been deployed to be used in surgeries are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on average estimated useful lives, determined principally in reference to associated product life cycles, primarily
Goodwill - Goodwill is not amortized but is subject to annual impairment tests. Goodwill has been assigned to reporting units. Potential impairment of a reporting unit is identified by either comparing a reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment. We may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and we do not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value. If a quantitative assessment is performed, the fair value of the reporting unit and the fair value of goodwill are determined based upon a discounted cash flow analysis and/or use of a market approach by looking at market values of comparable companies. Significant assumptions are incorporated into our discounted cash flow analyses such as forecasted net sales, revenue growth rates, forecasted operating expenses and risk-adjusted discount rates. We perform this test in the fourth quarter of the year or whenever events or changes in circumstances indicate that the fair value of the reporting unit is more likely than not below its carrying amount. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded in the amount that the carrying value of the reporting unit exceeds the fair value. See Note 10 for more information regarding goodwill.
Intangible Assets - Intangible assets are initially measured at their fair value. We have determined the fair value of our intangible assets either by the fair value of the consideration exchanged for the intangible asset or the estimated after-tax discounted cash flows expected to be generated from the intangible asset. Intangible assets with a finite life, including technology, certain trademarks and trade names, customer-related intangibles, intellectual property rights and patents and licenses are amortized on a straight-line basis over their estimated useful life or contractual life, which may range from less than
Intangible assets with an indefinite life, including certain trademarks and trade names and in-process research and development (“IPR&D”) projects, are not amortized. Indefinite life intangible assets are assessed annually to determine whether events and circumstances continue to support an indefinite life. Intangible assets with an indefinite life are tested for impairment annually or whenever events or circumstances indicate that the fair value of the asset is more likely than not below its carrying amount. An impairment loss is recognized if the carrying amount exceeds the estimated fair value of the asset. The amount of the impairment loss to be recorded would be determined based upon the excess of the asset’s carrying value over its fair value. The fair values of indefinite lived intangible assets are determined based upon a discounted cash flow analysis using the relief from royalty method or
54
a qualitative assessment may be performed for any changes to the asset’s fair value from the last quantitative assessment. The relief from royalty method estimates the cost savings associated with owning, rather than licensing, assets. Significant assumptions are incorporated into these discounted cash flow analyses such as estimated growth rates, royalty rates and risk-adjusted discount rates. We may do a qualitative assessment when the results of the previous quantitative test indicated that the asset’s fair value was significantly in excess of its carrying value.
Contingent Consideration - Contingent consideration related to business combinations is recognized at its estimated fair value on the acquisition date. Subsequent changes to the fair value of those contingent consideration arrangements are recognized in the financial statement line item "Acquisition, integration, divestiture and related". Contingent consideration obligations related to business acquisitions may consist of development, regulatory and commercial milestone payments, and revenue or earnings-based payments, and are valued using discounted cash flow techniques. The estimated fair value related to achievement of development, regulatory and commercial milestone payments reflects management’s expectations of the probability of payment, and increases or decreases as the probability of payment or expectation of timing or amount of payments changes. The estimated fair value related to achievement of revenue-based payments is based upon probability-weighted future revenue estimates and increases or decreases as revenue estimates or expectation of timing or amount of payments changes.
At the end of each reporting period, we remeasure the fair value of these obligations based upon new information and record changes in their fair values until either the contingent consideration obligation is satisfied through payment upon achievement of, or the obligation no longer exists due to the failure to achieve the specified objectives. Changes to contingent consideration obligations can result from adjustments to discount rates, accretion of the discount rates due to the passage of time, changes in our estimates of the likelihood or timing of achieving development or commercial milestones, changes in the assumed probability associated with regulatory approval, and changes in the projected cashflows related to certain revenue milestones.
The assumptions related to estimating the fair value of contingent consideration include a significant amount of judgment, and any changes in the underlying estimates could have a material impact on the amount of contingent consideration recorded in any given period.
If the transaction is determined to be an asset acquisition rather than a business combination, a contingent consideration liability is recognized when the specified objective is deemed probable and is estimable.
Income Taxes - We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the new tax rate is enacted.
55
We reduce our deferred tax assets by a valuation allowance if it is more likely than not that we will not realize some portion or all of the deferred tax assets. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance which would reduce the provision for income taxes.
We operate on a global basis and are subject to numerous and complex tax laws and regulations. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in numerous jurisdictions across our global operations. Our income tax filings are regularly under audit in multiple federal, state, and foreign jurisdictions. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. Because income tax adjustments in certain jurisdictions can be significant, we record tax positions based upon our estimates. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.
Derivative Financial Instruments - We measure all derivative instruments at fair value and report them on our consolidated balance sheet as assets or liabilities. We maintain written policies and procedures that permit, under appropriate circumstances and subject to proper authorization, the use of derivative financial instruments solely for risk management purposes. The use of derivative financial instruments for trading or speculative purposes is prohibited by our policy. See Note 14 for more information regarding our derivative and hedging activities.
Other Income (Expense), Net - Other income (expense), net includes gains/(losses) on changes in fair value of our investments, gains/(losses) on remeasurement of monetary assets and liabilities denominated in a currency other than an subsidiary's functional currency and the related gains/(losses) on derivative instruments that are not designated as hedging instruments that we use to manage the currency exposures of these assets and liabilities, certain components of pension expense, and other non-operating gains/(losses). In the years ended December 31, 2025, 2024 and 2023, we recognized gains of $
Treasury Stock - We account for repurchases of common stock under the cost method and present treasury stock as a reduction of stockholders’ equity. We reissue common stock held in treasury only for limited purposes.
Noncontrolling Interest - We have investments in other companies in which we have a controlling financial interest, but not 100 percent of the equity. Further information related to the noncontrolling interests of those investments has not been provided as it is not significant to our consolidated financial statements.
Accounting Pronouncements Recently Adopted
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Improvements to Income Tax Disclosures, which is an amendment to ASC Topic 740 - Income Taxes. The ASU improves the transparency of income tax disclosures by requiring greater disaggregated information about an entity’s effective tax rate reconciliation and requiring additional disclosures and disaggregation of income taxes paid, among other amendments to improve the effectiveness of income tax disclosures. We adopted the guidance effective for the year ended December 31, 2025, on a prospective basis. See Note 16 for the additional income tax disclosures.
56
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is an amendment to ASC Topic 220 - Comprehensive Income. The ASU improves financial reporting by requiring disclosure of additional information about specific expense categories included in the expense captions presented on the income statement as well as disclosures about selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods for fiscal years beginning after December 15, 2027. The guidance will be applied prospectively with an option to apply the guidance retrospectively. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have on our disclosures.
In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software, which is an amendment to ASC Topic 350 - Intangibles - Goodwill and Other. The ASU amends the criteria and threshold for capitalizing software costs. The ASU removes the sequential software project stages from the previous guidance and will now require companies to capitalize internal-use software when: (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within that reporting year. The guidance can be applied prospectively with an option to apply the guidance retrospectively or through a modified transition approach. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have on our consolidated financial statements.
We recognize revenue when our performance obligations under the terms of a contract with our customer are satisfied. This happens when we transfer control of our products to the customer, which generally occurs upon implantation or when title passes upon shipment. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring our product. Taxes collected from customers and remitted to governmental authorities are excluded from revenues.
We sell products through two principal channels: 1) direct to healthcare institutions, such as hospitals and ambulatory surgery centers, referred to as direct channel accounts; and 2) through stocking distributors and healthcare dealers. In direct channel accounts and with some healthcare dealers, inventory is generally consigned to sales agents or customers so that products are available when needed for surgical procedures. No revenue is recognized upon the placement of inventory into consignment, as we retain the ability to control the inventory. Upon implantation, we issue an invoice and revenue is recognized. Consignment sales represented approximately
With sales to stocking distributors and some healthcare dealers and hospitals, revenue is generally recognized when control of our product passes to the customer, which can be upon shipment of the product or receipt by the customer. We estimate sales recognized in this manner represented approximately
We offer standard warranties to our customers that our products are not defective. These standard warranties are not considered separate performance obligations. In limited circumstances, we offer extended warranties that are separate performance obligations. We have very few contracts that have multiple performance obligations. Since we do
57
We offer volume-based discounts, rebates, prompt pay discounts, limited rights of return and other various incentives which we account for under the variable consideration model. If sales incentives may be earned by a customer for purchasing a specified amount of our product, we estimate whether such incentives will be achieved and recognize these incentives as a reduction in revenue in the same period the underlying revenue transaction is recognized. We primarily use the expected value method to estimate incentives. Under the expected value method, we consider the historical experience of similar programs as well as review sales trends on a customer-by-customer basis to estimate what levels of incentives will be earned. Occasionally, products are returned and, accordingly, we maintain an estimated refund liability based upon the expected value method that is recorded as a reduction in revenue.
We analyze sales by
This net sales presentation differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. Each of our reportable operating segments sells all the product categories noted above. Accordingly, the only difference from the presentation below and our reportable operating segments are the geographic groupings.
Net sales by geography are as follows (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|||
International |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net sales by product category are as follows (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Knees |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Hips |
|
|
|
|
|
|
|
|
|
|||
S.E.T |
|
|
|
|
|
|
|
|
|
|||
Technology & Data, Bone Cement and Surgical |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
In February 2025 and then as further expanded in December 2025, our management approved a global restructuring program (the “2025 Restructuring Plan”) intended to reduce costs and transform the way we operate. The 2025 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $
58
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
Balance, December 31, 2024 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Expenses incurred |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Balance, December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expense incurred since the start of the 2025 Restructuring Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expense estimated to be recognized for the 2025 Restructuring Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In December 2023, our management approved a global restructuring program (the “2023 Restructuring Plan”) intended to optimize our cost base and drive greater efficiencies throughout the company. The 2023 Restructuring Plan concluded in 2025 and resulted in total pre-tax restructuring charges of approximately $
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
Balance, December 31, 2022 |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Expenses incurred |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Cash payments |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Non-cash activity |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Balance, December 31, 2023 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Expenses incurred |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Non-cash activity |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Balance, December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses incurred |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Balance, December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expense incurred under the 2023 Restructuring Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In December 2021, our management approved a global restructuring program (the “2021 Restructuring Plan”) intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie. The 2021 Restructuring Plan concluded in 2024 and resulted in total pre-tax restructuring charges of approximately $
59
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
Balance, December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenses incurred |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance, December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses incurred |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expense incurred under the 2021 Restructuring Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing costs to allow us to further invest in higher priority growth opportunities. The 2019 Restructuring Plan substantially concluded in 2025 and resulted in total pre-tax restructuring charges of approximately $
The following table summarizes the location on our consolidated statement of earnings and type of cost for our 2019 Restructuring Plan (in millions):
60
|
|
Year Ended December 31, 2025 |
|
|||||||||||||
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
sold, excluding intangible asset amortization |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||
Restructuring and other cost reduction initiatives |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended December 31, 2024 |
|
|||||||||||||
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
sold, excluding intangible asset amortization |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||
Restructuring and other cost reduction initiatives |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Year Ended December 31, 2023 |
|
|||||||||||||
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
sold, excluding intangible asset amortization |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||
Restructuring and other cost reduction initiatives |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
The following table summarizes the liabilities recognized related to the 2019 Restructuring Plan (in millions):
|
|
Employee |
|
|
|
|
|
|
|
|
|
|
||||
|
|
Termination |
|
|
Contract |
|
|
|
|
|
|
|
||||
|
|
Benefits |
|
|
Terminations |
|
|
Other |
|
|
Total |
|
||||
Balance, December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expenses incurred |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
( |
) |
|
Balance, December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expenses incurred |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Balance, December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Expenses incurred |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency exchange rate changes |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Balance, December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total expense incurred under the 2019 Restructuring Plan |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
61
We do not include restructuring charges in the operating profit of our reportable segments. We report the expenses for other cost reduction and optimization initiatives in our “Restructuring and other cost reduction initiatives” financial statement line item because these activities also have the goal of reducing costs across the organization. However, since the cost reduction initiative expenses are not considered restructuring, they have been excluded from the amounts presented in this note.
Our share-based payments primarily consist of stock options and restricted stock units (“RSUs”).
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Total expense, pre-tax |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Tax benefit related to awards |
|
|
|
|
|
|
|
|
|
|||
Total expense, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|||
We had
Stock Options
Stock options granted to date under our plans generally vest over or
A summary of stock option activity for the year ended December 31, 2025 is as follows (options in thousands):
|
|
Stock |
|
|
Weighted |
|
|
Weighted |
|
|
Intrinsic |
|
||||
Outstanding at January 1, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Options forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Options expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested or expected to vest as of December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
62
We use a Black-Scholes option-pricing model to determine the fair value of our stock options. Expected volatility was derived from a combination of historical volatility and implied volatility because the options that were actively traded around the grant date of our stock options did not have maturities of over one year. The expected term of the stock options has been derived from historical employee exercise behavior. The risk-free interest rate was determined using the implied yield currently available for zero-coupon U.S. government issues with a remaining term approximating the expected life of the options. The dividend yield was determined by using an estimated annual dividend and dividing it by the market price of our stock on the grant date.
The following table presents information regarding the weighted average fair value of stock options granted, the assumptions used to determine fair value, the intrinsic value of options exercised and the tax benefit of options exercised in the indicated year.
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Dividend yield |
|
N/A |
|
|
N/A |
|
|
|
% |
|||
Volatility |
|
N/A |
|
|
N/A |
|
|
|
% |
|||
Risk-free interest rate |
|
N/A |
|
|
N/A |
|
|
|
% |
|||
Expected life (years) |
|
N/A |
|
|
N/A |
|
|
|
|
|||
Weighted average fair value of options granted |
|
N/A |
|
|
N/A |
|
|
$ |
|
|||
Intrinsic value of options exercised (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Tax benefit of options exercised (in millions) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
As of December 31, 2025, there was
RSUs
We have awarded RSUs to certain of our employees. The terms of the awards are generally three or
A summary of nonvested RSU activity for the year ended December 31, 2025 is as follows (RSUs in thousands):
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Grant Date |
|
||
|
|
RSUs |
|
|
Fair Value |
|
||
Outstanding at January 1, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
For the RSUs with service conditions only, the fair value of the awards was determined based upon the fair market value of our common stock on the date of grant. For the RSUs with market conditions, a Monte Carlo valuation technique was used to simulate the market conditions of the awards. The outcome of the simulation was used to determine the fair value of the awards.
We are required to estimate the number of RSUs that will vest and recognize share-based payment expense on a straight-line basis over the requisite service period. As of December 31, 2025, we estimate that
63
share-based payment expense as of December 31, 2025 was $
Inventories consisted of the following (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Amounts charged to the consolidated statements of earnings for excess and obsolete inventory in the years ended December 31, 2025, 2024 and 2023 were $
Property, plant and equipment consisted of the following (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Building and equipment |
|
|
|
|
|
|
||
Capitalized software costs |
|
|
|
|
|
|
||
Instruments |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
We had $
64
The following financial assets and liabilities are recorded at fair value on a recurring basis (in millions):
|
|
As of December 31, 2025 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at Reporting Date Using: |
|
||||||||||
Description |
|
Recorded |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Cross-currency interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Derivatives not designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total Assets |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Cross-currency interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Derivatives not designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Contingent payments related to acquisitions |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Liabilities |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
65
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at Reporting Date Using: |
|
||||||||||
Description |
|
Recorded |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Cross-currency interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Derivatives not designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total Assets |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Derivatives designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Cross-currency interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Interest rate swaps |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Derivatives not designated as hedges, current and long-term |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency forward contracts |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Contingent payments related to acquisitions |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Liabilities |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
|||
We value our foreign currency forward contracts using a market approach based on foreign currency exchange rates obtained from active markets, and we perform ongoing assessments of counterparty credit risk.
We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps, and we perform ongoing assessments of counterparty credit risk. The valuation of our cross-currency interest rate swaps also includes consideration of foreign currency exchange rates.
Contingent payments related to acquisitions consist of sales-based payments and development and regulatory milestones, and are valued using discounted cash flow techniques. The fair value of sales-based payments is based upon significant unobservable inputs such as probability-weighted future revenue estimates and simulating the numerous potential outcomes, and changes as revenue estimates increase or decrease. The fair value of the development and regulatory milestones are based on the probability of success in obtaining the specified development achievement or regulatory approval. The fair value of sales-based payments and development and regulatory milestones utilize significant unobservable inputs, which could reasonably change in future periods resulting in significantly higher or lower fair value measurements. If our estimates of future revenue or probability of achievement increase, the fair value measurements for these contingent payments will increase. Vice versa, if our estimates of future revenue or probability of achievement decrease, the fair value measurements for these contingent payments will decline. For each of our acquisitions that include contingent consideration, there is a maximum payout. Accordingly, the range of our potential contingent consideration payments are $
Contingent payments related to our acquisition of Embody, Inc. (“Embody”) in February 2023 are to be settled by issuance of our common stock and cash payments. The Embody acquisition is discussed in Note 9. During the year ended December 31, 2025, we issued
66
The fair value of common stock was determined to be $
See Note 9 for a description of the contingent consideration related to the Paragon 28 and Monogram acquisitions.
The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in millions):
Level 3 - Liabilities |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Contingent payments related to acquisitions |
|
|
|
|
|
|
|
|
|
|||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
New contingent consideration related to acquisitions |
|
|
|
|
|
|
|
|
|
|||
|
|
( |
) |
|
|
|
|
|
|
|||
Settlements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign currency impact |
|
|
|
|
|
( |
) |
|
|
- |
|
|
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Changes in estimates for contingent payments related to acquisitions are recognized in the “Acquisition, integration, divestiture” and related line item on our consolidated statements of earnings.
2025 Acquisitions
Paragon 28, Inc.
On
Paragon 28 is a leading medical device company focused exclusively on the foot and ankle orthopedic segment. The acquisition increases our market share in the foot and ankle segment, which has been growing faster than some of the other segments in which we compete. We paid $
As part of the Paragon 28 business combination, the fair value of acquired technology was estimated using the multi-period excess earnings method, which isolates the net earnings attributable to the asset being measured. Significant assumptions used in the valuation of technology included revenue growth rates, obsolescence rate, gross margin, operating expenses, and contributory asset charge rate.
67
The goodwill related to the Paragon 28 acquisition represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to the acquisition is generated from the operational synergies, cross-selling opportunities and future development we expect to achieve from the technologies acquired. The goodwill related to this acquisition is
The purchase price allocation for the Paragon 28 acquisition is preliminary as of December 31, 2025. We need additional time to finalize tax-related accounts and the estimated fair values of contingent assets and liabilities. There may be differences between the preliminary estimates of fair value and the final acquisition accounting. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year after the acquisition date.
The following table summarizes the estimates of fair value of the assets acquired and liabilities assumed related to the Paragon 28 acquisition (in millions):
Cash consideration |
|
$ |
|
|
Contingent consideration |
|
|
|
|
Fair value of consideration transferred |
|
$ |
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
Accounts receivable, net |
|
|
|
|
Inventories |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Intangible assets subject to amortization: |
|
|
|
|
Technology |
|
|
|
|
Trademarks and trade names |
|
|
|
|
Customer relationships |
|
|
|
|
Intangible assets not subject to amortization: |
|
|
|
|
In-process research and development (IPR&D) |
|
|
|
|
Property, plant and equipment |
|
|
|
|
Other assets |
|
|
|
|
Current liabilities |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
Net assets acquired |
|
$ |
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
The weighted average amortization periods selected for technology, trademarks and trade names and customer relationships were
68
Monogram Technologies Inc.
On
We paid $
As part of the Monogram business combination, the fair value of the IPR&D was estimated using the multi-period excess earnings method, which isolates the net earnings attributable to the asset being measured. Significant assumptions used in the valuation of IPR&D included revenue growth rates, obsolescence rate, discount rate, and contributory asset charge rate.
The goodwill related to the Monogram acquisition represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to the acquisition is generated from the cross-selling opportunities and future development we expect to achieve from the technologies acquired. No goodwill is expected to be deductible for income tax purposes. The goodwill related to the Monogram acquisition is included in the Americas operating segment and the Americas Orthopedics reporting unit.
The purchase price allocation for the Monogram acquisition is preliminary as of December 31, 2025. We need additional time to finalize tax-related accounts. There may be differences between the preliminary estimates of fair value and the final acquisition accounting. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year after the acquisition date.
The following table summarizes the estimates of fair value of the assets acquired and liabilities assumed related to the Monogram acquisition (in millions):
69
Initial consideration |
|
$ |
|
|
Contingent consideration |
|
|
|
|
Fair value of consideration transferred |
|
$ |
|
|
|
|
|
|
|
Current assets |
|
$ |
|
|
Intangible assets not subject to amortization: |
|
|
|
|
IPR&D |
|
|
|
|
Other assets |
|
|
|
|
Current liabilities |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
Total identifiable net assets |
|
$ |
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
The Monogram robotic technologies are currently not commercialized and therefore have been recognized as an IPR&D intangible asset. The fully-autonomous robot is currently undergoing a clinical study. We expect commercialization to begin in 2027. Upon commercialization, the IPR&D will be reclassified to a definite-lived intangible asset and begin amortizing over the applicable estimated useful life.
2024 Acquisitions
On
On
On
On
These four acquisitions are collectively referred to in this report as the “2024 acquisitions”. Initial consideration related to the 2024 acquisitions was $
The goodwill related to the 2024 acquisitions represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to these acquisitions is generated from the operational synergies, cross-selling opportunities and future development we expect to achieve from the technologies acquired. No goodwill is expected to be deductible for income tax purposes. The goodwill related to the two acquisitions that occurred in April of 2024 is included in the EMEA operating segment and reporting unit. The goodwill related to the acquisition that occurred in August of 2024 is included in the Americas operating segment and the Americas CMFT reporting unit. The goodwill related to the OrthoGrid acquisition is included in the Americas operating segment and the Americas Orthopedics reporting unit.
During the year ended December 31, 2025, there were no material adjustments to the fair values of assets and liabilities acquired from the 2024 acquisitions.
70
The purchase price allocations for the 2024 acquisitions are final as of December 31, 2025.
Cash consideration |
|
$ |
|
|
Contingent consideration |
|
|
|
|
Fair value of consideration transferred |
|
$ |
|
|
|
|
|
|
|
Current assets |
|
$ |
|
|
Intangible assets subject to amortization: |
|
|
|
|
Technology |
|
|
|
|
Trademarks and trade names |
|
|
|
|
Customer relationships |
|
|
|
|
Intangible assets not subject to amortization: |
|
|
|
|
IPR&D |
|
|
|
|
Other assets |
|
|
|
|
Current liabilities |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
Total identifiable net assets |
|
$ |
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
The weighted average amortization periods selected for technology, customer relationships and trademarks and trade names were
2023 Acquisitions
On
On
71
On
On
These four acquisitions are collectively referred to in this report as the “2023 acquisitions”. Refer to Note 8 for information regarding the issuance of common stock and cash payments related to the contingent consideration liabilities that have occurred subsequent to the acquisition dates.
The goodwill related to the 2023 acquisitions represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to the 2023 acquisitions is generated from the operational synergies and cross-selling opportunities we expect to achieve from the technologies acquired. A portion of the goodwill is expected to be deductible for U.S. income tax purposes. The goodwill related to the Embody, the October 2023 and the November 2023 acquisitions is included in the Americas operating segment and the Americas Orthopedics reporting unit. The goodwill related to the April 2023 acquisition is included in the Asia Pacific operating segment and reporting unit.
The purchase price allocations for the 2023 acquisitions were final as of December 31, 2024.
Initial consideration |
|
$ |
|
|
Contingent consideration |
|
|
|
|
Fair value of consideration transferred |
|
$ |
|
|
|
|
|
|
|
Current assets |
|
$ |
|
|
Intangible assets subject to amortization: |
|
|
|
|
Technology |
|
|
|
|
Trademarks and trade names |
|
|
|
|
Customer relationships |
|
|
|
|
Intangible assets not subject to amortization: |
|
|
|
|
IPR&D |
|
|
|
|
Other assets |
|
|
|
|
Current liabilities |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
Total identifiable net assets |
|
$ |
|
|
|
|
|
|
|
Goodwill |
|
$ |
|
|
The weighted average amortization periods selected for technology, customer relationships and trademarks and trade names were
72
We have not included pro forma information and certain other information under GAAP for any of the acquisitions described in this Note because they did not have a material impact on our financial position or results of operations.
The following table summarizes the changes in the carrying amount of goodwill (in millions):
|
|
Americas |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Total |
|
||||
Balance at January 1, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accumulated impairment losses |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|||
2024 acquisitions |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Currency translation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated impairment losses |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Purchase accounting adjustments related to 2024 acquisitions |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|||
Paragon 28 acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Monogram acquisition |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated impairment losses |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As discussed further in Note 9, we completed acquisitions during the years ended December 31, 2025, 2024 and 2023, resulting in additional goodwill.
We perform our annual test of goodwill impairment in the fourth quarter of every year. In connection with the annual goodwill impairment test in the fourth quarter of 2025, we estimated the fair value of our Americas Orthopedics and Asia Pacific reporting units using the income and market approaches. In the annual 2025 test, the estimated fair values of each of the Americas Orthopedics and Asia Pacific reporting units exceeded their carrying values by more than 25 percent. We performed a qualitative test on our EMEA and Americas CMFT reporting units and concluded it was more likely than not that the fair value of each of these reporting units exceeded their carrying values.
Fair value under the income approach was determined by discounting to present value the estimated future cash flows of the reporting unit. Fair value under the market approach utilized the guideline public company methodology, which uses valuation indicators from publicly-traded companies that are similar to our reporting units and considers differences between our reporting units and the comparable companies.
In estimating the future cash flows of the reporting units, we utilized a combination of market and company-specific inputs that a market participant would use in assessing the fair value of the reporting units. The primary market input was revenue growth rates. These rates were based upon historical trends and estimated future growth drivers such as an aging global population, obesity and more active lifestyles. Significant company-specific inputs included assumptions regarding how the reporting unit could leverage operating expenses as revenue grows and the impact any of our differentiated products or new products will have on revenues.
Under the guideline public company methodology, we took into consideration specific risk differences between our reporting units and the comparable companies, such as recent financial performance, size risks and product portfolios, among other considerations.
73
We will continue to monitor the fair value of our reporting units in our interim and annual reporting periods. If our estimated cash flows decrease, we may have to record impairment charges in the future. Factors that could result in our cash flows being lower than our current estimates include: 1) decreased revenues caused by unforeseen changes in the healthcare market, or our inability to generate new product revenue from our research and development activities, 2) our inability to achieve the estimated operating margins in our forecasts from our restructuring programs, cost saving initiatives, and other unforeseen factors, and 3) the weakening of foreign currencies against the U.S. Dollar. Additionally, changes in the broader economic environment could cause changes to our estimated discount rates and comparable company valuation indicators, which may impact our estimated fair values.
There were
The components of identifiable intangible assets were as follows (in millions):
|
|
Technology |
|
|
Intellectual |
|
|
Trademarks |
|
|
Customer |
|
|
IPR&D |
|
|
Other |
|
|
Total |
|
|||||||
As of December 31, 2025: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Intangible assets not subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gross carrying amount |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
As of December 31, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Intangible assets not subject to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Gross carrying amount |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
|
||||||
In the year ended December 31, 2025, we recognized intangible assets of $
In the year ended December 31, 2024, we recognized intangible assets of $
74
$
In the year ended December 31, 2023, we entered into agreements to acquire intellectual property through the buyout of certain licensing arrangements. These new agreements and the related payments eliminate the various royalty payments that would have been due under the terms of previous licensing arrangements through 2030. These new agreements benefit us by expanding our ownership of intellectual property that we may use in the future. We recognized intangible assets of $
Estimated annual amortization expense based upon intangible assets recognized as of December 31, 2025 for the years ending December 31, 2026 through 2030 is (in millions):
For the Years Ending December 31, |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Other current liabilities consisted of the following (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Other current liabilities: |
|
|
|
|
|
|
||
License and service agreements |
|
$ |
|
|
$ |
|
||
Salaries, wages and benefits |
|
|
|
|
|
|
||
Customer rebates |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
||
.
75
Our debt consisted of the following (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current portion of long-term debt |
|
|
|
|
|
|
||
|
|
- |
|
|
|
|
||
|
|
|
|
|
- |
|
||
Total short-term debt |
|
$ |
|
|
$ |
|
||
Long-term debt |
|
|
|
|
|
|
||
|
|
- |
|
|
|
|
||
|
|
|
|
|
- |
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
- |
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
- |
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
- |
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
|
|
|
|
|
- |
|
||
|
|
|
|
|
- |
|
||
Debt discount and issuance costs |
|
|
( |
) |
|
|
( |
) |
Adjustment related to interest rate swaps |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
In 2025, we redeemed the $
On September 4, 2025, we issued two new series of senior unsecured debt securities denominated in Swiss francs, comprising CHF
On February 19, 2025, we completed the offering of $
On June 27, 2025, we entered into a new five-year revolving credit agreement (the “2025 Five-Year Credit Agreement”) and a new 364-day revolving credit agreement (the “2025 364-Day Revolving Credit Agreement”), as described below. Borrowings under these credit agreements will be used for general corporate purposes.
The 2025 Five-Year Credit Agreement contains a
76
The 2025 Five-Year Credit Agreement will mature on
Borrowings under the 2025 Five-Year Credit Agreement bear interest at floating rates, based upon either an adjusted term secured overnight financing rate (“Term SOFR”) for the applicable interest period or an alternate base rate, in each case, plus an applicable margin determined by reference to our senior unsecured long-term debt credit rating. We pay a facility fee on the aggregate amount of the 2025 Five-Year Revolving Facility at a rate determined by reference to our senior unsecured long-term debt credit rating.
The 2025 Five-Year Credit Agreement contains customary affirmative and negative covenants and events of default for unsecured financing arrangements, including, among other things, limitations on consolidations, mergers, and sales of assets. The 2025 Five-Year Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than
The 2025 364-Day Revolving Credit Agreement is an unsecured revolving credit facility in the principal amount of $
The 2025 364-Day Revolving Facility will mature on
The 2025 364-Day Revolving Credit Agreement contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement including, among other things, limitations on consolidations, mergers, and sales of assets. The 2025 364-Day Revolving Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than
On August 28, 2023, we entered into an uncommitted facility letter (the "Uncommitted Credit Facility"), which provides that from time to time, we may request, and the lender in its absolute and sole discretion may provide, short-term loans. Borrowings under the Uncommitted Credit Facility may be used only for general corporate and working capital purposes. The Uncommitted Credit Facility provides that the aggregate principal amount of outstanding borrowings at any time shall not exceed $
Borrowings under our revolving credit facilities have been executed with underlying notes that have maturities of three months or less. At maturity of the underlying note, we elect to either repay the note, borrow the same amount,
77
or some combination thereof. On our consolidated statements of cash flows, we present the borrowings and repayments of these underlying notes as net cash inflows or outflows due to their short-term nature.
The estimated fair value of our senior notes, which includes our Euro and Swiss notes, as of December 31, 2025, based on quoted prices for the specific securities from transactions in over-the-counter markets (Level 2), was $
At December 31, 2025 and 2024, the weighted average interest rate for our borrowings was
AOCI refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in AOCI may be reclassified to net earnings upon the occurrence of certain events.
Our AOCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges, and amortization of prior service costs and unrecognized gains and losses in actuarial assumptions on our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Amounts related to defined benefit plans that are in AOCI are reclassified over the service periods of employees in the plan. See Note 15 for more information on our defined benefit plans.
The following table shows the changes in the components of AOCI, net of tax (in millions):
|
|
Foreign |
|
|
Cash |
|
|
Defined |
|
|
|
|
||||
|
|
Currency |
|
|
Flow |
|
|
Benefit |
|
|
Total |
|
||||
|
|
Translation |
|
|
Hedges |
|
|
Plan Items |
|
|
AOCI |
|
||||
Balance December 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
AOCI before reclassifications |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Reclassifications to statements of earnings |
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance December 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
The following table shows the reclassification adjustments from AOCI (in millions):
|
|
Amount of Gain / (Loss) |
|
|
|
|||||||||
|
|
Reclassified from AOCI |
|
|
|
|||||||||
|
|
For the Years Ended December 31, |
|
|
Location on |
|||||||||
Component of AOCI |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
Statements of Earnings |
|||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|||
contracts |
|
$ |
|
|
$ |
|
|
$ |
|
|
Cost of products sold |
|||
Forward starting interest rate swaps |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
Total before tax |
|||
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Net of tax |
|||
Defined benefit plans |
|
|
|
|
|
|
|
|
|
|
|
|||
Settlements, Prior service cost and unrealized actuarial gain |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
Other income (expense), net |
||
|
|
|
( |
) |
|
|
|
|
|
|
|
Provision for income taxes |
||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
Net of tax |
||
Total reclassifications |
|
$ |
|
|
$ |
|
|
$ |
|
|
Net of tax |
|||
78
The following table shows the tax effects on each component of AOCI recognized in our consolidated statements of comprehensive income (loss) (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||||||||||||||
|
|
Before Tax |
|
|
Tax |
|
|
Net of Tax |
|
|||||||||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||
Foreign currency cumulative |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Unrealized cash flow hedge (losses) gains |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||||
Reclassification adjustments on |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Adjustments to prior service cost |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Total Other Comprehensive |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
We are exposed to certain market risks relating to our ongoing business operations, including foreign currency exchange rate risk, commodity price risk, interest rate risk and credit risk. We manage our exposure to these and other market risks through regular operating and financing activities. Currently, the only risks that we manage through the use of derivative instruments are interest rate risk and foreign currency exchange rate risk.
Interest Rate Risk
Derivatives Designated as Fair Value Hedges
We currently use fixed-to-variable interest rate swaps to partially manage our exposure to interest rate risk from our cash investments and debt portfolio. These derivative instruments are designated as fair value hedges under GAAP. Changes in the fair value of the derivative instrument are recorded in current earnings and are offset by gains or losses on the underlying debt instrument.
In 2021, we entered into $
As of December 31, 2025 and December 31, 2024, the following amounts were recorded on our consolidated balance sheets related to cumulative basis adjustments for fair value hedges (in millions):
|
|
Carrying Amount of the Hedged Liabilities |
|
|
|
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities |
|
||||||||||
Balance Sheet Line Item |
|
December 31, 2025 |
|
|
December 31, 2024 |
|
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||
Long-term debt |
|
$ |
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
||
Derivatives Designated as Cash Flow Hedges
In 2014, we entered into forward starting interest rate swaps that were designated as cash flow hedges of our
Foreign Currency Exchange Rate Risk
We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. We also designated our Euro notes and other foreign currency exchange forward contracts as net investment hedges of investments in foreign subsidiaries. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Swiss Francs, Japanese Yen, British Pounds, Chinese Renminbi, Canadian Dollars,
79
Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles, Indian Rupees, Turkish Lira, Polish Zloty, Danish Krone, and Norwegian Krone. We do not use derivative financial instruments for trading or speculative purposes.
Derivatives Designated as Net Investment Hedges
We are exposed to the impact of foreign exchange rate fluctuations in the investments in our wholly-owned foreign subsidiaries that are denominated in currencies other than the U.S. Dollar. In order to mitigate the volatility in foreign exchange rates, we have issued Euro notes. In September 2025, we issued Swiss Franc notes, as discussed in Note 12. We have designated
At December 31, 2025, we had receive-fixed-rate, pay-fixed-rate cross-currency interest rate swaps with notional amounts outstanding of Japanese Yen
Derivatives Designated as Cash Flow Hedges
Our revenues are generated in various currencies throughout the world. However, a significant amount of our inventory is produced in U.S. Dollars. Therefore, movements in foreign currency exchange rates may have different proportional effects on our revenues compared to our cost of products sold. To minimize the effects of foreign currency exchange rate movements on cash flows, we hedge intercompany sales of inventory expected to occur within the next
We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and confirming that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default. For derivatives which qualify as hedges of future cash flows, the gains and losses are temporarily recorded in AOCI and then recognized in cost of products sold when the hedged item affects net earnings. On our consolidated statements of cash flows, the settlements of these cash flow hedges are recognized in operating cash flows.
For foreign currency exchange forward contracts outstanding at December 31, 2025, we had obligations to purchase U.S. Dollars and sell Euros, Japanese Yen, Canadian Dollars, Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Indian Rupees, Polish Zloty, Danish Krone, and Norwegian Krone and obligations to purchase Swiss Francs and sell U.S. Dollars. These derivatives mature at dates ranging from January 2026 through April 2028. As of December 31, 2025, the notional amounts of outstanding forward contracts entered into with third parties to purchase U.S. Dollars were $
80
Derivatives Not Designated as Hedging Instruments
We enter into foreign currency forward exchange contracts with terms of one to three months to manage currency exposures for monetary assets and liabilities denominated in a currency other than an entity’s functional currency. Any foreign currency re-measurement gains/losses recognized in earnings are generally offset with gains/losses on the foreign currency forward exchange contracts in the same reporting period. The amount of these gains/losses is recorded in other income (expense), net. Outstanding contracts are recorded on the balance sheet at fair value as of the end of the reporting period. The notional amounts of these contracts are typically in a range of $
Income Statement Presentation
Derivatives Designated as Cash Flow Hedges
Derivative instruments designated as cash flow hedges had the following effects, before taxes, on AOCI and net earnings on our consolidated statements of earnings, consolidated statements of comprehensive income (loss) and consolidated balance sheets (in millions):
|
|
Amount of Gain / (Loss) |
|
|
|
|
Amount of Gain / (Loss) |
|
||||||||||||||||||
|
|
Recognized in AOCI |
|
|
Location on |
|
Reclassified from AOCI |
|
||||||||||||||||||
|
|
Years Ended December 31, |
|
|
Statement of |
|
Years Ended December 31, |
|
||||||||||||||||||
Derivative Instrument |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
Earnings |
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Foreign exchange forward |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
Cost of products sold |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Forward starting interest rate |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The fair value of outstanding derivative instruments designated as cash flow hedges and recorded on the consolidated balance sheet at December 31, 2025, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized gain of $
The following table presents the effects of fair value, cash flow and net investment hedge accounting on our consolidated statements of earnings (in millions):
|
|
|
|
Location and Amount of Gain/(Loss) Recognized in Income on Fair Value, Cash Flow and Net Investment Hedging Relationships |
|
|||||||||||||||||||||
|
|
|
|
Years Ended December 31, |
|
|||||||||||||||||||||
|
|
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
|
|
|
|
Cost of |
|
|
Interest |
|
|
Cost of |
|
|
Interest |
|
|
Cost of |
|
|
Interest |
|
||||||
|
|
|
|
Products |
|
|
Expense, |
|
|
Products |
|
|
Expense, |
|
|
Products |
|
|
Expense, |
|
||||||
|
|
|
|
Sold |
|
|
Net |
|
|
Sold |
|
|
Net |
|
|
Sold |
|
|
Net |
|
||||||
Total amounts of income and expense line items presented in the statements of earnings in which the effects of fair value, cash flow and net investment hedges are recorded |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||||||
|
The effects of fair value, cash flow and net investment hedging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Loss on fair value hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Interest rate swaps |
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
Gain (loss) on cash flow hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Foreign exchange forward contracts |
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|||
|
|
|
Forward starting interest rate swaps |
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
Gain on net investment hedging relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Cross-currency interest rate swaps |
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
81
Derivatives Not Designated as Hedging Instruments
The following gains from these derivative instruments were recognized on our consolidated statements of earnings (in millions):
|
|
Location on |
|
Years Ended December 31, |
|
|||||||||
Derivative Instrument |
|
Statements of Earnings |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Foreign exchange forward contracts |
|
Other income (expense), net |
|
$ |
|
|
$ |
|
|
$ |
|
|||
These gains do not reflect losses of $
Balance Sheet Presentation
As of December 31, 2025 and 2024, all derivative instruments designated as fair value hedges, cash flow hedges and net investment hedges are recorded at fair value on our consolidated balance sheets. On our consolidated balance sheets, we recognize individual forward contracts with the same counterparty on a net asset/liability basis if we have a master netting agreement with the counterparty. Under these master netting agreements, we are able to settle derivative instrument assets and liabilities with the same counterparty in a single transaction, instead of settling each derivative instrument separately. We have master netting agreements with all of our counterparties.
82
|
|
As of December 31, 2025 |
|
|
As of December 31, 2024 |
|
||||||
|
|
Balance Sheet |
|
Fair |
|
|
Balance Sheet |
|
Fair |
|
||
|
|
Location |
|
Value |
|
|
Location |
|
Value |
|
||
Asset Derivatives Designated as Hedges |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange forward contracts |
|
Other current assets |
|
$ |
|
|
Other current assets |
|
$ |
|
||
Cross-currency interest rate swaps |
|
Other current assets |
|
|
|
|
Other current assets |
|
|
|
||
Foreign exchange forward contracts |
|
Other assets |
|
|
|
|
Other assets |
|
|
|
||
Cross-currency interest rate swaps |
|
Other assets |
|
|
|
|
Other assets |
|
|
|
||
Total asset derivatives |
|
|
|
$ |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Asset Derivatives Not Designated as Hedges |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange forward contracts |
|
Other current assets |
|
$ |
|
|
Other current assets |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Liability Derivatives Designated as Hedges |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange forward contracts |
|
Other current liabilities |
|
$ |
|
|
Other current liabilities |
|
$ |
|
||
Cross-currency interest rate swaps |
|
Other current liabilities |
|
|
|
|
Other current liabilities |
|
|
|
||
Foreign exchange forward contracts |
|
Other long-term liabilities |
|
|
|
|
Other long-term liabilities |
|
|
|
||
Cross-currency interest rate swaps |
|
Other long-term liabilities |
|
|
- |
|
|
Other long-term liabilities |
|
|
|
|
Interest rate swaps |
|
Other long-term liabilities |
|
|
|
|
Other long-term liabilities |
|
|
|
||
Total liability derivatives |
|
|
|
$ |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Liability Derivatives Not Designated as Hedges |
|
|
|
|
|
|
|
|
|
|
||
Foreign exchange forward contracts |
|
Other current liabilities |
|
$ |
|
|
Other current liabilities |
|
$ |
|
||
83
The table below presents the effects of our master netting agreements on our consolidated balance sheets (in millions):
|
|
|
|
As of December 31, 2025 |
|
|
As of December 31, 2024 |
|
||||||||||||||||||
Description |
|
Location |
|
Gross |
|
|
Offset |
|
|
Net |
|
|
Gross |
|
|
Offset |
|
|
Net |
|
||||||
Asset Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash flow hedges |
|
Other current assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Cash flow hedges |
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivatives not designated as hedges |
|
Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liability Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash flow hedges |
|
Other current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash flow hedges |
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivatives not designated as hedges |
|
Other current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The following net investment hedge gains (losses) were recognized on our consolidated statements of comprehensive income (loss) (in millions):
|
|
Amount of Gain / (Loss) |
|
|||||||||
|
|
Recognized in AOCI |
|
|||||||||
|
|
Years Ended December 31, |
|
|||||||||
Derivative Instrument |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Euro Notes |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Swiss Notes |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
Cross-currency interest rate swaps |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
We have defined benefit pension plans covering certain U.S. and Puerto Rico employees. Plan benefits are primarily based on years of credited service and the participant’s average eligible compensation. The U.S. and Puerto Rico plans are frozen except for one insignificant plan; meaning there are no new participants that can join the plan and participants in the plan do not accrue additional years of service or compensation. In addition to the U.S. and Puerto Rico defined benefit pension plans, we sponsor various foreign pension arrangements, including retirement and termination benefit plans required by local law or coordinated with government sponsored plans.
We use a December 31 measurement date for our benefit plans.
84
Defined Benefit Plans
The components of net pension expense for our defined benefit retirement plans were as follows (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net periodic (income) benefit expense |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
In our consolidated statements of earnings, service cost is reported in the same location as other compensation costs arising from services rendered by the pertinent employees while the other components of net pension expense are reported in other income (expense), net.
The weighted average actuarial assumptions used to determine net pension expense for our defined benefit retirement plans were as follows:
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Discount rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||||
Rate of compensation increase |
|
- |
|
|
- |
|
|
- |
|
|
|
% |
|
|
% |
|
|
% |
||||||
Expected long-term rate of return on |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||||
The expected long-term rate of return on plan assets is based on the historical and estimated future rates of return on the different asset classes held in the plans. The expected long-term rate of return is the weighted average of the target asset allocation of each individual asset class. We believe that historical asset results approximate expected market returns applicable to the funding of a long-term benefit obligation.
Discount rates were determined for each of our defined benefit retirement plans at their measurement date to reflect the yield of a portfolio of high quality bonds matched against the timing and amounts of projected future benefit payments.
85
Changes in projected benefit obligations and plan assets were (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Projected benefit obligation - beginning of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Service cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plan Amendments |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Employee contributions |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Benefits paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Actuarial loss (gain) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Settlements |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Translation loss (gain) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
Projected benefit obligation - end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
For the Years Ended December 31, |
|
|||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Plan assets at fair market value - beginning of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Actual return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employer contributions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee contributions |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Settlements |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Benefits paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Translation gain (loss) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
Plan assets at fair market value - end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Funded status |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
For the Years Ended December 31, |
|
|||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Amounts recognized in consolidated balance sheet: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prepaid pension |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term accrued benefit liability |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Long-term accrued benefit liability |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net amount recognized |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The weighted average actuarial assumptions used to determine the projected benefit obligation for our defined benefit retirement plans were as follows:
|
|
For the Years Ended December 31, |
|
|||||||||||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Discount rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||||
Rate of compensation increase |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
% |
|
|
% |
|
|
% |
|||
Plans with projected benefit obligations in excess of plan assets were as follows (in millions):
|
|
As of December 31, |
|
|||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Projected benefit obligation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Plan assets at fair market value |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
86
Total accumulated benefit obligations and plans with accumulated benefit obligations in excess of plan assets were as follows (in millions):
|
|
As of December 31, |
|
|||||||||||||
|
|
U.S. and Puerto Rico |
|
|
Foreign |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Total accumulated benefit obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Plans with accumulated benefit obligations in excess |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Plan assets at fair market value |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
The benefits expected to be paid out in each of the next five years and for the five years combined thereafter are as follows (in millions):
For the Years Ending December 31, |
|
U.S. and |
|
|
Foreign |
|
||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
2031-2035 |
|
|
|
|
|
|
||
The U.S. and Puerto Rico defined benefit retirement plans’ overall investment strategy seeks to mitigate risk and balance the volatility of assets relative to liabilities due to interest rate fluctuations while allowing for some level of long-term growth of capital. We have established target ranges of assets held by the plans of
For the U.S. and Puerto Rico plans, we maintain an investment policy statement that guides the investment allocation in the plans. The investment policy statement describes the target asset allocation positions described above. Our benefits committee, along with our investment advisor, monitor compliance with and administer the investment policy statement and the plans’ assets and oversee the general investment strategy and objectives of the plans. Our benefits committee generally meets quarterly to review performance.
The investment strategies of foreign based plans vary according to the plan provisions and local laws. The majority of the assets in foreign based plans are located in Switzerland-based plans. These assets are held in trusts and are commingled with the assets of other Swiss companies with representatives of all the companies making the investment decisions. The overall strategy is to maximize total returns while avoiding risk. The trustees of the assets have established target ranges of assets held by the plans of
87
The fair value of our U.S. and Puerto Rico pension plan assets by asset category was as follows (in millions):
|
|
As of December 31, 2025 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
Asset Category |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Equity securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Fixed income securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|||
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
Asset Category |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Equity securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Fixed income securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
- |
|
|||
The fair value of our foreign pension plan assets was as follows (in millions):
|
|
As of December 31, 2025 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
Asset Category |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Fixed income securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other types of investments |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Real estate |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
88
|
|
As of December 31, 2024 |
|
|||||||||||||
|
|
|
|
|
Fair Value Measurements at |
|
||||||||||
Asset Category |
|
Total |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|||
Fixed income securities |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other types of investments |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Real estate |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2025 and 2024, our defined benefit pension plans’ assets did not hold any direct investment in Zimmer Biomet Holdings common stock.
Equity securities are valued using a market approach, based on quoted prices for the specific security from transactions in active exchange markets (Level 1), or in some cases where we are invested in mutual or collective funds, based upon the net asset value per unit of the fund which is determined from quoted market prices of the underlying securities in the fund’s portfolio (Level 2). Fixed income securities are valued using a market approach, based upon quoted prices for the specific security or from institutional bid evaluations. Real estate is valued by discounting to present value the cash flows expected to be generated by the specific properties.
The following table provides a reconciliation of the beginning and ending balances of our foreign pension plan assets measured at fair value that used significant unobservable inputs (Level 3) (in millions):
|
|
December 31, 2025 |
|
|
Beginning Balance |
|
$ |
|
|
Change in fair value of assets |
|
|
|
|
Net purchases and sales |
|
|
( |
) |
Translation gain |
|
|
|
|
Ending Balance |
|
$ |
|
|
We expect that we will have minimal legally required funding requirements in 2026 for the qualified U.S. and Puerto Rico defined benefit retirement plans, and we do not expect to voluntarily contribute to these plans during 2026. Contributions to foreign defined benefit plans are estimated to be $
Defined Contribution Plans
We also sponsor defined contribution plans for substantially all of the U.S. and Puerto Rico employees and certain employees in other countries.
The benefits offered under these plans are reflective of local customs and practices in the countries concerned. We expensed $
89
The components of earnings (loss) before income taxes consisted of the following (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
United States operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
Foreign operations |
|
|
|
|
|
|
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The provision (benefit) for income taxes consisted of the following (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
|
$ |
|
|
$ |
|
|||
State |
|
|
|
|
|
|
|
|
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
State |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Foreign |
|
|
|
|
|
|
|
|
|
|||
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Provision for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The components of income taxes paid, net of refunds received, consisted of the following (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
US federal |
|
$ |
|
|
|
|
|
|
|
|||
US state and local |
|
|
|
|
|
|
|
|
|
|||
US income tax paid |
|
$ |
|
|
|
|
|
|
|
|||
Foreign |
|
|
|
|
|
|
|
|
|
|||
China |
|
$ |
|
|
|
|
|
|
|
|||
Other - foreign |
|
|
|
|
|
|
|
|
|
|||
Foreign income tax paid |
|
$ |
|
|
|
|
|
|
|
|||
Net income taxes paid |
|
$ |
|
|
|
|
|
|
|
|||
Net income tax paid (prior to ASU 2023-09) |
|
$ |
- |
|
|
$ |
|
|
$ |
|
||
90
A reconciliation of the U.S. statutory income tax rate to our effective tax rate, and related dollar amounts, for the year ended December 31, 2025 is as follows ($ in millions):
|
For the Year Ended December 31, 2025 |
|||||||
|
Amount |
|
|
Percent |
|
|
||
U.S. federal statutory income tax rate |
$ |
|
|
|
|
% |
||
Domestic state and local income taxes, net of federal effect |
|
( |
) |
|
|
( |
) |
|
Foreign tax effects |
|
|
|
|
|
|
||
Switzerland |
|
|
|
|
|
|
||
Statutory income tax rate differential |
|
( |
) |
|
|
( |
) |
|
Intercompany distributions |
|
|
|
|
|
|
||
State and local income taxes |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
China |
|
|
|
|
|
|
||
Intercompany distributions |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Other foreign jurisdictions |
|
|
|
|
|
|
||
Cross-border tax laws |
|
|
|
|
|
|
||
Global intangible low-taxed income |
|
|
|
|
|
|
||
Foreign derived deduction eligible income |
|
( |
) |
|
|
( |
) |
|
Cross-border tax laws - other |
|
|
|
|
|
|
||
Tax credits |
|
|
|
|
|
|
||
Research credits |
|
( |
) |
|
|
( |
) |
|
Foreign tax credits |
|
( |
) |
|
|
( |
) |
|
Valuation allowance changes |
|
|
|
|
|
|
||
Nontaxable and nondeductible items |
|
|
|
|
|
|
||
Contingent consideration |
|
( |
) |
|
|
( |
) |
|
Nontaxable and nondeductible items - other |
|
|
|
|
|
|
||
Worldwide changes in unrecognized tax benefits |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Investments in partnership |
|
( |
) |
|
|
( |
) |
|
Capital loss |
|
( |
) |
|
|
( |
) |
|
Net operating loss |
|
|
|
|
|
|
||
Domestic federal - other |
|
|
|
|
|
|
||
Total |
$ |
|
|
|
|
% |
||
|
|
|
|
|
|
|
||
For the year ended December 31, 2025, state and local income taxes in California, Illinois, Indiana, New York, and Minnesota comprise the majority of the domestic state and local income taxes, net of federal effect category. |
|
|
||||||
|
|
|
|
|
|
|
||
91
A reconciliation of the U.S. statutory income tax rate to our effective tax rate for the years ended December 31, 2024 and 2023 is as follows:
|
|
For the Years Ended December 31, |
|
|
|||||||
|
|
|
2024 |
|
|
|
2023 |
|
|
||
U.S. statutory income tax rate |
|
|
|
|
% |
|
|
|
% |
||
State taxes, net of federal deduction |
|
|
|
|
|
|
|
|
|
||
Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits |
|
|
|
( |
) |
|
|
|
( |
) |
|
Change in valuation allowance |
|
|
|
( |
) |
|
|
|
( |
) |
|
Non-deductible expenses |
|
|
|
|
|
|
|
|
|
||
Tax impact of certain significant transactions |
|
|
|
|
|
|
|
- |
|
|
|
Tax benefit relating to foreign derived intangible income and U.S. manufacturer’s |
|
|
|
( |
) |
|
|
|
( |
) |
|
R&D tax credit |
|
|
|
( |
) |
|
|
|
( |
) |
|
Share-based compensation |
|
|
|
|
|
|
|
|
|
||
Net uncertain tax positions, including interest and penalties |
|
|
|
( |
) |
|
|
|
( |
) |
|
Other |
|
|
|
|
|
|
|
( |
) |
|
|
Effective income tax rate |
|
|
|
|
% |
|
|
|
% |
||
Our operations in Puerto Rico benefit from a tax incentive grant which expires in fiscal year 2026.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are recorded to reduce deferred income tax assets when it is more likely than not that an income tax benefit will not be realized. We reclassified certain prior period amounts to conform to the current period presentation.
92
The components of deferred taxes consisted of the following (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Inventory |
|
$ |
|
|
$ |
|
||
Net operating loss carryover |
|
|
|
|
|
|
||
Tax credit carryover |
|
|
|
|
|
|
||
Capital loss carryover |
|
|
|
|
|
|
||
Product liability and litigation |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Foreign currency items |
|
|
|
|
|
- |
|
|
Research and development |
|
|
|
|
|
|
||
Investment in partnerships |
|
|
|
|
|
- |
|
|
Lease liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax assets |
|
|
|
|
|
|
||
Less: Valuation allowances |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets after valuation allowances |
|
$ |
|
|
$ |
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Fixed assets |
|
$ |
|
|
$ |
|
||
Intangible assets |
|
|
|
|
|
|
||
Foreign currency items |
|
|
- |
|
|
|
|
|
Lease asset |
|
|
|
|
|
|
||
Defined benefit plans |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total deferred tax liabilities |
|
|
|
|
|
|
||
Total net deferred income taxes |
|
$ |
|
|
$ |
( |
) |
|
At December 31, 2025, net operating loss, tax credit carryovers, and capital loss carryovers are available to reduce future federal, state and foreign taxable earnings (in millions):
Expiration Period: |
|
Net operating loss carryover |
|
|
Tax credit carryover |
|
|
Capital loss carryover |
|
|||
1-5 years |
|
$ |
|
|
$ |
|
|
$ |
|
|||
6-10 years |
|
|
|
|
|
|
|
|
- |
|
||
11+ years |
|
|
|
|
|
|
|
|
|
|||
Indefinite |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Valuation allowances |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The assessment of the realizability of deferred tax assets related to capital loss carryforwards requires significant judgment. Realization of these deferred tax assets is dependent on our ability to generate capital gains of the appropriate character prior to expiration of the carryforwards. As a result, we have recorded a full valuation allowance against these deferred tax assets as of the reporting date. This conclusion could change if future events provide sufficient positive evidence, including but not limited to strategic asset sales, changes in investment strategy, or other taxable transactions that generate capital gains of the appropriate character. We monitor these factors on an ongoing basis. A change in judgment regarding the realizability of these capital loss carryforwards could result in a reduction of the valuation allowance and a corresponding decrease in income tax expense in the period such determination is made.
93
The remaining valuation allowances booked against deferred tax assets of $
We generally intend to limit distributions such that they would not result in significant U.S. tax costs. These distributions could come from foreign subsidiaries earnings that were previously taxed in the U.S. as a result of the transition tax or tax on Global Intangible Low-Taxed Income (“GILTI”). These previously taxed earnings would not be subject to further U.S. federal tax. However, in 2025 we implemented a policy to repatriate cash reserves from China to the U.S. and recorded appropriate current and deferred tax impacts. We have not provided deferred taxes on any other outside basis differences in our investments in other foreign subsidiaries as these other outside basis differences are indefinitely reinvested in the operations of our foreign entities. If we decide later to repatriate these earnings to the U.S., we would be required to provide for the net tax effects on these amounts. We estimate that the total tax effect of a potential repatriation would not be significant under enacted tax laws and regulations and at current foreign currency exchange rates.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Balance at January 1 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Increases related to business combinations |
|
|
|
|
|
- |
|
|
|
- |
|
|
Increases related to prior periods |
|
|
|
|
|
|
|
|
|
|||
Decreases related to prior periods |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Increases related to current period |
|
|
|
|
|
|
|
|
|
|||
Decreases related to settlements with taxing |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Decreases related to lapse of statute of limitations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Amounts impacting effective tax rate, if recognized balance at December 31 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
We recognize accrued interest and penalties related to unrecognized tax benefits as income tax expense. During 2025, we released interest and penalties of $
During 2024, we released interest and penalties of $
We operate on a global basis and are subject to numerous and complex tax laws and regulations. Additionally, tax laws have and continue to undergo rapid changes in both application and interpretation by various countries, including initiatives led by the Organisation for Economic Cooperation and Development. Our income tax filings are subject to examinations by taxing authorities throughout the world. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed.
We are under continuous audit by the Internal Revenue Service (“IRS”) and other foreign taxing authorities in the jurisdictions where we operate. In addition, some jurisdictions in which we operate require payment of disputed taxes to petition a court or taxing authority, or we may elect to make such payments prior to final resolution. We record any prepayments as income tax receivables when we believe our position is more likely than not to be upheld. We assess our position on these disputes at each reporting period. During the course of these audits, we receive proposed adjustments from taxing authorities that may be material. Therefore, there is a possibility that an
94
adverse outcome in these audits could have a material effect on our results of operations and financial condition. Our U.S. federal income tax returns have been audited through 2019.
The IRS has proposed adjustments for tax years 2013-2015, primarily related to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and the reallocation of profits between certain U.S. and foreign subsidiaries. We intend to continue to vigorously contest the adjustments, and we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to this matter is required to be made, if at all, until all applicable proceedings have been completed.
The IRS has proposed adjustments for tax years 2016-2019, primarily related to the U.S. taxation of foreign earnings and profits, which could result in additional material tax expense if we are unsuccessful in defending our position. This includes a proposed increase to our U.S. federal taxable income, which would result in tax expense of approximately $
State income tax returns are generally subject to examination for a period of
In other major foreign jurisdictions, open years are generally 2016 or later.
On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (OBBBA), was signed into law in the U.S., which includes a broad range of tax reform provisions. Beginning in 2025, the OBBBA provides an elective deduction for domestic research and development expenses, a reinstatement of elective 100% first-year bonus depreciation and repeal of non-U.S. corporations' fiscal year end. The legislation did not have a material impact on our consolidated financial statements as of December 31, 2025.
Members of the OECD, over 140 countries, have agreed in principle to a global minimum tax of
We are authorized to issue
The numerator for both basic and diluted earnings per share is net earnings available to common stockholders. The denominator for basic earnings per share is the weighted average number of common shares outstanding during the period. The denominator for diluted earnings per share is weighted average shares outstanding adjusted for the
95
effect of dilutive stock options and other equity awards.
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Weighted average shares outstanding for basic net |
|
|
|
|
|
|
|
|
|
|||
Effect of dilutive stock options and other |
|
|
|
|
|
|
|
|
|
|||
Weighted average shares outstanding for diluted net |
|
|
|
|
|
|
|
|
|
|||
We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; CMFT products; surgical products; and a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. Our chief operating decision maker (“CODM”) is our . Our CODM allocates resources to achieve our operating profit goals through
Our Americas operating segment is comprised principally of the U.S. and includes other North, Central and South American markets. Our EMEA operating segment is comprised principally of Europe and includes the Middle East and African markets. Our Asia Pacific operating segment is comprised principally of Japan, China and Australia and includes other Asian and Pacific markets. The Americas, EMEA and Asia Pacific operating segments include the commercial operations as well as regional headquarter expenses to operate in those markets. Our operating segments do not include many centralized, product category expenses such as R&D and global marketing that benefit all regions.
96
We reclassified certain immaterial prior period expenses to conform to the current year presentation.
Segment operating profit measures
|
|
Americas |
|
|
EMEA |
|
|
Asia Pacific |
|
|
Total |
|
||||||||||||||||||||||||||||||||||||
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||||||||||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net Sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||||
Cost of products sold, excluding intangible asset amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Segment profit |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||||
Corporate items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Intangible asset amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other (income) expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||||||||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||||
Other segment information is as follows (in millions):
|
|
|
Depreciation and Amortization |
|
|
Segment Assets |
|
||||||||||||||
|
|
|
Year Ended December 31, |
|
|
As of December 31, |
|
||||||||||||||
|
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
2025 |
|
|
2024 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Americas |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
EMEA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible asset amortization |
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|||
Total |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
We conduct business in the following countries that hold 10 percent or more of our total consolidated Property, plant and equipment, net (in millions):
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
United States |
|
$ |
|
|
$ |
|
||
Other countries |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
U.S. sales were $
We own most of our manufacturing facilities, but lease various office space, vehicles and other less significant assets throughout the world. Our contracts contain a lease if they convey a right to control the use of an identified asset, either explicitly or implicitly, in exchange for consideration. We have elected not to recognize a right-of-use asset nor a lease liability for leases with an initial term of twelve months or less. Additionally, we have elected not to separate non-lease components from the leased components in the valuation of our right-of-use asset and lease liability for all asset classes. Our lease contracts are a necessary part of our business, but we do not believe they are significant to our overall operations. We do not have any significant finance leases. Additionally, we do not have significant leases: where we are considered a lessor; where we sublease our assets; with an initial term of twelve months or less; with related parties; with residual value guarantees; that impose restrictions or covenants on us; or that have not yet commenced, but create significant rights and obligations against us.
97
We are required to discount our lease liabilities to present value using the rate implicit in the lease, or our incremental borrowing rate for a similar term as the lease term if the implicit rate is not readily available. We generally do not have adequate information to know the implicit rate in a lease and therefore use our incremental borrowing rate. The incremental borrowing rate must be on a collateralized basis, but our debt arrangements are unsecured. We have determined our incremental borrowing rate by using our credit rating to estimate our unsecured borrowing rate and applying reasonable assumptions to reduce the unsecured rate for a risk adjustment effect from collateral.
Information on our leases is as follows ($ in millions):
|
|
For the Years Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Cash paid for leases recognized in operating cash flows |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Right-of-use assets obtained in exchange for new lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
As of December 31, |
|
|||||
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
$ |
|
|
$ |
|
|||
|
|
|
$ |
|
|
$ |
|
|||
|
|
|
$ |
|
|
$ |
|
|||
Weighted-average remaining lease term |
|
|
|
|
|
|
||||
Weighted-average discount rate |
|
|
|
|
% |
|
|
% |
||
Our variable lease costs are not significant.
Our future minimum lease payments as of December 31, 2025 were (in millions):
For the Years Ending December 31, |
|
|
|
|
|
|
|
|
2026 |
|
|
|
|
|
$ |
|
|
2027 |
|
|
|
|
|
|
|
|
2028 |
|
|
|
|
|
|
|
|
2029 |
|
|
|
|
|
|
|
|
2030 |
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
Less imputed interest |
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
98
From time to time, we are involved in various legal proceedings, including product liability, intellectual property, stockholder matters, tax disputes, commercial disputes, employment matters, whistleblower and qui tam claims and investigations, governmental proceedings and investigations, and other legal matters that arise in the normal course of our business, including those described below. On a quarterly and annual basis, we review relevant information with respect to loss contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. We establish liabilities for loss contingencies on an undiscounted basis when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. For matters where a loss is believed to be reasonably possible, but not probable, or if no reasonable estimate of known or probable loss is available, no accrual has been made.
When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and other contingencies are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, and/or potentially involve penalties, fines or punitive damages. In addition to the current matters, we are subject to the risk of future governmental, regulatory and legal actions. Governmental and regulatory actions may lead to product recalls, injunctions and other restrictions on our operations and monetary sanctions, which may include substantial civil or criminal penalties. Actions involving intellectual property could result in a loss of patent protection or the ability to market products, which could lead to significant sales reductions or cost increases, or otherwise materially affect the results of our operations.
We recognize litigation-related charges in Selling, general and administrative expense on our consolidated statement of earnings. During the years ended December 31, 2025, 2024 and 2023, we recognized $
Litigation
In connection with our ongoing efforts to transform our sales and distribution strategies and go-to-market model in China, including making significant changes across our independent distributor network, some of the displaced or impacted distributors in China have formally and informally raised legal claims against us. Additional claims may come from these and other parties in the future. Based on currently known information and our legal assessment of these lawsuits and other claims in China, we do not believe a loss is probable and, therefore, no accrual has been made. However, the outcome of these lawsuits and disputes in China is uncertain. The changes in go-to-market model and commercial strategies in China, the outcome of existing litigation and the potential for additional litigation could have a material adverse impact on our results of operations in China.
Other Contingencies
Contractual obligations: We have entered into development, distribution and other contractual arrangements not accounted for as business combinations that may result in future payments dependent upon various events such as the achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product. Since there is uncertainty on the timing or whether such payments will have to be made, they have not been recognized on our consolidated balance sheets. These estimated payments could range from $
99
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2025, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting
The management of Zimmer Biomet Holdings, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company acquired Paragon 28 during the second quarter of 2025 in a purchase business combination. Management excluded Paragon 28 from its evaluation of internal control over financial reporting as of December 31, 2025. The Company will incorporate Paragon 28 into its annual report on internal control over financial reporting as of December 31, 2026. Paragon 28’s assets as of December 31, 2025, excluded from management’s assessment, were $267.7 million, or 1.1 percent of our total assets. Paragon 28’s net sales for the year ended December 31, 2025, excluded from management’s assessment, were $199.8 million, or 2.4 percent of our total net sales.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. In making this assessment, the Company’s management used the criteria set forth by the
100
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).
Based on their assessment, management has concluded that, as of December 31, 2025, the Company’s internal control over financial reporting is effective based on those criteria.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2025 and issued an unqualified opinion thereon as stated in their report, which appears under Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Audit and Other Services
During the fourth quarter of 2025, the Audit Committee of our Board of Directors approved the engagement of PricewaterhouseCoopers LLP, our independent registered public accounting firm, to perform certain audit related and tax services. This disclosure is made pursuant to Section 10A(i)(2) of the Exchange Act.
Trading Plan Arrangements
During the three-month period ended December 31, 2025, no members of our
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
101
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding our executive officers is included in Part I, Item 1 of this Annual Report on Form 10-K under the caption “Information About our Executive Officers.”
We have adopted the Zimmer Biomet Code of Ethics for Chief Executive Officer and Senior Financial Officers (the “finance code of ethics”), a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Corporate Controller, and other finance organization senior employees. The finance code of ethics is publicly available in the Investor Relations section of our website, which may be accessed from our homepage at www.zimmerbiomet.com or directly at https://investor.zimmerbiomet.com. If we make any substantive amendments to the finance code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our Chief Executive Officer, Chief Financial Officer, or Chief Accounting Officer and Corporate Controller, we will disclose the nature of that amendment in the Investor Relations section of our website.
We have
The additional information required by this item is incorporated by reference from our definitive Proxy Statement for our 2026 annual meeting of stockholders (the “2026 Proxy Statement”) under the captions “Corporate Governance” and “Delinquent Section 16(a) Reports.”
Item 11. Executive Compensation
The information required by this item is incorporated by reference from our 2026 Proxy Statement under the captions “Executive Compensation” and “Compensation of Non-Employee Directors.”
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference from our 2026 Proxy Statement under the captions “Executive Compensation” and “Ownership of our Stock.”
The information required by this item is incorporated by reference from our 2026 Proxy Statement under the caption “Corporate Governance.”
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated by reference from our 2026 Proxy Statement under the caption “Audit Committee Matters.”
102
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) (1) Financial Statements: See the Consolidated Financial Statements under Item 8 of this Report.
(2) Financial Statements Schedule
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Other financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
(3) Exhibits: See Index to Exhibits below
103
INDEX TO EXHIBITS
Exhibit No |
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Description |
2.1 |
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Separation and Distribution Agreement, dated as of March 1, 2022, by and between Zimmer Biomet Holdings, Inc. and ZimVie Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed March 1, 2022) |
2.2+ |
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Agreement and Plan of Merger, dated January 28, 2025, by and among Zimmer, Inc., Paragon 28, Inc., Gazelle Merger Sub I, Inc. and Zimmer Biomet Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed January 29, 2025) |
3.1 |
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Restated Certificate of Incorporation of Zimmer Biomet Holdings, Inc., dated May 29, 2025 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed June 3, 2025) |
3.2 |
|
Restated Bylaws of Zimmer Biomet Holdings, Inc., effective December 14, 2022 (incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed February 24, 2023) |
4.1 |
|
Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 |
4.2 |
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed August 5, 2019) |
4.3 |
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Indenture dated as of November 17, 2009 between Zimmer Holdings, Inc. (now known as Zimmer Biomet Holdings, Inc.) and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed December 13, 2016) |
4.4 |
|
First Supplemental Indenture to the Indenture dated as of November 17, 2009 between Zimmer Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 17, 2009) |
4.5 |
|
Form of 5.750% Note due 2039 (incorporated by reference to Exhibit 4.4 above) |
4.6 |
|
Second Supplemental Indenture dated as of November 10, 2011, to the Indenture dated as of November 17, 2009 between Zimmer Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed November 10, 2011) |
4.7 |
|
Third Supplemental Indenture, dated as of March 19, 2015, to the Indenture dated as of November 17, 2009 between Zimmer Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed March 19, 2015) |
4.8 |
|
Form of 4.250% Notes due 2035 (incorporated by reference to Exhibit 4.7 above) |
4.9 |
|
Form of 4.450% Notes due 2045 (incorporated by reference to Exhibit 4.7 above) |
4.10 |
|
Fourth Supplemental Indenture, dated as of December 13, 2016, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 13, 2016) |
4.11 |
|
Form of 2.425% Notes due 2026 (incorporated by reference to Exhibit 4.10 above) |
4.12 |
|
Agency Agreement, dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as registrar and transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed December 13, 2016) |
4.13 |
|
Amendment No. 1, dated as of January 4, 2017, to the Agency Agreement dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as original registrar and original transfer agent, U.S. Bank National Association, as successor registrar and successor transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed January 4, 2017) |
4.14 |
|
Fifth Supplemental Indenture, dated as of March 19, 2018, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed March 19, 2018) |
4.15 |
|
Sixth Supplemental Indenture, dated as of November 15, 2019, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 15, 2019) |
4.16 |
|
Form of 1.164% Notes due 2027 (incorporated by reference to Exhibit 4.15 above) |
104
4.17 |
|
Agency Agreement, dated as of November 15, 2019, by and between Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, U.S. Bank National Association, as transfer agent and registrar, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed November 15, 2019) |
4.18 |
|
Seventh Supplemental Indenture, dated as of March 20, 2020, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed March 20, 2020) |
4.19 |
|
Form of 3.550% Notes due 2030 (incorporated by reference to Exhibit 4.18 above) |
4.20 |
|
Eighth Supplemental Indenture, dated as of November 24, 2021, between Zimmer Biomet Holdings, Inc. and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 24, 2021) |
4.21 |
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Form of 2.600% Notes due 2031 (incorporated by reference to Exhibit 4.20 above) |
4.22 |
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Ninth Supplemental Indenture, dated as of December 1, 2023, between Zimmer Biomet Holdings, Inc. and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 1, 2023) |
4.23 |
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Form of 5.350% Notes due 2028 (incorporated by reference to Exhibit 4.22 above) |
4.24 |
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Tenth Supplemental Indenture, dated as of August 15, 2024, between Zimmer Biomet Holdings, Inc. and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed August 15, 2024) |
4.25 |
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Form of 5.200% Notes due 2034 (incorporated by reference to Exhibit 4.24 above) |
4.26 |
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Eleventh Supplemental Indenture, dated as of November 20, 2024, between Zimmer Biomet Holdings, Inc. and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 20, 2024) |
4.27 |
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Form of 3.518% Notes due 2032 (incorporated by reference to Exhibit 4.26 above) |
4.28 |
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Agency Agreement, dated as of November 20, 2024, by and among Zimmer Biomet Holdings, Inc., as issuer, U.S. Bank Europe DAC, UK Branch, as paying agent, U.S. Bank Trust Company, National Association, as transfer agent and registrar, and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed November 20, 2024) |
4.29 |
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Twelfth Supplemental Indenture, dated as of February 19, 2025, between Zimmer Biomet Holdings, Inc. and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed February 19, 2025) |
4.30 |
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Form of 4.700% Notes due 2027 (incorporated by reference to Exhibit 4.29 above) |
4.31 |
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Form of 5.050% Notes due 2030 (incorporated by reference to Exhibit 4.29 above) |
4.32 |
|
Form of 5.500% Notes due 2035 (incorporated by reference to Exhibit 4.29 above) |
10.1* |
|
Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan, as amended May 7, 2013 and further amended as of June 24, 2015 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed November 9, 2015) |
10.2* |
|
Amendment to Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed January 7, 2016) |
10.3* |
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Amendment to Zimmer Biomet Holdings, Inc. Executive Performance Incentive Plan, Effective May 7, 2020 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed May 11, 2020) |
10.4* |
|
Amended and Restated Zimmer Biomet Deferred Compensation Plan, effective as of January 1, 2022 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed May 5, 2022) |
10.5* |
|
Restated Zimmer Biomet Holdings, Inc. Long Term Disability Income Plan for Highly Compensated Employees (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed January 7, 2016) |
10.6* |
|
Restated Benefit Equalization Plan of Zimmer Holdings, Inc. and Its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Savings and Investment Program (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed February 27, 2009) |
10.7* |
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First Amendment to the Restated Benefit Equalization Plan of Zimmer Holdings, Inc. and its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Savings and Investment Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed January 7, 2016) |
105
10.8* |
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Offer Letter, dated as of August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed August 22, 2023) |
10.9* |
|
Change in Control Severance Agreement, dated as of August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed August 22, 2023) |
10.10* |
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Form of Amendment to Change in Control Severance Agreement with Ivan Tornos, Suketu Upadhyay, Lori Winkler and Paul Stellato (incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K filed February 23, 2024) |
10.11* |
|
Chief Executive Officer Confidentiality, Non-Competition and Non-Solicitation Agreement, dated as of August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed August 22, 2023) |
10.12* |
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Form of Change in Control Severance Agreement with Paul Stellato, Suketu Upadhyay and Lori Winkler (incorporated by reference to Exhibit 10.11 to the Registrant’s Annual Report on Form 10-K filed February 26, 2019) |
10.13* |
|
Form of Change in Control Severance Agreement with Kevin Thornal (incorporated by reference to Exhibit 10.54 to the Registrant’s Annual Report on Form 10-K filed February 23, 2024) |
10.14* |
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Form of Corporate Executive Confidentiality, Non-Competition and Non-Solicitation Agreement with Suketu Upadhyay and Lori Winkler (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K filed February 26, 2019) |
10.15* |
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Swiss Employment Agreement by and between Zimmer GmbH and Wilfred van Zuilen dated as of May 5, 2021 (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q filed August 3, 2021) |
10.16* |
|
Offer Letter by and between Zimmer Biomet Holdings, Inc. and Wilfred van Zuilen dated as of May 5, 2021 (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q filed August 3, 2021) |
10.17* |
|
Swiss Employment Agreement by and between Zimmer GmbH and Jehanzeb Noor dated as of February 13, 2025 (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed May 5, 2025) |
10.18* |
|
Change in Control Severance Agreement by and between Zimmer GmbH and Wilfred van Zuilen (incorporated by reference to Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q filed August 3, 2021) |
10.19* |
|
Amendment to Change in Control Severance Agreement dated February 19, 2024 between Zimmer GmbH and Wilfred van Zuilen (incorporated by reference to Exhibit 10.52 to the Registrant’s Annual Report on Form 10-K filed February 23, 2024) |
10.20* |
|
Change in Control Severance Agreement by and between Zimmer GmbH and Jehanzeb Noor effective as of February 13, 2025 (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed May 5, 2025) |
10.21* |
|
Confidentiality, Non-Competition and Non-Solicitation Agreement effective as of May 5. 2021 by and between Zimmer GmbH and Wilfred van Zuilen (incorporated by reference to Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q filed August 3, 2021) |
10.22* |
|
Confidentiality, Non-Competition and Non-Solicitation Agreement effective as of February 14, 2025 by and between Zimmer GmbH and Jehanzeb Noor (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q filed May 5, 2025) |
10.23* |
|
Offer Letter between Zimmer Biomet Holdings, Inc. and Suketu Upadhyay dated June 13, 2019 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 19, 2019) |
10.24* |
|
Letter of Appointment by and between Zimmer Asia (HK) Limited and Sang Yi dated June 15, 2020 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed August 5, 2020) |
10.25* |
|
Change in Control Severance Agreement with Sang Yi dated June 15, 2020 (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed August 5, 2020) |
10.26* |
|
Deed of Amendment dated February 19, 2024 between Zimmer Asia (HK) Limited and Sang-Uk Yi (incorporated by reference to Exhibit 10.53 to the Registrant’s Annual Report on Form 10-K filed February 23, 2024) |
10.27* |
|
Corporate Executive Confidentiality, Non-Competition and Non-Solicitation Agreement with Sang Yi dated June 15, 2020 (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed August 5, 2020) |
10.28* |
|
Form of Change in Control Severance Agreement with Chad F. Phipps (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed February 27, 2009) |
106
10.29* |
|
Form of Corporate Executive Confidentiality, Non-Competition and Non-Solicitation Agreement with Chad F. Phipps (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed June 26, 2015) |
10.30* |
|
Offer Letter by and between Zimmer Biomet Holdings, Inc. and Paul Stellato dated as of April 5, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 16, 2022) |
10.31* |
|
Form of Corporate Executive Confidentiality, Non-Competition and Non-Solicitation Agreement with Paul Stellato (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed May 16, 2022) |
10.32* |
|
Offer Letter, dated as of May 20, 2025, by and between Zimmer Biomet Holdings, Inc. and Kevin Thornal (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed May 27, 2025) |
10.33* |
|
Employee Non-Disclosure, Trade Secret and Intellectual Property Agreement, dated as of May 24, 2025, by and between Zimmer Biomet Holdings, Inc. and Kevin Thornal (incorporated by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed May 27, 2025) |
10.34* |
|
Restated Zimmer Biomet Holdings, Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2018) |
10.35* |
|
Amendment to Restated Zimmer Biomet Holdings, Inc. Executive Severance Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed May 5, 2022) |
10.36* |
|
Zimmer Biomet Holdings, Inc. Amended Stock Plan for Non-Employee Directors, as amended May 14, 2021 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed May 20, 2021) |
10.37* |
|
Form of Restricted Stock Unit Award Letter under the Zimmer Biomet Holdings, Inc. Stock Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K filed February 29, 2016) |
10.38* |
|
Zimmer Biomet Holdings, Inc. Deferred Compensation Plan for Non-Employee Directors, as amended August 25, 2023 (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed November 7, 2023) |
10.39* |
|
Form of Indemnification Agreement with Non-Employee Directors and Officers (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July 31, 2008) |
10.40* |
|
Zimmer Biomet Holdings, Inc. Executive Physical Sub Plan (incorporated by reference to Exhibit 10.47 to the Registrant’s Annual Report on Form 10-K filed February 26, 2019) |
10.41* |
|
Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (As Amended on May 29, 2025) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 3, 2025) |
10.42* |
|
Form of Nonqualified Stock Option Award Agreement (four-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K filed February 21, 2020) |
10.43* |
|
Form of Nonqualified Stock Option Award Agreement (two-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K filed February 27, 2018) |
10.44* |
|
Form of Nonqualified Stock Option Award Agreement (three-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed February 25, 2022) |
10.45* |
|
Form of Performance-Based Restricted Stock Unit Award Agreement (2022) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.38 to the Registrant’s Annual Report on Form 10-K filed February 25, 2022) |
10.46* |
|
Form of Restricted Stock Unit Award Agreement (three-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.40 to the Registrant’s Annual Report on Form 10-K filed February 25, 2022) |
10.47* |
|
Form of Restricted Stock Unit Award Agreement (two-year cliff vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed August 6, 2018) |
10.48* |
|
Form of Restricted Stock Unit Award Agreement (four-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan |
10.49* |
|
Form of Restricted Stock Unit Award Agreement (five-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan |
107
10.50 |
|
Zimmer Biomet Holdings, Inc. Employee Stock Purchase Plan, as amended and restated effective May 10, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 15, 2024) |
10.51 |
|
Tax Matters Agreement, dated as of March 1, 2022, by and between Zimmer Biomet Holdings, Inc. and ZimVie Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed March 1, 2022) |
10.52 |
|
Intellectual Property Matters Agreement, dated as of March 1, 2022, by and between Zimmer Biomet Holdings, Inc. and ZimVie Inc. (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed March 1, 2022) |
10.53 |
|
Transitional Trademark License Agreement, dated as of March 1, 2022, by and between Zimmer Biomet Holdings, Inc. and ZimVie Inc. (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed March 1, 2022) |
10.54 |
|
Five-Year Revolving Credit Agreement, dated as of June 27, 2025, among Zimmer Biomet Holdings, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed June 30, 2025) |
10.55 |
|
364-Day Revolving Credit Agreement, dated as of June 27, 2025, among Zimmer Biomet Holdings, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed June 30, 2025) |
19 |
|
Zimmer Biomet Holdings, Inc. Stock Trading Policy, effective April 26, 2023 (incorporated by reference to Exhibit 19 to the Registrant’s Annual Report on Form 10-K filed February 25, 2025) |
21 |
|
List of Subsidiaries of Zimmer Biomet Holdings, Inc. |
23 |
|
Consent of PricewaterhouseCoopers LLP |
31.1 |
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Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 |
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Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 |
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Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
97.1 |
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Zimmer Biomet Holdings, Inc. Compensation Recovery Policy, effective October 2, 2023 (incorporated by reference to Exhibit 97.1 to the Registrant’s Annual Report on Form 10-K filed February 23, 2024) |
101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, to furnish to the SEC, upon request, a copy of each instrument with respect to long-term debt of the Registrant or its consolidated subsidiaries. |
+ Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.
* Management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None
108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ZIMMER BIOMET HOLDINGS, INC. |
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By: |
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/s/ Ivan Tornos |
Dated: February 19, 2026 |
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Ivan Tornos |
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Chairman, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE |
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TITLE |
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DATE |
/s/ Ivan Tornos |
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Chairman, President and Chief Executive Officer |
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February 19, 2026 |
Ivan Tornos |
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(Principal Executive Officer) |
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/s/ Suketu Upadhyay |
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Chief Financial Officer and Executive Vice President -Finance, Operations and Supply Chain |
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February 19, 2026 |
Suketu Upadhyay |
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(Principal Financial Officer) |
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/s/ Paul Stellato |
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Vice President, Controller and Chief Accounting |
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February 19, 2026 |
Paul Stellato |
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Officer (Principal Accounting Officer) |
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/s/ Betsy Bernard |
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Director |
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February 19, 2026 |
Betsy Bernard |
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/s/ Michael Farrell |
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Director |
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February 19, 2026 |
Michael Farrell |
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/s/ Robert Hagemann |
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Director |
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February 19, 2026 |
Robert Hagemann |
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/s/ Arthur Higgins |
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Director |
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February 19, 2026 |
Arthur Higgins |
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/s/ Maria Teresa Hilado |
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Director |
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February 19, 2026 |
Maria Teresa Hilado |
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/s/ Syed Jafry |
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Director |
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February 19, 2026 |
Syed Jafry |
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/s/ Sreelakshmi Kolli |
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Director |
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February 19, 2026 |
Sreelakshmi Kolli |
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/s/ Devdatt Kurdikar |
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Director |
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February 19, 2026 |
Devdatt Kurdikar |
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/s/ Louis A. Shapiro |
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Director |
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February 19, 2026 |
Louis A. Shapiro |
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109
FAQ
What does Zimmer Biomet (ZBH) describe as its core business in this 10-K?
How is Zimmer Biomet’s global business organized in the 2025 10-K?
What key financial baseline figures are highlighted for Zimmer Biomet (ZBH)?
What major risks does Zimmer Biomet outline in its 2025 annual report?
How significant is consignment and customer concentration for Zimmer Biomet?
What does Zimmer Biomet say about research, technology and AI in this 10-K?
How many employees does Zimmer Biomet (ZBH) report and where are they located?
