What changed in this filing

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Item 1A. Risk Factors

2023-02-22 compared with 2022-02-24 · 128 added, 75 removed, 331 unchanged (38% of the section changed)

RISKS RELATED TO COVID-19

The effects of the COVID-19 pandemic continue to significantly impact global economic conditions and have affected, and may continue to affect, our operations, supply chain, distribution, sales force, as well as the financial stability of hospitals and other customers, and have caused and could again cause a reduction in procedures, which could materially adversely affect our business, results of operations, financial condition, and stock price.

On March 11, 2020, the World Health Organization characterized the Novel Coronavirus Disease 2019 (“COVID-19”) as a pandemic.

The COVID-19 pandemic continues to have widespread and unpredictable impacts on global society, economies, financial markets, and business practices and negatively impact business and healthcare activity globally.

To date, and in continuing efforts to control the spread of COVID-19 (including subsequent surges and variants), governments around the world, including in the U.S., have and continue to implement various preventative measures including quarantines, “shelter in place” orders, “stay at home” orders, travel restrictions, business operation restrictions, school closures, and other similar types of measures.

Even as efforts to contain the pandemic have made progress, new variants of the virus are causing additional surges or outbreaks.

The COVID-19 pandemic has impacted and may continue to impact our business operations, including our employees, customers, suppliers, distributors, other service providers and communities in which we operate, and there is substantial uncertainty in the nature and degree of its continued effects over time.

In response to the COVID-19 pandemic and related mitigation efforts, similar to many other employers in the U.S., the Company has and continues to encourage many employees to work remotely.

The Company has continued to operate certain manufacturing facilities to date in compliance with federal, state and local orders regarding COVID-19.

The health of the Company’s workforce is our top concern and the Company has procured equipment and implemented safety protocols in an effort to maintain the health and safety of our employees.

A number of our network of business partners have been adversely affected by the COVID-19 pandemic.

These impacts could impair our ability to move our products through distribution channels to end customers, and any such delay or shortage in the supply of materials or products may result in our inability to satisfy consumer demand for certain of our products in a timely manner or at all, which could harm our reputation, future sales and profitability.

It is not possible to predict with precision how future demand for our products will be impacted by the COVID-19 pandemic as the scope and duration of the pandemic and its impact on our business and the markets in which we operate remain unpredictable.

The Company has implemented extensive business contingency plans across its global organization and network of third parties through which the Company conducts its business which helps limit some of the impact of the COVID-19 pandemic but does not completely prevent or avoid a negative impact on the business.

In addition, COVID-19 has impacted and may further impact the global economy and capital markets, including by negatively impacting access to capital markets, foreign currency exchange rates, and interest rates, each of which may adversely impact our business and liquidity.

The extent to which the COVID-19 pandemic will negatively affect the Company's operations and financial position will depend on future developments that remain uncertain and cannot be predicted with precision.

For example, including, without limitation, the pandemic could cause:

• Continued fluctuations in our operational results, revenues, and cash flows which may negatively impact our stock price;

• Impact on our operations and sales including but not limited to delays in orders, ability to market, sell, deliver and service our products;

• Reductions in demand for our products and services due to the impact of COVID-19 on hospitals and customers such as continued or future postponement or cancellations of procedures, hospital postponement or cancellation of capital purchases, or elimination of services;

• Disruption to manufacturing operations and distribution supply chains;

• Increased challenges or restraints in obtaining necessary products or components from our suppliers and vendors;

• Reduction or interruption to our manufacturing processes which could have a material adverse effect on our business;

• Local and/or global economic instability and inflation and recessions, which may result in hospitals and customers reducing capital spending and could materially affect our business, including but not limited to our future access to capital, and negatively impact the value of our stock;

• Continued limitations on our operations due to restrictions associated with “shelter in place” orders and travel restrictions;

• Distraction of management time and focus;

• Increased risk that insurance coverage will not provide protection for all of the COVID-19-related disruption;

• Continued and/or increased risks related to the health and safety of our employees (and retention issues), volatility of foreign currency exchange rates, and risk of cybersecurity attacks and breaches;

• Possible liquidity constraints and credit impact;

• Delays in obtaining regulatory clearances, approval to market products, quality inspections, or delays to clinical trial activity;

• Delays in coverage decisions by private and public health insurers and foreign governmental health systems;

• Delays in the completion of supportive clinical studies for payer coverage decisions or clinical and economic decision makers due to slowed study enrollments;

• Delays to acquisition plans, increased risks to the operations and financial condition of newly acquired businesses, and increased costs or delays to integration of newly acquired businesses;

• The impact of any reprioritization of capital allocations on our ability to achieve our strategic objectives over the medium and long-term;

• Write downs or impairments of investments in third parties, goodwill or intangible assets from recently acquired businesses, accounts receivable, or other assets.

As the situation surrounding the COVID-19 pandemic remains fluid, it is difficult to predict, with any certainty, the duration and extent of its impact which depends on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus (including any variant strains), the extent and effectiveness of containment actions including the effectiveness of the vaccine against future variants and the availability of new antiviral medicines for the treatment of COVID-19, and the impact of these and other factors on our employees, customers, suppliers, distributors and other service providers.

If COVID-19, or a variant strain, continues to spread and escalate domestically or internationally, or if governments impose additional measures intended to mitigate the spread and related effects of the pandemic, the risks described above could be elevated significantly.

Should that occur, and the COVID-19 pandemic persist for a prolonged time, the above factors and others that are currently unknown could have a material adverse impact on our business, results of operations, financial conditions and prospects and could elevate known risks described in this Item 1A.

Risk Factors.

Information pertaining to the potential impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we have experienced to date can be found in Management's Discussion and Analysis of Financial Position and Results of Operations.

GLOBAL CHALLENGES AND MACROECONOMIC CONDITIONS

The continuing worldwide macroeconomic and geopolitical uncertainty may adversely affect our business and prospects.

Global economic disruptions, including the COVID-19 pandemic, have continued to impact the global supply chain, primarily through constraints on raw materials and electronic components.

Additionally, we have observed a reduction in both inbound and outbound transportation capacity as a result of port closures and delays associated with the pandemic, which is causing longer lead times in receiving raw materials, as well as increased freight costs.

These highly competitive and constrained supply chain conditions are increasing our cost of sales, which has and may continue to adversely impact our profitability.

Given the ongoing uncertainty regarding the duration and extent of the COVID-19 pandemic, we are uncertain as to the duration and extent of constraint on our supply chain and are unable to predict the extent to which it will affect our global operations.

Continued concerns about the systemic impact of potential long-term and wide-spread recession and geopolitical issues, including the war in Ukraine, have contributed to increased market volatility and diminished expectations for economic growth in the world.

Our business and results of operations have been and may continue to be adversely impacted by changes in macroeconomic conditions, including inflation, rising interest rates and the accessibility of capital markets.

Uncertainty about global economic conditions may also cause decreased demand for our products and services and increased competition, which could result in lower sales volume and downward pressure on the prices for our products, longer sales cycles, and slower adoption of new technologies.

A weakening of macroeconomic conditions may also adversely affect our suppliers, which could result in interruptions in supply.

Market acceptance of our medical products in the U.S.

and other countries is dependent upon the medical equipment purchasing and procurement practices of our customers, patient need for our products and procedures and the reimbursement of patients' medical expenses by government healthcare programs and third-party payors.

The continuing uncertainty surrounding global economic conditions and financial markets may cause the purchasers of medical equipment to decrease their procurement activities.

Economic uncertainty, an increase in unemployment rates, as well as increasing health insurance premiums, co-payments and deductibles may adversely affect demand for our products and procedures.

Furthermore, governments and other third-party payors around the world facing tightening budgets could move to further reduce the reimbursement rates or the scope of coverage offered, which could adversely affect sales of our products.

Public health crises, such as the COVID-19 pandemic, have had, and could in the future have, a negative effect on our business.

Our global operations and interactions with healthcare systems, providers and patients around the world expose us to risks associated with public health crises, including epidemics and pandemics such as COVID-19.

In particular, the COVID-19 pandemic continues to cause significant volatility and uncertainty in the global and regional economies, leading to changes in consumer and business behavior, market fluctuations, materials and product shortages and restrictions on business and individual activities, all of which are materially impacting supply and demand in broad sectors of the world markets.

Additionally, the COVID-19 pandemic, together with general macroeconomic conditions, have led to disruptions in the global supply chain, primarily through a lack of availability of raw materials and electronic components.

We have experienced challenges associated with material and component availability for certain product lines, longer shipping and delivery times for raw materials and components, constrained logistics capacity related to the movement of our products, availability of skilled labor and increased costs of raw materials, components, labor, and freight and courier services.

Regional COVID-19 case volumes (including those related to subsequent variants), actions taken by governmental authorities, private businesses and individuals, such as “shelter-in-place” orders and restrictions on travel and access to our customers or temporary closures of our facilities or the facilities of our suppliers, disruption and/or higher costs to the Company’s supply chain, staffing shortages in hospitals and labor constraints in our facilities, could further impact our gross margins and our ability to ship our products and supply our customers.

The emergence of new variants, vaccinations and public health measures are driving the pace of economic recovery unevenly in various regions.

The direct and indirect disruptions caused by the pandemic and the responses of both governments and individuals could negatively impact the number of surgical and medical intervention procedures performed and have a material adverse effect on our business, financial condition, results of operations, or cash flows.

The extent to which fear of exposure to or actual effects of COVID-19, new variants, disease outbreak, epidemic or a similar widespread health concern impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the speed and extent of geographic spread of the disease, the duration of the outbreak, travel restrictions, the efficacy of vaccination and treatment;

impact on the U.S.

and international healthcare systems, the U.S.

economy and worldwide economy;

the timing, scope and effectiveness of U.S.

and international governmental response;

and the impact on the health, well-being and productivity of our employees.

RISKS RELATING TO OUR BUSINESS

Our operating results may fluctuate.

Our operating results, including components of operating results such as gross margin and cost of product sales, may fluctuate from time to time, and such fluctuations could affect our stock price.

Our operating results, including components of operating results such as gross margin and operating expenses, may fluctuate from time to time, and such fluctuations could affect our stock price.

Our operating results have fluctuated in the past and can be expected to do so from time to time in the future.

Some of the factors that may cause these fluctuations include:

• risks related to COVID-19;

• economic conditions worldwide, which could affect the ability of hospitals and other customers to purchase our products and could result in a reduction in elective and non-reimbursed operative procedures;

• the impact of acquisitions, our ability to integrate acquisitions, and our restructuring activities including portfolio rationalization, divestitures and product lifecycle management;

• the impact of acquisitions, our ability to integrate acquisitions, and our restructuring activities including portfolio rationalization, and divestitures;

• risks related to COVID-19 and other epidemics or similar widespread health concerns;

• expenditures for major initiatives, including acquired businesses and integrations thereof and restructuring;

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Many of our competitors have access to greater financial, technical, research and development, marketing, manufacturing, sales, distribution, administrative, consulting and other resources than we do.

Our competitors may be more effective at developing commercial products.

Our competitors may be more effective at developing commercial products or navigating the regulatory approval process in the markets in which we operate.

They may be able to gain market share by offering lower-cost products or products that enjoy better reimbursement from third-party payors and foreign governmental health systems.

Our competitive position depends on our ability to achieve market acceptance for our products, develop new products, implement production and marketing plans, secure regulatory approval for products under development, demonstrate clinical and economic effectiveness, obtain and maintain reimbursement coverage and funding under third-party payors and foreign governmental health systems, obtain patent protection and produce products consistently in sufficient quantities to meet demand.

Our competitive position depends on our ability to achieve market acceptance for our products, develop new products, implement marketing plans, secure regulatory approval for products under development, demonstrate clinical and economic effectiveness, obtain and maintain reimbursement coverage and funding under third-party payors and foreign governmental health systems, obtain patent protection and produce products consistently in sufficient quantities to meet demand.

We may need to develop new applications for our products to remain competitive.

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• third-party payors of hospital services and hospital outpatient services, including Medicare, Medicaid, private and public health insurers and foreign governmental health systems, annually revise their payment methodologies, which can result in stricter standards for reimbursement of hospital charges for certain medical procedures or the elimination of reimbursement;

• several foreign countries have implemented reforms of their respective healthcare sectors in an effort to reduce healthcare spending, including restricting funding to only those medical technologies and procedures with proven effectiveness, and increasing patient co-payments.

Governmental health systems have revised and continue to consider revisions of healthcare budgets, which could result in stricter standards for implementing certain medical procedures, increased scrutiny of medical devices, and downward pricing pressure;

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In addition to internally generated growth, our current strategy involves growth through acquisitions.

Between January 1, 2019 and December 31, 2021, we have acquired 3 businesses at a total cost of approximately $404.3 million which amount includes our acquisition of ACell, Inc.

in January 2021 for $306.9 million.

This acquisition added products to our complex wound management product portfolio and provides additional growth opportunities for our TT segment.

Between January 1, 2020 and December 31, 2022, we have acquired two businesses at a total cost of approximately $358.4 million which amount includes our acquisition of ACell, Inc.

in January 2021 for $306.9 million and our acquisition of Surgical Innovation Associates, Inc.

for $51.5 million in December 2022.

Both of these acquisitions added products to our complex wound management and plastic and reconstructive surgery product portfolios, respectively, and provides additional growth opportunities for our TT segment.

We may be unable to continue to implement our growth strategy and it may ultimately be unsuccessful.

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Some acquisitions may include the need for ongoing product development to occur consistent with time sensitive milestones in order for the Company to achieve its commercial projections for the acquisition.

Our future profitability will depend in part upon our

ability to develop our resources to adapt to these new products or business areas and to identify and enter into or maintain satisfactory distribution networks.

Our future profitability will depend in part upon our ability to develop our resources to adapt to these new products or business areas and to identify and enter into or maintain satisfactory distribution networks.

As a result of our acquisitions of other healthcare businesses, we may be subject to the risk of unanticipated business uncertainties, regulatory and other compliance matters or legal liabilities relating to those acquired businesses for which the sellers of the acquired businesses may not indemnify us, for which we may not be able to obtain insurance (or adequate insurance), or for which the indemnification may not be sufficient to cover the ultimate liabilities.

We may not be able to identify suitable acquisition candidates in the future, obtain acceptable financing or consummate any future acquisitions.

may not be able to identify suitable acquisition candidates in the future, obtain acceptable financing or consummate any future acquisitions.

Certain potential acquisitions are subject to antitrust and competition laws, which laws could impact our ability to pursue strategic acquisitions and could result in mandated divestitures.

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We believe that these factors are most likely to affect the following products that we sell:

• our collagen-based products, such as the Integra Dermal Regeneration Template and wound matrix products, the DuraGen ® family of products, our Absorbable Collagen Sponges, PriMatrix ® and SurgiMend ® products;

• our collagen-based products and bovine-based products, such as the Integra Dermal Regeneration Template and wound matrix products, the DuraGen ® family of products, our Absorbable Collagen Sponges, PriMatrix ® and SurgiMend products;

• our products made from silicone, such as our neurosurgical shunts and drainage systems and hemodynamic shunts;

• products which use many different specialty parts, electrical components, or chemicals from numerous suppliers, such as our intracranial monitors, shunts, catheters, tissue ablation, and headlights;

• our biosynthetic products, including the DuraSeal sealant system and DuraSorb biosynthetic mesh scaffold;

• products which are amniotic tissue-based

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To the extent these suppliers are unable to provide sterilization services, whether due to lack of capacity, regulatory requirements, environmental concerns such as those relating to ethylene oxide or otherwise, we may be unable to transition sterilization to other suppliers in a timely or cost effective manner, or at all, which could have an adverse impact on our operating results.

Our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as inflation, including wage inflation, or to supply restrictions beyond our control or the control of our suppliers.

Our supply chain and our cost of goods also may be negatively impacted by unanticipated price increases due to factors such as global economic disruptions, electronic component shortages, fear of future or ongoing pandemics, inflation, including wage inflation, recessionary conditions and geopolitical events, including the war in Ukraine, all of which are beyond our control or the control of our suppliers.

While it is our policy to maintain sufficient inventory of components so that our production will not be significantly disrupted even if a particular component or material is not available for a period of time, we remain at risk that we will not be able to qualify new components or materials quickly enough to prevent a disruption if one or more of our suppliers ceases production of important components or materials.

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Economic and political instability around the world could adversely affect the ability of hospitals and other customers to access funds to enable them to fund their operating and capital budgets.

As a result, hospitals and other customers could reduce budgets or put all or part of their budgets on hold or close their operations, which could have a negative effect on our sales, particularly the sales of capital equipment such as our ultrasonic surgical aspirators, neuromonitors and stereotactic products, or result in a reduction in elective and non-reimbursed procedures.

As a result, hospitals and other customers could reduce budgets or put all or part of their budgets on hold or close their operations, which could have a negative effect on our sales, particularly the sales of capital equipment such as our ultrasonic surgical aspirators, neuromonitors and cranial stabilization products, or result in a reduction in elective and non-reimbursed procedures.

The occurrence of those economic conditions could make it more difficult for us to accurately forecast and plan our future business activities and depending on their severity, could have a material, adverse effect on our business, financial condition and results of operations.

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Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted, including The Budget Control Act of 2011, The American Taxpayer Relief Act of 2012 and Medicare Access and CHIP Reauthorization Act of 2015, which, among other things, have reduced payments under Medicare and Medicaid to certain healthcare providers or altered the formula by which Medicare makes annual payment adjustments.

Congress also drafts and introduces, from time to time, legislation that could significantly change the statutory provisions governing the regulation of medical devices.

In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay approval or clearance of our future products under development or impact our ability to modify our currently cleared products on a timely basis.

For example, over the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance process for their products.

We cannot predict what impact ongoing uncertainty regarding federal and state health reform proposals, including the implementation or repeal of the ACA, judicial review and interpretation of the ACA and other healthcare laws, instability of the insurance markets, changes in the U.S.

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Our products, development activities and manufacturing processes are subject to extensive and rigorous regulation by numerous government agencies, including the FDA and comparable foreign agencies, as discussed in “Part 1, Item 1.

Business – Government Regulation.” To varying degrees, each of these agencies monitors and enforces our compliance with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of our medical devices.

Government Regulation.” To varying degrees, each of these agencies monitors and enforces our compliance with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of our medical devices.

We are also subject to regulations that may apply to certain of our products that are Drug/Device Combination products or are considered to be subject to pharmaceutical regulations outside the U.S.

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In addition, without the data from one or more clinical studies, it may not be possible for us to secure the data necessary to support certain regulatory submissions, to secure reimbursement or demonstrate other requirements.

We cannot assure you that access to clinical investigators, sites and subjects, documentation and data will be available on the terms and timeframes necessary.

We cannot assure that access to clinical investigators, sites and subjects, documentation and data will be available on the terms and timeframes necessary.

We are subject to extensive complex regulatory requirements by domestic and foreign government agencies and any failure to comply with our ongoing responsibilities under their applicable laws and regulations could result in a material adverse impact on our business.

Failure to comply with applicable regulations could result in future product recalls, injunctions preventing the shipment of products or other enforcement actions that could have a material adverse effect on our business.

We are also subject to the European Medical Device Regulation, which was adopted by the European Union (“EU”) as a common legal framework for all EU member states.

The implementation for Class I products occurred on May 26, 2021 and the EUDAMED Database is scheduled for May 26, 2022.

We also are subject to the European Medical Device Regulation, which was adopted by the European Union (“EU”) as a common legal framework for all EU member states.

The implementation for Class I products occurred on May 26, 2021 and the EUDAMED Database was implemented on May 26, 2022.

Under this regulation, companies that wish to manufacture and distribute medical devices in EU member states must meet certain quality system, and safety requirements as well as ongoing product monitoring responsibilities.

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Complying with the requirements of these regulations may require us to incur significant expenditures.

Expenditures for European Union Medical Device Regulation compliance activities amounted to $45.1 million for the year ended December 31, 2022 and we anticipate incurring additional expenditures in connection with our on-going efforts to obtain certification for our products under the European Medical Device Regulation.

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 our business, results of operations and cash flows.

Further, the regulatory environment in China continues to evolve, and officials in the Chinese government exercise broad discretion in deciding how to interpret and apply regulations.

It is possible that the Chinese government's current or future interpretation and application of existing or new regulations will negatively impact our China operations, result in regulatory investigations or lead to fines or penalties.

In addition, we are subject to laws and regulations that govern the means by which companies in the healthcare industry may market their products to healthcare professionals and may compete by discounting the prices of their products, including for example, the federal Anti-Kickback Statute, the federal False Claims Act, the federal Health Insurance Portability and Accountability Act of 1996, state law equivalents to these federal laws that are meant to protect against fraud and abuse and analogous laws in foreign countries.

Violations of these laws are punishable by criminal and civil sanctions, including, but not limited to, in some instances civil and criminal penalties, damages, fines, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid.

Violations of these laws are punishable by criminal and civil sanctions, including, but not limited to, in some instances civil and criminal penalties, damages, fines, and exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid.

Although we exercise care in structuring our sales and marketing practices and customer discount arrangements to comply with those laws and regulations, we cannot assure that:

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Should we delay or fail to comply with one or more of the regulatory requirements we could have reduced sales, increased costs, delays to new product introductions, enhancements or our strategic plans, or harm to our reputation or competitiveness, which could have a material adverse effect on our business and financial results.

Our medical device products are subject to reporting requirements and recalls, even after receiving regulatory clearance, approval or certification, which could harm our reputation, business and financial results.

After a device is placed on the market, numerous regulatory requirements apply, which require manufacturers to follow, among other things, design, testing, production, control, documentation and other quality assurance procedures during the manufacturing process;

labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling;

and medical device reporting regulations that require us to report to FDA or similar governmental bodies in other countries if our products may have caused or contributed to a death or serious injury or malfunction in a way that would be reasonably likely to contribute to death or serious injury if the malfunction were to recur.

The FDA and similar governmental bodies in other countries have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health.

We may, under own initiative, recall a product if a reasonable possibility of serious injury or any material deficiency in a device is found, or withdraw a product to improve device performance or for other reasons.

Recalls of any of our products may divert managerial and financial resources and have an adverse effect on our financial condition and results of operations.

A recall could harm our reputation with customers and consumers which could reduce the sales of our products.

In addition, the FDA or other foreign governmental agencies may implement enforcement actions in connection with a recall which could impair our product offerings and be harmful to our business and financial results.

Certain of our products contain materials derived from animal sources and may become subject to additional regulation.

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With respect to bovine, among other products, our dermal regeneration products, duraplasty products, wound care products, bone void fillers, nerve and tendon repair products and certain other products, contain material derived from bovine tissue.

In 2021, approximately 43.3% of our revenues derived from products containing material derived from bovine tissue.

In 2022, 43.3% of our revenues derived from products containing material derived from bovine tissue.

Products that contain materials derived from animal sources, including food, pharmaceuticals and medical devices, are subject to scrutiny in the media and by regulatory authorities.

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and New Zealand.

New Zealand has never had a case of BSE.

New Zealand has

never had a case of BSE.

We received approval in the U.S., the EU, Japan, Taiwan, China, Argentina as well as other countries for the use of New Zealand-sourced tendon in the manufacturing of our products.

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While Integra has not been named in any such suits, if a substantial breach or loss of data were to occur, we could become a target of such litigation.

If we do not retain our key personnel and attract and retain other highly skilled employees, our business could suffer.

If we fail to recruit, develop and retain the necessary personnel, our business and our ability to obtain new customers, develop new products and provide acceptable levels of customer service could suffer.

The success of our business is heavily dependent on the leadership of our key management personnel.

Our success also depends on our ability to recruit, develop and retain and motivate highly skilled sales, marketing, manufacturing and scientific personnel.

Competition for these persons in our industry is intense, and we may not be able to successfully recruit, train or retain qualified personnel.

We are experiencing increasing challenges in building and retaining our workforce in certain markets, where pressure from inflation and competition have exacerbated turnover and retention trends continuing from the COVID-19 pandemic.

Labor shortages and competition for qualified personnel could cause disruptions in our business operations.

RISKS RELATED TO TAX AND DEBT

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Significant judgment is required in determining our worldwide provision for income taxes.

Although we believe that our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.

Although we believe that our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different

from our historical income tax provisions and accruals.

The results of an audit or litigation could have a material, adverse effect on our financial statements in the period or periods for which that determination is made.

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and many foreign jurisdictions.

Taxes could significantly increase due to changes in tax laws or changes in our interpretation of those laws.

For example, the Organization for Economic Co-operation and Development, a global policy forum, is developing a global tax framework that, if implemented, includes a global minimum tax rate of 15%.

Taxes could also significantly increase due to changes in accounting guidance.

Our future effective tax rate could be unfavorably affected by numerous factors including a change in, or the interpretation of, tax rules and regulations in the jurisdictions in which we operate (including changes in legislation currently being considered), a change in our geographic earnings mix, and/or to the jurisdictions in which we operate, or a change in the measurement of our deferred taxes.

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Our leverage and debt service obligations could adversely affect our business.

As of December 31, 2021, our total consolidated external debt was approximately $1.6 billion (See Item 7 and Note 5,5 Debt of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K) for a discussion of our consolidated external debt).

As of December 31, 2022, our total consolidated external debt was approximately $1.5 billion (See Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 5, Debt , to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K) for a discussion of our consolidated external debt).

We may also incur additional indebtedness in the future.

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Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness instead of for other corporate purposes, including funding future expansion of our business, acquisitions, and ongoing capital expenditures, which could impede our growth.

In addition, our ability to comply with, renegotiate or extend the Company’s debt obligations will depend on our operating and financial performance, which in turn is subject to prevailing economic conditions and financial, business and other factors beyond our control.Any disruptions in our operations, the financial markets, or the overall economy, including as a result of COVID-19, may adversely affect the availability and cost of credit to us and/or our ability to comply with our existing obligations.

Any disruptions in our operations, the financial markets, or the overall economy, including as a result of COVID-19, may adversely affect the availability and cost of credit to us and/or our ability to comply with our existing obligations.

Changes in the calculation and or complete replacement of LIBOR could have an impact on our business.

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We have multiple debt facilities which utilizes a variable rate equal to Eurodollar LIBOR rate as a component of our interest rate.

This transition away from LIBOR as a common reference rate in the global financial market could have a material, adverse effect on our business.

Management continues to monitor the status and discussions regarding LIBOR.

Management expects all LIBOR-based contracts to be replaced by the Secured Overnight Financing Rate (“SOFR”), which is calculated based on overnight transactions under repurchase agreements backed by Treasury securities.

The Alternative Reference Rates Committee, a group of private-market participants convened by the U.S.

Federal Reserve Board and the New York Federal Reserve, has recommended the use of SOFR as a more robust reference rate alternative to LIBOR.

The use of SOFR as a substitute for LIBOR is, however, voluntary and may not be suitable for all market participants.

There can be no assurance that the replacement rate will be economically equivalent to LIBOR, which could result in higher interest rates for us under our debt facilities.

There is no guarantee that a transition from LIBOR to SOFR will not result in financial market disruptions, significant increases in benchmark rates, or our borrowing costs, any of which could have an adverse effect on our business, results of operations and financial condition.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

Our intellectual property rights may not provide meaningful commercial protection for our products, potentially enabling third parties to use our technology or very similar technology and could reduce our ability to compete in the market.

To compete effectively, we depend, in part, on our ability to maintain the proprietary nature of our technologies and manufacturing processes, which includes the ability to obtain, protect and enforce patents on our technology and to protect our trade secrets.

trade secrets.

We own or have licensed patents that cover aspects of some of our product lines.

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Damage to our manufacturing, distribution, development and/or research facilities because of fire, extreme weather conditions, natural disaster, power loss, communications failure, geopolitical disruption, unauthorized entry or other events, such as a flu or other health epidemic, such as COVID-19, could significantly disrupt our operations, the operations of suppliers and critical infrastructure and delay or prevent product manufacture and shipment during the time required to repair, rebuild or replace the damaged facilities.

Certain of our manufacturing facilities are located in Puerto Rico, which in the past has experienced both severe earthquakes and other natural disasters.Climate change may increase both the frequency and severity of extreme weather conditions and natural disasters and, consequently, risks to our operations and growth.

Certain of our manufacturing facilities are located in Puerto Rico, which in the past has experienced both severe hurricanes and other natural disasters.

Climate change may increase both the frequency and severity of extreme weather conditions and natural disasters and, consequently, risks to our operations and growth.

Although we maintain property damage and business interruption insurance coverage on these facilities, our insurance might not cover all losses under such circumstances, and we may not be able to renew or obtain such insurance in the future on acceptable terms with adequate coverage or at reasonable costs.

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dollars, currency fluctuations between the U.S.

dollar and the currencies in which those customers do business may have a negative impact on the demand for our products in foreign countries where the U.S.

dollar and the currencies in which those

customers do business may have a negative impact on the demand for our products in foreign countries where the U.S.

dollar has increased in value compared to the local currency.

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Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective.

For a description of our use of derivative financial instruments, see Note 6, Derivative Instruments of the Notes to Consolidated Financial Statements (Part II, Item 8 of this Form 10-K).

For a description of our use of derivative financial instruments, see Note 6, Derivative Instruments to the Notes to Consolidated Financial Statements (Part IV, Item 15 of this Annual Report on Form 10-K).

Our international operations subject us to laws regarding sanctioned countries, entities and persons, customs, import-export, laws regarding transactions in foreign countries, the U.S.

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In addition, these laws require that we exercise care in structuring our sales and marketing practices and effecting product registrations in foreign countries.

The Russia-Ukraine conflict and resulting sanctions and export restrictions are creating barriers to doing business in Russia and adversely impacting global supply chains.

While we have no manufacturing, distribution or direct material suppliers in the region, we are closely monitoring the potential raw material or supplier impact in both Russia and Ukraine.

Materials like palladium and neon, which are both dependent on Russia supply, are part of broader semiconductor shortages in industry.

Additional sanctions, export restrictions, and potential countermeasures within Russia may lead to greater uncertainty and geopolitical shifts in Asia that could cause additional adverse impacts on global supply chains and our business, results of operations, financial condition and cash flows.

The United Kingdom’s (“UK”) exit from the European Union on January 31, 2020, commonly referred to as Brexit, has caused, and may continue to cause uncertainty in the global political markets.

It is possible that Brexit could, among other things, affect the legal and regulatory environments to which our business is subject, impose greater restrictions on imports and exports between the UK and the EU and other parties, and create economic and political uncertainty in the region.

It is possible that Brexit could, among other things, affect the legal and regulatory environments, including the regulatory landscape concerning medical devices, to which our business is subject, impose greater restrictions on imports and exports between the UK and the EU and other parties, increase currency volatility and create economic and political uncertainty in the region.

As we seek to continue to expand and strengthen our international operations, we may experience difficulty in growing our sales in certain new markets and other international markets in which we are attempting to increase our presence due to, among other things, customer acceptance, undeveloped and/or unfamiliar distribution channels, regulatory restrictions and changes, and business knowledge of these markets.

From time to time, proposals are made to significantly change existing trade agreements and relationships between the U.S.

and other countries.

In recent years, the U.S.

government has implemented substantial changes to U.S.

trade policies, including import restrictions, increased import tariffs and changes in U.S.

participation in multilateral trade agreements, such as the United States-Mexico-Canada Agreement to replace the former North American Free Trade Agreement.

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

and China has resulted in the U.S.

government assessing supplemental tariffs on certain goods imported from China and China’s assessment of retaliatory tariffs on certain imports of U.S.

goods into China.

In addition, the United States has assessed or proposed supplemental tariffs and quantitative restrictions on U.S.

imports of certain products from other countries as well.

Owing to the complex relationships between the U.S.

and such other countries, political, diplomatic, military, or other events could result in business disruptions, including increased regulatory enforcement against companies, tariffs, trade embargoes, and export restrictions.

The imposition of such restrictions could increase the cost of the Company’s products and the components and raw materials that go into making them, require the Company to change its operations and the products it offers and negatively impact consumer confidence and spending, all of which, both individually and in the aggregate, could materially and adversely affect our operations and financial results.

GENERAL RISK FACTORS

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We are increasingly dependent on sophisticated information technology for our infrastructure and to support business decisions.

Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns.

An experienced third party maintains the enterprise business system used to support our transaction processing, accounting and financial reporting, and supply chain and manufacturing processes.

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We continue to consolidate and integrate the number of systems we operate, and to upgrade and expand our information system capabilities for stable and secure business operations.

Despite our implementation of controls to protect our systems and sensitive, confidential or personal data or information, we may be vulnerable to material security breaches, theft, misplaced, lost or corrupted data, employee errors and/or malfeasance (including misappropriation by departing employees) that could potentially lead to the compromising of sensitive, confidential or personal data or information, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimes and operational disruptions.

In addition, a cyber-related attack could result in other negative consequences, including damage to our reputation or competitiveness, remediation or increased protection costs, litigation or regulatory action.

Environmental, social and corporate governance (ESG) issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

There is an increasing focus from certain investors, customers, consumers, employees and other stakeholders concerning ESG matters.

Additionally, public interest and legislative pressure related to public companies’ ESG practices continue to grow.

Consistent with these developments, we published our inaugural ESG Report which includes performance highlights in key areas such as employee health and safety, diversity and inclusion, community impact, ethics and compliance, and environmental responsibility.

In addition, we formally expanded Board oversight to include ESG strategy and reporting.

If, however, our ESG practices fail to meet regulatory requirements or investor, customer, consumer, employee or other stakeholders' evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, product quality, supply chain management, corporate governance and transparency, our reputation, brand and employee retention may be negatively impacted, and our customers and suppliers may be unwilling to continue to do business with us.

If we do not adapt to or comply with new regulations, or fail to meet evolving investor, industry or stakeholder expectations and concerns regarding ESG issues, investors may reconsider their capital investment in our Company, and customers may choose to stop purchasing our products, which could have a material adverse effect on our reputation, business or financial condition.

UNRESOLVED STAFF COMMENTS

As of the filing of this Annual Report on Form 10-K, we had no unresolved comments from the staff of the Securities and Exchange Commission that were received not less than 180 days before the end of our 2022 fiscal year.

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