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What changed in Zimmer Biomet's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Zimmer Biomet's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+302 added−330 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in Zimmer Biomet's 2023 10-K

302 paragraphs added · 330 removed · 231 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+13 added−26 removed66 unchanged
Biggest changePreviously, he served as the Company’s Group President, Global Businesses and the Americas since December 2019 and prior to that as Group President, Orthopedics since joining the Company in November 2018. 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.
Biggest changePrior 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.
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 features and uses. Sales force representatives must have strong technical selling skills and medical education to provide technical support for surgeons.
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.
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.
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.
Failure to comply with any such data protection laws and regulations 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.
Failure to comply with any such data protection laws, regulations 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.
Winkler joined Zimmer Biomet as Group Vice President of Human Resources in February 2020 and was appointed Senior Vice President, Chief Human Resources Officer in February 2021. 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 joined Zimmer Biomet as Group Vice President of Human Resources in February 2020 and was appointed Senior Vice President, Chief Human Resources Officer in March 2021. 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.
Data Privacy Laws We are subject to evolving supranational, national, state and international data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, location, storage, disposal and protection of 8 health-related and other personal information, including laws and regulations that regulate and restrict cross-border data transfers.
Data Privacy Laws We are subject to evolving supranational, national, state and international 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.
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.
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. 10 We believe it is critical to keep our employees engaged through frequent and transparent communication.
Our quality management system is based upon the requirements of ISO 13485, the FDA Quality System regulations, the MDD, the EU MDR, the UK 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.
Our quality management system is based upon the requirements of ISO 13485, the FDA Quality 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.
Risk Factors – 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. Competition The orthopedics and broader musculoskeletal care industry is highly competitive.
Risk Factors – 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. 8 Competition The orthopedics and broader musculoskeletal care industry is highly competitive.
Ellingson was appointed Senior Vice President and Chief Strategy Officer in April 2018 and was designated as an executive officer in January 2021. Prior to joining Zimmer Biomet, Ms. Ellingson served as a member of the executive leadership team of St.
Ellingson was appointed Senior Vice President and Chief Strategy Officer in April 2018 and was designated as an executive officer in January 2021. Prior to joining Zimmer Biomet, Ms. Ellingson served as a member of the 11 executive leadership team of St.
In the global markets for our knees, hips, and S.E.T. products, our major competitors include the DePuy Synthes Companies of Johnson & Johnson, Stryker Corporation and Smith & Nephew plc. There are smaller competitors in these product categories as well who have success by focusing on smaller subsegments of the industry.
In the global markets for our knees, hips, and S.E.T. products, our major competitors include the DePuy Synthes Companies of Johnson & Johnson, Stryker Corporation and Smith & Nephew plc. There are smaller competitors in these product categories as well that have success by focusing on smaller subsegments of the industry.
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 sales.
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 sales in 2023.
Customers, Sales and Marketing Our primary customers include orthopedic surgeons, neurosurgeons, and other specialists, hospitals, 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.
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 are subject to supranational, national, regional and local regulations affecting, among other things, the development, design, manufacturing, product standards, packaging, advertising, promotion, labeling, marketing and postmarket 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.
We are subject to supranational, national, regional and local 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.
This segment also includes research, development engineering, medical education and brand management for our product category headquarter locations. The U.S. accounts for approximately 95 percent of net sales in this region. The U.S. sales force consists of a combination of employees and independent sales agents, most of whom sell products exclusively for Zimmer Biomet.
This segment also includes research, development engineering, medical education and brand management for our product category headquarter locations. The U.S. accounted for approximately 95 percent of net sales in this region in 2023. The U.S. sales force consists of a combination of employees and independent sales agents, most of whom sell products exclusively for Zimmer Biomet.
France, Germany, Italy, Spain and the United Kingdom (the “UK”) collectively account for approximately 55 percent of net sales in the region. This segment also includes other key markets, including Switzerland, Benelux, Nordic, Central and Eastern Europe, the Middle East and Africa.
France, Germany, Italy, Spain and the United Kingdom (the “UK”) collectively accounted for approximately 55 percent of net sales in the region in 2023. This segment also includes other key markets, including Switzerland, Benelux, Nordic, Central and Eastern Europe, the Middle East and Africa.
With sales to stocking distributors, some healthcare dealers and some hospitals, title to product passes upon shipment. Consignment sales represented approximately 85 percent of our net sales in 2022. No individual customer accounted for more than 1 percent of our net sales for 2022.
With sales to stocking distributors, some healthcare dealers and some hospitals, title to product passes upon shipment. Consignment sales represented approximately 85 percent of our net sales in 2023. No individual customer accounted for more than 2 percent of our net sales for 2023.
Food and Drug Administration (“FDA”) regulations control all aspects of the development, manufacturing, advertising, promotion, marketing, distribution and postmarket surveillance of medical products and medical devices.
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.
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.
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.
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. 13 Mr. Yi was appointed President, Asia Pacific in June 2015. He is responsible for the sales, marketing and distribution of products, services and solutions in the Asia Pacific region. Mr.
She has served as an independent voting 12 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.
Certain of these laws and regulations impose time-sensitive notification requirements to governmental authorities or consumers. We are also subject to emerging guidance governing data security and cyber risk management for medical devices.
Certain of these laws and regulations impose time-sensitive notification requirements to governmental authorities or consumers. We are also subject to emerging guidance governing data security and cyber risk management for medical devices as well as emerging guidance relating to artificial intelligence.
The guiding principles are: • Respect the contributions and perspectives of all employees • Commit to the highest standards of patient safety, quality and integrity • Focus our resources in areas where we will make a difference • Ensure the company’s return is equivalent to the value we provide our customers and patients • Give back to our communities and people in need.
The guiding principles are: 9 • Respect and show gratitude for the contributions and diverse perspectives of all team members • Commit to the highest standards of patient safety, quality and integrity • Focus our resources in areas where we will make a difference • Ensure the company’s return is equivalent to the value we provide our customers and patients • Give back to our communities and people in need.
As of December 31, 2022, women made up approximately 35 percent of our total employee population, and approximately 25 percent of positions at Director level and above. People of Color (“POC”) made up approximately 23 percent of our total employee population in the U.S., and comprised approximately 15 percent of positions at Director level and above.
As of December 31, 2023, women made up approximately 35 percent of our total employee population, and approximately 26 percent of positions at Director level and above. People of Color (“POC”) made up approximately 25 percent of our total employee population in the U.S., and comprised approximately 16 percent of positions at Director level and above.
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. Mr. Tornos was appointed Chief Operating Officer in March 2021.
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. Mr.
The Zimmer Biomet Foundation is an independent, non-profit organization established in 2018 to address the needs of our global community; • Match, through the Zimmer Biomet Foundation, employee financial contributions to non-profit organizations, including those dedicated to combating racism and supporting diversity, equality and justice; • Expand our student and early career internship programs to attract and develop more Black leaders; and • Continue our financial support of Movement is Life, Inc., a nonprofit multidisciplinary coalition seeking to eliminate racial, ethnic and gender disparities in muscle and joint health. 10 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.
The Zimmer Biomet Foundation is an independent, non-profit organization established in 2018 to address the needs of our global community; • Match, through the Zimmer Biomet Foundation, employee financial contributions to non-profit organizations, including those dedicated to combating racism and supporting diversity, equality and justice; • Expand our student and early career internship programs to attract and develop more Black leaders; and • Continue our financial support of Movement is Life, Inc., a nonprofit multidisciplinary coalition seeking to eliminate racial, ethnic and gender disparities in muscle and joint health.
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 Government Affairs activities. Previously, Mr. Phipps served 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.
Phipps was appointed Senior Vice President, General Counsel and Secretary in May 2007. 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 Government Affairs activities. Previously, Mr. Phipps served as Associate General Counsel and Corporate Secretary from December 2005 to May 2007.
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 12 transactions. Since June 2022, Mr.
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.
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.
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.
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.
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.
Our significant hip brands include the Taperloc ® Hip System, Avenir Complete ® Hip System, Arcos ® Modular Hip System, and G7 ® Acetabular System. In 2021, we entered the robotic assistance market for hips with our ROSA ® Robot. S.E.T. Our S.E.T. product category includes sports medicine, biologics, foot and ankle, extremities, trauma and CMFT products.
Our significant hip brands include the Taperloc ® Hip System, Avenir Complete ® Hip System, 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.
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 7 addition, exported medical products are subject to the regulatory requirements of each country to which the medical product is exported.
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”).
Ellingson had more than 15 years of experience in investment banking, rising to the position of Managing Director, Medical Technology Investment Banking with Bank of America. She has served as a member of the board of directors of Biolife Solutions, Inc. since April 2021. Mr. Phipps was appointed Senior Vice President, General Counsel and Secretary in May 2007.
Ellingson had more than 15 years of experience in investment banking, rising to the position of Managing Director, Medical Technology Investment Banking with Bank of America. She has served as a member of the board of directors of Biolife Solutions, Inc. since April 2021 and serves on their audit and compensation committees. Mr.
To date, we have not experienced any significant difficulty in locating and obtaining the materials necessary to fulfill our production schedules. 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.
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.
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. Mr. van Zuilen was appointed President, Europe, Middle East and Africa in June 2021.
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.
Name Age Position Bryan Hanson 56 Chairman, President and Chief Executive Officer Rachel Ellingson 53 Senior Vice President and Chief Strategy Officer Chad Phipps 51 Senior Vice President, General Counsel and Secretary Paul Stellato 48 Vice President, Controller and Chief Accounting Officer Ivan Tornos 47 Chief Operating Officer Suketu Upadhyay 53 Executive Vice President and Chief Financial Officer Wilfred van Zuilen 53 President, Europe, Middle East and Africa Lori Winkler 61 Senior Vice President, Chief Human Resources Officer Sang Yi 60 President, Asia Pacific Mr.
Name Age Position Ivan Tornos 48 President and Chief Executive Officer Mark Bezjak 49 President, Americas Rachel Ellingson 54 Senior Vice President and Chief Strategy Officer Chad Phipps 52 Senior Vice President, General Counsel and Secretary Paul Stellato 49 Vice President, Controller and Chief Accounting Officer Suketu Upadhyay 54 Chief Financial Officer and Executive Vice President - Finance, Operations and Supply Chain Wilfred van Zuilen 54 Group President, Europe, Middle East and Africa Lori Winkler 62 Senior Vice President, Chief Human Resources Officer Sang Yi 61 Group President, Asia Pacific Mr.
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.
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.
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 also continued to serve as President, EMEA of Bard, a position to which he was appointed in September 2013. Mr.
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.‌ Our significant S.E.T. brands include the JuggerKnot ® Soft Anchor System, Gel-One ® Cross-linked Hyaluronate, Comprehensive ® Shoulder, Natural Nail ® System, and SternaLock ® System.
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.
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 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.
Our sports medicine products are primarily for the repair of soft tissue injuries, most commonly used in the knee and shoulder. Our biologics products are used as early intervention for joint preservation or to support surgical procedures. Our foot and ankle and extremities products are designed to treat arthritic conditions and fractures in the foot, ankle, shoulder, elbow and wrist.
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 11 percent of our S.E.T. product category net sales in 2023. Our biologics products are used as early intervention for joint preservation or to support surgical procedures.
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.
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.
Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts.
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 conference calls, presentations and webcasts.
Yi joined the Company in March 2013 as Senior Vice President, Asia Pacific. Previously, 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.
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.
Our trauma products are used to stabilize damaged or broken bones and their surrounding tissues to support the body’s natural healing process.
Our upper extremities products represented 33 percent of our S.E.T. product category net sales in 2023. 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 24 percent of our S.E.T. product category net sales in 2023.
In 2022, our Total Recordable Incident Rate was 0.29 and our Lost Time Incident Rate was 0.11. These results are shared with relevant regulatory agencies as required and presented to our Board of Directors.
In 2023, our Total Recordable Incident Rate was 0.23 and our Lost Time Incident Rate was 0.13. 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 15, 2024.
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. Upadhyay was appointed Executive Vice President and Chief Financial Officer in July 2019. Prior to joining Zimmer Biomet, 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. Bezjak was appointed President, Americas in September 2023. As President, Americas, he oversees all commercial, downstream marketing and distribution activities in North America and Latin America. Mr.
The new regulation, initially scheduled to be implemented in 2023, is anticipated to be delayed until 2024. The UK, in the meantime, continues to allow product meeting the current EU regulations to be marketed.
The UK additionally is in the process of creating a new medical device framework (the “UK MDR”) following its exit from the European Union. The new regulation, initially scheduled to be implemented in 2023, is anticipated to be delayed until 2025. The UK, in the meantime, continues to allow products meeting the current EU regulations to be marketed.
Approximately 8,000 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 7,600 employees dedicated to manufacturing our products worldwide. Our mission is to alleviate pain and improve the quality of life for people around the world.
Human Capital As of December 31, 2023, we employed approximately 18,000 employees worldwide, including approximately 2,200 employees dedicated to research and development. Approximately 8,000 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 7,900 employees dedicated to manufacturing our products worldwide.
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.
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 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 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.
Since most of our sales occur at the time of an elective procedure, we generally do not have firm orders. 5 Products Our products include orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; CMFT products; surgical products; and a suite of integrated digital and robotic technologies.
Since most of our sales occur at the time of an elective procedure, we generally do not have firm orders.
The rapid commercialization of innovative new materials, biologics products, implant and instrument designs and surgical techniques 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.
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.
In many locations, our inventory is consigned to the healthcare institution. We generally ship our orders via expedited courier.
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.
Our primary research and development facility is located in Warsaw, Indiana. We have other research and development personnel based in, among other places, Canada, China, France, Switzerland and other U.S. locations. As of December 31, 2022, we employed approximately 2,100 research and development employees worldwide.
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 facility is located in Warsaw, Indiana. We have other research and development personnel based in, among other places, Canada, China, France, Switzerland and other U.S. locations.
The European Union (the “EU”) adopted the European Medical Device Directive (the “MDD”), which created a single set of medical device regulations for products marketed in all member countries. The EU Medical Device Regulation (the “EU MDR”) took effect in May 2021, replacing the MDD. The EU MDR imposes significant additional premarket and postmarket requirements.
In addition, exported medical products are subject to the regulatory requirements of each country to which the medical product is exported. 7 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.
Hanson was appointed President and Chief Executive Officer and a member of the Board of Directors in December 2017. He was subsequently named Chairman of the Board of Directors in May 2021. Previously, Mr. Hanson served as Executive Vice President and President, Minimally Invasive Therapies Group of Medtronic plc from January 2015 until joining Zimmer Biomet.
Tornos 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.
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Most notably, in 2021 the Chinese government began to implement a nationwide volume-based procurement (“VBP”) process across certain of our product categories that negatively affected our net sales due to distributor inventory reductions, ongoing pricing negotiations with distributor partners, revaluation of channel inventory and volume reductions as patients deferred procedures until after VBP pricing became effective in 2022.
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Products Our products include orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; CMFT products; surgical products; and a suite of integrated digital and robotic technologies. 5 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).
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Due to the COVID-19 global pandemic, typical seasonal patterns were disrupted in 2020 and 2021, but started to return to normal in 2022. Distribution We distribute our products both through large, centralized warehouses and through smaller, market specific facilities, depending on the needs of the market.
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Biologics products represented 8 percent of our S.E.T. product category net sales in 2023. 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 4 percent of our S.E.T. product category net sales in 2023.
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Gel-One ® is a registered trademark of Seikagaku Corporation. OTHER Our other product category primarily includes our robotic, surgical and bone cement products. 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.
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CMFT products represented 20 percent of our S.E.T. product category net sales in 2023.‌ Our significant S.E.T. brands include the JuggerKnot ® Soft Anchor System, Gel-One ® Cross-linked Hyaluronate, Comprehensive ® Shoulder, Natural Nail ® System, and SternaLock ® System. Gel-One ® is a registered trademark of Seikagaku Corporation.
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For information regarding a warning letter and certain Form 483 inspectional observations that we are addressing at a single Zimmer Biomet site, see Note 21 to our consolidated financial statements. The FDA, in cooperation with U.S.
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OTHER Our other product category primarily includes our robotic technology, surgical and bone cement products. We market a collective suite of our products and technologies as the ZBEdge TM Platform.
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Products currently certified per the existing MDD regulations must be certified to the new EU MDR regulation prior to the current MDD certificate expiry or May 2024, whichever comes first.
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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. Research and Development We have extensive research and development activities to develop new surgical techniques, including robotic techniques, materials, biologics and product designs.
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Industry members, EU Notified Bodies and individual EU country heath administrations have voiced concern over the lack of progress in the issuance of MDR certifications and the subsequent impact on product availability on the European market as the May 2024 deadline nears.
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As of December 31, 2023, we employed approximately 2,200 research and development employees worldwide.
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Subsequently the EU Commission recommended action to ensure medical device access to patients, which we expect to be detailed and forthcoming in 2023. The UK additionally is in the process of creating a new medical device framework (the “UK MDR”) following its exit from the European Union.
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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.
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On January 12, 2017, we resolved previously-disclosed FCPA matters involving Biomet and certain of its subsidiaries. As part of that settlement, we entered into a Deferred Prosecution Agreement with the DOJ, which concluded on February 9, 2021, six months following certification to the DOJ and the U.S.
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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.
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Securities and Exchange Commission (the “SEC”) by an independent compliance monitor that our compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of the FCPA and is functioning effectively.
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Bezjak joined Zimmer Biomet in April of 2008 as Director of Corporate Sales and has held roles of increasing importance within the Company, most recently serving as President, North America, since 2021. Prior to his work at Zimmer Biomet, Mr.
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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. 9 Human Capital As of December 31, 2022, we employed approximately 18,000 employees worldwide, including approximately 2,100 employees dedicated to research and development.
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Bezjak held multiple roles with Teleflex Incorporated ranging from a regional sales representative to Director of Strategic Accounts from 2000 to 2008. He also held various sales representative roles with Michelin Tire Company from 1997 to 2000. Ms.
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Cybersecurity 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 NIST Cybersecurity framework. We are currently ISO 27001 certified for our surgery planning ecosystem and continue to maintain this industry certification while expanding its scope.
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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.
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The Audit Committee of the Board of Directors receives cybersecurity updates at least quarterly. The Audit Committee 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 our Audit Committee.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

95 edited+23 added−21 removed53 unchanged
Biggest changeOur international operations are, and will continue to be, subject to a number of risks and potential costs, including: • changes in foreign medical reimbursement policies and programs; • differences in and changes to foreign regulatory requirements, such as more stringent requirements for regulatory clearance of products; • differing local product preferences and product requirements; • fluctuations in foreign currency exchange rates; • the effects of inflation, including the effects of different rates of inflation in different countries, on our costs and the costs of our products; • diminished protection of intellectual property in some countries outside of the U.S.; • trade protection measures, import or export requirements, new or increased tariffs, trade embargoes and sanctions and other trade barriers, which may prevent us from shipping products to or receiving products 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; • foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.; • complex data privacy and cybersecurity requirements and labor relations laws; • extraterritorial effects of U.S. laws such as the FCPA; 21 • effects of foreign anti-corruption laws, such as the UK Bribery Act; • difficulty in staffing and managing foreign operations; • labor force instability; • potentially negative consequences from changes in tax laws; and • political, social and economic instability and uncertainty, including wars, other conflict and sovereign debt issues.
Biggest changeOur international operations are, and will continue to be, subject to a number of risks and potential costs, including: 20 • changes to trade restrictions and protection measures, new import or export requirements, new or increased tariffs, trade embargoes and sanctions and other trade barriers, which may 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; • changes in foreign medical reimbursement policies and programs; • differences in and changes to foreign regulatory requirements, such as more stringent requirements for regulatory clearance of products; • differing local product preferences and product requirements; • fluctuations in foreign currency exchange rates; • the effects of inflation, including the effects of different rates of inflation in different countries, on our costs and expenses, and the costs of our products; • diminished protection of intellectual property in some countries outside of the U.S.; • foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.; • complex data privacy and cybersecurity requirements and labor relations laws; • extraterritorial effects of U.S. laws such as the FCPA; • effects of foreign anti-corruption laws, such as the UK Bribery Act; • difficulty in staffing and managing foreign operations; • labor force instability; • increased tax liabilities under foreign tax laws or changes thereto; and • political, social and economic instability and uncertainty, including wars, other conflict and sovereign debt issues.
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 and 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 worldwide regulatory bodies prior to implementation.
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.
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 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 other proprietary rights against others.
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.
The success of our new 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 in sufficient volumes on time; 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.
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 in sufficient volumes on time; 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.
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.
Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the 24 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.
In addition, new materials, product designs and surgical techniques that we develop may not be accepted quickly, in some or all markets, because of, among other factors, entrenched patterns of clinical practice, the need for regulatory clearance and uncertainty with respect to third-party reimbursement.
In addition, new materials, product designs, product enhancements and surgical techniques that we develop may not be accepted quickly, in some or all markets, because of, among other factors, the need for regulatory clearance, entrenched patterns of clinical practice and uncertainty with respect to third-party reimbursement.
Our future performance depends, in large part, on the continued skills, experiences, competencies and services of our senior management and other key talent, including our ability to attract, retain, develop and motivate our highly skilled employees, senior management, independent agents and distributors. Competition for talent in our business is significant.
Our future performance depends, in large part, on the continued skills, experiences, competencies and services of our senior management and other key talent, including our ability to attract, retain, develop and motivate our highly skilled employees, senior management, independent agents and distributors. Competition for talent in our business is 14 significant.
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, or that we have marketed or promoted a product for use other than as indicated in labelling approved by the regulator, the regulator could 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.
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, 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.
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 24 be found invalid, unenforceable or insufficiently broad to protect our technology or to provide us with any competitive advantage.
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.
The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving as countries continue to adopt privacy and data security laws that may apply to us, both because our operations are located in those countries and/or because we provide services to customers in those countries.
The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving as countries continue to adopt 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.
Disruptions in the supply of the materials and components used in manufacturing our products or the sterilization of our products by 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.
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.
In addition, 18 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.
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.
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.
These laws are administered by, among others, the DOJ, the Office of Inspector General of the Department of 22 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.
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 and results of operations.
While it is not possible to predict the outcome of patent and other intellectual 23 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 acquisitions involve numerous risks, including: • unforeseen difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, compliance, vendor management, communications, purchasing, accounting, marketing, administration and other systems and processes; • difficulties harmonizing and optimizing quality systems and operations; • diversion of financial and management resources from existing operations; 15 • unforeseen difficulties related to entering geographic regions or markets where we do not have prior experience; • potential loss of key employees; • unforeseen risks and liabilities associated with businesses acquired, including any unknown vulnerabilities in acquired technology or compromises of acquired data; and/or • inability to generate sufficient revenue or realize sufficient cost savings to offset acquisition or investment costs.
Our acquisitions involve numerous risks, including: • unforeseen difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, compliance, vendor management, communications, purchasing, accounting, marketing, administration and other systems and processes; • difficulties harmonizing and optimizing quality systems and operations; • diversion of financial and management resources from existing operations; • unforeseen difficulties related to entering markets for which or geographic regions where we do not have prior experience; • potential loss of key employees; • unforeseen risks and liabilities associated with businesses acquired, including any unknown vulnerabilities in acquired technology or compromises of acquired data; and/or • inability to generate sufficient revenue or realize sufficient cost savings to offset acquisition or investment costs.
These requirements relate to quality systems, recordkeeping, labeling, promotional requirements, adverse event reporting regulations and other matters, 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 22 require corrective action, or other forms of enforcement.
These requirements relate to quality systems, recordkeeping, labeling, promotional and marketing requirements, adverse event reporting regulations and other matters, 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.
The increased level of debt could, among other things: • require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our debt, thereby reducing funds available for working capital, capital expenditures, research and development expenditures and other general corporate requirements; • limit our ability to obtain additional financing to fund future working capital, capital expenditures, research and development expenditures and other general corporate requirements; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities; • place us at a competitive disadvantage compared to our competitors that have less debt; 19 • adversely affect our credit rating, with the result that the cost of servicing our indebtedness might increase and our ability to obtain surety bonds could be impaired; • adversely affect the market price of our common stock; and • limit our ability to apply proceeds from a future offering or asset sale to purposes other than the servicing and repayment of debt.
Our current and future increased level of debt could, among other things: • require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our debt, thereby reducing funds available for working capital, capital expenditures, research and development expenditures and other general corporate requirements; • limit our ability to obtain additional financing to fund future working capital, capital expenditures, research and development expenditures and other general corporate requirements; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; • restrict our ability to make strategic investments, collaborations, acquisitions or dispositions or to exploit business opportunities; • place us at a competitive disadvantage compared to our competitors that have less debt; • adversely affect our credit rating, with the result that the cost of servicing our indebtedness might increase and our ability to obtain surety bonds could be impaired; • adversely affect the market price of our common stock; and • limit our ability to apply proceeds from a future offering or asset sale to purposes other than the servicing and repayment of debt.
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 significant risk factors is not all-inclusive or necessarily in order of importance.
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.
Many customers for 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.
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.
Although we believe that our independent agents and distributors are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. Further, we have been subject to lawsuits challenging 20 the characterization of these relationships.
Although we believe that our 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.
As a result of technology initiatives, expanding and evolving privacy and cybersecurity laws, changes in our system platforms and integration of new business acquisitions, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.
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.
Damage to one or more facilities from weather or natural disaster-related events, vulnerabilities in technology, cyber-attacks against our information systems or the information systems of our business partners (such as ransomware attacks), or 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 or other factors could adversely affect the ability to manufacture our products.
Damage to one or more facilities from weather or natural disaster-related events, vulnerabilities in technology, cyber-attacks against our information systems or the information systems of our business partners (such as ransomware attacks), 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 could adversely affect the ability to manufacture and distribute our products.
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 systems for maintenance and other purposes.
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.
Our competition may have greater financial, marketing and other resources than us; respond more quickly to new or emerging technologies; undertake more extensive marketing campaigns; operate more effective sales and distribution channels; adopt more aggressive pricing policies; or be more successful in attracting potential customers, employees and strategic partners.
Our competition may 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.
The occurrence of any one or more risks described in these Risk Factors or otherwise may have unpredictable effects on other risks, our business, operations or financial results which may be comparable to, or more adverse than, those we experienced in connection with the COVID-19 pandemic.
Moreover, the occurrence of any one or more risks described in these Risk Factors or 17 otherwise may have unpredictable effects on other risks, our business, financial or operational results which may be comparable to, or more adverse than, those we experienced in connection with the COVID-19 pandemic.
Our incident response efforts, business continuity procedures and disaster recovery planning may not be sufficient for all eventualities.
Our cybersecurity program, incident response efforts, business continuity procedures and disaster recovery planning may not be sufficient for all eventualities.
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, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.
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.
We are increasingly dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems or data, including from data breaches, our business could be adversely affected. We are increasingly dependent on sophisticated information technology for our products and infrastructure.
We 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.
Our information systems, and those of third-party suppliers 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 systems and regulatory standards, changing threats and vulnerabilities, and the increasing need to protect patient and customer information.
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 systems and regulatory standards, changing threats and vulnerabilities, and the increasing need to protect data including patient, customer and Confidential Information.
As a result, we may experience loss of market share, which we may be unable to recapture, and harm to our reputation, which could adversely affect our business, financial condition and results of operations.
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.
In addition, given their size and complexity, these systems could be vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or from cyber-attacks by malicious third parties attempting to gain unauthorized access to our products, systems or Confidential Information.
In 16 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.
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.
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.
A reduction or interruption in the supply of materials or components used in manufacturing our products, such as due to one or more suppliers experiencing reductions in operations and/or worker absences due to a pandemic or otherwise; 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.
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 the event of a significant interruption, for example, as a result of a failure to follow regulatory protocols and procedures, we may experience lengthy delays in resuming production of affected products due primarily to the need for regulatory approvals.
In the event of a significant interruption, for example, as a result of our or a supplier’s failure to follow 15 regulatory protocols and procedures, we (or our suppliers) may experience lengthy delays in resuming production of affected products due primarily to the need for additional regulatory approvals.
As discussed further in Note 11 to our consolidated financial statements, in the fourth quarter of 2022, we recorded goodwill impairment charges of $289.8 million as a result of, among other factors, changes in foreign currency exchange rates in our European-based currencies, inflation and a higher interest rate environment; in the first quarter of 2020, we recorded goodwill impairment charges of $470.0 million as a result of the adverse impacts from the COVID-19 pandemic and a change in our reportable segments; and in the second quarter of 2022 and 2021, we recorded $3.0 million and $16.3 million, respectively, of in-process research and development (“IPR&D”) intangible asset impairments on certain IPR&D projects.
As discussed further in Note 11 to our consolidated financial statements, in the fourth quarter of 2022, we recorded goodwill impairment charges of $289.8 million as a result of, among other factors, changes in foreign currency exchange rates in our European-based currencies, inflation and a higher interest rate environment; and in the second quarter of 2022 and 2021, we recorded $3.0 million and $16.3 million, respectively, of in-process research and development (“IPR&D”) intangible asset impairments on certain IPR&D projects.
In addition, certain of our affiliates and associates are subject to privacy, security and breach notification regulations established under these and other international, national, state and foreign laws. We, and certain of our affiliates and associates, are also subject to reporting requirements relating to certain data and other breaches.
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.
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, and malicious cyber actors may increase malware campaigns and phishing emails targeting teleworkers, which exposes us to additional cybersecurity risks.
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, and malicious cyber actors may increase efforts targeting remote workers, which exposes us to additional cybersecurity risks.
Losing access to such markets or exports may have a material adverse effect on our business in the affected market and may limit our ability to operate some of our businesses globally.
Losing access to such markets or to exports from such markets may have a material adverse effect on our business, and may limit our ability to operate, both in the affected market and globally.
Demand for our products may change, in certain cases, in ways we may not anticipate because of evolving customer needs, changing demographics, slowing industry growth rates, declines in the musculoskeletal implant market, the introduction of new products and technologies and evolving surgical philosophies and industry standards.
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, the emergence of alternative treatment methods, and evolving surgical philosophies and industry standards.
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.
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 sterilization services to certain of our customers.
In addition, some of our products and services incorporate software or information technology that processes health data regarding patients and patient therapy for treatment, health care, 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.
In addition, some 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.
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 the foregoing provisions.
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.
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, 2022, we had $8.6 billion in goodwill and $5.1 billion of intangible assets.
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, 2023, we had $8.8 billion in goodwill and $4.9 billion of intangible assets.
Violations of foreign laws or regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.
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.
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 more plants, some of which plants are geographically concentrated.
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.
We also have outsourced elements of our operations to third parties, and, as a result, we manage a number of third-party suppliers who may or could have access to our confidential information, including, but not limited to, intellectual property, proprietary business information and personal information of patients, employees and customers (collectively “Confidential Information”).
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”).
The global supply chain has been and continues to be negatively impacted by COVID-19 and a variety of other macro factors which has, in part, resulted in challenges to meet end market demand in some instances. We expect similar challenges in 2023.
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.
If we fail to achieve some or all of the expected benefits of restructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.
For more information on our restructuring programs, see Note 5 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.
Risks Related to our Business, Operations and Strategy Business and economic conditions, including disruptions related to the COVID-19 pandemic, 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 are uncertain and unpredictable.
Business and economic conditions 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.
We anticipate that the effects of emerging, expanding and new conflicts, such as a possible expansion of the Russian-Ukrainian conflict or a conflict involving China and Taiwan, would not be limited to the specific markets involved.
The effects of emerging, expanding and new conflicts, such as a possible expansion of the Russian-Ukrainian conflict, a possible expansion of conflicts in the Middle East, or a possible conflict involving China and Taiwan, may not be limited to the specific markets involved.
If we fail to maintain or protect our information systems and data integrity effectively, we could: • lose existing customers, vendors and business partners; • have difficulty attracting new customers; • have problems in determining product cost estimates and establishing appropriate pricing; • suffer outages or disruptions in our operations or supply chain; • have difficulty preventing, detecting, and controlling fraud; • have disputes with customers, physicians, and other healthcare professionals; • have regulatory sanctions or penalties imposed; • incur increased operating expenses; • be subject to issues with product functionality that may result in a loss of data, risk to patient safety, field actions and/or product recalls; • incur expenses or lose revenues as a result of a data privacy breach; or • suffer other adverse consequences.
If we fail to maintain or protect our information systems and data integrity effectively, we could: • suffer a loss of access to or alteration of all or a portion of our Confidential Information; • have difficulty meeting our compliance requirements, including with respect to data retention and reporting, QMS, quality reporting or other requirements; • have difficulty developing new or enhanced products; • lose existing customers, suppliers and business partners; • have difficulty attracting new customers; • have problems in determining product cost estimates and establishing appropriate pricing; • suffer outages or disruptions in our operations, supply chain, products and/or services, including our ZBEdge TM ecosystem; • have difficulty preventing, detecting, and controlling fraud; • have disputes with customers, physicians, other healthcare professionals and payors for our products; • have regulatory sanctions or penalties imposed; • incur increased operating expenses; • be subject to issues with product functionality that may result in a loss of data, risk to patient safety, field actions and/or product recalls; • incur expenses or lose revenues as a result of a data privacy breach; or • suffer other adverse consequences.
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.
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, particularly through our ZBEdge TM ecosystem.
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.
Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, also may materially adversely affect us in future periods.
The products we design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other supranational, national, federal, regional, state and local governmental authorities.
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 supranational, national, federal, regional, state and local governmental authorities.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement compliance with any additional requirements. In addition, new and more stringent multinational, national and state privacy legislation and regulations may be adopted in 2023 and beyond.
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.
If any of these assumptions or representations are, or become, inaccurate or incomplete, reliance on the opinion and rulings may be jeopardized.
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.
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.
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.
Without the timely introduction of new products and enhancements, our products may become obsolete over time. If that happens, our revenue and operating results would suffer.
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.
In markets outside of the U.S., other factors influence competition as well, including local distribution systems, complex regulatory environments and differing medical philosophies and product preferences.
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, and differing medical philosophies and product preferences.
Effective succession planning is also important to our long-term success; failure to ensure effective transfer of knowledge and orderly transitions involving key employees could hinder our business. We may not be able to effectively integrate acquired businesses into our operations or achieve expected cost savings or profitability from our acquisitions.
Effective succession planning is also important to our long-term success; failure to ensure effective transfer of knowledge and orderly transitions involving key employees could hinder our business. 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.
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 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.
In cases where our product is not selected in VBP, sales of that product are substantially impacted. Pricing pressure has also increased due to continued 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.
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.
Therefore, despite our efforts, we cannot assure that cyber-attacks or data breaches will not occur or that systems 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.
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.
If the operating performance at one or more of our reporting units falls significantly below current levels, including if elective surgical procedures return to lower levels due to a resurgence of the COVID-19 pandemic or otherwise, if competing or alternative technologies 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.
There were no impairment charges during the year ended December 31, 2023, 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.
We expect several of these factors to continue, and there can be no assurance that we will successfully manage these risks without adverse impacts to our business or financial results.
There can be no assurance that we will successfully manage risks, such as experienced during the COVID-19 pandemic, without adverse impacts to our business or financial results.
Our operations expose us to risks from business interruptions that may arise from a variety of sources, including public health crises and outbreaks of diseases, such as the COVID-19 pandemic and its variants, supply chain 14 disruptions, trade and tariff disputes and global conflicts, that can, singly or in combination with other factors, adversely affect our business and financial results.
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.
Restructuring initiatives present significant 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 5 to our consolidated financial statements.
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.
We sell our products in more than 100 countries and derived approximately 42 percent of our net sales in 2022 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.
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.
These data and information-focused activities carry additional risk. 23 We are subject to supranational, national, state and international data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, location, disposal and protection of health-related and other personal information.
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.
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 (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the Delaware General Corporation Law or our Restated Certificate of Incorporation or our Restated By-Laws, as either may be amended from time to time, or (iv) any action asserting a 25 claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.
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.
To the extent we or our contract sterilizers are unable to sterilize our products, whether due to capacity, availability of materials for sterilization, regulatory or other constraints, including federal and state regulations on the use of ethylene oxide, or reductions in operations and/or worker absences due to the COVID-19 pandemic 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. 16 Moreover, we are subject to the SEC’s rule regarding disclosure of the use of certain minerals, known as “conflict minerals” (tantalum, tin and tungsten (or their ores) and gold), which are mined from the Democratic Republic of the Congo and adjoining countries.
To the extent we or our contract sterilizers are unable to sterilize our products or provide sterilization services to our customers, whether caused by capacity, availability of materials for sterilization, and regulatory or other restrictions on the use of ethylene oxide 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.
Additionally, the availability of recognized European notified body services certified to the new EU MDR requirements is limited, which may delay the marketing approval for some of our products under the EU MDR.
Additionally, the availability of designated European notified body services to certify compliance with the new EU MDR requirements is limited, which may delay the marketing approval for some of our products under the EU MDR (and, potentially, the UK MDR). Furthermore, regulators strictly regulate the promotional claims that we may make about approved or cleared products.
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.
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.
For example, changes in the tax laws of foreign jurisdictions are expected to occur as a result of pillar two of the base erosion and profit shifting plan (“Pillar Two”) undertaken by the Organisation for Economic Co-operation and Development, which would require profits earned in jurisdictions in which we operate to be subject to a minimum 15 percent income tax rate.
Tax law changes in certain foreign jurisdictions in which we operate conforming to Pillar Two of the base erosion and profit shifting plan (“Pillar Two”) undertaken by the Organisation for Economic Co-operation and Development will take effect in 2024.
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 the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the United States.
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 recent lows, which has increased our cost of borrowing.
Legal, Regulatory and Compliance Risks We are subject to costly and complex laws and governmental regulations relating to the development, design, product standards, packaging, advertising, promotion, postmarket 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.
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. 21 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.
As of December 31, 2022, our debt service principal obligations (excluding interest, leases and equipment notes), during the next 12 months are expected to be $0.5 billion. As a result of the increase in our debt, demands on our cash resources have increased.
We incurred substantial additional indebtedness in connection with previous mergers and acquisitions. At December 31, 2023, our total indebtedness was $5.8 billion. As of December 31, 2023, our debt service principal obligations (excluding interest, leases and equipment notes), during the next 12 months are expected to be $0.9 billion.
We could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations 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.
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.
In addition to intellectual property and product liability claims and lawsuits, we are involved in various commercial and securities litigation and claims and other legal proceedings that arise from time to time in the ordinary course of our business.
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.
In the event of an interruption in manufacturing, we may be unable to move quickly to alternate means of producing affected products or to meet customer demand. We have experienced such interruptions due to the COVID-19 pandemic, and we may experience such interruptions in the future due to the pandemic or otherwise.
In the event of an interruption in manufacturing or involving a critical supplier, 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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeInternationally, 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, the U.K., China, and Puerto Rico.
Biggest changeInternationally, 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, China, and Puerto Rico.
Item 2. Pr operties We own or lease approximately 280 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. product divisions.
Item 2. Pr operties 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. product divisions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have selected the Peer Group to replace the S&P 500 Health Care Equipment Index because we believe it better reflects our relative market performance and to provide consistency in evaluating our relative executive compensation practices. 27 Company/Index 2017 2018 2019 2020 2021 2022 Zimmer Biomet Holdings, Inc. $ 100.00 $ 86.69 $ 126.03 $ 130.77 $ 108.51 $ 113.18 S&P 500 Stock Index 100.00 95.62 125.72 148.85 191.58 156.88 S&P 500 Health Care Equipment Index 100.00 116.24 150.32 176.83 211.05 171.25 Peer Group 100.00 112.39 147.56 171.63 208.11 165.99 Issuer Purchases of Equity Securities The following table summarizes repurchases of common stock settled during the three months ended December 31, 2022: 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 Purchased Under the Program (1) October 2022 - $ - - $ 1,000,000,000 November 2022 - - - 1,000,000,000 December 2022 1,185,064 126.58 1,185,064 850,000,131 Total 1,185,064 $ 126.58 1,185,064 $ 850,000,131 (1) In February 2016, our Board of Directors authorized a $1.0 billion share repurchase program effective March 1, 2016, with no expiration date. 28 Item 6. [Reserved]
Biggest changeCompany/Index 2018 2019 2020 2021 2022 2023 Zimmer Biomet Holdings, Inc. $ 100.00 $ 145.38 $ 150.84 $ 125.16 $ 130.55 $ 125.57 S&P 500 Stock Index 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Health Care Equipment Index 100.00 129.32 152.12 181.56 147.32 160.64 Issuer Purchases of Equity Securities The following table summarizes repurchases of common stock settled during the three months ended December 31, 2023: 27 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 Purchased Under the Program (1) October 2023 - $ - - $ 591,700,271 November 2023 1,610,580 111.44 1,610,580 412,214,066 December 2023 2,160,287 118.69 2,160,287 155,805,204 Total 3,770,867 $ 115.60 3,770,867 $ 155,805,204 (1) In February 2016, our Board of Directors authorized a $1.0 billion share repurchase program effective March 1, 2016, with no expiration date.
Market for the Registrant’s Common Equity, Related S tockholder 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 7, 2023, there were approximately 14,540 holders of record of our common stock.
Market for the Registrant’s Common Equity, Related S tockholder 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 6, 2024, there were approximately 13,587 holders of record of our common stock.
The graph below shows the cumulative total stockholder return on our common stock compared to the S&P 500 Stock Index, the S&P 500 Health Care Equipment Index and the common stock of a selected group of peer issuers (the “Peer Group”).
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, 2018 in Zimmer Biomet common stock and each index and that dividends were reinvested.
The chart assumes $100 was invested on December 31, 2017 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.
Returns over the indicated period should not be considered indicative of future returns.
Removed
The Peer Group is a group of publicly traded companies, including other large healthcare equipment and services companies, life sciences services companies and companies with whom we compete for business and for executive talent, which companies we use as a market reference point for performance comparisons, executive compensation levels, equity usage and incentive plan design and industry trend analysis.
Removed
The Peer Group is selected by our Compensation and Management Development Committee from time to time, most recently in May 2022, and currently consists of the following issuers: Agilent Technologies, Inc.; Align Technology, Inc.; Baxter International Inc.; Becton Dickinson and Company; Boston Scientific Corporation; DexCom, Inc.; Edwards Lifesciences Corporation; Hologic, Inc.; Intuitive Surgical, Inc.; Laboratory Corporation of America Holdings; Quest Diagnostics Incorporated; Stryker Corporation; Teleflex Incorporated; and The Cooper Companies, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

66 edited+34 added−50 removed11 unchanged
Biggest changeNet Sales by Geography The following table presents net sales by geography and the percentage changes (dollars in millions): Year Ended December 31, 2022 2021 2020 2022 vs. 2021 % Inc/(Dec) 2021 vs. 2020 % Inc United States $ 4,012.4 $ 3,853.9 $ 3,507.7 4.1 % 9.9 % International 2,927.5 2,973.4 2,619.8 (1.5 ) 13.5 Total $ 6,939.9 $ 6,827.3 $ 6,127.5 1.6 11.4 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, 2022 2021 2020 2022 vs. 2021 % Inc/(Dec) 2021 vs. 2020 % Inc Knees $ 2,778.3 $ 2,647.9 $ 2,378.3 4.9 % 11.3 % Hips 1,894.9 1,856.1 1,750.5 2.1 6.0 S.E.T. 1,696.7 1,727.8 1,525.6 (1.8 ) 13.3 Other 570.0 595.5 473.1 (4.3 ) 25.9 Total $ 6,939.9 $ 6,827.3 $ 6,127.5 1.6 11.4 30 The following table presents net sales by product category by geography for our Knees and Hips product categories, which represent our most significant product categories (dollars in millions): Year Ended December 31, 2022 2021 2020 2022 vs. 2021 % Inc/(Dec) 2021 vs. 2020 % Inc Knees United States $ 1,615.0 $ 1,487.6 $ 1,382.5 8.6 % 7.6 % International 1,163.3 1,160.3 995.8 0.3 16.5 Total $ 2,778.3 $ 2,647.9 $ 2,378.3 4.9 11.3 Hips United States $ 960.9 $ 921.5 $ 881.1 4.3 % 4.6 % International 934.0 934.6 869.4 (0.1 ) 7.5 Total $ 1,894.9 $ 1,856.1 $ 1,750.5 2.1 6.0 Demand (Volume/Mix) Trends Changes in volume and mix of product sales had a positive effect of 7.6 percent and 12.3 percent on year-over-year sales during the years ended December 31, 2022 and 2021, respectively.
Biggest changeNet Sales by Geography The following table presents net sales by geography and the percentage changes (dollars in millions): Year Ended December 31, 2023 2022 2021 2023 vs. 2022 % Inc 2022 vs. 2021 % Inc/(Dec) United States $ 4,288.8 $ 4,012.4 $ 3,853.9 6.9 % 4.1 % International 3,105.4 2,927.5 2,973.4 6.1 (1.5 ) Total $ 7,394.2 $ 6,939.9 $ 6,827.3 6.5 1.6 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, 2023 2022 2021 2023 vs. 2022 % Inc 2022 vs. 2021 % Inc/(Dec) Knees $ 3,038.4 $ 2,778.3 $ 2,647.9 9.4 % 4.9 % Hips 1,967.2 1,894.9 1,856.1 3.8 2.1 S.E.T. 1,752.6 1,696.7 1,727.8 3.3 (1.8 ) Other 636.0 570.0 595.5 11.6 (4.3 ) Total $ 7,394.2 $ 6,939.9 $ 6,827.3 6.5 1.6 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, 2023 2022 2021 2023 vs. 2022 % Inc 2022 vs. 2021 % Inc/(Dec) Knees United States $ 1,770.6 $ 1,615.0 $ 1,487.6 9.6 % 8.6 % International 1,267.8 1,163.3 1,160.3 9.0 0.3 Total $ 3,038.4 $ 2,778.3 $ 2,647.9 9.4 4.9 Hips United States $ 1,012.3 $ 960.9 $ 921.5 5.4 % 4.3 % International 954.9 934.0 934.6 2.2 (0.1 ) Total $ 1,967.2 $ 1,894.9 $ 1,856.1 3.8 2.1 Demand (Volume/Mix) Trends Changes in volume and mix of product sales had positive effects of 8.1 percent and 7.6 percent on year-over-year sales during the years ended December 31, 2023 and 2022, respectively.
In 2022, the ETR was primarily driven by the $289.8 million goodwill impairment charge and the $116.6 million loss on our investment in ZimVie, which have no corresponding tax benefits, partially offset by favorable tax audit settlements and finalization of Switzerland's Federal Act on Tax Reform and AHV Financing (“TRAF”) step-up.
In 2022, the ETR was primarily driven by the $289.8 million goodwill impairment charge and the $116.6 million loss on our investment in ZimVie, which have no corresponding tax benefits, partially offset by favorable tax settlements and finalization of Switzerland's Federal Act on Tax Reform and AHV Financing (“TRAF”) step-up.
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.
Our business is seasonal in nature to some extent, as many of our products are used 29 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.
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.
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 36 not be recoverable.
Currently, we cannot reasonably estimate the impact of these items on our financial results. See Note 17 to our consolidated financial statements for additional information on our income taxes.
Currently, we cannot reasonably estimate the impact of all these items on our financial results. See Note 17 to our consolidated financial statements for additional information on our income taxes.
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 from continuing operations were $1,356.2 million in 2022 compared to $1,404.3 million in 2021.
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 from continuing operations were $1,581.6 million in 2023 compared to $1,356.2 million in 2022.
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, 2022, $328.2 million of our cash and cash equivalents were held in jurisdictions outside of the U.S.
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, 2023, $343.4 million of our cash and cash equivalents were held in jurisdictions outside of the U.S.
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 34 twelve months. However, due to the continued uncertainties related to the COVID-19 pandemic, it is possible our needs may change.
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.
Under the Tax Cuts and Jobs Act of 2017, we have a $187.8 million liability remaining from a one-time tax on the mandatory deemed repatriation of post-1986 untaxed foreign earnings and profits (“toll charge”) for the deemed repatriation of unremitted foreign earnings.
Under the Tax Cuts and Jobs Act of 2017, we have a $206.2 million 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.
The historical results of our spine and dental businesses have been reflected as discontinued operations in our consolidated financial statements in our 2022 results through the date of the spinoff and in the prior year periods.
The historical results of our spine and dental businesses have been reflected as discontinued operations in our consolidated financial statements in our 2022 results through the date of the spinoff and in the prior year periods. See Note 3 to our consolidated financial statements for additional information.
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 European Union adoption of Pillar 2 proposals; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations.
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 European Union adoption of Pillar Two proposals which will begin to take effect in 2024; the outcome of various federal, state and foreign audits, appeals, and litigation; and the expiration of certain statutes of limitations.
In addition, we had $1.0 billion available to borrow under a 364-day revolving credit agreement that matures on August 18, 2023, and $1.1 billion available under a five-year revolving facility that matures on August 19, 2027. The terms of the 364-day revolving credit agreement and the five-year revolving facility are described further in Note 13 to our consolidated financial statements.
In addition, we had $1.0 billion available to borrow under a 364-day revolving credit agreement that matures on July 5, 2024, and $1.5 billion available under a five-year revolving facility that matures on July 7, 2028. The terms of the 364-day revolving credit agreement and the five-year revolving facility are described further in Note 13 to our consolidated financial statements.
Expenses as a Percent of Net Sales Year Ended December 31, 2022 2021 2020 2022 vs. 2021 Inc/(Dec) 2021 vs. 2020 Inc/(Dec) Cost of products sold, excluding intangible asset amortization 29.1 % 28.7 % 29.8 % 0.4 % (1.1) % Intangible asset amortization 7.6 7.8 8.4 (0.2) (0.6) Research and development 5.9 6.4 5.3 (0.5) 1.1 Selling, general and administrative 39.8 41.6 44.3 (1.8) (2.7) Goodwill and intangible asset impairment 4.2 0.2 8.2 4.0 (8.0) Restructuring and other cost reduction initiatives 2.8 1.8 1.7 1.0 0.1 Quality remediation 0.5 0.8 0.8 (0.3) - Acquisition, integration, divestiture and related 0.2 - 0.2 0.2 (0.2) Operating Profit 10.0 12.6 1.4 (2.6) 11.2 Cost of Products Sold and Intangible Asset Amortization We calculate gross profit as net sales minus cost of products sold and intangible asset amortization.
Expenses as a Percent of Net Sales Year Ended December 31, 2023 2022 2021 2023 vs. 2022 Inc/(Dec) 2022 vs. 2021 Inc/(Dec) Cost of products sold, excluding intangible asset amortization 28.2 % 29.1 % 28.7 % (0.9) % 0.4 % Intangible asset amortization 7.6 7.6 7.8 - (0.2) Research and development 6.2 5.9 6.4 0.3 (0.5) Selling, general and administrative 38.4 39.8 41.6 (1.4) (1.8) Goodwill and intangible asset impairment - 4.2 0.2 (4.2) 4.0 Restructuring and other cost reduction initiatives 2.1 2.8 1.8 (0.7) 1.0 Quality remediation - 0.5 0.8 (0.5) (0.3) Acquisition, integration, divestiture and related 0.3 0.2 - 0.1 0.2 Operating Profit 17.3 10.0 12.6 7.3 (2.6) Cost of Products Sold and Intangible Asset Amortization Cost of products sold, excluding intangible asset amortization, increased in 2023 compared to 2022 primarily due to higher sales.
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.
These estimated payments related to these agreements could range from $0 to $440 million. 35 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.
Product Categories In 2022, our Knees and Hips net sales increased by 4.9 percent and 2.1 percent, respectively, when compared to 2021 due to the recovery in elective surgical procedures and new product introductions.
Product Categories In 2023, our Knees and Hips net sales increased by 9.4 percent and 3.8 percent, respectively, when compared to 2022 due to the recovery in elective surgical procedures, improvements in our supply chain and new product introductions.
As discussed in Note 17 to our consolidated financial statements, the IRS has issued proposed adjustments for years 2010 through 2012, and for years 2013 through 2015, reallocating profits between certain of U.S. and foreign subsidiaries. We have disputed these proposed adjustments and intend to continue to vigorously defend our positions.
As discussed in Note 17 to our consolidated financial statements, the IRS has issued proposed adjustments for years 2010 through 2012, 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.
In our original estimates, we expected to reduce gross annual pre-tax operating expenses by approximately $180 million to $280 million relative to the 2019 baseline expenses by the end of 2023 as program benefits under the 2019 Restructuring Plan are realized. Our latest estimates indicate that we will be near the low end of that range.
In our original estimates, we expected to reduce gross annual pre-tax operating expenses by approximately $180 million to $280 million relative to the 2019 baseline expenses by the end of 2023 as benefits under the 2019 Restructuring Plan were realized.
Material Cash Requirements from Known Contractual and Other Obligations At December 31, 2022, we had outstanding debt of $5,696.5 million, of which $544.3 million was classified as current debt.
Material Cash Requirements from Known Contractual and Other Obligations At December 31, 2023, we had outstanding debt of $5,767.9 million, of which $900.0 million was classified as current debt.
Cash flows used in investing activities from continuing operations were $522.0 million in 2022 compared to $443.3 million in 2021. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, optimization of our manufacturing and logistics network and investments in enterprise resource planning software.
Cash flows used in investing activities from continuing operations were $778.9 million in 2023 compared to $522.0 million in 2022. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, including new product introductions, optimization of our manufacturing and logistics networks, investments in enterprise resource planning software and a new corporate jet.
We estimated the fair value of these reporting units using the income and market approaches. We performed a qualitative test on the other reporting unit and concluded it was more likely than not the fair value of this reporting unit exceeded its carrying value.
We performed a qualitative test on the other reporting unit and concluded it was more likely than not the fair value of this reporting unit exceeded its carrying value. Future impairment in our reporting units could occur if the estimates used in the income and market approaches change.
The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $350 million to $400 million, of which approximately $280 million was incurred through December 31, 2022.
The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $370 million by the end of 2025, of which approximately $320 million was incurred through December 31, 2023.
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 February 2016, our Board of Directors authorized a $1.0 billion share repurchase program effective March 1, 2016, with no expiration date.
In March, May, August and December 2023, 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.
This amount was recorded in non-current income tax liabilities on our consolidated balance sheet as of December 31, 2022. As discussed in Note 21 to our consolidated financial statements, we are involved in various litigation matters. We estimate the total liabilities for all litigation matters was $349.2 million as of December 31, 2022.
As of December, 31, 2023, $51.6 and $154.6 million of this amount is recorded in current income tax liabilities and non-current income tax liabilities, respectively, on our consolidated balance sheet. As discussed in Note 21 to our consolidated financial statements, we are involved in various litigation matters.
In 2022, we recognized a goodwill impairment charge of $289.8 million related to our EMEA reporting unit. In 2022 and 2021, we recognized intangible asset impairment charges of $3.0 million and $16.3 million, respectively, related to IPR&D projects that we discontinued. For more information regarding these charges, see Note 11 to our consolidated financial statements.
In 2023, we did not recognize any goodwill or intangible asset impairment charges. In 2022, we recognized a goodwill impairment charge of $289.8 million related to our EMEA reporting unit. In 2022 and 2021, we recognized intangible asset impairment charges of $3.0 million and $16.3 million, respectively, related to IPR&D projects that we discontinued.
Geography The 4.1 percent and 9.9 percent net sales growth in the U.S. in 2022 and 2021, respectively, when compared to the prior year in each case was primarily driven by recovery in surgical procedures as COVID-19 cases subsided, especially in the Knees and Hips categories.
Geography The 6.9 percent net sales growth in the U.S. in 2023 when compared to 2022 was primarily driven by recovery in surgical procedures as COVID-19 caused fewer disruptions, especially in the Knees and Hips categories. Internationally, net sales increased by 6.1 percent in 2023 when compared to 2022.
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 Other. 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.
(Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic); and Other. 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.
The following table sets forth the factors that contributed to the gross margin changes in each of 2022 and 2021 compared to the prior year: Year Ended December 31, 2022 2021 Prior year gross margin 63.5 % 61.9 % Lower average selling prices (0.3 ) (0.6 ) Manufacturing costs (0.9 ) 0.5 Impact of volume, product mix and other 0.6 (0.5 ) Inventory charges (0.1 ) 2.1 Impact from changes in foreign currency exchange rates 0.3 (0.5 ) Intangible asset amortization 0.2 0.6 Current year gross margin 63.3 % 63.5 % The decline in gross margin percentage in 2022 compared to 2021 was primarily due to inflationary cost pressures, lower average selling prices and inventory charges related to products we plan to discontinue.
The following table sets forth the factors that contributed to the gross margin changes in each of 2023 and 2022 compared to the prior year: Year Ended December 31, 2023 2022 Prior year gross margin 63.3 % 63.5 % Lower average selling prices (0.2 ) (0.3 ) Manufacturing costs (0.1 ) (0.9 ) Volume, product and market mix and other 1.4 0.6 Inventory charges (0.5 ) (0.1 ) Changes in foreign currency exchange rates 0.3 0.3 Intangible asset amortization - 0.2 Current year gross margin 64.2 % 63.3 % Operating Expenses Research & development (“R&D”) expenses increased in both amount and as a percentage of net sales in 2023 compared to 2022.
Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes. The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2022 and 2021.
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, 2023 and 2022.
We also have other cost reduction and optimization initiatives that have the goal of reducing costs across the organization. We recognized expenses of $191.6 million and $125.7 million in 2022 and 2021, respectively, primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs.
We recognized expenses of $151.9 million and $191.6 million in 2023 and 2022, respectively, primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs.
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.
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.
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.
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.
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.
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.
In the majority of countries in which we operate, we continue to experience pricing pressure from governmental healthcare cost containment efforts and from local hospitals and health systems. However, we have had some success in reducing the negative effects of pricing in 2022 due to internal initiatives and being able to pass some inflationary impacts on to customers.
The majority of countries in which we operate continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts.
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 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.
Discussion, analysis and comparisons of the years ended December 31, 2021 and 2020 that are not included in this Form 10-K can be found in (i) “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) prior to the spinoff of ZimVie; and (ii) “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of Exhibit 99.1 filed with our Form 8-K on June 22, 2022, which Form 8-K was filed to recast certain items of the 2021 Form 10-K, including Part II, Item 7, to reflect the historical results of our spine and dental businesses as discontinued operations following the ZimVie spinoff.
Discussion, analysis and comparisons of the years ended December 31, 2022 and 2021 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 Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
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. 36 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.
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.
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.
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. 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.
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.
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.
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 EMEA reporting unit. As a result of its carrying value being in excess of its estimated fair value, we recorded a goodwill impairment charge of $289.8 million.
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 determined from other businesses that are similar to our reporting unit.
We have entered into various agreements 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. These estimated payments related to these agreements could range from $0 to $415 million.
However, we do not believe these purchase commitments are material to the overall standing of our business or our liquidity. 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.
We incurred these quality remediation expenses to complete our remediation milestones that address inspectional observations on Form 483 and a warning letter issued by the FDA at our Warsaw North Campus facility, among other matters. The decline in expenses in 2022 when compared to 2021 was due to the natural regression as various remediation milestones were completed.
For more information regarding these expenses, see Note 5 to our consolidated financial statements. 32 In 2023, we did not recognize any significant quality remediation expenses as we completed our remediation milestones in late 2022 that addressed inspectional observations on Form 483 and a warning letter issued by the FDA at our Warsaw North Campus facility, among other matters.
Other (Expense) Income, net, Interest Expense, net, Loss on Early Extinguishment of Debt and Income Taxes In 2022, we incurred a loss of $128.0 million in our other (expense) income, net compared to a gain of $12.2 million in 2021. The expense in 2022 was primarily due to a $116.6 million loss on our investment in ZimVie.
Other (Expense) Income, net, Interest Expense, net, and Income Taxes In 2023, we incurred a loss of $9.3 million in our other (expense) income, net compared to a loss of $128.0 million in 2022.
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.
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.
Foreign Currency Exchange Rates In 2022 and 2021, changes in foreign currency exchange rates had a negative effect of 5.0 percent and a positive effect of 1.2 percent, respectively, on year-over-year sales.
Changes in foreign currency exchange rates had negative effects of 0.8 percent and 1.3 percent on 2023 Knees and Hips net sales, respectively. S.E.T. net sales increased by 3.3 percent in 2023 when compared to 2022. Changes in foreign currency exchange rates had a negative effect of 0.5 percent on 2023 S.E.T. net sales.
As discussed in Note 5 to our consolidated financial statements, we have a 2021 Restructuring Plan and a 2019 Restructuring Plan. The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $220 million, of which approximately $130 million was incurred through December 31, 2022.
The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $180 million by the end of 2024, of which approximately $170 million was incurred through December 31, 2023.
Commitments and Contingencies - We are involved in various ongoing proceedings, legal actions and claims arising in the normal course of doing business, including litigation related to product, labor and intellectual property. 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.
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.
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.
We estimate the total liabilities for all litigation matters was $244.1 million as of December 31, 2023. 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.
In 2021, we recognized a $165.1 million loss on the early extinguishment of debt. See Note 13 to our consolidated financial statements for additional information on this loss. 33 Our effective tax rate (“ETR”) on earnings from continuing operations before income taxes was 27.9 percent and 10.7 percent for the years ended December 31, 2022 and 2021, respectively.
In addition, in 2023 we incurred losses of $38.9 million on our fixed-to-variable interest rate swaps compared to losses of $4.0 million in 2022. Our effective tax rate (“ETR”) on earnings from continuing operations before income taxes was 4.0 percent and 27.9 percent for the years ended December 31, 2023 and 2022, respectively.
The decrease in cash flows from operating activities in 2022 when compared to 2021 was primarily the result of higher tax payments and increased payments under our restructuring programs. These unfavorable items were partially offset by lower interest payments and lower investments in inventory, as well as the fact that the 2021 period included payments related to certain IPR&D agreements.
The increase in 2023 was primarily driven by higher earnings, lower restructuring-related payments and lower tax payments. These favorable items were partially offset by higher investments in inventory in 2023 when compared to 2022, as well as higher bonus payments in 2023.
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.
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. 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.
For additional information on our debt, including types of debt, maturity dates, interest rates, debt covenants and available revolving credit facilities, see Note 13 to our consolidated financial statements. 35 In February, May, August and December 2022, our Board of Directors declared cash dividends of $0.24 per share.
We 34 believe we can satisfy these debt obligations with 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 13 to our consolidated financial statements.
Of this amount, $43.2 million is denominated in U.S. Dollars and, therefore, bears no foreign currency translation risk. The balance of these assets is denominated in currencies of the various countries where we operate.
Of this amount, $55.0 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 17 to our consolidated financial statements, we generally intend to limit distributions such that they would not result in significant U.S. tax costs.
Our net sales in 2022 were tempered by a negative 5.0 percent effect from changes in foreign currency exchange rates.
Our net sales in 2023 were tempered by a negative 1.0 percent effect from changes in foreign currency exchange rates. Our net earnings from continuing operations were $1,024.0 million in 2023 compared to $290.2 million in 2022. Our net earnings increased in 2023 driven by the higher net sales, favorable tax settlements and lower operating expenses.
No goodwill balance remains for the EMEA reporting unit. See Note 11 to our consolidated financial statements for further discussion and the factors that contributed to this impairment charge. 37 We have three other reporting units with goodwill assigned to them. For two of these reporting units, their estimated fair values exceeded their carrying values by more than 35 percent.
We have three reporting units with goodwill assigned to them. During our annual goodwill impairment testing in the fourth quarter of 2023, for two of these reporting units their estimated fair values exceeded their carrying values by more than 50 percent. We estimated the fair value of these reporting units using the income and market approaches.
Asia Pacific In Asia Pacific, operating profit and operating profit as a percentage of net sales increased in 2022 when compared to 2021. Our net sales declined in Asia Pacific due to the negative effects of changes in foreign currency exchange rates and by the China government implementing a nationwide volume-based procurement process that became effective in 2022.
Asia Pacific In Asia Pacific, operating profit and operating profit as a percentage of net sales increased in 2023 when compared to 2022. In Asia Pacific, changes in foreign currency exchange rates have had a larger impact on our results than in our other operating segments.
Segment Operating Profit Operating Profit as a Net Sales Operating Profit Percentage of Net Sales Year Ended December 31, Year Ended December 31, Year Ended December 31, (dollars in millions) 2022 2021 2020 2022 2021 2020 2022 2021 2020 Americas $ 4,295.5 $ 4,102.1 $ 3,699.5 $ 1,811.9 $ 1,709.3 $ 1,528.2 42.2 % 41.7 % 41.3 % EMEA 1,456.6 1,477.2 1,237.3 380.8 380.3 303.0 26.1 25.7 24.5 Asia Pacific 1,187.8 1,248.0 1,190.7 407.0 401.3 395.4 34.3 32.2 33.2 Americas In the Americas, operating profit and operating profit as a percentage of net sales increased in 2022 when compared to 2021 due to higher net sales driven by continued recovery of elective surgical procedures, lower excess and obsolete inventory charges and savings from our restructuring programs.
Segment Operating Profit Operating Profit as a Net Sales Operating Profit Percentage of Net Sales Year Ended December 31, Year Ended December 31, Year Ended December 31, (dollars in millions) 2023 2022 2021 2023 2022 2021 2023 2022 2021 Americas $ 4,624.1 $ 4,295.5 $ 4,102.1 $ 1,948.9 $ 1,819.7 $ 1,726.9 42.1 % 42.4 % 42.1 % EMEA 1,592.4 1,456.6 1,477.2 524.6 404.1 405.9 32.9 27.7 27.5 Asia Pacific 1,177.7 1,187.8 1,248.0 422.6 419.6 418.3 35.9 35.3 33.5 Americas In the Americas, operating profit increased, but operating profit as a percentage of net sales decreased, in 2023 compared to 2022.
In December of 2021 and 2019, we initiated restructuring programs. The 2021 Restructuring Plan is intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie. The 2019 Restructuring Plan has an objective of reducing costs to allow us to invest in higher priority growth opportunities.
The 2023 Restructuring Plan is intended to further streamline the organization, to better align it with our go-to-market strategies and to reduce costs across the organization. The 2021 Restructuring Plan is intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie.
Intangible asset amortization expense was similar in both amount and as a percentage of net sales in 2022 when compared to 2021.
However, as a percentage of net sales intangible asset amortization in 2023 was similar to 2022 as amortization expense and net sales increased by a similar percentage. 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 expenses were higher in 2022 primarily due to additional expenses related to the 2021 Restructuring Plan that had just been initiated at the end of 2021. For more information regarding these expenses, see Note 5 to our consolidated financial statements. We incurred quality remediation expenses of $33.8 million and $52.8 million in 2022 and 2021, respectively.
The expenses were higher in 2022 when compared to 2023 primarily due to additional expenses related to the 2021 Restructuring Plan that had just been initiated at the end of 2021. We expect restructuring and other cost reduction initiatives expense to increase in 2024 as we further implement our 2023 Restructuring Plan.
These favorable items were partially offset by higher R&D costs. EMEA In EMEA, operating profit and operating profit as a percentage of net sales increased in 2022 when compared to 2021. Our net sales declined in EMEA due to the negative effects of changes in foreign currency exchange rates.
While net sales declined in 2023 when compared to 2022 due to changes in foreign currency exchange rates, the negative net sales impact was partially offset by higher hedge gains recognized in 2023 from our hedging program.
We do not expect to incur any significant quality remediation expenses related to these inspectional observations in 2023. Acquisition, integration, divestiture and related expenses related to acquisitions made in 2022 and 2020 as well as costs related to our separation with ZimVie.
This warning letter was resolved in late 2023. Acquisition, integration, divestiture and related expenses relate to acquisitions made in 2023 and 2022, as well as costs related to our separation with ZimVie. The increase in these expenses in 2023 was primarily due to higher contingent consideration charges from our various acquisitions.
Of our current debt, we settled the full amount of our $83.0 million of our short-term term loan in February 2023 using $33.9 million in cash and the transfer of all the ZimVie shares that we owned, $86.3 million of senior notes mature on March 19, 2023 and the remaining $375.0 million is outstanding under our five-year revolving facility which we expect to repay during 2023.
Of our current debt, $850.0 million of senior notes mature on November 22, 2024 and the remaining $50.0 million is outstanding under an uncommitted credit facility which we expect to repay during 2024.
Selling, general & administrative (“SG&A”) expenses decreased in both amount and as a percentage of net sales in 2022 compared to 2021 primarily due to litigation-related expenses declining by $135.1 million and savings from our restructuring plans.
The increases were driven by higher personnel-related costs, higher spending on our initial compliance with the European Union Medical Device Regulation, additional R&D expenses from acquisitions we made in 2023, and other R&D investments. Selling, general & administrative (“SG&A”) expenses increased in amount, but decreased as a percentage of net sales in 2023 compared to 2022.
These favorable items were partially offset by higher bad debt charges partially related to the Russia/Ukraine conflict and higher expenses for travel and other activities as we started to return to pre-pandemic levels in 2022.
These higher costs were partially offset by lower litigation-related charges in 2023, lower bad debt charges in 2023 as we recognized higher bad debt charges in 2022 that were partially related to the beginning of the Russia/Ukraine conflict, lower share-based compensation expense in 2023 due to the forfeiture of awards related to employee departures, and a gain recognized in 2023 from the sale of an asset.
In 2021, all our product categories experienced net sales growth when compared to 2020 due to the recovery of elective surgical procedures.
The increase in operating profit in 2023 was primarily due to higher net sales driven by continued recovery of elective surgical procedures and new product introductions.
In addition, based on foreign currency exchange rates at the end of 2022 we expect foreign currency to negatively affect net sales growth in 2023, but at a lower level than experienced in 2022.
Based on foreign currency exchange rates at the end of 2023, we expect foreign currency to negatively affect year-over-year net sales by approximately 0.5 percent. We estimate operating profit will increase in 2024 when compared to 2023 due to higher net sales, leverage from fixed operating expenses and savings from our restructuring plans.
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In addition, as of December 31, 2021, the assets and liabilities associated with these businesses are classified as assets and liabilities of discontinued operations in our consolidated balance sheet. See Note 3 to our consolidated financial statements for additional information. The following discussion and analysis is presented on a continuing operations basis unless otherwise noted.
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The following discussion and analysis is presented on a continuing operations basis unless otherwise noted. 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.
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EXECUTIVE LEVEL OVERVIEW Impact of the COVID-19 Global Pandemic Our results continue to be impacted by the COVID-19 global pandemic.
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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.
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The vast majority of our net sales are derived from products used in elective surgical procedures that have typically declined during surges of the virus as governments and healthcare systems take actions in an effort to prevent the spread and provide sufficient hospital beds and other resources for COVID-19 patients.
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EXECUTIVE LEVEL OVERVIEW 2023 Financial Highlights In 2023, we experienced fewer disruptions to elective surgical procedures from the COVID-19 global pandemic as compared to 2022 when the Omicron variant and staffing shortages caused widespread deferrals of procedures.
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Additionally, we believe that staffing shortages at hospitals have contributed to the deferral of elective surgical procedures. In the year ended December 31, 2022, the Omicron variant resulted in fewer elective surgical procedures earlier in the year with recovery in procedures as the surge began to subside later in the first quarter and through the second quarter.
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In addition, improvements in our supply chain, procedure volume recovery from patients who deferred surgical procedures related to the pandemic, new product introductions and commercial execution have contributed to our net sales growth. As a result, in 2023 our net sales increased by 6.5 percent compared to 2022.
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In the second half of 2022, procedural volumes continued to improve across most markets relative to the first half of the year.
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Operating expenses declined primarily due to lower litigation-related, restructuring-related and quality remediation-related charges.
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However, in the fourth quarter we did experience more acute deferrals of elective surgical procedures in some markets, such as China, due to surges of the virus. 2022 Financial Highlights In 2022, our net sales increased by 1.6 percent compared to 2021.
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In addition, 2022 included $292.8 million of goodwill and intangible asset impairments, and a $116.6 million loss on our investment in ZimVie. 2024 Outlook We expect year-over-year revenue growth of mid-single digits in 2024 to be driven by a combination of market growth, new product introductions, commercial execution and continued improvements in product supply.
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We continued to see the return of elective surgical procedures across most markets when compared to the prior year, which was negatively affected by a surge of the COVID-19 virus in early 2021 before vaccines were widely available and later in the year by the Delta variant.
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However, we estimate these favorable items may be partially offset by higher intangible asset amortization and increased restructuring-related costs to implement our plans. We estimate our net interest expense will increase slightly due to higher interest rates.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWhile 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. 39
Biggest changeExposure to credit risk is controlled through credit approvals, credit limits and monitoring procedures, and we believe that reserves for losses are adequate. 39
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. 38 For details about these and other financial instruments, including fair value methodologies, see Note 15 to our consolidated financial statements.
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 15 to our consolidated financial statements.
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, 2022 indicated that, if the U.S.
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, 2023 indicated that, if the U.S.
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, 2022, 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.
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, 2023, 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.
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 $93 million to an increase of approximately $88 million before income taxes in periods through June 2025.
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 $114 million to an increase of approximately $105 million before income taxes in periods through June 2026.
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 $1,771.5 million at December 31, 2022.
Consequently, 37 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.
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.
Dollar functional currencies of $1,854.5 million at December 31, 2023. 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.
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.
Since we sell products to public hospitals in those countries, we are indirectly exposed to government budget constraints and price reduction initiatives.
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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. 38 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.

Other ZBH 10-K year-over-year comparisons