What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-02-23 compared with 2021-02-11 · 220 added, 166 removed, 199 unchanged (66% of the section changed)

Risk Factors.

In addition to the other information in this Annual Report on Form 10-K, stockholders or prospective investors should carefully consider the following risk factors.

In addition to the other information in this Annual Report on Form 10-K (Annual Report), stockholders or prospective investors should carefully consider the following risk factors.

If any of the events described below occurs, our business, financial condition, results of operations, future growth prospects and stock price could suffer.

Risks Related to the COVID-19 Pandemic

Risks Relating to the COVID-19 Pandemic

The effects of the COVID-19 pandemic have had, and we expect will continue to have, a material adverse effect on our business.

1 unchanged sentence

Our global operations expose us to risks associated with public health crises, including epidemics and pandemics, such as the COVID-19 pandemic.

COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and will continue to increase our expenses, including the impact associated with preventive and precautionary measures that we, other businesses and governments are taking.

COVID-19 has had, and we expect will continue to have, an adverse impact on our operations, supply chains and distribution systems and has increased and will continue to increase our expenses, including due to preventive and precautionary measures that we, other businesses and governments have taken and may continue to take.

These measures have led to unprecedented restrictions on, disruptions in, and other related impacts on businesses and personal activities.

In addition to travel restrictions put in place in early 2020, governments have closed borders, imposed prolonged quarantines and may continue those measures or implement other restrictions and requirements in light of the continuing spread of the pandemic.

We expect that these evolving restrictions and requirements, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

We expect that evolving restrictions and precautions, as well as the corresponding need to adapt to new methods of conducting business remotely, will continue to have an adverse effect on our business.

Risks associated with COVID-19 include, but are not limited to, the following:

• We have experienced, and expect to continue to experience, significant and unpredictable reductions or increases in demand for certain of our products as healthcare customers re-prioritize the treatment of

Some of our products are particularly sensitive to reductions in elective medical procedures, and, as hospital systems prioritize treatment of COVID-19 patients and otherwise comply with government guidelines, many of those procedures have been suspended or postponed in our principal markets.

In the second, third and fourth quarters of 2020, this resulted in lower levels of general hospital admissions and elective surgery volumes in those markets, which negatively impacted the demand for certain of our products.

It is not possible to predict the timing of a broad resumption of elective medical procedures.

If patients and hospital systems continue to de-prioritize, delay or cancel these procedures, our business, financial condition and results of operations would continue to be negatively affected.

• A significant number of our suppliers, manufacturers, distributors and vendors have been adversely affected by the COVID-19 pandemic, including with respect to the ability of their employees to get to their places of work and maintain the continuity of their on-site operations.

These impacts could impair our ability to move our products through distribution channels to end customers.

Any delay or shortage in the supply of components or materials or other operational or logistical challenges may result in our inability to satisfy consumer demand for our products in a timely manner or at all, which could harm our reputation, future sales and profitability.

For example, we have experienced and expect to continue to experience supply constraints for amino acid raw materials used in our parenteral nutrition products, as such materials are also being used to produce COVID-19 vaccines.

Some of our products are particularly sensitive to reductions in elective medical procedures.

For example, due to the recent spread of the Omicron variant, many elective procedures have been suspended or postponed in our principal markets as hospital systems prioritize treatment of COVID-19 patients again or otherwise comply with changing government guidelines.

It is not possible to predict the timing of a broad resumption of elective medical procedures or whether, once resumed, further delays or cancellations may occur in the future in connection with the spread of new variants.

If patients and hospital systems continue to de-prioritize, delay or cancel elective procedures, our business, financial condition and results of operations would continue to be negatively affected.

• A significant number of our suppliers, manufacturers, distributors and vendors have been adversely affected by the COVID-19 pandemic, including with respect to increased absenteeism among their employees and other obstacles relating to their ability to maintain the continuity of their on-site operations.

These impacts have caused interruptions and delays in our supply chain, and may continue to do so, resulting in more expensive alternative sources of labor and materials and heightened supply chain costs.

Any delay or shortage in the supply of components or materials or other operational or logistical challenges impacts our ability to satisfy consumer demand for our products in a timely manner or at all, which could harm our reputation, future sales and profitability.

These constraints have resulted in certain product backorders and may do so in the future.

• We could experience a loss of sales and profitability due to delayed payments, reduced demand or insolvency of healthcare professionals, hospitals and other customers, and suppliers and vendors facing liquidity or other financial issues.

These liquidity or other financial issues could be exacerbated if prolonged high levels of unemployment or loss of insurance coverage impact patients’ ability to access treatments that use our products and services.

• COVID-19 could adversely impact our ability to retain key employees and the continued service and availability of skilled personnel necessary to run our operations, including members of our management, as well as the ability of our suppliers, manufacturers, distributors and vendors to retain their key employees.

To the extent our management or other personnel are impacted in significant numbers by COVID-19 and are not available to perform their professional duties, we could experience delays in, or the suspension of, our manufacturing operations, research and development activities and other functions.

• We face increased operational challenges as we continue to take measures to support and protect employee health and safety, including through office closures and work from home policies.

For example, remote working arrangements heighten our risks associated with information technology systems and networks, including cyber-attacks, computer viruses, malicious software, security breaches, and telecommunication failures, both for systems and networks we control directly and for those that employees and third-party developers rely on to work remotely.

• COVID-19 has adversely impacted the continued service and availability of skilled personnel necessary to run our operations.

For example, we have faced increased absenteeism in connection with the rise of recent COVID-19 variants.

Although we have sought to mitigate these staffing challenges through overtime and enlisting contingent labor, staffing shortages have strained our operations and increased our expenses.

In addition, we may be unable to retain employees who object to governmental vaccine mandates or heightened safety protocols.

Vaccination is currently required for employees who are customer-facing and/or directly engaged with hospitals and medical care providers covered by the Centers for Medicare and Medicaid Services (CMS).

To the extent our management or other personnel are impacted in significant numbers by COVID-19 and are not available to perform their professional duties, we could experience further disruptions in our manufacturing operations or disruptions in other activities and other functions.

• We face increased operational challenges as we continue to take measures to support and protect employee health and safety, including through office closures, vaccine mandates and work from home policies.

that employees and third-party developers rely on to work remotely.

Any failure to prevent or mitigate security breaches or cyber risks or detect, or respond adequately to, a security breach or cyber risk, or any other disruptions to our information technology systems and networks (as a result of remote working arrangements or otherwise), can have adverse effects on our business and cause reputational and financial harm.

These risks are particularly heightened due to COVID‑19 as cybercriminals attempt to profit from the disruptions caused by the uncertain environment.

• COVID-19 and related impacts have affected and may further affect the global economy and capital markets worldwide, which, among other consequences, may restrict our access to capital, increase financing costs, adversely affect our liquidity, the perceptions of our creditworthiness, and our ability to complete acquisitions, and increase volatility in foreign currency exchange rates.

The extent of the impact from the pandemic depends on future developments that cannot be predicted at this time, such as the severity and duration of the pandemic (including of related resurgences and future mutations or outbreaks of related strains of the virus);

the extent and effectiveness of containment efforts, including the effectiveness and acceptance of any vaccines for COVID-19;

and the direct and indirect impact of the pandemic on our employees, customers, counterparties, service providers and regulators, as well as other market participants.

These risks are particularly heightened due to COVID‑19 as cybercriminals attempt to profit from COVID-related disruptions.

Any of these and other impacts of the pandemic could have a material adverse effect on our business, financial condition and results of operations.

1 unchanged sentence

Risks Related to Our Ability to Grow Our Business

If we are unable to successfully introduce new products or fail to keep pace with advances in technology, our business, financial condition and results of operations could be adversely affected.

If we are unable to successfully introduce new products or fail to keep pace with changing consumer preferences and needs and advances in technology, our business, financial condition and results of operations could be adversely affected.

We need to successfully introduce new products to achieve our strategic business objectives.

Product development requires substantial investment and there is inherent risk in the R&D process.

A successful product development process depends on many factors, including our ability to properly anticipate and satisfy customer needs, adapt to new technologies, obtain regulatory approvals on a timely basis, demonstrate satisfactory clinical results, manufacture products in an economical and timely manner and differentiate our products from those of our competitors.

We can provide no assurances that our new products will achieve commercial acceptance in the marketplace.

In addition, difficulties in manufacturing or in obtaining regulatory approvals, including as a result of the COVID-19 pandemic, might delay or prohibit introduction of new products into the marketplace.

We may not be able to obtain patent protection on our new products or be able to defend our intellectual property rights globally.

Warranty claims and service costs relating to our new products might be greater than anticipated, and we might be required to devote significant resources to address any quality issues associated with our new products, which could reduce the resources available for further new product development and other matters.

In addition, the introduction of new products might also cause customers to defer purchases of existing products.

Our future financial performance will also depend in part on our ability to influence, anticipate, identify and respond to changing consumer preferences and needs, including those impacted by the COVID-19 pandemic.

We might not correctly anticipate or identify trends in customer preferences or needs or might identify them later than competitors do.

Failure to successfully introduce new products in a cost-effective manner, or delays in customer purchasing decisions related to the evaluation of new products, could cause us to lose market share and could materially adversely affect our business.

Furthermore, product development requires substantial investment and there is inherent risk in the R&D process.

A successful product development process further depends on many other factors, including our ability to adapt to new technologies, demonstrate satisfactory clinical results and differentiate our products from those of our competitors.

If we cannot successfully introduce new products or adapt to changing technologies, our products may become obsolete and our revenue and profitability could suffer.

Issues with product supply or quality could have an adverse effect on our business or cause a loss of customer confidence in us or our products, among other negative consequences.

Our success depends upon the availability and quality of our products.

The pharmaceutical and medical products industries are competitive and subject to complex market dynamics and varying demand levels.

These levels vary in response to macro-economic conditions, regulatory requirements (including the availability of private or public reimbursement), seasonality, natural disasters, pandemics, epidemics and other matters.

For example, as hospital systems prioritized treatment of COVID-19 patients, elective medical procedures were suspended or postponed in our principal markets, which negatively impacted demand for certain products.

Our success depends upon the availability and quality of our products and the underlying raw materials and component parts.

The medical products and pharmaceutical industries are competitive and subject to complex market dynamics and varying demand levels.

These levels vary in response to economic conditions, regulatory requirements, seasonality, natural disasters, pandemics, epidemics and other matters.

For example, for many of our suppliers, the COVID-19 pandemic has created increased employee absenteeism rates and other obstacles relating to their ability to maintain the continuity of their on-site operations.

These increased rates and other obstacles have increased the cost of certain raw materials and component parts and caused us to incur increased freight costs.

They may, in the future, prevent suppliers from providing good and services to us on reasonable terms or at all.

Additionally, the development of new or enhanced products involves a lengthy regulatory process and is capital intensive.

As a result, our ability to match our production levels and capacity to market demand is imprecise and may result in a failure to meet market demand or satisfy customer requirements for our products or, alternatively, an oversupply of inventory.

Increased costs relating to freight, raw materials or component parts and difficulties hiring and retaining staff have had and may continue to have a negative impact on product supply.

Failure to meet market demand may result in customers transitioning to available competitive products, loss of market share, negative publicity, reputational damage, loss of customer confidence or other negative consequences (including a decline in stock price).

In the event of an oversupply, we may be forced to lower our prices, record asset impairment charges or take other actions, which may adversely affect our business, financial condition and results of operations.

Our success also depends on our ability to maintain and routinely improve product quality and our quality management program.

1 unchanged sentence

While we have a quality system that covers the lifecycle of our products, quality and safety issues have and may in the future occur with respect to our products.

New or unintended uses of our product (for example, in response to COVID-19 or changing clinical practice) may also raise quality or safety issues.

A quality or safety issue may result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product recalls (either voluntary or required by FDA or similar governmental authorities in other countries) or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions, costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses.

New or unintended uses of our products (for example, in response to COVID-19 or changing clinical practice) may also raise quality or safety issues.

A quality or safety issue may result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product recalls (either voluntary or required by FDA or similar governmental authorities in other countries) or seizures, monetary sanctions, injunctions to halt manufacture and distribution of products, civil or criminal sanctions (which may include corporate integrity agreements), costly litigation, refusal of a government to grant approvals and licenses, restrictions on operations or withdrawal of existing approvals and licenses.

See “—Risks Related to Legal and Regulatory Matters.” An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products.

1 unchanged sentence

Product quality or safety issues may restrict us from being able to realize the expected returns from these investments, potentially resulting in asset impairments in the future.

Unaffiliated third-party suppliers provide a number of goods and services to our R&D, clinical and manufacturing organizations.

Third party suppliers are required to comply with our quality standards.

Failure of a third-party supplier to provide compliant raw materials or supplies could result in delays, service interruptions or other quality related issues that may negatively impact our business results.

There is substantial competition in the product markets in which we operate.

Although no single company competes with us in all of our businesses, we face substantial competition in all of our markets from international and domestic healthcare and pharmaceutical companies and providers of all sizes, and these competitors often differ across our businesses.

Unaffiliated third-party suppliers provide a number of goods and services to our R&D, clinical and manufacturing organizations, many of whom do so on a spot basis and not pursuant to a contractual arrangement.

Our ability to receive goods or services at all or on reasonable financial terms from these third parties will be impacted if they are unable or refuse to supply or service us.

Moreover, we may have limited or no recourse if the goods or services are not subject to contractual terms.

If we are unable to identify an alternative provider on reasonable terms, our ability to meet our obligations to our customers could be negatively impacted, which could adversely affect our financial results and our reputation.

Additionally, third party suppliers are required to comply with our quality standards.

Failure of a third-party supplier to provide compliant raw materials, component parts or supplies could result in delays, service interruptions or other quality related issues that may negatively impact our business results.

There is substantial competition in the product markets in which we operate and the risk of declining demand and pricing pressures could adversely affect our operating results.

Although no single company competes with us in all of our businesses, we face substantial competition in all of our markets from international and domestic healthcare medical products and pharmaceutical companies and providers of all sizes, and these competitors often differ across our businesses.

Competition is primarily focused on cost-effectiveness, price, service, product performance, and technological innovation.

3 unchanged sentences

If we are forced to reduce our prices due to increased competition, our business could become less profitable.

Our sales could be adversely affected if any of our contracts with GPOs, IDNs or other customers are terminated due to increased competition or otherwise.

In addition, many health care industry companies, including health care systems, distributors, manufacturers, providers, and insurers, are consolidating or have formed strategic alliances.

As the health care industry consolidates, competition to provide goods and services to industry participants will become more intense.

In addition, many healthcare industry companies, including healthcare systems, distributors, manufacturers, providers, and insurers, are consolidating or have formed strategic alliances.

As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense.

Further, this consolidation creates larger enterprises with greater negotiating power, which they can use to negotiate price concessions.

If we face an increase in costs or must reduce our prices because of industry consolidation, or if we lose customers as a result of consolidation, our business, financial condition and results of operations could be adversely affected.

Demand for our products and services depends in large part on overall demand in the healthcare market.

With the healthcare market’s increased focus on hospital asset and resource efficiency as well as reimbursement constraints, spending for some of our products could decline over time.

Further, the competitive pressures in our industry could cause us to lose market share unless we increase our commercial investments or reduce our prices, which could adversely impact our operating results.

These factors, along with possible legislative developments and others, might result in significant shifts in market share among the industry’s major participants, which includes us.

Accordingly, if we are unable to effectively differentiate ourselves from our competitors in terms of new products and

diversification of our product portfolio through business acquisitions, then our market share, sales and profitability could be adversely impacted through lower volume or decreased prices.

We may fail to realize the anticipated benefits of the Hillrom acquisition.

During 2021, we completed the acquisition of Hillrom.

The success of this acquisition depends on, among other things, our ability to integrate Hillrom in a manner that facilitates growth opportunities, realizes anticipated cost and revenue synergies (some of which are still being identified) and achieves certain previously communicated net leverage targets without adversely affecting current revenues and investments in future growth.

If we are not able to successfully achieve these objectives, the anticipated benefits of the Hillrom acquisition may not be realized fully or at all or may take longer to realize than expected.

There is a significant degree of difficulty and management distraction inherent in the process of integrating an acquisition.

These difficulties include challenges consolidating certain operations and functions (including regulatory and other corporate functions), integrating technologies (including differing IT systems and processes), organizations, procedures, policies and operations, addressing differences in the business cultures of the two companies and retaining key personnel.

The integration may be complex and time consuming and involve delays or additional and unforeseen expenses.

The integration process and other disruptions resulting from the Hillrom acquisition may also disrupt our ongoing businesses or cause inconsistencies in standards, controls, procedures and policies that adversely affect our relationships with market participants, employees, regulators and others with whom we and Hillrom have business or other dealings.

Any failure to successfully or cost-effectively integrate Hillrom could have a material adverse effect on our business and cause reputational harm.

If our business development activities are unsuccessful, we may not realize the intended benefits.

9 unchanged sentences

If we are unsuccessful in our business development activities, we may not realize the intended benefits of such activities, including that acquisition and integration costs may be greater than expected or the possibility that expected return on investment, synergies and accretion will not be realized or will not be realized within the expected timeframes.

For more information on recent business development activities, see Note 2 in Item 8 of this Annual Report on Form 10-K.

For more information, see Note 2 in Item 8 of this Annual Report.

If we fail to attract and retain key employees our business may suffer.

Our ability to compete effectively depends on our ability to attract and retain key employees, including people in senior management, sales, marketing, information technology and R&D positions.

Competition for top talent in the

healthcare industry can be intense.

Our ability to compete effectively depends on our ability to attract and retain key employees, including people in senior management, sales, marketing, information technology and R&D positions and from the recently acquired Hillrom business.

Competition for top talent in the healthcare industry can be intense.

Our ability to recruit and retain such talent will depend on a number of factors, including hiring practices of our competitors, compensation and benefits, work location, work environment (including our competitors’ policies regarding remote work arrangements and COVID-19 protocols) and industry economic conditions.

If we cannot effectively recruit and retain qualified employees, our business could suffer.

Risks Related to Our Business Operations

Segments of our business are significantly dependent on major contracts with GPOs, IDNs, and certain other distributors and purchasers.

A portion of our U.S.

hospital sales and rentals are made pursuant to contracts with hospital GPOs.

At any given time, we are typically at various stages of responding to bids, negotiating and renewing expiring GPO agreements.

Failure to be included in certain of these agreements could have a material adverse effect on our business,

including product sales and service and rental revenue.

In addition, we have faced and continue to face challenges related to increasing costs associated with these agreements (associated with ongoing supply chain challenges), which negatively impact our revenues.

Our participation in such programs often requires increased discounting or restrictions on our ability to raise prices, and failure to participate or to be selected for participation in such programs might result in a reduction of sales to the member hospitals.

In addition, the industry is showing an increased focus on contracting directly with health systems or IDNs (which typically represent influential members and owners of GPOs).

IDNs and health systems often make key purchasing decisions and have influence over the GPO’s contract decisions, and often request additional discounts or other enhancements.

Further, certain other distributors and purchasers have similar processes to the GPOs and IDNs and failure to be included in agreements with these other purchasers could have a material adverse effect on our business.

We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and might experience business disruptions and adverse tax consequences associated with restructuring, realignment and cost reduction activities.

Portions of our business have been, and following the Hillrom acquisition may be, the subject of restructuring, realignment and cost reduction initiatives.

While we initiate these actions with the goal of realizing efficiencies, we may not be successful in achieving the full efficiencies and cost reduction benefits we expect.

Further, such benefits might be realized later than expected, and the ongoing costs of implementing these measures might be greater than anticipated.

If these measures are not successful or sustainable, we might undertake additional realignment and cost reduction efforts, which could result in future charges.

Moreover, our ability to achieve our other strategic goals and business plans might be adversely affected, and we could experience business disruptions, if our restructuring and realignment efforts and our cost reduction activities prove ineffective.

These actions, the resulting costs, and potential delays or potential lower than anticipated benefits might also impact our foreign tax positions and might require us to record tax reserves against certain deferred tax assets in our international business.

We have incurred a substantial amount of debt in connection with the Hillrom acquisition, which could adversely affect our business, financial condition or results of operations.

We have incurred acquisition-related debt financing of approximately $11.8 billion to fund the cash consideration for the Hillrom acquisition, refinance certain indebtedness of Hillrom and pay related fees and expenses.

Our substantially increased indebtedness and higher debt-to-equity ratio following the acquisition has the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions and has increased our borrowing costs (including as a result of the downgrade in our senior debt credit ratings).

The increased levels of indebtedness could also reduce funds available for investments in product development, capital expenditures, dividend payments, acquisitions, share repurchases and other activities and may create competitive disadvantages for us relative to other companies with lower debt levels.

In addition, until we achieve our commitment to reduce our indebtedness following the Hillrom acquisition, our capital allocation activities and operational flexibility may be limited.

There can be no assurance that we will be successful in doing so on a timely basis or at all.

If we are unable to obtain sufficient components or raw materials on a timely basis or for a cost-effective price or if we experience other manufacturing, sterilization, supply or distribution difficulties, our business and results of operations may be adversely affected.

4 unchanged sentences

Further, while efforts are made to diversify certain of our sources of components and materials, in certain instances there is only a sole source or supplier with no alternatives yet identified.

Additionally, we obtain certain components and materials on a spot basis from third party suppliers with whom we do not have a contractual arrangement.

For most of our components and materials for which a single source or supplier is used, alternative sources or suppliers may exist, but we have made a strategic determination to use the single source or supplier.

Although we do carry strategic inventory and maintain insurance to help mitigate the potential risk related to any supply disruption, there can be no assurance that such measures will be sufficient or effective.

A reduction or interruption in supply, an issue in the supply chain, including issues due to the revocation of distribution facilities’ licenses, and our inability to quickly develop acceptable alternative sources for such supply could adversely affect our ability to manufacture, distribute and sell our products in a timely or cost-effective manner.

Although we do carry strategic inventory and maintain insurance to help mitigate the potential risk related to any supply disruption, such measures may not be sufficient or effective.

A reduction, interruption or suspension in supply, other supply chain issues, including those due to the revocation of distribution facilities’ licenses, and our inability to quickly develop acceptable alternative sources for such supply

could adversely affect our ability to manufacture, distribute and sell our products in a timely or cost-effective manner.

We have faced difficulties obtaining supplies of key materials such as electromechanical components, active ingredients for pharmaceuticals and resins due to the COVID-19 pandemic and related supply chain disruptions.

Moreover, changes in regulation, world trade policies, international taxes and government-to-government relations and issues with export and import activities could negatively impact our ability to distribute products within a country and across countries.

See “—Risks Related to Legal and Regulatory Matters.” Additionally, volatility in our costs of energy, transportation/freight, components, raw materials and other supply, manufacturing and distribution costs could adversely affect our results of operations.

Climate change (including laws or regulations passed in response thereto) could increase our costs, in particular our costs of supply, energy and transportation/freight.

Material or sustained increases in the price of oil could have an adverse impact on the cost of many of the plastic materials we use to make and package our products, as well as our transportation/freight costs.

These outcomes may in turn result in customers transitioning to available competitive products, loss of market share, negative publicity, reputational damage, loss of customer confidence or other negative consequences (including a decline in stock price).

See “—Risks Related to Legal and Regulatory Matters.”

Additionally, volatility in our costs of energy, transportation/freight, components, raw materials and other supply, manufacturing and distribution costs have had and could in the future adversely affect our results of operations.

These prices might continue to fluctuate based on many factors beyond our control, including, but not limited to, changes in general economic conditions, labor costs, delivery costs, competition and currency exchange rates.

Significant increases in the cost of raw materials, sub-assemblies or materials used in the production of our products that cannot be recovered through increased prices of our products (or the unavailability of those raw materials, sub-assemblies or production materials) could adversely affect our results of operations.

There can be no assurance that the marketplace will support higher prices or that such prices and productivity gains will fully offset any commodity cost increases in the future.

We may from time to time engage in hedging transactions with respect to raw material purchases but do enter into fixed price supply contracts at times.

Future decisions not to engage in hedging transactions or ineffective hedging transactions might result in increased cost volatility, potentially adversely impacting our profitability.

Many of our products are difficult to manufacture.

This is due to the complex nature of manufacturing pharmaceuticals, including biologics, and devices, as well as the strict regulatory regime governing our manufacturing operations.

This is due to the complex nature of manufacturing devices and pharmaceuticals, including biologics, as well as the strict regulatory regime governing our manufacturing operations.

Variations in the manufacturing process may result in production failures which could lead to launch delays, product shortage, unanticipated costs, lost revenues and damage to our reputation.

1 unchanged sentence

Some of our products are manufactured at a single manufacturing facility or stored at a single storage site.

Additionally, some of our manufacturing facilities are located in the same geographic area.

Loss or damage to, or closure of, a manufacturing facility or storage site due to a natural disaster, such as we experienced as a result of Hurricane Maria, a pandemic, such as COVID-19, or otherwise could adversely affect our ability to manufacture sufficient quantities of key products or deliver products to meet customer demand or contractual requirements, which may result in a loss of revenue and other adverse business consequences (including those identified in the paragraphs above).

We might be unable to transfer manufacturing of the relevant products to another facility or location in a cost-effective or timely manner, if at all.

This potential inability to transfer production could occur for several reasons, including but not limited to a lack of necessary relevant manufacturing capability at another facility, or the regulatory requirements of the FDA or other governmental regulatory bodies.

Such an event could materially negatively impact our financial condition, results of operations and cash flows.

In addition, several of our manufacturing facilities are leased and we may not be able to renew leases on favorable terms or at all.

3 unchanged sentences

If an event occurs that results in damage to or closure, whether temporarily or permanent, of one or more of these facilities, we may be unable to manufacture or sterilize the relevant products at prior levels or at all, and a third party may not be available on a timely basis (if at all) to replace sterilization capacity.

For example, in February 2020, certain air emission control technology used to reduce ethylene oxide emissions from sterilization equipment at our facility in Mountain Home, Arkansas, was tested and determined not to operate in accordance with applicable emission limitations in our state-issued air permit.

Although we received a temporary variance and have recommenced operations, these events or other disruptions of manufacturing or sterilization processes that we or third parties may experience, whether due to lack of capacity, environmental, regulatory or compliance issues or otherwise, could result in product shortage, unanticipated costs, loss of revenues, litigation and damage to our reputation, all of which could have a material adverse effect on our business, financial condition and results of operations.

For example, in May 2021, our facility in Mountain Home, Arkansas, entered into a Consent Administrative Order with the Arkansas Division of Environmental Quality relating to certain air emission control technology used to reduce ethylene oxide-emissions from sterilization equipment.

Although the events giving rise to the Consent Administrative Order only caused a temporary pause in operations, these events or other disruptions of manufacturing or sterilization processes that we or third parties may experience, whether due to lack of capacity, environmental, regulatory or compliance issues or otherwise, could result in product shortage, unanticipated costs, loss of revenues, litigation and damage to our reputation, all of which could have a material adverse effect on our business, financial condition and results of operations.

Climate change, or legal, regulatory or market measures to address climate change, could adversely affect our business, results of operations and financial condition.

The long-term effects of climate change are difficult to predict and may be widespread.

The impacts of climate change may include physical risks (e.g., rising sea levels or frequency and severity of extreme weather conditions, including natural disasters), social and human effects (e.g., population dislocations or harm to health and well-being), compliance costs and transition risks (e.g., regulatory or technology changes), shifts in market trends (e.g., customers increasingly prioritize purchasing products that are sustainably made) and other adverse effects.

Such impacts may disrupt our supply chain and operations by adversely affecting our ability to procure goods or services required for the operation of our business at the quantities and levels we require, due to impairment of the availability and cost of certain products, materials, commodities and energy.

For example, material or sustained increases in the price of oil could have an adverse impact on the cost of many of the plastic materials or resins we use to make and package our products, as well as our transportation/freight costs.

In addition, the increasing concern over climate change has resulted and may continue to result in more regional, federal, and/or global legal and regulatory requirements relating to climate change, including regulating greenhouse gas emissions (and the establishment of enhanced internal processes or systems to track them), alternative energy policies and sustainability initiatives.

If legislation or regulations are enacted or promulgated in the United States or in any other jurisdictions in which we do business that impose more stringent restrictions and requirements than our current legal or regulatory obligations, we may experience disruptions in, or increases in the costs associated with, sourcing, manufacturing and distributing our products, which could have a material adverse effect on our business, financial condition or result of operations.

Any such regulatory changes could have a significant effect on our operating and financial decisions, including those involving capital expenditures to reduce emissions and comply with other regulatory requirements.

Breaches and breakdowns affecting our information technology systems or protected data, including from cyber security breaches and data leakage, could have a material adverse effect on our business, results of operations, financial condition, cash flows, reputation and competitive position.

We rely upon information technology systems and infrastructure, including support provided by our partners and third parties, to support our business, our products and our customers.

For example, we routinely rely on our technology systems and infrastructure to aid us in the collection, use, storage and transfer, disclosure and other processing of voluminous amounts of data including confidential, business, financial, personal, patient and other sensitive information (collectively, Confidential Information).

We rely upon information technology systems and infrastructure, including support provided by our partners and third parties, to support our business, products and customers.

For example, we routinely rely on technology systems and infrastructure in the collection, use, storage and transfer, disclosure and other processing of voluminous amounts of data including confidential, business, financial, personal and other sensitive information (collectively, Confidential Information).

We also rely on systems for manufacturing, customer orders, shipping, regulatory compliance and various other matters.

8 unchanged sentences

We have, like other large multi-national companies, experienced cyber incidents in the past and may experience them in the future, which have exposed and may continue to expose vulnerabilities in our information technology systems.

Although the prior incidents have not had a material effect on our business and we have invested and continue to invest in the protection of data and Technology, there can be no assurance that our efforts will prevent breakdowns, attacks, breaches in our Technology, cyber incidents or other incidents or ensure compliance with all applicable security and privacy laws, regulations and standards, including with respect to third-party service providers that host or process Confidential Information on our behalf.

Although the prior incidents have not had a material effect on our business and we have invested and continue to invest in the protection of data and Technology, there can be no assurance that our efforts have prevented or will prevent breakdowns, attacks, breaches in our Technology, cyber incidents or other incidents or ensure compliance with all applicable security and

privacy laws, regulations and standards, including with respect to third-party service providers that host or process Confidential Information on our behalf.

Such incidents could result in unauthorized access to patient data and other Confidential Information and could pose a risk to patient safety.

4 unchanged sentences

In addition, significant implementation issues may arise as we continue to consolidate and outsource certain computer operations and application support activities.

Further, a greater number of our employees are working remotely in response to the COVID-19 pandemic and related government actions, which (among other things) could

expose us to greater risks related to cybersecurity and our information technology systems.

Further, a greater number of our employees are working remotely in response to the COVID-19 pandemic and the emergence of related variants, which (among other things) could expose us to greater risks related to cybersecurity and our information technology systems.

We also face all of the same risks listed above and other heightened risks when acquiring a company, in particular if we need to transition or implement certain processes or controls with the acquired company.

For example, as we integrate Hillrom into our business, we may identify vulnerabilities or other issues as we transition its information technology systems and processes to our processes and controls, including with respect to cybersecurity and privacy.

Any such vulnerabilities if unidentified or unremediated could have a material adverse effect on our business, results of operations or financial condition.

We are subject to risks associated with doing business globally.

Our operations are subject to risks inherent in conducting business globally and under the laws, regulations and customs of various jurisdictions and geographies.

These risks include changes in exchange controls and other governmental actions, loss of business in government and public tenders that are held annually in many cases, increasingly complex labor environments, availability of raw materials, changes in taxation, tariffs, export control restrictions, changes in or violations of U.S.

These risks include changes in exchange controls and other governmental actions, loss of business in government and public tenders that are held annually in many cases, increasingly complex labor environments, availability of raw materials and component parts, changes in taxation, tariffs, export control restrictions, changes in or violations of U.S.

or local laws, dependence on a few government entities as customers, pricing restrictions, economic and political instability, monetary or currency volatility or instability (including as it relates to the U.S.

dollar, the Euro, the Yuan and currencies in emerging market countries), disputes between countries, trade relationships and conflicts, diminished or insufficient protection of intellectual property, and disruption or destruction of operations in a significant geographic region regardless of cause, including natural disaster, pandemic, power loss, cyber-attack, data breach, war, terrorism, riot, labor disruption, civil insurrection or social unrest.

dollar, the Euro, the Yuan and currencies in emerging market countries (including the Turkish Lira)), disputes between countries, trade relationships and conflicts, diminished or insufficient protection of intellectual property, and disruption or destruction of operations in a significant geographic region regardless of cause, including natural disaster, pandemic, power loss, cyber-attack, data breach, war, terrorism, riot, labor disruption, civil insurrection or social unrest.

Failure to comply with, or material changes to, the laws and regulations that affect our global operations could have an adverse effect on our business, financial condition or results of operations.

On January 31, 2020, the United Kingdom (UK) formally left the European Union (EU) (commonly known as Brexit) when the UK-EU Withdrawal Agreement became effective.

Under the Withdrawal Agreement, a transition period began that ran until December 31, 2020.

On January 1, 2021, the UK left the EU Single Market and Customs Union, as well as all EU policies and international agreements.

As a result, the free movement of persons, goods, services and capital between the UK and the EU ended, and the EU and the UK formed two separate markets and two distinct regulatory and legal spaces.

On December 24, 2020, the European Commission reached a trade agreement with the UK on the terms of its future cooperation with the EU (Trade Agreement).

The Trade Agreement offers UK and EU companies preferential access to each other’s markets, ensuring imported goods will be free of tariffs and quotas;

however, economic relations between the UK and the EU will now be on more restricted terms than existed previously.

The withdrawal by the UK from the EU could result in the deterioration of economic conditions, volatility in currency exchange rates, and increased regulatory complexities, as well as the potential for product shortages, increased costs or other similar effects.

These outcomes could have an adverse effect on our business, financial condition or results of operations.

The escalating global economic competition and trade tensions between the U.S.

and China could have an adverse effect on our business, financial condition or results of operations.

Although we have been able to mitigate some of the impact from increased duties imposed by both countries (through petitioning both governments for tariff exclusions and other mitigations), the risk remains of additional tariffs and other kinds of restrictions.

The escalating global economic competition and trade tensions between the U.S., China and Russia could have an adverse effect on our business, financial condition or results of operations.

Although we have been able to mitigate some of the impact from increased duties imposed by these countries (through petitioning the governments for tariff exclusions and other mitigations), the risk remains of additional tariffs and other kinds of restrictions.

Tariff exclusions awarded to us by the U.S.

Government require annual renewal, and policies for granting exclusions could shift.

and China could impose other types of restrictions such as limitations on government procurement or technology export restrictions, which could affect our access to the markets.

More generally, several governments including the U.S.

have raised the possibility of policies to induce “re-shoring” of supply chains, less reliance on imported supplies, and greater national production.

One example would be the stronger “Buy American” requirements in the U.S.

The U.S., China and Russia could impose other types of restrictions such as limitations on government procurement or technology export restrictions, which could affect our access to the markets.

More generally, several governments have raised the possibility of policies to induce “re-shoring” of supply chains, less reliance on imported supplies, and greater national production.

For example, the Chinese government has issued a series of policies in the past several years to promote local medical devices or suggest government procurement budget for local products.

Another example would be the stronger “Buy American” requirements in the U.S.

(pursuant to a U.S.

2 unchanged sentences

If such steps triggered retaliation in other markets, such as by restricting access to foreign products in purchases by their government-owned healthcare systems, the outcomes could have an adverse effect on our business, financial condition or results of operations.

A portion of our workforce is unionized, and we could face labor disruptions that would interfere with our operations.

Some of our employees both in and outside of the United States (including contingent workers) work under collective bargaining agreements and/or national trade union agreements.

Although we have not recently experienced any significant work stoppages as a result of labor disagreements, we cannot ensure that such a stoppage will not occur in the future.

Two collective bargaining agreements for one of our U.S.

manufacturing facilities are scheduled to expire in February 2022 and January 2024, respectively.

On February 23, 2022, union members are scheduled to vote on whether to enter into a new collective bargaining agreement (in place of the one scheduled to expire in February 2022) or to authorize a potential strike.

Our inability to negotiate satisfactory new agreements or a labor disturbance at any of our manufacturing facilities (including at the facility with a collective bargaining agreement scheduled to expire in February 2022) could have a material adverse effect on our operations.

Risks Related to Legal and Regulatory Matters

1 unchanged sentence

As a participant in the healthcare industry, our operations and products, and those of our customers, are regulated by numerous government agencies, both inside and outside the United States.

The impact of this on us is direct to

the extent we are subject to these laws and regulations, and indirect in that in a number of situations, even though we may not be directly regulated by specific healthcare laws and regulations, our products must be capable of being used by our customers in a manner that complies with those laws and regulations.

Laws and regulations include the Patient Protection and Affordable Health Care Act (H.R.

3590) and the Health Care and Education Reconciliation Act (H.R.

4872) (collectively, the Healthcare Reform Act) which aim to decrease costs through comparative effectiveness research and pilot programs to evaluate alternative payment methodologies.

Compliance with these and similar regulations could result in pricing pressure or negatively impact the demand for our products.

In a number of situations, even though specific laws and regulations may not directly apply to us, our products must be capable of being used by our customers in a manner that complies with those laws and regulations.

The manufacture, distribution, marketing and use of our products are subject to extensive regulation and scrutiny by FDA and other regulatory authorities globally.

Any new product must undergo lengthy and rigorous testing and other extensive, costly and time-consuming procedures mandated by FDA and foreign regulatory authorities.

The same testing and procedures sometimes apply to current products that are up for authorization or renewal or are subject to changes in laws or regulations (for example certain of our medical devices will have to comply with the new European Union Medical Device Regulation when it enters into force in May 2021).

The same testing and procedures sometimes apply to current products that are up for authorization or renewal or are subject to changes in laws or regulations.

For example, certain of our medical devices have to comply with the new European Union Medical Device Regulation that entered into force in May 2021.

These regulations require companies that wish to manufacture and distribute medical devices in EU member states to meet certain quality system and safety requirements and ongoing product monitoring responsibilities, and obtain a “CE” marking (i.e., a mandatory conformity marking for certain products sold within the European Economic Area) for their products.

Various penalties exist for non-compliance with the laws implementing the European Medical Device Regulations which if incurred, could have a material adverse impact on portions of our business, results of operations and cash flows.

Changes to current products may be subject to vigorous review, including additional 510(k) and other regulatory submissions, and approvals or the time needed to secure approvals are not certain.

1 unchanged sentence

Failure to comply with the requirements of FDA or other regulatory authorities, including a failed inspection or a failure in our adverse event reporting system, could result in adverse inspection reports, voluntary or official action indicated, warning letters, import bans, product recalls or seizures, monetary sanctions, reputational damage, injunctions to halt the manufacture and distribution of products, civil or criminal sanctions, refusal of a government to grant approvals or licenses, restrictions on operations or withdrawal of existing approvals and licenses.

In addition, our efforts to comply with FDA regulations have been challenged by the ongoing COVID-19 pandemic.

For example, our attempts to rectify an outstanding warning letter for our facility in Ahmedabad have been thwarted as the FDA inspectors cannot travel to the site to evaluate our remediation efforts.

The failure of our suppliers to comply with regulations could also adversely affect segments of our business as regulatory actions taken by the FDA against those manufacturers can result in product shortages, recalls or modifications.

Any of these actions could cause a loss of customer confidence in us and our products, which could adversely affect our sales.

The requirements of regulatory authorities, including interpretative guidance, are subject to change and compliance with additional or changing requirements or interpretative guidance may subject us to further review, result in product launch delays or otherwise increase our costs.

For information on current regulatory issues affecting us, please refer to the caption entitled “Certain Regulatory Matters” in Item 7 of this Annual Report on Form 10-K.

In connection with these issues, there can be no assurance that additional costs or civil and criminal penalties will not be incurred, that additional regulatory actions with respect to us will not occur, that we will not face civil claims for damages from purchasers or users, that substantial additional charges or significant asset impairments may not be required, that sales of other products may not be adversely affected, or that additional regulation will not be introduced that may adversely affect our operations and consolidated financial statements.

The sales, marketing and pricing of products and relationships that pharmaceutical and medical device companies have with healthcare providers are under increased scrutiny by federal, state and foreign government agencies.

Compliance with the Anti-Kickback Statute, False Claims Act, Food, Drug and Cosmetic Act (including as these laws relate to off-label promotion of products) and other healthcare related laws, as well as competition, data and patient privacy and export and import laws, is under increased focus by the agencies charged with overseeing such activities, including FDA, OIG, DOJ and the Federal Trade Commission.

Our business is also subject to risks associated with U.S.

and foreign legislation, regulations and trade agreements relating to the materials we import, including quotas, duties, tariffs or taxes, other charges or restrictions on imports and the nature of materials that can be used in our products, which could adversely affect our operations and our

ability to import materials used in our products at current or increased levels.

We cannot predict whether additional U.S.

and foreign customs quotas, duties (including antidumping or countervailing duties), tariffs, taxes or other charges or restrictions, requirements as to where raw materials and component parts must be purchased, additional workplace regulations or other restrictions on our imports will be imposed in the future or adversely modified, or what effect such actions would have on our costs of operations.

Future quotas, duties or tariffs may have a material adverse effect on our business, financial condition, results of operations or cash flows.

Future trade agreements could also provide our competitors with an advantage over us, or increase our costs, either of which could have a material adverse effect on our business, financial condition, results of operations or cash flows.

The sales, marketing and pricing of products and relationships that medical device and pharmaceutical companies have with healthcare providers are under increased scrutiny by federal, state and foreign government agencies.

The DOJ and the SEC have also increased their focus on the enforcement of the U.S.

Foreign Corrupt Practices Act (FCPA), particularly as it relates to the conduct of pharmaceutical and medical product companies.

Foreign Corrupt Practices Act (FCPA), particularly as it relates to the conduct of medical product and pharmaceutical companies.

The FCPA and similar anti-bribery laws generally prohibit companies and their employees, contractors or agents from making improper payments to government officials for the purpose of obtaining or retaining business.

Healthcare professionals in many countries are employed by the government and consequently may be considered government officials.

Foreign governments have also increased their scrutiny of pharmaceutical and medical product companies’ sales and marketing activities and relationships with healthcare providers and competitive practices generally.

The laws and standards governing the promotion, pricing, sale and reimbursement of our products and those governing our relationships with healthcare providers and governments, including the Sunshine Act enacted under the Patient Protection and Affordable Care Act (as amended, the PPACA), can be complicated, are subject to frequent change and may be violated unknowingly.

Foreign governments have also increased their scrutiny of medical product and pharmaceutical companies’ sales and marketing activities and relationships with healthcare providers and competitive practices generally.

The laws and standards governing the promotion, pricing, sale and reimbursement of our products and those governing our relationships with healthcare providers and governments, including the Physician Payments Sunshine Act, can be complicated, are subject to frequent change and may be violated unknowingly.

We are also subject to environmental laws, which are becoming more stringent throughout the world.

1 unchanged sentence

Other environmental laws may have similar consequences to us or our suppliers, or result in liability to us.

The enactment of additional laws in the future may increase our compliance costs or otherwise adversely impact our operations.

Additionally, the U.S.

4 unchanged sentences

economic sanctions.

From time to time,

certain of our subsidiaries have limited business dealings with countries subject to these sanctions, including Iran, Sudan, Syria, Russia and Cuba.

From time to time, certain of our subsidiaries have limited business dealings with countries subject to these sanctions, including Iran, Sudan, Syria, Russia and Cuba.

These dealings represent an insignificant amount of our consolidated revenues and income but expose us to an increased risk of operating in these countries, including foreign exchange risks or restrictions or limitations on our ability to access funds generated in these jurisdictions, or the risk of violating applicable sanctions or regulations, which are complex and subject to frequent change.

Additional restrictions may be enacted, enforced or interpreted in a way that may adversely affect our operations.

We have compliance programs in place, including policies, training and various forms of monitoring, designed to address the risks discussed above.

1 unchanged sentence

Violations or allegations of violations of these laws may result in large civil and criminal penalties, debarment or exclusion from participating in government programs, diversion of management time, attention and resources and may otherwise have an adverse effect on our business, financial condition and results of operations.

For more information related to our ongoing government investigations, please refer to Note 7 in Item 8 of this Annual Report on Form 10-K.

For more information on regulatory matters currently affecting us, including quality-related matters, refer to the discussion under the caption entitled “Certain Regulatory Matters” in Item 7 of this Annual Report on Form 10-K.

The laws and regulations discussed above are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our sales and marketing practices and may subject us to enforcement actions or litigation which could adversely affect our business, financial condition and results of operations.

The laws and regulations discussed above are broad in scope and subject to evolving interpretations and changes, which may be violated unknowingly, could require us to incur substantial costs regarding compliance or to alter our sales and marketing practices and may subject us to enforcement actions or litigation which could adversely affect our business, financial condition and results of operations.

We cannot predict with certainty what laws, regulations and healthcare initiatives, if any, will be implemented, or what the ultimate effect of healthcare reform or any future legislation or regulation will have on us.

For more information related to ongoing government investigations, see Note 7 in Item 8 of this Annual Report.

For more information on regulatory matters currently affecting us, including quality-related matters, see “Certain Regulatory Matters” in Item 7 of this Annual Report.

Increasing regulatory focus on privacy and security issues and expanding laws could impact our business and expose us to increased liability.

14 unchanged sentences

Sales of our products are dependent, in part, on the availability of reimbursement by government agencies and healthcare programs, as well as insurance companies and other private payers.

In much of Europe, Latin America, Asia and Australia, for example, the government provides healthcare at low cost to patients, and controls its expenditures by purchasing products through public tenders, collective purchasing, regulating prices, setting reference prices in public tenders or limiting reimbursement or patient access to certain products.

In much of Europe, Latin America, Asia and Australia, the government provides healthcare at low cost to patients, and controls its expenditures by purchasing products through public tenders, collective purchasing, regulating prices, setting reference prices in public tenders or limiting reimbursement or patient access to certain products.

For example, China has been implementing volume-based procurement policies, a series of centralized reforms being instituted in China on both a national and regional basis that has resulted in significant price cuts for pharmaceuticals and medical consumables.

Additionally, austerity measures or other reforms by foreign governments may limit, reduce or eliminate payments for our products and adversely affect both pricing flexibility and demand for our products.

The PPACA includes several provisions which impact our businesses in the United States, including increased Medicaid rebates and an expansion of the 340B Drug Pricing Program which provides certain qualified entities, such as hospitals serving disadvantaged populations, with discounts on the purchase of drugs for outpatient use and an excise tax on the sale of certain drugs.

The PPACA reduces Medicare and Medicaid payments to hospitals and other providers, which may cause us to experience downward pricing pressure.

Certain portions of the PPACA could negatively impact the demand for our products, and therefore our results of operations and financial position.

There have been multiple attempts to repeal or amend the PPACA through legislative action and legal challenges, and the most recent challenge is currently before the U.S.

Supreme Court.

Recent changes to the composition of the Supreme Court may increase the likelihood that the PPACA is repealed or impacted in some manner.

In the event the PPACA is repealed or significantly altered, it would impact our business in a number of ways, some of which may be material.

Following a 2019 executive order from former President Donald Trump, the U.S.

Department of Health and Human Services announced the launch of a new kidney health initiative.

The Centers for Medicare & Medicaid Services (CMS) published the final end stage renal disease Treatment Choices mandatory payment model (ETC) on September 18, 2020.

The ETC launched in 30% of dialysis clinics across the country on January 1, 2021 and creates payment incentives for the greater use of home dialysis and kidney transplants for those already on dialysis.

In addition, our recent acquisition of Hillrom has increased our exposure to risks related to reimbursement (as certain portions of that business directly bill various government agencies).

The Healthcare Reform Act includes several provisions which impact our businesses in the United States, including increased Medicaid rebates and an expansion of the 340B Drug Pricing Program which provides certain qualified entities with discounts on the purchase of drugs for outpatient use and an excise tax on the sale of certain drugs.

The Healthcare Reform Act reduces Medicare and Medicaid payments to hospitals and other providers, which may cause us to experience downward pricing pressure.

Certain portions of the Healthcare Reform Act could negatively impact the demand for our products, and therefore our results of operations and financial position.

In 2019, the U.S.

Department of Health and Human Services launched a new kidney health initiative.

The CMS published the final end stage renal disease Treatment Choices mandatory payment model (ETC) in 2020.

The ETC launched in 30% of dialysis clinics across the country on January 1, 2021 and creates payment incentives for the

greater use of home dialysis and kidney transplants for those new to and already on dialysis.

CMS also announced the implementation of four voluntary payment models with the stated goal of helping healthcare providers reduce the cost and improve the quality of care for patients with late-stage chronic kidney disease and ESRD.

CMS has stated these payment models are aimed to prevent or delay the need for dialysis and encourage kidney transplantation.

These voluntary payment models have a scheduled commencement date of April 2021, but applicants now have the option to delay implementation until January 2022.

CMS launched the program on January 1, 2022, at which time 85 entities (or potential customers) were enrolled as participants.

These proposed regulatory changes in kidney health policy and reimbursement may substantially change the U.S.

7 unchanged sentences

We cannot predict the impact of these pressures and initiatives, or any negative effects of any additional regulations that may affect our business.

We could be subject to fines or damages and possible exclusion from participation in federal or state healthcare programs if we fail to comply with the laws and regulations applicable to our business.

Portions of our business are subject to stringent laws and regulations at the federal or state levels governing the participation of durable medical equipment suppliers and independent diagnostic testing facilities in federal and state healthcare programs.

From time to time, the government seeks additional information related to our claims submissions, and in some instances government contractors perform audits of payments made to us under Medicare, Medicaid, and other federal healthcare programs.

On occasion, these reviews identify overpayments for which we submit refunds.

At other times, our own internal audits identify the need to refund payments.

We believe the frequency and intensity of government audits and review processes has grown and we expect this will continue in the future, due to increased resources allocated to these activities at both the federal and state Medicaid level, and greater sophistication in data review techniques.

In addition, our business contracts with foreign and U.S.

federal, state and local government entities and is subject to specific rules, regulations and approvals applicable to government contractors.

Our failure to comply with these could result in contract terminations, suspension or debarment from contracting with these entities, civil fines and damages, criminal prosecution and possible exclusion from participation in federal healthcare programs such as Medicare and Medicaid, as well as possible recoupment of any overpayments related to such violations.

While we believe that our practices materially comply with applicable state and federal requirements, the requirements might be interpreted in a manner inconsistent with our interpretation.

Failure to comply with applicable laws and regulations, even if inadvertent, could have a material adverse impact on our business.

If we are unable to protect our patents or other proprietary rights, or if we infringe the patents or other proprietary rights of others, our competitiveness and business prospects may be materially damaged.

5 unchanged sentences

Patent claims include challenges to the coverage and validity of our patents on products or processes as well as allegations that our products infringe patents held by competitors or other third parties.

An unfavorable litigation outcome in any of these types of cases could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations.

An unfavorable litigation outcome in any of these types of cases could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of

sales, or otherwise materially affect future results of operations.

We also rely on trademarks, copyrights, trade secrets and know-how to develop, maintain and strengthen our competitive positions.

2 unchanged sentences

To the extent that our employees, consultants, parties to collaboration agreements and other business partners use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Furthermore, our intellectual property, other proprietary technology and other sensitive company data is potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses, unauthorized access to our data or misappropriation or misuse thereof by those with permitted access and other events.

Furthermore, our intellectual property, proprietary technology and sensitive company data is potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses and unauthorized access to our data or misappropriation or misuse thereof by those with permitted access and other events.

While we have invested to protect our intellectual property, confidential information and other data, and continue to work diligently in this area, there can be no assurance that our precautionary measures will prevent breakdowns, breaches, cyber incidents or other events.

Such events could have a material adverse effect on our reputation, business, financial condition or results of operations.

Misappropriation or other loss of our intellectual property from any of the foregoing would have an adverse effect on our competitive position and may cause us to incur substantial litigation costs.

Changes in tax laws or exposure to additional income tax liabilities may have a negative impact on our operating results.

Changes to the tax laws in the United States or other countries in which we operate could have an adverse effect on our operating results.

In particular, the Tax Cuts and Jobs Act of 2017 and the regulations issued thereunder (collectively, 2017 Tax Act), including, among other things, certain changes in tax rates, deductibility of interest, deductibility of executive compensation expense, expensing of capital expenditures, the ability to use certain tax credits, taxation on earnings from international business operations, and the treatment of deductible payments made by our U.S.

affiliates to our foreign affiliates could adversely affect our financial condition and results of operations.

In certain instances, the 2017 Tax Act could have a negative effect on our tax rate and the carrying value of tax balances.

Any of these changes could adversely affect our financial performance.

There remains some uncertainty regarding aspects of the implementation of the 2017 Tax Act that could potentially have adverse impacts on us.

We cannot currently predict the full impact that the 2017 Tax Act may have over time on our business, including revenues, profit margins, profitability, operating cash flows and results of operations.

For more information regarding the impact of the 2017 Tax Act, see Note 12 in Item 8 of this Annual Report on Form 10-K.

For example, the Build Back Better framework, if enacted as proposed by President Biden, could adversely affect our financial condition and results of operations.

Similarly, the outcome of various initiatives currently being undertaken by the Organization of Economic Cooperation and Development could significantly impact how we allocate profits across multiple jurisdictions, which could adversely impact our global tax obligations.

5 unchanged sentences

However, we may not accurately predict the outcome of these audits and, as a result, the actual outcome of these audits may have an adverse impact on our financial results.

For more information on ongoing audits, see Note 12 in Item 8 of this Annual Report on Form 10-K.

For more information on ongoing audits, see Note 12 in Item 8 of this Annual Report.

We are party to a number of pending lawsuits and other disputes which may have an adverse impact on our business, operations or financial condition.

We are party to a number of pending lawsuits, settlement discussions, mediations, arbitrations and other disputes.

In addition, in the future we may be party to such disputes, including patent, product liability or other lawsuits.

We are party to a number of pending lawsuits, settlement discussions, mediations, arbitrations and other disputes, including for example, the Superfund cases, opioid litigation, ethylene oxide litigation, Linet antitrust litigation and a stockholder request for inspection of our books and records related to the restatement of certain of our financial statements, as set forth in Note 7 in Item 8 of this Annual Report.

In addition, in the future we may be party to additional lawsuits, disputes or other matters, including patent, product liability or other lawsuits.

These current and future matters may result in a loss of patent protection, reduced revenue, incurrence of significant liabilities and diversion of our management’s time, attention and resources.

Given the uncertain nature of litigation and other disputes generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome in these current matters.

In view of these uncertainties, the outcome of these matters may result in charges in excess of any established reserves, and, to the extent available, liability insurance.

In view of these uncertainties, the outcome of these current matters may result in charges in excess of any established reserves, and, to the extent available, liability insurance.

We also continue to be self-insured with respect to product liability claims.

The absence of third-party insurance coverage for current or future claims increases our potential exposure to unanticipated claims and adverse decisions.

Protracted litigation and other disputes, including any adverse outcomes, may have an adverse impact on our business, operations or financial condition.

Protracted litigation and other disputes, including any adverse outcomes, may have an adverse impact on our business,

operations or financial condition.

Even claims without merit could subject us to adverse publicity and require us to incur significant legal fees.

See Note 7 in Item 8 of this Annual Report on Form 10-K for more information regarding current lawsuits.

We identified certain misstatements to our previously issued financial statements and have restated the financial statements described below (the “restatement”), which has exposed us to a number of additional risks and uncertainties.

As discussed in the Explanatory Note, in Note 2, Restatement of Previously Issued Consolidated Financial Statements, and in Note 19, Quarterly Financial Data (Unaudited) in our 2019 Annual Report on Form 10-K, we restated certain of our previously issued audited and unaudited consolidated financial statements and selected financial information to correct misstatements of certain foreign exchange gains and losses from foreign currency denominated intra-company loan receivables and payables, cash balances and gains and losses from foreign currency derivative contracts, which we determined were material to these periods.

As a result of the misstatements and the restatement, we have become subject to additional risks and uncertainties and costs, including as a result of a pending class-action lawsuit and a stockholder request for inspection of our books and records.

As initially disclosed on October 24, 2019, we also voluntarily advised the staff of the SEC of our previously disclosed internal investigation and we are continuing to cooperate with the staff of the SEC.

We may become subject to enforcement proceedings brought by the SEC or other regulatory or governmental authorities, or subject to other legal proceedings, as a result of the events leading to our internal investigation, the misstatements or the related restatement, and actions and proceedings could also be brought against our current and former employees, officers, or directors.

These actions, lawsuits or other legal proceedings related to the misstatements or the restatement could result in reputational harm, additional defense and other costs, regardless of the outcome of the lawsuit or proceeding.

If we do not prevail in any such lawsuit or proceeding, we could be subject to substantial damages or settlement costs, criminal and civil penalties and other remedial measures, including, but not limited to, injunctive relief, disgorgement, civil and criminal fines and penalties.

In addition, we continue to be at risk for loss of investor confidence, loss of key employees, changes in management or our board of directors and other reputational issues, all of which could have a material adverse effect on our business, financial position and results of operations.

Risks Related to the Economy and Our Financial Performance

1 unchanged sentence

Our ability to generate cash flows from operations could be affected if there is a material decline in the demand for our products, in the solvency of our customers or suppliers, or deterioration in our key financial ratios or credit ratings.

Current or worsening economic conditions may adversely affect the ability of our customers (including governments) to pay for our products and services, and the amount spent on healthcare generally.

This could result in a decrease in the demand for our products and services, declining cash flows, longer sales cycles, slower adoption of new technologies and increased price competition.

These conditions may also adversely affect certain of our suppliers, which could cause a disruption in our ability to produce our products.

Current or worsening economic conditions may adversely affect the ability of our customers (including governments) to pay for our products and services, and the amount spent on healthcare generally, which could result in decreased demand for our products and services, declining cash flows, longer sales cycles, slower adoption of new technologies and increased price competition.

These conditions may also adversely affect certain of our suppliers, which could disrupt our ability to produce products.

We continue to do business with foreign governments in certain countries, including Greece and Italy, which have experienced deterioration in credit and economic conditions.

While global economic conditions have not significantly impacted our ability to collect receivables, liquidity issues in certain countries have resulted, and may continue to result, in delays in the collection of receivables and credit losses.

These conditions may also impact the stability of the U.S.

dollar, Euro or Yuan.

5 unchanged sentences

We are also exposed to changes in interest rates, and our ability to access the money markets and capital markets could be impeded if market conditions are not favorable.

A discussion of the financial impact of foreign exchange rate and interest rate fluctuations, and the ways and extent to which we attempt to mitigate such impact is contained under the caption “Financial Instrument Market Risk” in Item 7 of this Annual Report on Form 10-K.

For more information see “Financial Instrument Market Risk” in Item 7 of this Annual Report.

Our operating results and financial condition may fluctuate.

Our operating results and financial condition may fluctuate from quarter to quarter and year to year for a number of reasons.

Events, such as a delay in product development, changes to our expectations or strategy or even a relatively small revenue shortfall may cause financial results for a period to be below our expectations or projections.

As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful, and these comparisons should not be relied upon as an indication of future performance.

Events, such as a delay in product development, changes to our expectations or strategy or even a relatively small revenue shortfall or increase in supply chain or other costs may cause financial results for a period to be below our expectations or projections.

As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful, nor should they be relied upon as an indication of future performance.

Our operating results and financial condition are also subject to fluctuation from all of the risks described throughout this section.

1 unchanged sentence

We may not achieve our financial goals.

We continue to evaluate and refine both our short-term and long-term financial objectives.

These include, for example, our stated objective to improve our gross margin.

Our strategy to achieve these objectives is focused on strengthening our portfolio and extending our impact through transformative innovation that spans prevention to recovery.

As part of this strategy, we intend to invest in portfolio innovation and market development and entering adjacencies while continuing to drive operational excellence through ongoing business transformation efforts and organization optimization.

We will also look to unlock additional value through strategic capital deployment.

We continue to evaluate and refine both our short-term and long-term financial objectives, including our stated commitment to achieve certain net leverage targets after completion of the Hillrom acquisition.

Our ability to achieve these targets depends, in part, on our ability to realize the anticipated benefits of the acquisition (and related cost and revenue synergy targets) while continuing to strengthen our portfolio and extend our impact through transformative innovation.

We may fail to achieve our targeted financial results if we are unsuccessful in implementing our strategies, our estimates or assumptions change or for any other reason.

4 unchanged sentences

Other long-lived assets are reviewed when there is an indication that impairment may have occurred.

Changes in market conditions or other changes in the future outlook of value may lead to impairment charges in the future.

Changes in market conditions or other changes in the future outlook of value may lead to impairment charges in the

In addition, we may from time to time sell assets that we determine are not critical to our strategy, including in connection with strategic exits.

2 unchanged sentences

Material impairment charges could negatively affect our results of operations.

For more information on the valuation and impairment of long-lived assets, refer to the discussion under the caption entitled “Critical Accounting Policies” in Item 7 of this Annual Report on Form 10-K.

There could be significant liability if the separation and distribution or any Retained Shares Transaction is determined to be a taxable transaction.

Baxalta has indemnified us for certain potential liabilities that may arise, and such indemnification obligation is guaranteed by Shire, but Baxalta and Shire may be unable to satisfy their indemnification obligations to us in the future.

The separation and distribution and the Retained Shares Transactions (collectively, the Baxter Transactions) qualify for tax-free treatment to Baxter and its stockholders under the Internal Revenue Code of 1986, as amended (the Code).

Completion of the separation and distribution was conditioned upon, among other things, the receipt of a private letter ruling from the IRS regarding certain issues relating to the tax-free treatment of the Baxter Transactions.

Although the IRS private letter ruling is generally binding on the IRS, the continuing validity of such ruling is subject to the accuracy of factual representations and assumptions made in the ruling.

Completion of the distribution was also conditioned upon Baxter’s receipt of a tax opinion from KPMG LLP regarding certain aspects of the Baxalta separation not covered by the IRS private letter ruling.

The opinion was based upon various factual representations and assumptions, as well as certain undertakings made by Baxter and Baxalta.

If any of the factual representations or assumptions in the IRS private letter ruling or tax opinion is untrue or incomplete in any material respect, if any undertaking is not complied with, or if the facts upon which the IRS private letter ruling or tax opinion are based are materially different from the actual facts relating to the Baxter Transactions, the opinion or IRS private letter ruling may not be valid.

Moreover, opinions of a tax advisor are not binding on the IRS.

As a result, the conclusions expressed in the opinion of a tax advisor could be successfully challenged by the IRS.

If the Baxter Transactions are determined to be taxable, Baxter and its stockholders could incur significant tax liabilities.

Pursuant to the tax matters agreement, Baxalta agreed to indemnify us for certain tax-related losses incurred if Baxalta’s actions cause the separation and distribution and certain related transactions to fail to qualify for tax-free status under the applicable provisions of the Code.

In anticipation of the merger between Baxalta and Shire (the Merger), we entered into a letter agreement with Shire and Baxalta (the Letter Agreement).

Under the Letter Agreement, Baxalta agreed to indemnify, and Shire agreed to guarantee such indemnity to, Baxter and each of its affiliates and each of their respective officers, directors and employees against certain tax-related losses attributable to or resulting from (in whole or in part) the Merger as further described in the Letter Agreement.

If the Baxter Transactions are determined to be taxable as a result (in whole or in part) of the Merger (for example, if the Merger is deemed to be part of a plan (or series of related transactions) that includes the Baxter Transactions), Baxter and its stockholders could incur significant tax liabilities.

Although Baxalta and Shire may be required to indemnify Baxter under the tax matters agreement and the Letter Agreement for any such tax liabilities incurred by Baxter, there can be no assurance that the indemnity from Baxalta or the guarantee thereof by Shire will be sufficient to protect us against all or a part of the amount of such liabilities, or that either Baxalta or Shire will fully satisfy their respective obligations.

Even if we ultimately succeed in recovering from Baxalta or Shire any amounts for which we are held liable, we may be required to bear these costs initially, which could negatively affect our business, results of operations and financial condition.

For more information on the valuation and impairment of long-lived assets, see “Critical Accounting Policies” in Item 7 of this Annual Report.

Unresolved Staff Comments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors