ZBH 10-K & 10-Q changes, risk factors and insider trading

Competition within our markets is primarily on the basis of technology, innovation, quality, reputation, customer service and pricing. In markets outside of the U.S., other factors influence competition as well, including local distribution systems, complex regulatory environments, differing medical philosophies and differing product preferences.preferences, including policy-driven preferences for local manufacturers. Our competition may havehave, and at times does have, greater financial, marketing, technical and other resources than us; respond more quickly to new or emerging technologies; undertake more extensive marketing campaigns; operate more effective planning, manufacturing, sales and distribution channels; adopt more aggressive pricing policies; or be more successful in attracting potential customers, employees and strategic partners. Additionally, our customers’ needs often vary depending on their sites of care, such as hospitals, hospital systems, ambulatory surgical centers and doctors’ offices, and certain of our competitors have better capabilities to serve certain sites of care than we do. We also face competition from pharmaceutical and other therapies that may be more attractive than, or have other benefits over, our products, or that could affect the frequency, progressions or symptoms of diseases and conditions that our products treat. Any of these factors, alone or in combination, could cause us to have difficulty maintaining or increasing sales of our products or otherwise have an adverse effect on our business and financial results.

Our products may become obsolete, customers may not buy our products, and our revenue and profitability may decline without the timely introduction of new products and enhancements, due to changes in markets, changes in our strategy, or due to changes in applicable standards of care.

Demand for our products may change, in certain cases, in ways we may not anticipate because of evolving customer needs, changing demographics, changing industry growth rates, declines in the musculoskeletal implant market, the introduction of competing products and technologies, changes to our strategy, the emergence of alternative treatment methods, evolving surgical philosophies and evolving industry standards. Our products may become obsolete without the timely introduction of new products and enhancements,enhancements or due to changes in applicable standards of care. If that happens, our revenue and operating results would suffer. The success of our new and enhanced product offerings will depend on several factors, including our ability to properly identify and anticipate customer needs; commercialize new products in a timely manner; manufacture and deliver instruments and products on time and in sufficient volumes; differentiate our offerings from competitors’ offerings; achieve positive clinical outcomes for new products; satisfy the increased demands by healthcare payors, providers and patients for shorter hospital stays, faster post-operative recovery and lower-cost procedures; innovate and develop new materials, product designs and surgical techniques; and provide adequate medical education relating to new products.

Additionally, certain of our key employees and third parties have detailed knowledge of our products and instruments and have developed professional relationships with existing and potential customers due to this knowledge. Recent legal and regulatory changes may affect our ability to enforce post-termination obligations from certain employees and third parties with respect to non-competition, non-solicitation and protection of confidential information, which may negatively impact our ability to retain key employees and third-party distributors and to protect our information and relationships with our customers.

unforeseen difficulties related to entering markets for whichwhich, or geographic regions wherewhere, we do not have prior experience;

potential loss of key employees and key third parties;

unforeseen risks and liabilities associated with businesses acquired, including any unknown vulnerabilities in acquired technology, compromises of acquired data or noncompliance with datalaws privacyand requirementsregulations; and/or inability to generate sufficient revenue or realize sufficient cost savings to offset acquisition or investment costs.

We and our third-party manufacturers have manufacturing sites all over the world. In some instances, however, the manufacturing of certain of our product lines is concentrated in one or a few plants which are concentrated in a single country or region. Damage to one or more facilities or related operations from weather or natural disaster-related events, vulnerabilities in technology, cyber-attackscyber attacks against our information systems or the information systems of our business partnerspartners’ (suchinformation as ransomware attacks),systems, issues in manufacturing arising from failure to follow specific internal protocols and procedures, compliance concerns relating to the Quality System Regulation (“QSR”) and Good Manufacturing Practice requirements, equipment breakdown or malfunction, reductions in operations and/or worker absences, trade impediments, international sanctions, wars or other factors couldhas in the past adversely affectaffected, and could in the future adversely affect, the ability to manufacture and distribute our products. InIf thewe event of an interruption in manufacturingsuffer, or involving a critical supplier,supplier suffers, a manufacturing interruption, we may be unable to move quickly to alternate means of producing or acquiring affected products or to meet customer demand, and alternative sources of supply may not be adequate to accommodate sudden increases in demand. We have experienced such interruptions previously (including in connection with our enterprise resource planning system implementation which negatively impacted distribution of our products in 2024), and we may experience such interruptions in the future. In the event of a significant interruption, for example, as a result of our or a supplier’s failure to follow regulatory protocols and procedures or as a result of a bankruptcy, we (or our suppliers) may experience lengthy delays in resuming production of affected products due primarily to the need for additional regulatory approvals. The global supply chain has been and continues to be negatively impacted by a variety of macro factors which have, in part, resulted in challenges to meet end market demand in some instances. As a result, we may experience lost sales, which we may be unable to recover, loss of market share, which we may be unable to recapture, and/or harm to our reputation, which could adversely affect our business, financial condition and results of operations.

As a result of technology initiatives, changes in our system platforms and the ongoing integration of business acquisitions, we have been consolidating and integrating the ERP systems that we operate. ERP consolidation and integration programs are highly complex, require substantial management and financial resources, and may adversely affect our ability to process and/or fulfill orders, provide customer service, send and collect invoices, manage our contracts, manage our distribution network, provide financial information or otherwise run our business, in a timely manner or at all, or without incurring additional expenses or disruption. For example, during 2024, we experienced unanticipated challenges during an Americas ERP transition that disrupted our ability to fulfill customer orders during the second half of fiscal 2024, which caused adverse consequences including disruption to our ability to distribute product, difficulty in meeting customer demand, productivity declines, delays in invoicing customers, increased ERP system costs and loss of customers and sales. Additional disruptions, delays or deficiencies in the transition, design, and implementation of our ERP systems, particularly any disruptions, delays or deficiencies that impact our operations, could again in the future have a material adverse effect on our business and financial condition and results of financial operations.

We purchase many of the materials and components used in manufacturing our products from third-party suppliers, and we outsource some key manufacturing activities. Certain of these materials and components and outsourced activities can only be obtained from a single source or a limited number of sources due to quality considerations, expertise, costs or constraints resulting from regulatory requirements. In certain cases, we may not be able to establish additional or replacement suppliers for such materials or components or outsourced activities in a timely or cost effective manner, due to market constraints or as a result of FDA or other worldwide regulations that require validation of materials and components prior to their use in our products and the complex nature of our and many of our suppliers' manufacturing processes and the need for clearance or approval of significant changes by FDA and other worldwide regulatory bodies prior to implementation. A reduction or interruption in the supply of materials or components used in manufacturing our products, such as due to loss of access to one or more suppliers; an inability to timely develop and validate alternative sources if required; or a significant increase in the price of such materials or componentscomponents, could adversely affect our business, financial condition and results of operations.

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 systemssystem and regulatory standards, changing threats and vulnerabilities, and the increasing need to protect data including patient, customer and Confidential Information. In addition, given their size and complexity, these systems are vulnerable to service interruptions and to security breaches from inadvertent or intentional actions by our employees, third party suppliers and/or business partners, and from cyber attacks by malicious third parties attempting to gain unauthorized access to our products, systems or Confidential Information. Our use of artificial intelligence and machine learning in our infrastructure and products exposes us to new threats, risks and uncertainties, including with respect to changing laws and regulations regarding the use of such technologies.

Like other large multi-national corporations, we and the third parties with whom we contract regularly experience cyber attacks, certain of which (including email phishing attacks on our email systems) have been successful, and we expect to continue to be subject to such attacks. These attacks may include phishing, state-sponsored cyber attacks, industrial espionage, insider threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, payment fraud or other cyber incidents. Evolving artificial intelligence and machine learning tools continue to improve the capabilities of cyber attackers. In addition, as a result of our adoption of remote work arrangements in many positions, a significant number of our employees who are able to work remotely are doing so, and malicious cyber actors may increase efforts targeting remote workers, which exposes us to additional cybersecurity risks. Our cybersecurity program, incident response efforts, business continuity procedures and disaster recovery planning may not be sufficient for all eventualities. If we (or third parties with whom we contract) fail to maintain or protect our information systems and data integrity effectively, we could:

We will continue to dedicate significant resources to protect against unauthorized access to our systems and work with government authorities to detect and reduce the risk of future cyber incidents; however, cyberCyber attacks are becoming more sophisticated, frequent and adaptive.adaptive, Therefore,and therefore, despite our efforts, we cannot assure that cybersecurity incidents or data breaches will not occur or that technology or information system issues will not arise in the future. Any significant breakdown, intrusion, breach, interruption, corruption or destruction of these systems could have a material adverse effect on our business and reputation and could materially adversely affect our results of operations and financial condition.

Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business, and we have experienced downward pressure on product pricing and other effects of healthcare reform in our international markets. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. For example, China has implemented volume-based procurement (“VBP”) processes designed to reduce medical spending, which have in the past resulted in, and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges. In cases where our product is not selected in VBP, sales of that product are substantially impacted. “Buy local” initiatives have in the past resulted in, and could in the future result in, reduced demand for our products, as well as reduced margins on covered devices and products, required renegotiation of distributor arrangements and incurrence of inventory-related charges. Similarly, the Italian Public Administration has implemented a “Pay Back” law to obtain reimbursement from the medical device industry to contribute to government overspending on medical devices beginning in 2015, which assessments we have challenged,2015 and a “Fund for the Government of Medical Devices” applicable to revenues relating to medical devices, large medical equipment and in vitro diagnostic devices commencing in 2024, which assessment we have also challenged.2024. Additional cost reduction and recovery strategies are likely to be proposed in various jurisdictions, the effects of which are difficult to predict, but may have a material adverse effect on our sales and results of operations.

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 recentpandemic-era lows, which has increased our cost of borrowing. Any further increase in interest rates applicable to our debt obligations would increase our cost of borrowing and could adversely affect our financial position, results of operations or cash flows.

Goodwill and intangible assets represent a significant portion of our assets. At December 31, 2024,2025, we had $9.0$9.9 billion in goodwill and $4.6$4.7 billion of intangible assets. The goodwill results from our acquisition activity and represents the excess of the consideration transferred over the fair value of the net assets acquired. We assess at least annually whether events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable. 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, we recorded $3.0 million of an in-process research and development (“IPR&D”) intangible asset impairment on a certain IPR&D project. There were no impairment charges during the years ended December 31, 20242025 and 2023,2024, but if the operating performance at one or more of our reporting units significantly declines, including if competing or alternative technologies or pharmacological treatments, emerge, if market conditions or future cash flow estimates for one or more of our businesses decline, or as a result of restructuring initiatives pursuant to which we reorganize our reporting units, we could be required to record additional impairment charges. Any write-off of a material portion of our goodwill or unamortized intangible assets would negatively affect our results of operations.

data privacy and cybersecurity requirements andrequirements, labor relations laws, sustainability disclosure requirements and other laws that may add to the complexity and costs of our operations or require changes to our products or business processes;

Furthermore, political tensions between the U.S., Canada, Mexico, ChinaChina, Russia, Venezuela and certain other countries have escalated in recent years. Rising political tensions could reduce trade, investment and other economic activities between or among these economies. Any of these factors could have a material adverse effect on our business, prospects, financial condition and results of operations.

The effects of emerging, expanding and new conflicts, such as a possible expansion of the Russian-Ukrainian conflict, 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. Sanctions and other civil, political and economic effects of such conflicts are likely to have adverse impacts upon us. Additionally, other trade disruptions include supply chain continuity disruption; inflationary pressures and increased costs of raw materials and inputs; manufacturing or shipping delays; increased shipping costs and transit delays (such as experienced due to attacks on shipping transiting the Red Sea); and increased disruptions and delays affecting our ability to operate in and to collect payment for our products and services in particular markets.

Tariffs, trade restrictions and other trade measures couldhave adversely affectaffected, and could continue to adversely affect, our business and financial results.

We operate in multiple countries and maintain a complex global supply chain and distribution network which exposes us to a variety of risks from U.S. and other countries’ international trade and tariff policies. Changes to tariffs, trade restrictions and protection measures applicable to trade with certain countries, trade in certain types of goods, or otherwise; new import or export requirements; changes to trade agreements; new or increased tariffs, trade embargoes, sanctions and other trade barriersbarriers, have in the past and may in the future prevent us from shipping products to or from a particular market, restrict our access to certain sources of raw materials and other inputs, increase our operating costs and disrupt our ability to collect payment for our products and services in particular markets. For example, the U.S. has imposed tariffstariff and export controls policies have recently experienced rapid and extensive change, which in turn drove responsive or retaliatory changes to other countries’ tariff and export controls policies, many of which had adverse consequences on certainour cost of goods and products imported from Chinasold and certain other countries, which has resulted in retaliatory tariffs by China and other countries. Recently, the U.S. has imposed or threatened to impose additional tariffs on imports from Canada, China, Mexico and other countries, and has further threatened to impose additional tariffs on certain steel and aluminum imports; certain countries have imposed or threatened to impose retaliatory tariffs.revenue. We cannot predict how these dynamic developments will impact us,us or the bilateral and existingmultilateral trade agreements upon which we rely. Existing or future tariffs and trade restrictions could have a material adverse effect on our business and financial results. Additionally, these and other tariffs and further retaliatory trade measures could result in an increase in supply chain costs that we may not be able to offset in full or in part or that may otherwise adversely impact our financial results.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations, the EU MDR, UK MDR and other national, regional, state and other requirements. These requirements relate to quality systems, recordkeeping, labeling, promotional and marketing requirements, adverse event reporting, monitoring and other regulations, which are subject to continual review and are monitored rigorously through periodic inspections by regulators, which may result in observations (such as on FDA Form 483), and in some cases warning letters, that require corrective action or other forms of enforcement. Additionally, the availability of designated European notified body services to certify compliance with the 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.

We process personal and personal health data in our business, particularlyand through our ZBEdge® ecosystem. In addition, somecertain 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.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices. In the ordinary course of business, we are the subject of product liability lawsuits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients. As discussed further in Note 21 to our consolidated financial statements, we are defending product liability lawsuits relating to the Durom® Acetabular Component (“Durom Cup”), certain products within the M/L Taper and M/L Taper with Kinectiv® Technology hip stems and Versys® Femoral Head implants, and the M2a-MagnumTM hip system. We are also currently defending a number of other product liability lawsuits and claims related to various other products. Any product liability claim brought against us, with or without merit, can be costly to defend. Product liability lawsuits and claims, safety alerts or product recalls, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers.

The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 20242025 and 2023.2024. Discussion, analysis and comparisons of the years ended December 31, 20232024 and 20222023 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 Exhibit 99.1 to our Current Report on Form 8-K filed on August 7, 2024. The Current Report on Form 8-K filed on August 7, 2024 was filed solely to recast financial information and related disclosures contained in our Annual Report on Form 10-K forfiled theon yearFebruary ended25, December 31, 2023 to reflect changes to the operating profit measures of our operating segments.2025.

We expect year-over-year revenuenet sales growth of 1.02.5 percent to 3.54.5 percent in 20252026 to be driven by a combination of market growth, new product introductionsintroductions, the Paragon 28 acquisition and commercialpositive execution.effects of changes in foreign currency exchange rates, partially offset by the expected impact from changes to our go-to-market strategy and execution in the U.S. and certain other international markets, as well as price declines. These expected impacts, combined with the uncertain timing of incentivized stocking orders and capital sales, could cause fluctuations in our quarterly results. We estimate that the Paragon 28 acquisition will contribute an additional 1.0 percent to the year-over-year net sales growth until it eclipses the one year anniversary of deal closing in April 2026. Based on foreign currency exchange rates at the end of 2024,2025, we expect foreign currency to negativelyhave affecta 0.5 percent positive impact on year-over-year net sales by approximately 1.5 percent to 2.0 percent.growth. We estimate operating profit will increase in 20252026 when compared to 20242025 due to higher net sales, leverage from fixed operating expenses, ongoing savings from our restructuring plansplans, non-recurrence of inventory and instrument charges related to certain product lines we expect to discontinue and lower employee termination and other charges from our restructuring plans. However, we estimateexpect that these favorable items may be partially offset by higherthe intangibleimpact assetfrom amortization,inflation, investments in our U.S. commercial sales channel, higher net interest expense due to higher interest rates and a higher estimated effective tax rate due to favorable 20242025 adjustments that are not expected to recur.

We review sales by two geographies, the United States and International, and by the following product categories: Knees; Hips; S.E.T. (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic); and Technology & Data, Bone Cement and Surgical. This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. We review sales by these geographies because the underlying market trends in any particular geography tend to be similar across product categories, because we primarily sell the same products in all geographies and because many of our competitors publicly report in this manner. Our business is seasonal in nature to some extent, as many of our products are used in elective surgical procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans. Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.

Changes in volume and mix of product sales had a positive effect of 4.26.4 percent on year-over-year sales growth in 2024.2025. MarketThe Paragon 28 acquisition contributed 2.5 percent to volume growth in 2025. In addition, market growth and new product introductions contributed positively to volume and mix trends, but were partially offset by the operational challenges resulting from our ERP implementation.trends. Market growth is being driven by an aging and active population, technological advancements, and data showcasing positive clinical outcomesoutcomes, among other factors.

Global selling prices had a positiveminimal effect of 0.6 percent on year-over-year sales growth in 2024.2025. The majority of countries in which we operate continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts. However, we have had success in offsetting negative effects of pricing pressure due to internal initiatives and being able to pass some inflationary impacts on to customers.

In 2024,2025, changes in foreign currency exchange rates had a negativepositive effect of 1.00.8 percent on year-over-year sales.

The 3.57.3 percent net sales growth in the U.S. in 20242025 when compared to 20232024 was driven by the Paragon 28 acquisition, market growth in our Knees, Hips and S.E.T. product categories.categories, However,new product introductions, lower net sales in the U.S.prior wereyear negativelyperiods impacteddue byto theoperational implementationchallenges fulfilling customer orders as a consequence of oura new ERP software system whichimplementation causedand operationalopportunistic challengesend-of-year customer purchases and capital sales above historic levels, partially offset by price reductions. The Paragon 28 acquisition contributed 3.6 percent to U.S. net sales growth in fulfilling customer orders.2025. Internationally, net sales increased by 4.37.0 percent in 20242025 when compared to 2023.2024. The 20242025 International net sales increase was similarly driven by the Paragon 28 acquisition, market growth in most of our international markets,markets butand volumechanges increasesin wereforeign partiallycurrency offsetexchange byrates. theThe negativeParagon impacts28 ofacquisition contributed 1.1 percent and changes in foreign currency exchange rates ofcontributed 2.31.8 percent.percent to International net sales growth in 2025.

In 2024,2025, our Knees and Hips net sales both increased by 4.44.7 percent and 1.6 percent, respectively, when compared to 20232024 due to market growth and new product introductions. Changes in foreign currency exchange rates had negativepositive effects of 0.80.7 percent and 1.40.9 percent on 20242025 Knees and Hips net sales, respectively. S.E.T. net sales increased by 6.515.2 percent in 20242025 when compared to 2023.2024. S.E.T. net sales growth was primarily driven by the Paragon 28 acquisition, which had a positive effect of 10.5 percent on net sales growth, as well as net sales growth in CMFT, upper extremities and sports medicine and upper extremities products of 14.012.5 percent, 13.18.2 percent and 6.05.5 percent, respectively,respectively. These increases were partially offset by adeclines 0.5of 14.2 percent declineand 0.7 percent in net sales of biologics and trauma products.products, respectively. Changes in foreign currency exchange rates had a negativepositive effect of 0.6 percent on 20242025 S.E.T. net sales. Technology & Data, Bone Cement and Surgical product category net sales increased by 0.74.0 percent in 20242025 when compared to 20232024, primarily due to highernew netproduct sales for our ROSA robot in the first half of the year, but was partially offset by the operational challenges from our ERP system implementation.introductions.

Cost of products sold, excluding intangible asset amortization, increased in both amount and as a percentage of net sales in 20242025 compared to 2023.2024. The increase in amount was primarily due to a higher volume of net sales.sales, excess and obsolete inventory charges on certain products we intend to discontinue by 2032, U.S. tariffs and Paragon 28 inventory sold being stepped-up to fair value on the acquisition date. The increase as a percentage of net sales was primarily due to higherthe manufacturinginventory costscharges, from inflationtariffs and otherinventory coststep-up, pressures. The manufacturing cost increasebut was partially offset by lowera royalty expense, volume andfavorable mix shift to higher margin products and markets, and improved pricing. The reduction in royalty expense was partially the result of agreements we entered into in 2023 to acquire intellectual property through the buyout of certain licensing arrangements, which are recognized as intangible assets and result in additional intangible asset amortization expense instead of royalty expense.markets.

Intangible asset amortization expense increased in amount and as a percentage of net sales in 20242025 when compared to 20232024 due to the Paragon 28 acquisition, other acquisitions and technology-based asset purchases we made in 2024 and 2023, the buyout of certain royalty-related licensing agreements as described above and other technology-based asset purchases in 2024.

Research & development (“R&D”) expenses decreasedincreased in bothamount, amountbut anddecreased as a percentage of net sales in 20242025 compared to 2023.2024. The decreasesincrease in amount was driven by Paragon 28-related R&D expenses and higher spending on certain technology-based projects, but were drivenpartially offset by lower spending on our initial compliance with the EUEuropean MDRUnion Medical Device Regulation as we continue to make progress on the approvals of our products,products. andThe savingsdecrease fromin R&D expenses as a percentage of net sales was due to our 2023restructuring Restructuringprograms Plan.as well as controlling spend as net sales increased.

Selling, general & administrative (“SG&A”) expenses increased in amount,amount but decreasedand as a percentage of net sales in 20242025 compared to 2023.2024. The increaseincreases inwere expenses wasprimarily due to selling and distribution costs that are variable expenses which increase as net sales increase.increase, InParagon addition,28-related SG&Aexpenses, expensehigher increasedperformance-related duecompensation, instrument-related charges on certain product lines we intend to higher bad debt-related charges drivendiscontinue by a2032 bankruptcyand atinvestments a significant U.S. healthcare system, higher instrument-related costs due to new product introductions, higher litigation-related charges, a gain recognizedmade in 2023direct-to-patient frommarketing, themedical sale of an asset which did not recur in 2024,education and higherinformation spending on various strategic initiatives.technology. These higher expenses were partially offset by savings from our 2023 Restructuring Plan and lower performance-relatedlitigation-related expenses. The decline in SG&A expenses as a percentage of net sales was due to many of our SG&A expenses being fixed costs that do not change as net sales increase.

In February 2025 and then as further expanded in December 2025, and in December of each of 2023, 2021 and 2019, we initiated global restructuring programs (theintended “2023to Restructuringreduce Plan,”costs and transform the “2021way Restructuringwe Plan” and the “2019 Restructuring Plan,” respectively).operate. We also have other cost reduction and optimization initiatives that have the goal of reducing costs across the organization. We recognized expenses of $219.0$181.2 million and $151.9$219.0 million in 20242025 and 2023,2024, respectively, primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs.programs and optimization initiatives. The expenses were higherlower in 20242025 compared to 20232024 primarily due to additional expenses related to the 2023 Restructuring Plan that had just been initiated at the end of 2023 and additionallower expenses related to our U.S. and Canada ERP implementation.implementation and other optimization projects. For more information regarding these expenses, see Note 54 to our consolidated financial statements.

Other Expense,Income (Expense), net, Interest Expense, net, and Income Taxes

In 2024,2025, we incurredrecognized a gain of $25.5 million in our other income (expense), net compared to a loss of $31.1 million in our other expense, net compared to a loss of $9.3 million in 2023.2024. The year-over-year change was primarily due to highergains recognized on equity investments in 2025 as compared to losses on debt and equity security investments in 2024 when compared to 2023.2024.

Interest expense, net, increased in 20242025 when compared to 2023,2024, primarily fromdue to higher average debt balances,balances higheroutstanding interestrelated ratesto onthe Paragon 28 acquisition and new debt issuedborrowings in late 2024 that replaced debt thatwith matured and higher losses incurred on our fixed-to-variablelower interest rate swaps in 2024.rates.

Our effective tax rate (“ETR”) on earnings from continuing operations before income taxes was 12.715.1 percent and 4.012.7 percent for the years ended December 31, 20242025 and 2023,2024, respectively. In 2024,2025, the ETR was primarily driven by the foreign rate differential as our foreign locations have lower corporate income tax rates and a net favorable impact of changescertain tointercompany unrecognizedtransactions taxand benefits.restructuring. In 2023,2024, the ETR was primarily driven by the foreign rate differential and a net favorable impact of changes to unrecognized tax benefits.

Absent discrete tax events, we expect our future ETR will be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and foreign locations, which have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation, including the continuedOECD adoptionframework to implement a global minimum corporate tax of Pillar15% Twofor proposalscompanies whichwith beganglobal revenue and profits above certain thresholds (referred to takeas effectPillar in 20242); the outcome of various federal, state and foreign audits, appeals, and litigation; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of all these items on our financial results.

In Asia Pacific, operating profit and operating profit as a percentage of net sales increaseddecreased in 20242025 when compared to 2023.2024. The increasesdecreases were due to higher netmanufacturing salescosts drivenincluded in segment operating profit and higher bad debt expense, as well as the fact that the operating profit contributed by marketParagon growth28 andis improved pricing, reduced royalty expense asat a result of agreements we entered into in 2023 to acquire intellectual property through the buyout of certain licensing arrangements, and lower expensesoperating drivenprofit by our 2023 Restructuring Plan and cost savings initiatives.margin.

Cash flows provided by operating activities fromwere continuing$1,697.1 operationsmillion werein 2025 compared to $1,499.4 million in 20242024. comparedThe to $1,581.6 millionincrease in 2023. The decrease in 20242025 was primarily due to a higher volumenet sales, favorable timing of accounts payable payments near the end of 2024 relative to 20232024 asand welllower as higher bonus, income taxbonus and restructuring-related payments. These unfavorablefavorable items were partially offset by lowercosts inventory investments in 2024 when comparedrelated to 2023.closing the Paragon 28 and Monogram acquisitions, U.S. tariffs and higher interest and tax-related payments.

Cash flows used in investing activities fromwere continuing$1,975.7 operationsmillion werein 2025 compared to $888.1 million in 2024 compared to $778.9 million in 2023.2024. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, including new product introductions,introductions and optimization of our manufacturing and logistics networks, and investments in ERP software. The decline in property, plant and equipment additions in 2024 when compared to 2023 was driven by lower ERP software spend as that project is getting implemented, in addition to 2023 including investment in a corporate aircraft which did not recur in 2024.networks. In addition, in 20242025 we paid $276.3$1,393.2 million, net of cash acquired, for the acquisitions of Paragon 28 and Monogram, as well as paid $52.4 million related to acquisitions and $153.0 million to acquire the ownership rights or to gain access to various technologies that were recognized as intangible assets.

As of December 31, 2024,2025, $436.8$353.8 million of our cash and cash equivalents were held in jurisdictions outside of the U.S. Of this amount, $59.3$77.6 million is denominated in U.S. Dollars and, therefore, bears no foreign currency translation risk. The remaining amount is denominated in currencies of the various countries where we operate. As discussed in Note 1716 to our consolidated financial statements, we generally intend to limit distributions suchfrom foreign subsidiaries earnings that theywere previously taxed in the U.S. These previously taxed earnings would not resultbe insubject significantto further U.S. taxfederal costs.tax.

At December 31, 2024,2025, we had outstanding debt of $6,204.6$7,519.1 million, of which $863.0$587.1 million was classified as current debt that matures on AprilDecember 1,13, 2025.2026. We believe we can satisfy these debt obligations with cash on hand, cash generated from our operations, by issuing new debt and/or by borrowing on our committed revolving credit facilities.

In March,February, May, August and December 2024,2025, our Board of Directors declared cash dividends of $0.24 per share. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.

In May 2024, our Board of Directors authorized a $2.0 billion share repurchase program effective May 29, 2024, with no expiration date. In 2024,2025, we executed share repurchases under this new repurchase program as well as a previous program in an aggregate amount of $868.0$487.0 million to return cash to investors as well as to limit ownership dilution from the issuance of common stock under our share-based compensation programs and in connection with our acquisition of Embody, Inc.programs. As of December 31, 2024,2025, $1,250.0$770.2 million remained authorized under this program. On February 9, 2026, our Board of Directors authorized a $1.5 billion share repurchase program effective February 9, 2026, with no expiration date, and terminated the existing May 2024 share repurchase program.

As discussed in Note 54 to our consolidated financial statements, we are executing on a 2025 Restructuring Plan, 2023 Restructuring Plan, a 2021 Restructuring Plan and a 2019 Restructuring Plan. The 20232025 Restructuring Plan along is expected to result in total pre-tax charges of approximately $120$155 million by the end of 2025,2027, of which $114approximately $137 million was incurred through December 31, 2024.2025. We expect to reduce gross annual pre-tax operating expenses by approximately $175 million relative to the 2024 baseline expenses by the end of 2027 as program benefits under the 2025 Restructuring Plan are realized. The 2023 Restructuring Plan, which was completed in 2025, resulted in total pre-tax charges of $115 million. We estimate gross annual pre-tax operating expenses were reduced by $175 million to $200 million relative to the 2023 baseline expenses by the end of 2025 as program benefits under the 2023 Restructuring Plan are realized.2025. The 2021 Restructuring Plan was completed by the end of 2024, resulting in $169 million of total pre-tax charges. We estimate gross annual pre-tax operating expenses were reduced by approximately $190 million relative to the 2021 baseline expenses by the end of 2024. The 2019 Restructuring PlanPlan, iswhich expectedwas tosubstantially resultcompleted as of December 31, 2025, resulted in total pre-tax restructuring charges of approximately$393 $400million. millionWe byestimate the endprogram resulted in a reduction of 2025, of which $368 million was incurred through December 31, 2024. In our original estimates, we expected to reduce gross annual pre-tax operating expenses byof 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. Our latest estimates indicate that we will be near the low end of that range, and the full benefits will not be realized until we complete the closure of a manufacturing facility, which is expected to occur in 2025.

Under the Tax Cuts and Jobs Act of 2017, we have a $154.6$85.9 million current liability remaining from a one-time tax on the mandatory deemed repatriation of post-1986 untaxed foreign earnings and profits (“transition tax”) for the deemed repatriation of unremitted foreign earnings. AsOur of2026 December,payment 31,will 2024,be $68.7our millionlast and $85.9 million offrom this amounttransition is recorded in current income tax liabilities and non-current income tax liabilities, respectively, on our consolidated balance sheet.tax.

Excess Inventory and Instruments - We must determine as of each balance sheet date how much, if any, of our inventory may ultimately prove to be unsaleable or unsaleable at our carrying cost. Similarly, we must also determine if instruments on hand will be put to productive use or remain undeployed as a result of excess supply. Accordingly, inventory and instruments are written down to their net realizable value. To determine the appropriate net realizable value, we evaluate current stock levels in relation to historical and expected patterns of demand for all of our products and instrument systems and components. The basis for the determination is generally the same for all inventory and instrument items and categories except for work in process inventory, which is recorded at cost. Obsolete or discontinued items are generally destroyed and completely written off. Management evaluates the need for changes to the net realizable values of inventory and instruments based on market conditions, competitive offerings and other factors on a regular basis. For example, in December 2025, management decided on a plan to discontinue selling certain products by 2032. As a result of this decision, management estimated the amount of inventory and undeployed instruments on hand that would be utilized before discontinuance and recognized a charge of approximately $170 million to reduce such inventory and instruments to their net realizable value based upon the reduced demand.

We have four reporting units with goodwill assigned to them. During our annual goodwill impairment testing in the fourth quarter of 2024,2025, for the threetwo reporting units we quantitatively testedtested, their estimated fair values exceeded their carrying values by more than 3025 percent. We estimated the fair value of these reporting units using the income and market approaches. Fair value under the income approach was determined by discounting to present value the estimated future cash flows of the reporting unit. Fair value under the market approach utilized the guideline public company methodology, which uses valuation indicators determined from other businesses that are similar to our reporting unit. We performed a qualitative test on the other two reporting unitunits and concluded it was more likely than not the fair value of thiseach of these reporting unitunits exceeded its carrying value.

Results for the Three-MonthThree Periodand Six-Month Periods ended MarchJune 31,30, 2026

In the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, our net sales increased 9.34.8 percent and 7.0 percent, respectively, when compared to the same prior year period.periods. Net sales growth was driven by a combination of our Paragon 28 acquisition, positive effects of changes in foreign currency exchange rates, opportunistic end-of-quarter customer purchases, timing ofincreased ROSA® Robot and bone cement sales, market growth and new product introductions. Paragon 28 had a positive impact on our net sales of 3.90.7 percent and 2.3 percent in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. Additionally, our net sales experienced a positive effect of 2.50.1 percent and 1.3 percent from changes in foreign currency exchange rates in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively.

Our net earnings were $238.1$198.3 million and $436.5 million in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, respectively, compared to $182.0$152.8 million and $334.9 million, respectively, in the same prior year period.periods. The increase in net earnings in both 2026 periods was primarily due to increased net sales, lower acquisition and integration costs due to significant charges incurred in the 2025 periods related to the Paragon 28 acquisition that did not recur, lower spending on R&D projects and savings from our restructuring programs. In addition, in the six-month period ended June 30, 2026, we recognized a favorable adjustment of approximately $30 million related to probable U.S. tariff refunds, lower restructuring charges, lower spending on R&D projects and savings from our restructuring programs.refunds.

We expect year-over-year net sales growth of 2.53.9 percent to 4.54.9 percent in 2026 to be driven by a combination of market growth, new product introductions, the Paragon 28 acquisition and positive effects of changes in foreign currency exchange rates, partially offset by the expected impact from changes to our go-to-market strategy and execution in the U.S. and certain other international markets, as well as price declines. These expected impacts, combined with the uncertain timing of incentivized stocking orders and capital sales, could cause fluctuations in our quarterly results. We estimate that the Paragon 28 acquisition will contribute an additional 1.01.1 percent to the year-over-year net sales growth for the period up until the one-year anniversary of the deal closing in April 2026. Based on foreign currency exchange rates at the end of 2025, we expect foreign currency to have a 0.5 percent positive impact on year-over-year net sales growth. We estimate operating profit will increase in 2026 when compared to 2025 due to higher net sales, leverage from fixed operating expenses, the expected refundrefunds from U.S. tariffs paid in 2025, ongoing savings from our restructuring plans, non-recurrence of inventory and instrument charges related to certain product lines we expect to discontinue and lower employee termination and other charges from our restructuring plans. However, we expect that these favorable items may be partially offset by the impact from inflation, investments in our U.S. commercial sales channel,channel and higher net interest expense and a higher estimated effective tax rate due to favorable 2025 adjustments that are not expected to recur.expense.

The following tabletables presentspresent our net sales by geography and the percentage changes (dollars in millions):

The following tabletables presentspresent our net sales by product category and the percentage changes (dollars in millions):

Changes in volume and mix of product sales had a positive effect of 7.25.5 percent and 6.4 percent on year-over-year sales during the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. The Paragon 28 acquisition contributed 3.90.7 percent and 2.3 percent to volume growth in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. In addition, opportunistic end-of-quarter customer purchases, timing ofincreased ROSA® Robot and bone cement sales, market growth and new product introductions contributed positively to volume and mix trends.trends in both periods.

Global selling prices had a negative effect of 0.40.8 percent and 0.7 percent on year-over-year sales during the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, Therespectively. majority of countries in which we operateWe continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment efforts. However,In weaddition, havevolume-based discounts to incentivize customer purchases had successa negative effect on our pricing in offsettingboth negative effects of pricing pressure due to internal initiatives and being able to pass some inflationary impacts on to customers.periods.

For the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, changes in foreign currency exchange rates had a positive effect of 2.50.1 percent and 1.3 percent on year-over-year sales.sales, respectively. If foreign currency exchange rates remain at levels consistent with recent rates, we estimate there will be a positive impact of approximately 0.5 percent on full-year 2026 sales.

The 8.65.6 percent and 7.1 percent net sales growth in the U.S. in the three-monththree periodand six-month periods ended MarchJune 31,30, 20262026, respectively, was driven by the Paragon 28 acquisition, opportunistic end-of-quarter customer purchases, timing ofincreased ROSA® Robot sales and market growth in our Hips and S.E.T. product categories. The Paragon 28 acquisition contributed 5.41.0 percent and 3.2 percent to U.S. net sales growth in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. Internationally, net sales increased by 10.33.7 percent and 6.8 percent during the three-monththree periodand six-month periods ended MarchJune 31,30, 20262026, respectively, when compared to the same prior year period.periods. This increase was driven by the Paragon 28 acquisition, timing ofincreased bone cement sales, market growth in most of our international markets and changes in foreign currency exchange rates. The Paragon 28 acquisition contributed 1.90.4 percent and 1.1 percent to International net sales growth in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. Our International sales were positively affected by 6.10.2 percent and 3.0 percent due to changes in foreign currency exchange rates in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively.

Knees and Hips net sales benefited from opportunistic end-of-quarter customer purchases, market growth and new product introductions in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026. Changes in foreign currency exchange rates had a positive effectseffect of 2.70.3 percent and 2.51.5 percent on Knees net sales in the three and six-month periods ended June 30, 2026, respectively. Changes in foreign currency exchange rates had a negative effect of 0.1 percent and a positive effect of 1.1 percent on Hips net sales, respectively,sales in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. The S.E.T. net sales increase in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, was primarily the result of the Paragon 28 acquisition and growth in our upper extremities and craniomaxillofacial and thoracic products. The Paragon 28 acquisition contributed 16.02.8 percent and 8.9 percent to S.E.T. net sales growth in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026.2026, respectively. Technology & Data, Bone Cement and Surgical net sales increased 14.621.1 percent and 18.0 percent in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, respectively, primarily due to strong net sales of our ROSA® Robot and bone cement products.

Intangible asset amortization expense increased in amount but decreased as a percentage of net sales in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026 compared to the same prior year periodperiods due to the Paragon 28 acquisition.

R&D expenses decreased in amount and as a percentage of net sales in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. The decreases were driven by completion of our spending on our initial compliance with the European Union Medical Device Regulation at the end of 2025, decreases in spending on certain projects and savings from our 2025 Restructuring Plan. These favorable items were partially offset by Paragon 28 and Monogram-related R&D expenses.

Selling, general and administrative (“SG&A”) expenses increased in amount and as a percentage of net sales in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. The increases were driven by variable and bonus selling expenses from higher net sales,sales and other incentive programs, Paragon 28-related expensesexpenses, higher litigation-related expense from certain product liability matters, higher bad debt charges and investments made in our sales force and other areas.

In February 2025 and then as further expanded in December 2025, and in December of each of 2023, 2021 and 2019, we initiated global restructuring programs. We also have other cost reduction and optimization initiatives that have the goal of reducing costs across the organization. We recognized expenses of $6.3$29.8 million and $36.1 million in the three-monththree periodand six-month periods ended MarchJune 31,30, 20262026, respectively, compared to $36.0$17.5 million and $53.5 million in the same prior year periodperiods, respectively, related to these programs and initiatives. These expenses were primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs, as well as expenses related to other optimization initiatives. The expenses were lowerhigher in the 2026three-month period ended June 30, 2026, when compared to the 2025same prior year period, due to a new manufacturing optimization initiative that commenced in 2026. The expenses were lower in the six-month period ended June 30, 2026, when compared to the same prior year period, due to the completion of the 2023, 2021 and 2019 plans by the end of 2025 as well as a majority of expense related to the 2025 Restructuring Plan having already been incurred by the end of 2025. For more information regarding these expenses, see Note 4 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report.

Acquisition, integration, divestiture and related expenses increaseddecreased in amount and as a percentage of net sales in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. The increasedecreases waswere primarily driven by Paragon 28 and Monogram-related28-related integration costs.costs incurred when that acquisition was completed in the prior year periods.

Other Income (Expense) Income,, Net, Interest Expense, Net, and Income Taxes

In the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, we recognized $3.0income of $1.9 million and expense of expense$1.1 million, respectively, in our other income (expense) income,, net financial statement line item compared to $2.9income of $3.9 million ofand income$6.9 million in the same prior year period.periods, respectively. Our other income (expense) income,, net financial statement line item is primarily composed of pension-related gains, changes in the value of our investments, and foreign currency exchange rate-related gains and losses and can vary based upon market conditions.

In the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, our effective tax rate (“ETR”) was 20.921.8 percent and 21.3 percent, respectively, compared to 20.331.7 percent and 25.9 percent in the three-monththree periodand six-month periods ended MarchJune 31,30, 2025.2025, respectively. The 20.921.8 percent and the 20.321.3 percent ETR in the three-monththree periodand six-month periods ended MarchJune 31,30, 20262026, respectively, were primarily driven by our mix of earnings between U.S. and foreign locations. The 31.7 percent and the 25.9 percent ETR in the three and six-month periods ended June 30, 2025, respectively, were primarily driven by our mix of earnings between U.S. and foreign locations.locations and in part due to a change in our assertion regarding the indefinite reinvestment of earnings of certain foreign subsidiaries.

In the Americas, operating profit increased while operating profit as a percentage of net sales decreased in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. Operating profit increased in both periods primarily due to thehigher acquisitionnet ofsales, including Paragon 28.28 products. Operating profit as a percentage of net sales decreased in both periods due to the fact that the operating profit contributed by Paragon 28 is at a lower operating profit margin as well as higher selling expenses and investments we have made in our sales force.

In EMEA, operating profit increased whileand operating profit as a percentage of net sales decreased in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. The increasedecreases in operating profit waswere primarily due to higherhedge-related sales.losses The decreaserecognized in operatingthe profit2026 asperiods a percentage of sales was primarily duecompared to hedge-related gains recognized in the 2025 periods and investments in our sales force as well as higher bad debt charges.force.

In Asia Pacific, operating profit and operating profit as a percentage of net sales increaseddecreased in the three-monththree periodand six-month periods ended MarchJune 31,30, 2026, when compared to the same prior year period.periods. The increasesdecreases were primarily due to a higher netmix sales,of savingsrevenues fromto ourless 2025profitable Restructuring Plancountries and lowerhigher bad debt charges.

As of MarchJune 31,30, 2026, we had $424.2$410.0 million in cash and cash equivalents. In addition, we had $1.0$1.25 billion available to borrow under our 20252026 364-Day Credit Agreement, and $1.5 billion available under our 20252026 Five-Year Revolving Facility. The terms of the 20252026 364-Day Credit Agreement and the 20252026 Five-Year Revolving Facility are described further in Note 9 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report.

Cash flows provided by operating activities were $359.4$807.2 million in the three-monthsix-month period ended MarchJune 31,30, 2026, compared to $382.8$761.0 million in the same prior year period. The decline in operating cash flowsincrease was due to lower restructuring-related payments; lower U.S. tariffs paid, net of refunds, in the 2026 period; lower income tax payments; and payments related to the closing of the Paragon 28 acquisition in 2025 that did not recur. These favorable items were partially offset by higher bonus payments and unfavorable timing of payments of accounts payable payments relative to the 2025 period.

Cash flows used in investing activities were $159.0$349.8 million in the three-monthsix-month period ended MarchJune 31,30, 2026, compared to $106.0$1,490.4 million in the same prior year period. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, including new product introductions and optimization of our manufacturing and logistics networks. In the three-monthsix-month period ended MarchJune 31,30, 2026, we paid $39.0$101.2 million related to the ownership rights or to gain access to various technologies that were recognized as intangible assets. In the six-month period ended June 30, 2025, we paid $1,226.3 million, net of cash acquired, for the acquisition of Paragon 28, as well as paid $32.4 million related to the ownership rights to a technology that was recognized as an intangible asset.

Cash flows used in financing activities were $369.2$640.3 million in the three-monthsix-month period ended MarchJune 31,30, 2026, compared to cash flows provided by financing activities of $575.4$739.2 million in the same prior year period. In the 2026 period, we repurchased $250.1$500.8 million of our common stock using cash on hand.hand and net borrowings from our revolving credit facilities. In the 2025 period, we issued senior notes for proceeds of $1,748.1 million and had net borrowings of $220.0 million on our revolving credit facilities. We used thethese proceeds, along with cash on hand, for the acquisition of Paragon 28, to redeem $863.0 million of senior notes that were to mature on April 1, 2025, and to repurchase $229.8$237.0 million of our common stock.

As of MarchJune 31,30, 2026, $326.2$353.0 million of our cash and cash equivalents were held in jurisdictions outside of the U.S. Of this amount, $69.2$63.7 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. We generally intend to limit distributions from foreign subsidiaries earnings that were previously taxed in the U.S. These previously taxed earnings would not be subject to further U.S. federal tax.

At MarchJune 31,30, 2026, we had outstanding debt of $7,471.0$7,479.0 million, of which $1,175.9$1,201.5 million was classified as current debt. Our current debt consists of $575.9$571.5 million of senior notes that mature on December 13, 2026 and2026, $600.0 million of senior notes that mature on February 19, 2027.2027 and $30.0 million outstanding on our Uncommitted Credit Facility which we expect to repay within the next year. We believe we can satisfy these debt obligations with cash on hand, cash generated from our operations, by issuing new debt and/or by borrowing on our committed revolving credit facilities.

In February and May 2026, our Board of Directors declared a quarterly cash dividend 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.

On February 9, 2026, our Board of Directors authorized a $1.5 billion share repurchase program effective immediately, with no expiration date. As of MarchJune 31,30, 2026, $1,250.0$1,003.1 million remained authorized under the program.

As discussed in Note 4 to our interim condensed consolidated financial statements in Part I, Item 1 of this report, we are executing on a 2025 Restructuring Plan. The 2025 Restructuring Plan is expected to result in total pre-tax charges of approximately $155 million by the end of 2027, of which approximately $143$147 million was incurred through MarchJune 31,30, 2026. We expect to reduce gross annual pre-tax operating expenses by approximately $175 million relative to the 2024 baseline expenses by the end of 2027 as program benefits under the 2025 Restructuring Plan are realized.

As discussed in Note 16 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, we are involved in various litigation matters. We estimate the total liabilities for all litigation matters was $133.1$137.9 million as of MarchJune 31,30, 2026. However, litigation is inherently uncertain, and upon resolution of any of these uncertainties, we may incur charges in excess of these estimates, and may in the future incur other material judgments or enter into other material settlements of claims. We expect to pay these liabilities over the next few years. Additionally, we have entered into development, distribution, investment and other contractual arrangements that may result in future payments dependent upon various events such as a capital call, the achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product. Since there is uncertainty on the timing or whether such payments will have to be made, they have not been recognized on our condensed consolidated balance sheets. These estimated payments could range from $0 to approximately $525$465 million. Included in that estimate is the amount under a commitment letter we executed in the three-monthsix-month period ended MarchJune 31,30, 2026, to invest in an investment fund with a capital commitment of up to $300 million, which is expected to become callable over a four yearfour-year period. The investment fund intends to invest in healthcare companies and assets, with a primary focus on transformative healthcare innovations that address musculoskeletal and rheumatologic conditions, enabling improved human mobility and performance, primarily through privately negotiated investments in healthcare enterprises and assets. We estimate the investment fund will commence in the second half of 2026, at which time we will begin making investments.

In addition, we have entered into business combinations that include contingent consideration. For each of our acquisitions that include contingent consideration, there is a maximum payout. Accordingly, the range of our potential contingent consideration payments are $0 to $720 million as of MarchJune 31,30, 2026, that may be paid out through 2031.

The preparation of our financial statements is affected by the selection and application of accounting policies and methods, and also requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. There were no changes in the three-monthsix-month period ended MarchJune 31,30, 2026 to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2025.