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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For year ended December 31, 20172021

Commission file number 001-16407

ZIMMER BIOMET HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:  (574) 267-6131

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.   (Check One):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by checkmark whether the registrant is a shell company (as defined Exchange Actin Rule 12b-2)12b-2 of the Act).    Yes  ☐    No  ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

The aggregate market value of shares held by non-affiliates was $25,893,487,085 (based$33,533,707,317(based on the closing price of these shares on the New York Stock Exchange on June 30, 20172021 and assuming solely for the purpose of this calculation that all directors and executive officers of the registrant are “affiliates”).  As of February 15, 2018, 203,146,9257, 2022, 209,177,445 shares of the registrant’s $.01 par value common stock were outstanding.  

Documents Incorporated by Reference

ZIMMER BIOMET HOLDINGS, INC.

2017 FORM 10-K ANNUAL REPORT

Cautionary Note AboutRegarding Forward-Looking Statements

This Annual Report on Form 10-K includes “forward-looking”contains forward-looking statements within the meaning of federal securities laws, including, among others, statements regarding sales and earnings guidance and any statements about our expectations, plans, intentions, strategies or prospects.  We generally use the words “may,” “will,” “expect,“expects,” “believe,“believes,” “anticipate,“anticipates,” “plan,“plans,” “estimate,“estimates,” “project,“projects,” “assume,“assumes,” “guide,“guides,” “target,“targets,” “forecast,“forecasts,” “see,“sees,” “seek,” “can,“seeks,” “should,” “could,” “would,” “intend” “predict,“predicts,” “potential,” “strategy,” “is confident that,” “future,” “opportunity,” “work toward,” “intends,” “guidance,” “confidence,” “positioned,” “design,” “strive,” “continue,” “look forward to” and similar expressions to identify forward-looking statements.  All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements.  Such statements are based upon the current beliefs, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements.  A detailedThese risks, uncertainties and changes in circumstances include, but are not limited to:  the effects of the COVID-19 global pandemic and other adverse public health developments on the global economy, our business and operations and the business and operations of our suppliers and customers, including the deferral of elective surgical procedures and our ability to collect accounts receivable; the failure of vaccine rollouts and other strategies to mitigate or reverse the impacts of the COVID-19 pandemic; the failure of elective surgical procedures to recover at the levels or on the timeline anticipated; the risks and uncertainties related to our ability to successfully execute our restructuring plans; our ability to attract, retain and develop the highly skilled employees we need to support our business; the risks and uncertainties associated with the planned spinoff of ZimVie Inc., including, without limitation, the significant expenses, time and efforts related to implementing such transaction, the ability to complete the transaction on our expected timeline or at all, the tax-free nature of the transaction, the tax-efficient nature of any subsequent distribution of any ZimVie Inc. common stock we retain, possible disruptions in our relationships with customers, suppliers and other business partners, and the possibility that the anticipated benefits and synergies of the transaction, strategic and competitive advantages of each company, and future growth and other opportunities will not be realized within the expected time periods or at all; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; the ability to remediate matters identified in inspectional observations or warning letters issued by the U.S. Food and Drug Administration (FDA), while continuing to satisfy the demand for our products; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; the ability to retain the employees, independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the FDA and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors and cost containment efforts sponsored by government agencies, legislative bodies, the private sector and healthcare purchasing organizations, including the volume-based procurement process in China; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; the ability to obtain and maintain adequate intellectual property protection; breaches or failures of our information technology systems or products, including by cyberattack, unauthorized access or theft; the ability to form and implement alliances; changes in tax obligations arising from tax reform measures, including European Union rules on state aid, or examinations by tax authorities; product liability, intellectual property and commercial litigation losses; changes in general industry and market conditions, including domestic and international growth rates; changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; the domestic and international business impact of political, social and economic instability, tariffs, trade embargoes, sanctions, wars, disputes and other conflicts; and the impact of the ongoing financial and political uncertainty on countries in EMEA on the ability to collect accounts receivable in affected countries.

See also the section titled “Risk Factors” (refer to Part I, Item 1A of this report) for further discussion of certain risks and uncertainties that could cause actual results and events to differ materially from suchthe forward-looking statements is included in the section titled “Risk Factors” (refer to Part I, Item 1A of this report).statements.  Readers of this report are cautioned not to rely on these forward-looking statements, since there can be no assurance that these forward-looking statements will prove to be accurate.  WeForward-looking statements speak only as of the date they are made, and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10‑Q10-Q and Current Reports on Form 8-K.This cautionary note is applicable to all forward-looking statements contained in this report.

TABLE OF CONTENTS

PART I

Overview

Zimmer Biomet is a global leader in musculoskeletal healthcare.  We design, manufacture and market orthopaedicorthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic (“CMFT”) products; dental implants; and related surgical products.  We collaborate with healthcare professionals around the globe to advance the pace of innovation.  Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues.  Together with healthcare professionals, we help millions of people live better lives.  In this report, “Zimmer Biomet,” “we,” “us,” “our,” “the Company” and similar words refer collectively to Zimmer Biomet Holdings, Inc. and its subsidiaries.  “Zimmer Biomet Holdings” refers to the parent company only.  

Zimmer Biomet Holdings was incorporated in Delaware in 2001.  Our history dates to 1927, when Zimmer Manufacturing Company, a predecessor, was founded in Warsaw, Indiana.  On August 6, 2001, we were spun off from our former parent and became an independent public company.

On June 24,  In 2015, (the “Closing Date”), we acquired LVB Acquisition, Inc. (“LVB”), the parent company of Biomet, Inc. (“Biomet”), and LVB and Biomet became our wholly-owned subsidiaries (sometimes hereinafter referred to as the “Biomet merger” or the “merger”).subsidiaries.  In connection with the merger, we changed our name from Zimmer Holdings, Inc. to Zimmer Biomet Holdings, Inc.  “Zimmer” used alone refers

On February 5, 2021, we announced our intention to pursue a plan to spin off our Spine and Dental businesses into a new public company named ZimVie Inc. (“ZimVie”).  The planned transaction is intended to benefit our stockholders by enhancing the business or informationfocus of usboth Zimmer Biomet and our subsidiaries onZimVie to meet the needs of patients and customers and, therefore, achieve faster growth and deliver greater value for all stakeholders.  The transaction is intended to qualify as a stand-alone basis without inclusiontax-free distribution, for U.S. federal income tax purposes, to U.S. stockholders of new publicly traded stock in ZimVie.  The expected completion date of the business or information of LVB or any of its subsidiaries.spinoff is March 1, 2022.

Customers, Sales and Marketing

Our primary customers include orthopaedicorthopedic surgeons, neurosurgeons, oral surgeons, and other specialists, dentists, hospitals, stocking distributors, healthcare dealers and, in their capacity as agents, healthcare purchasing organizations or buying groups.  These customers range from large multinational enterprises to independent clinicians and dentists.  

We have operations throughout the world.  We manage our operations through three major geographic operating segments and four product category operating segments.  Our three major geographic operating segments are the Americas, which is comprised principally of the U.S. and includes other North, Central and South American markets; EMEA, which is comprised principally of Europe and includes the Middle East and African markets; and Asia Pacific, which is comprised primarily of Japan, China and Australia and includes other Asian and Pacific markets.  Our four product category operating segments, which are individually not as significant as our geographic operating segments, are as follows: 1) Spine, less Asia Pacific (“Spine”); 2) Office Based Technologies; 3) Craniomaxillofacial and Thoracic (“CMF”); and 4) Dental.

We market and sell products through three principal channels:  1) direct to healthcare institutions, such as hospitals, referred to as direct channel accounts; 2) through stocking distributors and healthcare dealers; and 3) directly to dental practices and dental laboratories.  With direct channel accounts and some healthcare dealers, inventory is generally consigned to sales agents or customers.  With sales to stocking distributors, some healthcare dealers and hospitals, dental practices and dental laboratories, title to product passes upon shipment or upon implantation of the product.  Direct channel accountsshipment.  Consignment sales represented approximately 7580 percent of our net sales in 2017.2021.  No individual direct channel account, stocking distributor, healthcare dealer, dental practice or dental laboratorycustomer accounted for more than 1 percent of our net sales for 2017.2021.

We stock inventory in our warehouse facilities and retain title to consigned inventory in an effort to have sufficient quantities available when products are needed for surgical procedures.  Safety stock levels are determined based on a number of factors, including demand, manufacturing lead times and quantities required to maintain service levels.  

We also carry trade accounts receivable balances based on credit terms that are generally consistent with local market practices.

We utilize a network of sales associates, sales managers and support personnel, some of whom are employed or contracted by independent distributors and sales agencies.  We invest a significant amount of time and expense in training sales associates in how to use specific products and how to best inform surgeons of product features and uses.  Sales force representatives must have strong technical selling skills and medical education to provide technical support for surgeons.

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In response to the different healthcare systems throughout the world, our sales and marketing strategies and organizational structures differ by region.  We utilize a global approach to sales force training, marketing and medical education to provide consistent, high quality service.  Additionally, we keep current with key surgical

developments and other issues related to orthopaedicorthopedic surgeons, neurosurgeons, other specialists, dentists and oral surgeons and the medical and dental procedures they perform.

We allocate resources to achieve our operating profit goals through sevenfour operating segments.  Our operating segments are comprised of both geographicAmericas Orthopedics; Europe, Middle East and product category business units.  We are organized through a combination of geographicAfrica (“EMEA”); Asia Pacific; and product category operating segments for various reasons, including the distribution channels through which products are sold.  Our product category operating segments generally have distribution channels focused specifically on those product categories, whereas our geographic operating segments have distribution channels that sell multiple product categories.Americas Spine and Global Dental.  The following is a summary of our seven operating segments.  See Note 1719 to theour consolidated financial statements for more information regarding our segments.

Americas.Americas Orthopedics.  The Americas geographicOrthopedics operating segment is our largest operating segment.  This segment is comprised principally of the U.S. and includes other North, Central and South American markets for our orthopedic product categories.  This segment also includes research, development engineering, medical education, and brand management for our orthopedic product category headquarter locations.  The U.S. accounts for 94approximately 95 percent of net sales in this region.  The U.S. sales force consists of a combination of employees and independent sales agents, most of whom sell products exclusively for Zimmer Biomet.  The sales force in the U.S. receives a commission on product sales and is responsible for many operating decisions and costs.  

In this region, we contract with group purchasing organizations and managed care accounts and have promoted unit growth by offering volume discounts to customer healthcare institutions within a specified group.  Generally, we are designated as one of several preferred purchasing sources for specified products, although members are not obligated to purchase our products.  Contracts with group purchasing organizations generally have a term of three years, with extensions as warranted.  

In the Americas, we monitor and rank independent sales agents and our direct sales force across a range of performance metrics, including the achievement of sales targets and maintenance of efficient levels of working capital.  

EMEA.  The EMEA geographic operating segment is our second largest operating segment.  France, Germany, Italy, Spain and the United Kingdom collectively account for 56approximately 55 percent of net sales in the region.  This segment also includes other key markets, including Switzerland, Benelux, Nordic, Central and Eastern Europe, the Middle East and Africa.  This operating segment includes all product categories in these markets, except for Dental.  Our sales force in this segment is comprised of direct sales associates, commissioned agents, independent distributors and sales support personnel.  We emphasize the advantages of our clinically proven, established designs and innovative solutions and new and enhanced materials and surfaces.  In most European countries, healthcare is sponsored by the government and therefore government budgets impact healthcare spending, which can affect our sales in this segment.  

Asia Pacific.  The Asia Pacific geographic operating segment includes key markets such as Japan, China, Australia, New Zealand, Korea, Taiwan, India, Thailand, Singapore, Hong Kong and Malaysia.  Japan is the largest market within this segment, accounting for 45approximately 50 percent of the region’s sales.  This operating segment includes all product categories in these markets, except for Dental.  In Japan and most countries in the Asia Pacific region, we maintain a network of dealers, who act as order agents on behalf of hospitals in the region, and sales associates, who build and maintain relationships with orthopaedicorthopedic surgeons and neurosurgeons in their markets.  The knowledge and skills of these sales associates play a critical role in providing service, product information and support to surgeons.  We haveIn certain countries of this region, healthcare is sponsored by governments.  Most notably, in 2021 the Chinese government began to implement a researchnationwide volume-based procurement (“VBP”) process across certain of our product categories that negatively affected our net sales due to distributor inventory reductions, ongoing pricing negotiations with distributor partners, revaluation of channel inventory and development center in Beijing, China, which focuses on productsvolume reductions as patients deferred procedures until after VBP pricing has become effective.

Americas Spine and technologies designed to meet the unique needs of Asian patientsGlobal Dental.  The Americas Spine and their healthcare providers.

Spine.  The Spine product categoryGlobal Dental operating segment includes all spine product results except those in Asia Pacific.constitutes a majority of the operations that will be spun off to ZimVie.  The U.S. accounts for the majorityapproximately 75 percent of sales in this operating segment.  The Americas Spine market dynamics of the Spine business are similar to those described in the geographic operating segments.Americas Orthopedics.  However, the Spine business maintains a separate sales force of employees and independent sales agents.  

Office Based Technologies.  Our Office Based Technologies product category operating segment only sells to U.S. customers.  In this product category, we market our Dental products to doctors who prescribe them for use by patients.  The products are mostly provided directly by Zimmer Biomet to patients and are paid for through patients’ insurance or by patients themselves.  Products are also sold through wholesale channels on a limited basis.

CMF.  Our CMF product category operating segment competes across the world through a combination of direct and independent sales agents.  The U.S. accounts for the majority of sales in this operating segment.  The U.S. sales

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force consists of a combination of employees and independent sales agents.  Internationally,division, our primary customers are independent stocking distributors who market our products to their customers.  

Dental. Our Dental product category operating segment competes across the world.  Our sales force is primarily composed of employees who market our products to customers.  We sell directly to dental practices or dental laboratories, or to independent stocking distributors depending on the market.

Seasonality

Our business is seasonal in nature to some extent, as many of our products are used in elective procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans.  Additionally, with sales to customers where title to product passes upon shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.  Due to the COVID-19 global pandemic, the typical seasonal patterns did not occur in 2020 or 2021.

Distribution

We distribute our products both through large, centralized warehouses and through smaller, market specific facilities, depending on the needs of the market.  We maintain large, centralized warehouses in the U.S. and Europe to be able to efficiently distribute our products to customers in those regions.  In addition to these centralized warehouses, we maintain smaller distribution facilities in the U.S. and in each of the countries where we have a direct sales presence.  In many locations, our inventory is consigned to the healthcare institution.

We generally ship our orders via expedited courier.  Since most of our sales occur at the time of an elective procedure, we generally do not have firm orders.

Products

Our products include orthopaedicorthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine and CMFCMFT products; dental implants; and related surgical products.  

Knees

Total knee replacement surgeries typically include a femoral component, a patella (knee cap), a tibial tray and an articular surface (placed on the tibial tray).  Knee replacement surgeries include first-time, or primary, joint replacement procedures and revision procedures for the replacement, repair or enhancement of an implant or component from a previous procedure.  There are also procedures for partial reconstruction of the knee, which treat limited knee degeneration and involve the replacement of only one side, or compartment, of the knee with a unicompartmental knee prosthesis.  OurA developing trend in knee portfolio also includes early intervention and joint preservation products, which seekreplacement surgeries is the use of robotic technologies to preserveassist a surgeon with implant positioning.  In 2019, we entered the joint by repairingrobotic assistance market with our ROSA^® Robot.  The ROSA^® Robot can be used for total knee arthroplasty or regenerating damaged tissues and by treating osteoarthritis.partial knee arthroplasty.  

Our significant knee brands include the following:  

Hips

Total hip replacement surgeries replace both the head of the femur and the socket portion of the pelvis (acetabulum) of the natural hip.  Hip procedures include first-time, or primary, joint replacement as well as revision procedures.  Hip implant procedures involve the use of bone cement to attach or affix the prosthetic components to the surrounding bone, or are press-fit into bone, which means that they have a surface that bone affixes to through either ongrowth or ingrowth technologies. In 2021, we entered the robotic assistance market for hips with our ROSA^® Robot.

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Our significant hip brands include the following:  

S.E.T.

Our S.E.T. product category includes surgical, sports medicine, biologics, foot and ankle, extremities, trauma and traumaCMFT products.  Our surgical products are used to support various surgical procedures.  Our sports medicine products are primarily for the repair of soft tissue injuries, most commonly used in the knee and shoulder.  Our biologics products are used as early intervention for joint preservation or to support surgical procedures.  Our foot and ankle and extremities products are designed to treat arthritic conditions and fractures in the foot, ankle, shoulder, elbow and wrist.  Our trauma products are used to stabilize damaged or broken

bones and their surrounding tissues to support the body’s natural healing process.

Our significant S.E.T. brands include the following:  

SPINE and CMF

Our spine products division designs, manufactures and distributes medical devices and surgical instruments to deliver comprehensive solutions for individuals with back or neck pain caused by degenerative conditions, deformities or traumatic injury of the spine.  Our CMFCMFT product division includes face and skull reconstruction products as well as products that fixate and stabilize the bones of the chest in order to facilitate healing or reconstruction after open heart surgery, trauma or for deformities of the chest.

Our significant spine and CMFS.E.T. brands include the following:  

SPINE and DENTAL

Our dentalSpine products division designs, manufactures and distributes medical devices and surgical instruments to deliver comprehensive solutions for individuals with back or neck pain caused by degenerative conditions, deformities or traumatic injury of the spine.  Our Dental products division manufactures and/or distributes: 1) dental reconstructive implants – for individuals who are totally without teeth or are missing one or more teeth; 2) dental prosthetic products – aimed at providing a more

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natural restoration to resemble the original teeth; and 3) dental regenerative products – for soft tissue and bone rehabilitation.

Our significant spine and dental brands include the following:  

OTHER

Our other product category primarily includes our robotic, surgical and bone cement and office based technology products.    Our significant brands include the following:  

Research and Development

We have extensive research and development activities to develop new surgical techniques, including robotic techniques, materials, biologics and product designs.  The research and development teams work closely with our strategic brand marketing function.  The rapid commercialization of innovative new materials, biologics products, implant and instrument designs and surgical techniques remains one of our core strategies and continues to be an important driver of sales growth.

We are broadening our offerings in eachcertain of our product categories and exploring new technologies, including artificial intelligence and machine learning, with possible applications in multiple areas.  Our primary research and development facility is located in Warsaw, Indiana.  We have other research and development personnel based in, among other places, Canada, China, France, Switzerland and other U.S. locations.  As of December 31, 2017,2021, we employed approximately 1,9002,000 research and development employees worldwide.

We expect to continue to identify innovative technologies, which may include acquiring complementary products or businesses, establishing technology licensing arrangements or strategic alliances.  

Government Regulation and Compliance

WeOur operations, products and customers are subject to extensive government regulation inby numerous government agencies, both within and outside the countries in which we conduct business.  U.S.  Our global regulatory environment is increasingly stringent, unpredictable and complex. There is a global trend toward increased regulatory activity related to medical products.

In the U.S., numerous laws and regulations govern all the processes by which our products are brought to market.  These include, among others, the Federal Food, Drug and Cosmetic Act (“FDCA”) and regulations issued or promulgated thereunder.  The U.S. Food and Drug Administration (“FDA”) has enacted regulations that control all aspects of the development, manufacture, advertising, promotion and postmarket surveillance of medical products, including medical devices.  In addition, the FDA controls the access of products to market through processes designed to ensure that only products that are safe and effective are made available to the public.

Most of our new products fall into an FDA medical device classification that requires the submission of a Premarket Notification (510(k)) to the FDA.  This process requires us to demonstrate that the device to be marketed is at least as safe and effective as, that is, substantially equivalent to, a legally marketed device.  We must submit information that supports our substantial equivalency claims.  Before we can market the new device, we must receive an order from the FDA finding substantial equivalence and clearing the new device for commercial distribution in the U.S.  

Other devices we develop and market are in a category (class) for which the FDA has implemented stringent clinical investigation and Premarket Approval (“PMA”) requirements.  The PMA process requires us to provide clinical and laboratory data that establishes that the new medical device is safe and effective.  The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s).  

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All of our devices marketed in the U.S. have been cleared or approved by the FDA, with the exception of some devices which are classified by FDA regulation as exempt from premarket clearance and approval or were in commercial distribution prior to May 28, 1976.  The

In January 2021, the FDA has grandfathered these devices, soannounced a new FDA submissions are not required.  “Action Plan” to address software as a medical device (“SaMD”) and artificial intelligence and machine learning (“AI/ML”).  Certain of our new products will likely incorporate innovations related to AI/ML, and therefore we will monitor developments in this area closely to determine our compliance obligations and risks.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations.  The FDA reviews design and manufacturing practices, labeling and record keeping, and manufacturers’ required reports of adverse experiences and other information to identify potential problems with marketed medical devices.  We are also subject to periodic inspection by the FDA for compliance with its Quality System Regulation (21 CFR Part 820) (“QSR”), among other FDA requirements, such as restrictions onrequirements for advertising and promotion.promotion of our devices.  Our manufacturing operations, and those of our third-party manufacturers, are required to comply with the QSR, which addresses a company’s responsibility for product design, testing and manufacturing quality assurance and the maintenance of records and documentation.  The QSR requires that each manufacturer establish a quality system by which the manufacturer monitors the manufacturing process and maintains records that show compliance with FDA regulations and the manufacturer’s written specifications and procedures relating to the devices.  QSR compliance is necessary to receive and maintain FDA clearance or approval to market new and existing products.products and is also necessary for distributing in the U.S. certain devices exempt from FDA clearance and approval requirements.  The FDA conducts announced and unannounced periodic and on-going inspections of medical device manufacturers to determine compliance with the QSR.  If in connection with these inspections the FDA believes the manufacturer has failed to comply with applicable regulations and/or procedures, it may issue inspectional observations on Form 483FDA-483 (“Form 483”) that would necessitate prompt corrective action.  If FDA inspectional observations are not addressed and/or corrective action is not taken in a timely manner and to the FDA’s satisfaction, the FDA may issue a warning letter (which would similarly necessitate prompt corrective action) and/or proceed directly to other forms of enforcement action, including the imposition of operating restrictions, including a ceasing of operations, on one or more facilities, enjoining and restraining certain violations of applicable law pertaining to medical devicesproducts, seizure of products, and assessing civil or criminal penalties against our officers, employees or us.  The FDA could also issue a corporate warning letter or a recidivist warning letter or negotiate the entry of a consent decree of permanent injunction.injunction with us.  The FDA may also recommend prosecution to the U.S. Department of Justice (“DOJ”).  Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business,

financial condition and results of operations.  For information regarding certain warning letters and FDA Form 483 inspectional observations that we are addressing, see Note 1921 to theour consolidated financial statements.

The FDA, in cooperation with U.S. Customs and Border Protection (“CBP”), administers controls over the import of medical devices into the U.S. and can prevent the importation of products the FDA deems to violate the FDCA or its implementing regulations.  The CBP imposes its own regulatory requirements on the import of our products, including inspection and possible sanctions for noncompliance.  We are also subject to foreign trade controls administered by certain U.S. government agencies, including the Bureau of Industry and Security within the Commerce Department and the Office of Foreign Assets Control within the Treasury Department (“OFAC”).  In addition, exported medical products are subject to the regulatory requirements of each country to which the medical product is exported.

There are also requirements of state local and foreignlocal governments that we must comply with in the manufacture and marketing of our products.

In many of the foreign countries in which we market our products are sold, we are subject to supranational, national, regional and local regulations affecting, among other things, the development, design, andmanufacturing, product standards, packaging, requirementsadvertising, promotion, labeling, marketing and labeling requirements.  Manypostmarket surveillance of the regulations applicable to ourmedical products, in these countries are similar to those of the FDA.including medical devices.  The member countries of the European Union (the “EU”) have adopted the European Medical Device Directive (the “MDD”), which creates a single set of medical device regulations for products marketed in all member countries.  Compliance with the Medical Device DirectiveMDD and certification to a quality system (e.g., ISO 13485 certification) enable the manufacturer to place a CE mark on its products.  To obtain authorization to affix the CE mark to a product, a recognized European Notified Body must assess a manufacturer’s quality system and the product’s conformity to the requirements of the Medical Device Directive.MDD.  We are subject to inspection by the Notified Bodies for compliance with these requirements.  In May 2017, a new EU Medical Device Regulation (“MDR”) was published that will replace the MDD and will impose significant additional premarket and postmarket requirements.  The regulation haseffective date for the MDR was extended to May 2021 due to the COVID-19 pandemic.  Under a three-year implementationcorrigendum to the MDR finalized in December 2019, some low-risk medical devices being up-classified as a result of the MDR, including low-risk instruments, may now receive a transitional period to comply by May 2024.

Our quality management system is based upon the requirements of ISO 13485, the QSR, the MDD and after that time all products marketedother applicable regulations for the markets in which we sell.  Our principal manufacturing sites are certified to ISO 13485 and audited at regular intervals.  Additionally, our principal sites are certified under the EU will require certification accordingMedical Device Single Audit Program (“MDSAP”), which is a voluntary audit program developed by regulatory authorities in five countries (i.e., Australia, Brazil, Canada, Japan, and the United States) to these new requirements.  In addition, many countries, including Canada and Japan, have very specific additionalassess compliance with the quality management system regulatory requirements for quality assuranceof those countries.  MDSAP audits are conducted by an MDSAP-recognized auditing organization and manufacturing with which we must comply.can fulfill the needs of the participating regulatory jurisdictions, replacing standard surveillance audits by the regulatory authorities in those countries.

Further, we are subject to other supranational, national, regional, federal, state and foreignlocal laws concerning healthcare fraud and abuse, including false claims and anti-kickback laws, as well as the U.S. Physician Payments Sunshine Act and similar state and foreign healthcare professional payment transparency laws.  These laws are administered by, among others, the DOJ, the Office of Inspector General of the Department of Health and Human Services (“OIG-HHS”), state attorneys general and various foreign government agencies.  Many of these agencies have increased their enforcement activities with respect to medical deviceproducts manufacturers in recent years.  Violations of these laws are

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punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.  

Our operations in foreign countries are subject to the extraterritorial application of the U.S. Foreign Corrupt Practices Act (“FCPA”).  Our global operations are also subject to foreign anti-corruption laws, such as the United Kingdom (“UK”) Bribery Act, among others.  As part of our global compliance program, we seek to address anti-corruption risks proactively.  On January 12, 2017, we resolved previously-disclosed FCPA matters involving Biomet and certain of its subsidiaries.  As part of that settlement, we entered into a Deferred Prosecution Agreement (“DPA”) with the DOJ.  For information regarding the DPA, see Note 19DOJ, which concluded on February 9, 2021, six months following certification to the consolidated financial statements.  DOJ and the U.S. Securities and Exchange Commission (“SEC”) by an independent compliance monitor that our compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of the FCPA and is functioning effectively.

Our facilities and operations are also subject to complex federal, state, local and foreign environmental and occupational safety laws and regulations, including those relating to discharges of substances in the air, water and land, the handling, storage and disposal of wastes and the clean-up of properties contaminated by pollutants.  We do not expect that the ongoing costs of compliance with these environmental requirements will have a material impact on our consolidated earnings, capital expenditures or competitive position.

In addition, we are subject to federal, state and international data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal and protection of health-related and other personal information.  CertainThe FDA has issued guidance to which we may be subject concerning data security for medical devices.  The FDA and the Department of Homeland Security (“DHS”) have issued urgent safety communications regarding cybersecurity vulnerabilities of certain medical devices.  

In addition, certain of our affiliates are subject to privacy, security and securitybreach notification regulations promulgated under the Health Insurance Portability and Accountability Act of 1996 and the Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”).  HIPAA governs the use, disclosure, and security of protected health information by HIPAA “covered entities” and their “business associates.”  Covered entities are health plans, health care clearinghouses and health care providers that engage in specific types of electronic transactions.  A business associate is any person or entity (other than members of a covered entity’s workforce) that performs a service on behalf of a covered entity involving the use or disclosure of protected health information.  The U.S. Department of Health and Human Services (“HHS”) (through the Office for Civil Rights) has direct enforcement authority against covered entities and business associates with regard to compliance with HIPAA regulations.  On December 10, 2020, HHS issued a notice of proposed rulemaking (“NPR”) to modify the HIPAA privacy rule. The proposed modifications would remove communication barriers between providers and health plans, allow individuals more access to their health information and impose new requirements on entities that receive patient data requests. Separately, HHS (through the National Coordinator for Health Information Technology) issued a new rule, to be effective April 5, 2021, that seeks to limit “blocking” of electronic health information by imposing data access, software licensing and inter-operability requirements on healthcare providers and information technology vendors.  We intend to monitor both the NPR and the “information blocking” rule and assess their impact on the use of data in our business.

In addition to the FDA guidance and HIPAA regulations described above, a number of U.S. states have also has issued guidance to which weenacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal and protection of personal information, such as social security numbers, medical and financial information and other information.  These laws and regulations may be subject concerningmore restrictive and not preempted by U.S. federal laws.   For example, several U.S. territories and all 50 states now have data securitybreach laws that require timely notification to individuals, and at times regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of personal information. Other state laws include the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020.  The CCPA, among other things, contains new disclosure obligations for medical devices.businesses that collect personal information about California residents and affords those individuals numerous rights relating to their personal information that may affect our ability to use personal information or share it with our business partners. A second law called the California Privacy Rights Act (“CPRA”) passed via a ballot referendum in November 2020.  The CPRA expands the scope of the CCPA, imposes new restrictions on behavioral advertising and establishes a new California Privacy Protection Agency which will enforce the law and issue regulations.  The CPRA is scheduled to take effect on January 1, 2023, with a lookback to January 1, 2022.  Other states have considered and/or enacted similar privacy laws.  We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigation and compliance, allow private class-action litigation and carry significant potential liability for our business.

InternationalOutside of the U.S., data protection laws, including the EU General Data Protection DirectiveRegulation (the “GDPR”) and member state implementing legislation, mayand the Brazil Lei Geral de Proteção de Dados (the “LGPD”), also apply to some of our operations.  operations in the countries in which we provide services to our customers.  Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data continue to evolve.  The EU Data Protection DirectiveGDPR, which became effective on May 25, 2018, imposes data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data.  Moreover, the General Data Protection Regulation, an EU-wide regulation that will be fully enforceable by May 25, 2018, will introduce new data, protection requirementsa requirement for prompt notice of data breaches to data subjects and supervisory authorities in the EUcertain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the data protection rules.greater of 20 million Euros or 4% of total worldwide annual turnover of the preceding financial year).

Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

Competition

The orthopaedicsorthopedics and broader musculoskeletal care industry is highly competitive.  In the global markets for our knees, hips, and S.E.T. products, our major competitors include:include the DePuy Synthes Companies of Johnson & Johnson;Johnson, Stryker Corporation;Corporation and Smith & Nephew plc.  There are smaller competitors in these product categories as well who have success by focusing on smaller subsegments of the industry.  

In the spine and CMF categories,product category, we compete globally primarily with the spinal and biologic business of Medtronic plc, the DePuy Synthes Companies, Stryker Corporation, NuVasive, Inc. and Globus Medical Inc.

In the dental implant category, we compete primarily with Nobel Biocare Holding AG (part of the Danaher Corporation),The Straumann Holding AG andGroup, Dentsply Sirona Inc. and Nobel Biocare Services AG (part of Envista Holdings Corporation).

Competition within the industry is primarily based on pricing, technology, innovation, quality, reputation, customer service and customer service.pricing.  A key factor in our continuing success in the future will be our ability to develop new products and technologies and improve existing products and technologies.  

Manufacturing and Raw Materials

We manufacture our products at various sites.  We also strategically outsource some manufacturing to qualified suppliers who are highly capable of producing components.  

The manufacturing operations at our facilities are designed to incorporate the cellular concept for production and to implement tenets of a manufacturing philosophy focused on continuous improvement efforts in product quality, lead time reduction and capacity optimization.  Our continuous improvement efforts are driven by Lean and Six Sigma methodologies.  In addition, at certain of our manufacturing facilities, many of the employees are cross-trained to perform a broad array of operations.

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We generally target operating our manufacturing facilities at optimal levels of total capacity.  We continually evaluate the potential to in‑source and outsource production as part of our manufacturing strategy to provide value to our stakeholders.

In most of our manufacturing network, we have improved our manufacturing processes to harmonize and optimize our quality systems and to protect our profitability and offset the impact of inflationary costs.  We have, for example, employed computer-assisted robots and multi-axis grinders to precision polish medical devices; automated certain manufacturing and inspection processes, including on-machine inspection and process controls; purchased state-of-the-art equipment; in-sourced core products and processes; and negotiated cost reductions from third-party suppliers.  Our Warsaw North Campus facility is in the process of implementing many of these manufacturing process improvements.  These process improvements are an integral part of our quality remediation plans.

We use a diverse and broad range of raw materials in the manufacturing of our products.  We purchase all of our raw materials and select components used in manufacturing our products from external suppliers.  In addition, we purchase some supplies from single sources for reasons of quality assurance, sole source availability, cost effectiveness or constraints resulting from regulatory requirements.  We work closely with our suppliers to assure continuity of supply while maintaining high quality and reliability.  To date, we have not experienced any significant difficulty in locating and obtaining the materials necessary to fulfill our production schedules.

Intellectual Property

Patents and other proprietary rights are important to the continued success of our business.  We also rely upon trade secrets, know-how, continuing technological innovation and licensing opportunities to develop and maintain our competitive position.  We protect our proprietary rights through a variety of methods, including confidentiality agreements and proprietary information agreements with vendors,suppliers, employees, consultants and others who may have access to proprietary information.  We own or control through licensing arrangements over 8,0009,000 issued patents and patent applications throughout the world that relate to aspects of the technology incorporated in many of our products.

EmployeesHuman Capital

As of December 31, 2017,2021, we employed approximately 18,20019,500 employees worldwide, including approximately 1,9002,000 employees dedicated to research and development.  Approximately 8,5009,000 employees are located within the U.S. and approximately 9,70010,500 employees are located outside of the U.S., primarily throughout Europe and in Japan.Japan and China.  We have approximately 7,9008,000 employees dedicated to manufacturing our products worldwide.  

Our mission is to alleviate pain and improve the quality of life for people around the world.  Our commitment to patients shapes all day-to-day decisions at Zimmer Biomet.  To be able to accomplish our mission we have established guiding principles.  These guiding principles are central to our human capital management policies and practices.  The Warsaw, Indiana production facilities employ approximately 2,700 employees in the aggregate. guiding principles are:

Diversity, Equity and Inclusion

We have production employees represented by a labor union in each of Dover, Ohio and Bridgend, South Wales.  We have other employees in Europe who are represented by Works Councils.  We believe that each of us as individuals can drive change every day.  We remain wholly committed to creating, supporting and celebrating diverse and equal workplaces and communities.  Together, we will continue to foster and embrace diversity and inclusion within our relationshipteam and our communities, and commit our voices and our resources to community groups, business platforms and other organizations united to driving meaningful change and sustained improvement.

We believe that representation matters.  As of December 31, 2021, women made up approximately 35 percent of our total employee population, and approximately 25 percent of positions at Director level and above.  People of Color (“POC”) made up approximately 22 percent of our total employee population in the U.S., and comprised approximately 15 percent of positions at Director level and above.  We have established 2026 representation goals for women and POC at all levels of the organization, guided by internal data and external benchmarking.  

Core to our values is our commitment to stand together against hatred, discrimination and injustice, and we advance these values through our actions and investments. With this in mind, we have committed to the following initiatives to drive and accelerate change both within our own organization and around the globe. We have shared these commitments publicly and are tracking our progress against them:  

Employee Engagement

We value our employees’ input and to that end, from time-to-time, we conduct comprehensive employee engagement surveys that ultimately inform our actions towards improving employee engagement.  Surveys attempt to assess five drivers of engagement including purpose, culture, leadership, personal growth and belonging.  The key results of surveys, and commensurate action plans, are shared with our Board of Directors and with our employee base.  Employee engagement is the degree to which employees invest their cognitive, emotional, and behavioral energies toward positive organizational outcomes.  While we strive for engagement scores to sequentially improve, the outcomes of the surveys can be influenced by many factors that are internal and external to the company.  

We believe it is critical to keep our employees engaged through frequent and transparent communication.  This is accomplished through town halls, video and written messages, news and recognition on our intranet site, and various other methods.  To stay connected through the COVID-19 pandemic, our Chief Executive Officer has kept employees informed of our priorities, financial results, management response and employee health and safety through frequent video messages and written communications.

Health, Safety and Wellness

The physical and mental health, financial wellbeing, and work/life balance of our employees is satisfactory.vital to accomplishing our mission.  We sponsor wellness programs designed to enhance physical, financial and mental wellbeing for our employees.  We encourage participation in these programs through regular communications, educational sessions and other incentives.  

We are also intensely focused on the health and safety of our team members in the workplace. Our environmental, health and safety team constantly monitor various metrics to ensure we are providing the safest environment in which to work. In 2021, our Total Recordable Incident Rate was 0.29 and our Lost Time Incident Rate was 0.14. These results are shared with relevant regulatory agencies as required and presented to our Board of Directors.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our executive officers as of February 19, 2018.15, 2022.

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Mr. Hansonwas appointed President and Chief Executive Officer and a member of the Board of Directors in December 2017.  He was subsequently named Chairman of the Board of Directors in May 2021.  Previously, Mr. Hanson served as Executive Vice President and President, Minimally Invasive Therapies Group of Medtronic plc from January 2015 until joining Zimmer Biomet.  Prior to that, he was Senior Vice President and Group President, Covidien of Covidien plc from October 2014 to January 2015; Senior Vice President and Group President, Medical Devices and United States of Covidien from October 2013 to September 2014; Senior Vice President and Group President of Covidien for the Surgical Solutions business from July 2011 to October 2013; and President of Covidien’s Energy-based Devices business from July 2006 to June 2011.  Mr. Hanson held several other positions of increasing responsibility in sales, marketing and general management with Covidien from October 1992 to July 2006.

Mr. Bruneau was appointed Group President with responsibility for the Company’s, Spine, Craniomaxillofacial, Thoracic and Surgery Assisting Technology businesses in December 2017.  Prior to that, Mr. Bruneau served as Vice President and General Manager with global responsibility for the Company’s Craniomaxillofacial and Thoracic businesses beginning in June 2015.  He also led the integration of the Robotics business until assuming his current role.  Previously, Mr. Bruneau served in Vice President roles of increasing responsibility in marketing, business development and general management at Biomet from September 2008 until June 2015.  Prior to joining Biomet, Mr. Bruneau held numerous positions with Sofamor Danek Group and Medtronic over a 12-year period.

Mr. Collins Davis was appointed Vice President, Interim Controller and Chief Accounting Officer in November 2021. Previously, he served as the Company’s Vice President, Finance Integration since August 2020, and the Vice President, Global Integration of the Company since June 2015. Mr. Davis served as the Vice President, Finance and Corporate Controller and Chief Accounting Officer, effective June 2015.  Prior to that, Mr. Collins served as Vice President, Finance for the Global Reconstructive Division and Global Operations organization.  He joinedprincipal accounting officer, of the Company in 2010 as Vice President, Finance for the Global Reconstructive Division and U.S. Commercial organization.  Previously, Mr. Collins held the position of Vice President, Finance and served as the chief financial officer of the Commercial segment of Oshkosh Corporation from 2007 to 2010.  From 1997 to 2007, he was employed at Guidant Corporation and Boston Scientific Corporation, where he held a number of positions of increasing responsibility, including Finance Director and chief financial officer of the Guidant Japan organization, Global Director of Operations Finance and Director of Strategic Planning.

Mr. Delp was appointed President, Americas effective January 2017.  He is responsible for the Company’s sales and management of the direct and indirect sales channels in the Americas region, including the United States, Canada and Latin America.  He served as Vice President, U.S. Sales from June 2015 until assuming his current role.  Mr. Delp previously served in commercial Vice President roles with Biomet from OctoberMay 2007 until June 2015.  Prior to those appointments, Mr. Delp held numerous positions within the musculoskeletal healthcare field, where he began his career in 1995.

Mr. Florin Ms. Ellingson was appointed Executive Vice President and Chief Financial Officer in February 2018.  Prior to that appointment, he served as Senior Vice President and Chief FinancialStrategy Officer from June 2015 to February 2018.  In addition, he served as Interim Chief Executive Officer from July 2017 to December 2017.  Prior to the Biomet merger, Mr. Florin served as Senior Vice President and Chief Financial Officer of Biomet from June 2007 to June 2015.  Before joining Biomet, he served as Vice President and Corporate Controller of Boston Scientific Corporation from 2001 through May 2007.  Prior to that, Mr. Florin served in financial leadership positions within Boston ScientificCorporation and its various business units.  Before joining Boston Scientific Corporation, Mr. Florin worked for C.R. Bard from October 1990 through June 1995.

Dr. Mazur-Hofsaess was appointed President, Europe, Middle East and Africa (EMEA) in April 2013.  She is responsible for the sales, marketing and distribution of products in the EMEA region.  Dr. Mazur-Hofsaess joined the Company in February 2010 as Senior Vice President, EMEA Sales and Marketing2018 and was appointed President, EMEA Reconstructivedesignated as an executive officer in February 2012.  She has more than 20 years’ experience within the pharmaceutical, diagnostics and medical device sectors.  January 2021.  Prior to joining Zimmer Biomet, Ms. Ellingson served as a member of the Company, Dr. Mazur-Hofsaess servedexecutive leadership team of St. Jude Medical in various management positions at Abbott Laboratories beginning in 2001,of increasing responsibility from 2012 until 2017, most recently as Vice President, Diagnostics – Europe.

Mr. Nolan was appointed Group President effective June 2015.  He has responsibility for the Company’s Biologics, Extremities, Sports Medicine, Surgical, Trauma, Foot and Ankle, Office Based Technologies and Zimmer Biomet Signature Solutions businesses.  He joined the Company in November 2012Corporate Strategy from 2015 until 2017.  Before joining St. Jude Medical, Ms. Ellingson served as Senior Vice President, Sales.  From January 2014 to June 2015, he served as Senior Vice President, SalesBusiness Development and Advanced Solutions.Investor Relations at AGA Medical Corporation.  Prior to joining the Company, Mr. Nolan servedAGA Medical, Ms. Ellingson had more than 15 years of experience in investment banking, most recently with Bank of America as President, Biomet Sports Medicine, Extremities and Trauma from 2011 to 2012 and as President, Biomet Sports Medicine from 2001 to 2011.  He joined Biomet in 1996.a Managing Director, Medical Technology Investment Banking.

Mr. Phippswas appointed Senior Vice President, General Counsel and Secretary in May 2007.  He has global responsibility for the Company’s Legal Affairs and he serves as Secretary to the Board of Directors.  Mr. Phipps

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also oversees the Company’s Government Affairs Corporate Communication and Public Relations activities.  Previously, Mr. Phipps served as Associate General Counsel and Corporate Secretary from December 2005 to May 2007.  He joined the Company in September 2003 as Associate Counsel and Assistant Secretary.  Prior to joining the Company, he served as Vice President and General Counsel of L&N Sales and Marketing, Inc. in Pennsylvania and he practiced law with the firm of Morgan, Lewis & Bockius in Philadelphia, focusing on corporate and securities law, mergers and acquisitions and financial transactions.

Mr. Williamson Tornos wasappointed Chief Operating Officer in March 2021. Previously, he served as the Company’s Group President, Global Businesses and the Americas since December 2019 and prior to that as Group President, Orthopedics since joining the Company in November 2018.  Prior to joining Zimmer Biomet, Mr. Tornos served as Worldwide President of the Global Urology, Medical and Critical Care Divisions of Becton, Dickinson and Company (“BD”) (and previously, C. R. Bard, Inc. (“Bard”)) from June 2017 until October 2018.  From June 2017 until BD’s acquisition of Bard in December 2017, Mr. Tornos also continued to serve as President, EMEA of Bard, a position to which he was appointed Groupin September 2013.  Mr. Tornos joined Bard in August 2011 and, prior to his appointment as President, Joint ReconstructionEMEA, served as Vice President and General Manager with leadership responsibility for Bard’s business in Southern Europe, Central Europe and the Company’s Knee, Hip, Bone Cement, Patient-Matched ImplantsEmerging Markets Region of the Middle East and Personalized Solutions businesses effective June 2015.Africa.  Before joining Bard, Mr. Tornos served as Vice President and General Manager of the Americas Pharmaceutical and Medical/Imaging Segments of Covidien International from April 2009 to August 2011.  Before that, he served as International Vice President, Business Development and Strategy with Baxter International Inc. from July 2008 to April 2009 and, prior to that, Mr. Tornos spent 11 years with Johnson & Johnson in positions of increasing responsibility.  He has also served as a member of the board of directors at PHC Holdings Corporation since September 2021.  

Mr. Upadhyay was appointed Executive Vice President and Chief Financial Officer in July 2019.  Prior to thejoining Zimmer Biomet, merger, heMr. Upadhyay served as Senior Vice President, Biomet and President, Global Reconstructive JointsFinancial Operations at Bristol-Myers Squibb from February 2014 toNovember 2016 until June 2015.  Prior to that, Mr. Williamson2019.  Before joining Bristol-Myers Squibb, he served as Biomet’sExecutive Vice President and General Manager, Global Bone Cement and Biomaterials ResearchChief Financial Officer of Endo International from September 20112013 to November 2016.  Prior to his tenure at Endo International, Mr. Upadhyay served as Interim Chief Financial Officer as well as Senior Vice President of Finance, Corporate Controller and Principal Accounting Officer of BD.  Prior to his role as BD’s Interim Chief Financial Officer and Corporate Controller, Mr. Upadhyay was the Senior Vice President of Global Financial Planning and Analysis and also held the role of Vice President and Chief Financial Officer of BD’s international business.  Before joining BD in 2010, Mr. Upadhyay held a number of leadership roles across AstraZeneca and Johnson & Johnson.  Mr. Upadhyay spent the early part of his career in public accounting with KPMG.

Mr.van Zuilen was appointed President, Europe, Middle East and Africa in June 2021.  Prior to joining Zimmer Biomet, Mr. van Zuilen served in various roles for Medtronic plc, including as Vice President, North Western Europe from October 2020 to May 2021, as Vice President, Restorative Therapies Group EMEA from February 2014,2017 through September 2020, and as Corporate Vice President, Global Biologics and BiomaterialsAdvanced Surgical Technologies Europe, Surgical Solution Group, from May 2006 to September 2011.  Mr. Williamson previouslyOctober 2011 through January 2017. He served in other roles of increasing responsibility with Medtronic plc through January 1998. Before joining Medtronic, he spent more than five years in medical sales, most recently with Baxter BV (Edwards Life Sciences).

Ms. Winkler joined Zimmer Biomet as Biomet’sGroup Vice President Business Development from December 2003of Human Resources in March 2020 and was appointed Senior Vice President, Chief Human Resources Officer in February 2021. Prior to May 2006.  He began his career withjoining Zimmer Biomet, in 1990she served Cardinal Health as a Product Development Engineer.Worldwide Vice President of Human Resources in the Medical Segment from November 2016 through January 2020. Before joining Cardinal Health, Ms. Winkler served more than 20 years with Johnson and Johnson, including its subsidiary companies DePuy and Cordis, most recently as Global Head, Human Resources Global Finance from April 2011 through November 2016.

Mr. Yi was appointed President, Asia Pacific effectivein June 2015.  He is responsible for the sales, marketing and distribution of products, services and solutions in the Asia Pacific region.  Mr. Yi joined the Company in March 2013 as Senior Vice President, Asia Pacific.  Previously, he served as Vice President and General Manager of St. Jude Medical for Asia Pacific and Australia from 2005 to 2013.  Prior to that, Mr. Yi held several leadership positions over a ten-year period with Boston Scientific Corporation, ultimately serving as Vice President for North Asia.

AVAILABLE INFORMATION

Our Internet address is www.zimmerbiomet.com.  We routinely post important information for investors on our website in the “Investor Relations” section, which may be accessed from our homepage at www.zimmerbiomet.com or directly at http:https://investor.zimmerbiomet.com.  We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.  Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, Securities and Exchange Commission (“SEC”)SEC filings, public conference calls, presentations and webcasts.  Our goal is to maintain the Investor Relations website as a portal through which investors can easily find or navigate to pertinent information about us, free of charge, including:

The information available on our website is not incorporated by reference in, or a part of, this or any other report we file with or furnish to the SEC.

We operate in a rapidly changing economic and technological environment that presents numerous risks, many of which are driven by factors that we cannot control or predict.  Our business, financial condition and results of

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operations may be impacted by a number of factors.  In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm our business, financial condition or results of operations, including causing our actual results to differ materially from those projected in any forward-looking statements.  The following list of significant risk factors is not all-inclusive or necessarily in order of importance.  Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, also may materially adversely affect us in future periods.  You should carefully consider these risks and uncertainties before investing in our securities.

Risks Related to our Business, Operations and Strategy

The COVID-19 pandemic has adversely impacted, and continues to pose risks to, our business, results of operations and financial condition, the nature and extent of which are highly uncertain and remain unpredictable.

Our global operations expose us to risks associated with public health crises and outbreaks of epidemic, pandemic, or contagious diseases, such as COVID-19.  We maycontinue to experience a disruption of our business activitiesdecline in elective surgical procedures globally due to the transitionCOVID-19 pandemic.  In the third and fourth quarters of 2021, the highly transmissible Delta and Omicron variants resulted in further deferrals of elective surgical procedures, and we believe that staffing shortages at hospitals also contributed to a new Chief Executive Officer.

Effective asthe deferral of December 19, 2017, our Board of Directors appointed Bryan C. Hanson as President and Chief Executive Officer and a membersuch procedures. We expect these declines to continue for the duration of the Boardpandemic, and they may be further impacted by COVID-19 variants and resurgences.  

The COVID-19 global pandemic has had, and we expect it to continue to have, an adverse impact on our financial condition, results of Directors.  Recently hired executives may view the business differently than prior membersoperations and cash flows.  Our net sales have not returned to pre-pandemic levels.  It is not certain when our financial condition, results of management, and over time may make changesoperations, or cash flows will return to our strategic focus, operations, business plans, existing personnel and their responsibilities.  We can give no assurances that we will be ablepre-pandemic levels.  

Deferral of elective surgical procedures has caused us to properly manage any such shift in focus, or that any changes to our business would ultimately prove successful.  In addition, leadership transitions and management changes can be inherently difficult to manage and may cause uncertainty or a disruption to our business or may increase the likelihood of turnover in key officers and employees.  Our success depends in part on having a successful leadership team.  If we cannot effectively manage leadership transitions and management changes, it could make it more difficult to successfully operate our business and pursue our business goals.  We can give no assurances that we will be able to retain the services of any of our current executives or other key employees.  If we do not succeed in attracting well-qualified employees, retaining and motivating existing employees or integrating new executives and employees, our business could be materially and adversely affected.

We incurred substantial additional indebtedness in connection with the Biomet and LDR mergers and may not be able to meet all of our debt obligations.

We incurred substantial additional indebtedness in connection with the Biomet merger in 2015 and the LDR Holding Corporation (“LDR”) merger in 2016.  At December 31, 2017, our total indebtedness was $10.1 billion, as compared to $1.4 billion at December 31, 2014.  We funded the cash portionexperience certain of the Biomet merger consideration, the pay-off of certain indebtedness of Biometfollowing, and the payment of transaction-related expenses through a combination of available cash-on-hand and proceeds from debt financings, including proceeds from a $7.65 billion issuance of senior unsecured notes in March 2015 and borrowings of $3.0 billion under a five-year term loan (“U.S. Term Loan A”) in June 2015.  In addition, in September 2016, we borrowed $750 million under a three-year unsecured term loan facility and utilized these funds to repay outstanding borrowings under our revolving facility incurred in connection with the acquisition of LDR.  Also, in December 2016, we issued €1.0 billion aggregate principal amount of Euro-denominated senior notes and used the proceeds to repay a portionmay experience other of the U.S. dollar-denominated senior notes issued in connection with the Biomet merger.  Further, in September 2017, we borrowed 21.3 billion Japanese Yen under a five-year term loan and utilized these funds to pay down a portion of U.S. Term Loan A.  As of December 31, 2017, our debt service obligations, comprised of principal and interest (excluding capital leases and equipment notes), during the next 12 months are expected to be $1,522.4 million.  As a result of the increase in our debt, demands on our cash resources have increased.  The increased level of debt could,following, among other things:potential negative outcomes:

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limitCOVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas, present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows.  

Our restructuring program may not be successful or we may not fully realize the expected cost savings and/or operating efficiencies from our restructuring initiatives.

In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing costs to allow us to further invest in higher priority growth opportunities, which program is ongoing.  In December 2021, our management also initiated a global restructuring program (the “2021 Restructuring Plan”) to reorganize our operations in preparation for the planned spinoff of ZimVie with an objective of reducing costs.  Restructuring initiatives involve complex plans and actions that may include, or result in, workforce reductions, global plant closures and/or consolidations, product portfolio rationalizations and asset impairments.  Additionally, as a result of restructuring initiatives, we may experience a loss of continuity, loss of accumulated knowledge and/or inefficiencies during transitional periods.  Restructuring initiatives present significant risks that may impair our ability to apply proceeds from a future offering achieve anticipated operating enhancements and/or asset salecost reductions, or otherwise harm our business, including higher than anticipated costs in implementing our restructuring program, as well as management distraction. For more information on our restructuring program, see Note 4 to purposes other than the servicing and repayment of debt.

our consolidated financial statements.  If we fail to comply with the termsachieve some or all of the DPA that we entered into in January 2017, we may be subject to criminal prosecution and/or exclusion from federal healthcare programs.

On January 12, 2017, we resolved previously-disclosed FCPA matters involving Biomet and certainexpected benefits of its subsidiaries.  As part of the settlement, we entered into a DPA with the DOJ.  A copy of the DPA is incorporated by reference as an exhibit to this report.

If we do not comply with the terms of the DPA, we could be subject to prosecution for violating the internal controls provisions of the FCPA and the conduct of Biomet and its subsidiaries described in the DPA, which conduct pre-dated our acquisition of Biomet, as well as any new or continuing violations.  We could also be subject to exclusion by OIG-HHS from participation in federal healthcare programs, including Medicaid and Medicare.  Any of these eventsrestructuring, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

Our success largely depends on the strength of our talent, including our senior management, and ensuring we have meaningful succession plans in place. We may not be able to attract, retain and develop the highly skilled employees we need to support our business, which could harm our business.

Our future performance depends, in large part, on the continued skills, experiences, competencies and services of our senior management and other key talent, including our ability to attract, retain, develop and motivate key talent. Competition for talent in the various geographies and business segments in which we operate is significant. Our ability to attract and retain key talent, in particular senior management, will be dependent on a number of factors, including prevailing market conditions and our ability to offer competitive compensation packages. There is no guarantee that we will have the continued service of key employees who we rely upon to execute our business strategy and identify and pursue strategic opportunities and initiatives. The loss of the services of any of our senior management or other key talent, or our inability to attract highly qualified senior management and other key talent, could harm our business. In particular, we may have to incur costs to replace senior officers or other key employees who leave, and our ability to execute our business strategy could be impaired if we are unable to replace such persons in a timely manner.

Effective succession planning is also important to our long-term success. Failure to ensure effective transfer of knowledge and orderly transitions involving key employees could hinder our strategic planning and execution. Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key new hires or promoted employees could adversely affect our business and results of operations.

We may not be able to effectively integrate acquired businesses into our operations or achieve expected cost savings or profitability from our acquisitions.

Our acquisitions involve numerous risks, including:

As a result, if we fail to evaluate and execute acquisitions properly, we might not achieve the anticipated benefits of such acquisitions, and we may incur costs in excess of what we anticipate.  These risks would likely be greater in the case of larger acquisitions.

The planned spinoff of our Spine and Dental businesses may not be completed on the terms or timeline currently contemplated, if at all, and may not achieve the intended results.

As previously announced, we plan to spin off our Spine and Dental businesses to form ZimVie Inc., a new and independent, publicly traded company (“ZimVie”) through a tax-free distribution to our stockholders of publicly traded stock in ZimVie.  Unanticipated developments could delay, prevent or otherwise adversely affect the planned spinoff.  Therefore, we cannot provide assurance that we will be able to complete the spinoff on the terms or on the timeline that we announced, or at all.

We expect the completion of the spinoff to continue to require significant expenses and management time and effort. We will have continuing obligations to ZimVie after the completion of the spinoff, which may cause us to incur additional costs. The spinoff will also require modifications to our systems and processes used to operate our business.  We may experience delays, increased costs and other difficulties related to these modifications during or following the spinoff, which could adversely affect our business, financial condition and results of operations.  Following the spinoff, we will be a smaller, less diversified company with a narrower business focus and may be more vulnerable to changing market conditions, which could adversely affect our operating results.  We may also experience increased difficulties in attracting, retaining and motivating employees during the pendency of the spinoff and following its completion, which could harm our business.

Further, if the spinoff is completed, the anticipated benefits and synergies of the transaction, strategic and competitive advantages of each company, and future growth and other opportunities for each company may not be realized within the expected time periods or at all.  Failure to implement the spinoff effectively could also result in a lower value to our company and our stockholders.

The planned spinoff, and any subsequent divestiture of our retained interest in ZimVie, could result in substantial tax liability.

We obtained an Internal Revenue Service (“IRS”) ruling, and we intend to obtain an opinion as to the tax-free nature of the spinoff under the U.S. Internal Revenue Code of 1986, as amended. The IRS ruling is, and the opinion will be, based, among other things, on various factual assumptions and representations we will make. If any of these assumptions or representations are, or become, inaccurate or incomplete, reliance on the opinion and ruling may be jeopardized. If the spinoff does not qualify for tax-free treatment for U.S. federal income tax purposes, the resulting tax liability to us, to our stockholders and to ZimVie stockholders could be substantial.

We have announced we intend to retain 19.7% of the outstanding shares of ZimVie common stock upon the spinoff and to divest these shares after the spinoff in a tax-efficient manner.  There can be no assurance that any such divestiture will occur, will occur at a time or times favorable to us,or will occur at prices or on terms favorable to us.  Additionally, there can be no assurance that any such divestiture achieves a desired or any favorable tax

treatment.  If the divesture does not achieve a favorable tax treatment, the resulting tax liability to us, to our stockholders, and to ZimVie stockholders could be substantial.

Interruption of our manufacturing operations could adversely affect our business, financial condition and results of operations.

We and our third-party manufacturers have manufacturing sites all over the world.  In some instances, however, the manufacturing of certain of our product lines is concentrated in one or more of our plants.  Damage to one or more of our facilities from weather or natural disaster-related events, suchvulnerabilities in technology, cyber-attacks against our information systems or the information systems of our business partners (such as the recent hurricanes that affected our employees and operations at our Guaynabo, Puerto Rico and Ponce, Puerto Rico manufacturing facilities,ransomware attacks), or issues in our manufacturing arising from failure to follow specific internal protocols and procedures, compliance concerns relating to the QSR and Good Manufacturing Practice requirements, equipment breakdown or malfunction, reductions in operations and/or worker absences due to the COVID-19 pandemic or other health epidemics (or local, state, or national reactions to such epidemics), or other factors could adversely affect ourthe ability to manufacture our products.  In the event of an interruption in manufacturing, we may be unable to move quickly to alternate means of producing affected products or to meet customer demand.  We have experienced such interruptions due to the COVID-19 pandemic, and we may experience such interruptions in the future.  In the event of a significant interruption, for example, as a result of a failure to follow regulatory protocols and procedures, we may experience lengthy delays in resuming production of affected products due primarily to the need for regulatory approvals.  As a result, we may experience loss of market share, which we may be unable to recapture, and harm to our reputation, which could adversely affect our business, financial condition and results of operations.

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Disruptions in the supply of the materials and components used in manufacturing our products or the sterilization of our products by third-party suppliers could adversely affect our business, financial condition and results of operations.

We purchase many of the materials and components used in manufacturing our products from third-party vendorssuppliers and we outsource some key manufacturing activities.  Certain of these materials and components and outsourced activities can only be obtained from a single source or a limited number of sources due to quality considerations, expertise, costs or constraints resulting from regulatory requirements.  In certain cases, we may not be able to establish additional or replacement vendorssuppliers for such materials or components or outsourced activities in a timely or cost effective manner, largely as a result of FDA and other worldwide regulations that require validation of materials and components prior to their use in our products and the complex nature of our and many of our vendors'suppliers' manufacturing processes.processes and the need for clearance or approval of significant changes by worldwide regulatory bodies prior to implementation.  A reduction or interruption in the supply of materials or components used in manufacturing our products;products, such as due to one or more suppliers experiencing reductions in operations and/or worker absences due to the COVID-19 pandemic or other health epidemics; an inability to timely develop and validate alternative sources if required; or a significant increase in the price of such materials or components could adversely affect our business, financial condition and results of operations.

In addition, many of our products require sterilization prior to sale and we utilize a mix of internal resources and contract sterilizers to perform this service.  To the extent we or our contract sterilizers are unable to sterilize our products, whether due to capacity, availability of materials for sterilization, regulatory or other constraints, including federal and state regulations on the use of ethylene oxide, or reductions in operations and/or worker absences due to the COVID-19 pandemic or other health epidemics, we may be unable to transition to other contract sterilizers, sterilizer locations or sterilization methods in a timely or cost effective manner or at all, which could have a material impact on our results of operations and financial condition.

Moreover, we are subject to the SEC’s rule regarding disclosure of the use of certain minerals, known as “conflict minerals” (tantalum, tin and tungsten (or their ores) and gold), which are mined from the Democratic Republic of the Congo and adjoining countries.  This rule could adversely affect the sourcing, availability and pricing of materials used in the manufacture of our products, which could adversely affect our manufacturing operations and our profitability.  In addition, we are incurring additional costs to comply with this rule, including costs related to determining the source of any relevant minerals and metals used in our products.  We have a complex supply chain and we may not be able to sufficiently verify the origins of the minerals and metals used in our products through our due diligence procedures.  As a result, we may face reputational challenges with our customers and other stakeholders.

We are increasingly dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems or data, including from data breaches, our business could be adversely affected.

We are increasingly dependent on sophisticated information technology for our products and infrastructure.  As a result of technology initiatives, expanding privacy and cybersecurity laws, changes in our system platforms and integration of new business acquisitions, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.  In addition, some of our products and services incorporate software or information technology that collects data regarding patients and patient therapy, and some products or software we provide to customers connect to our systems for maintenance and other purposes.  We also have outsourced elements of our operations to third parties, and, as a result, we manage a number of third-party suppliers who may or could have access to our confidential information, including, but not limited to, intellectual property, proprietary business information and personal information of patients, employees and customers (collectively “Confidential Information”).  

Our information systems, and those of third-party suppliers with whom we contract, require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information technology, evolving systems and regulatory standards, changing threats and vulnerabilities, and the increasing need to protect patient and customer information.  In addition, given their size and complexity, these systems could be vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or from cyber-attacks by malicious third parties attempting to gain unauthorized access to our products, systems or Confidential Information.  

Like other large multi-national corporations, we have experienced instances of successful phishing attacks on our email systems and expect to be subject to similar attacks in the future. We also are subject to other cyber-attacks, including state-sponsored cyber-attacks, industrial espionage, insider threats, computer denial-of-service attacks, computer viruses, ransomware and other malware, payment fraud or other cyber incidents.  In addition, as a result of the COVID-19 pandemic, a significant number of our employees who are able to work remotely are doing so, and malicious cyber actors may increase malware campaigns and phishing emails targeting teleworkers, preying on the uncertainties surrounding COVID-19, which exposes us to additional cybersecurity risks.  Our incident response efforts, business continuity procedures and disaster recovery planning may not be sufficient for all eventualities.  If we fail to maintain or protect our information systems and data integrity effectively, we could:

While we have invested heavily in the protection of our data and information technology, there can be no assurance that our activities related to consolidating the number of systems we operate, upgrading and expanding our information systems capabilities, protecting and enhancing our systems and implementing new systems will be successful.  We will continue to dedicate significant resources to protect against unauthorized access to our systems and work with government authorities to detect and reduce the risk of future cyber incidents; however, cyber-attacks are becoming more sophisticated, frequent and adaptive. Therefore, despite our efforts, we cannot assure that cyber-attacks or data breaches will not occur or that systems issues will not arise in the future.  Any significant breakdown, intrusion, breach, interruption, corruption or destruction of these systems could have a material adverse effect on our business and reputation and could materially adversely affect our results of operations and financial condition.

Our success depends on our ability to effectively develop and market our products against those of our competitors.

We operate in a highly competitive environment.  Our present or future products could be rendered obsolete or uneconomical by technological advances by one or more of our present or future competitors or by other therapies,

including biological therapies.  To remain competitive, we must continue to develop and acquire new products and technologies and improve existing products and technologies.  Competition is primarily on the basis of:

In markets outside of the U.S., other factors influence competition as well, including:

Our competitors may:

Any of these factors, alone or in combination, could cause us to have difficulty maintaining or increasing sales of our products.

If we fail to retain the employees and independent agents and distributors upon whom we rely heavily to market our products, customers may not buy our products and our revenue and profitability may decline.

Our marketing success in the U.S. and abroad depends significantly upon our employees’, agents’ and distributors’ sales and service expertise in the marketplace.  Many of these agents have developed professional relationships with existing and potential customers because of the agents’ detailed knowledge of products and instruments.  A loss of a significant number of our agents could have a material adverse effect on our business and results of operations.

If we do not introduce new products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may decline.

Demand for our products may change, in certain cases, in ways we may not anticipate because of:

Without the timely introduction of new products and enhancements, our products may become obsolete over time.  If that happens, our revenue and operating results would suffer.  The success of our new product offerings will depend on several factors, including our ability to:

In addition, new materials, product designs and surgical techniques that we develop may not be accepted quickly, in some or all markets, because of, among other factors:

Moreover, innovations generally require a substantial investment in research and development before we can determine their commercial viability and we may not have the financial resources necessary to fund the production.  In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce revenue in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.

If third-party payors decline to reimburse our customers for our products or reduce reimbursement levels, the demand for our products may decline and our ability to sell our products profitably may be harmed.

We sell our products and services to hospitals, doctors, dentists and other healthcare providers, which receive reimbursement for the healthcare services provided to their patients from third-party payors, such as domestic and international government programs, private insurance plans and managed care programs.  These third-party payors may deny reimbursement if they determine that a product or service used in a procedure was not in accordance with cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.  Third-party payors may also decline to reimburse for experimental procedures and products.

In addition, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services.  If third-party payors reduce reimbursement levels or change reimbursement models for hospitals and other healthcare providers for our products, demand for our products may decline, or we may experience increased pressure to reduce the prices of our products, which could have a material adverse effect on our sales and results of operations.

We have also experienced downward pressure on product pricing and other effects of healthcare reform in our international markets.  For example, China has implemented a volume-based procurement process designed to decrease prices for medical devices and other products.  If key participants in government healthcare systems reduce the reimbursement levels for our products, including through political changes or transitions, our business, financial condition, results of operations and cash flows may be adversely affected.

We are subject to cost containment measures in the United States and other countries, resulting in pricing pressures, which could have a material adverse effect on our business, results of operations, and cash flows.

Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. For example, China has implemented a volume-based procurement process designed to decrease prices for certain medical devices and other products, which has in the past resulted in, and could in the future result in, reduced margins on covered devices and products, required renegotiation of distributor arrangements, and incurrence of inventory-related charges.  Pricing pressure has also increased due to continued consolidation among healthcare providers, trends toward managed care, the shift toward governments becoming the primary payors of healthcare expenses, reductions in reimbursement levels and government laws and regulations relating to reimbursement and pricing generally.

In addition, many customers for our products have formed group purchasing organizations in an effort to contain costs.  Group purchasing organizations negotiate pricing arrangements with medical supply manufacturers and distributors, and these negotiated prices are made available to a group purchasing organization’s affiliated hospitals and other members.  If we are not one of the providers selected by a group purchasing organization, affiliated hospitals and other members may be less likely to purchase our products, and, if the group purchasing organization has negotiated a strict compliance contract for another manufacturer’s products, we may be precluded from making

sales to members of the group purchasing organization for the duration of the contractual arrangement.  Our failure to respond to the cost-containment efforts of group purchasing organizations may cause us to lose market share to our competitors and could have a material adverse effect on our sales and results of operations.

Financial, Credit and Liquidity Risks

We incurred substantial additional indebtedness in connection with previous mergers and acquisitions and may not be able to meet all of our debt obligations, and the phase-out, replacement or unavailability of LIBOR and/or other interest rate benchmarks could adversely affect our indebtedness.

We incurred substantial additional indebtedness in connection with previous mergers and acquisitions.  At December 31, 2021, our total indebtedness was $7.1 billion, as compared to $1.4 billion at December 31, 2014.  As of December 31, 2021, our debt service principal obligations (excluding interest, leases and equipment notes), during the next 12 months are expected to be $1.6 billion.  As a result of the increase in our debt, demands on our cash resources have increased.  The increased level of debt could, among other things:

In addition, the interest rates applicable to certain of our debt obligations are based on a fluctuating rate of interest determined by reference to the London Interbank Offered Rate (“LIBOR” or “LIBO rate”).  Any increase in interest rates applicable to our debt obligations would increase our cost of borrowing and could adversely affect our financial position, results of operations or cash flows.  Further, in July 2017, the U.K.’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates to the ICE Benchmark Administration Limited. On March 5, 2021, the FCA publicly announced publication of all non-U.S. dollar denominated LIBO rate settings, as well as the 1-week and 2-month U.S. dollar denominated LIBO rate, will permanently cease as of December 31, 2021, and that publication of the overnight and 12-month U.S. dollar denominated LIBO rate settings will permanently cease after June 30, 2023. In addition, the FCA announced that immediately after June 30, 2023, the 1-month, 3-month and 6-month U.S. dollar LIBO rates will cease to be provided or, subject to the FCA’s consideration of the case, may be provided on a synthetic basis and no longer be representative of the underlying market and economic reality that they are intended to measure and that representativeness will not be restored. The dates announced by the FCA may change or other administrators of LIBO rates and/or regulators may take further action that could change or otherwise impact the availability and characteristics of LIBO rates, currencies and tenors.  The credit agreements governing our debt provide a mechanism for determining alternative rates of interest using customary hardwired rate replacement provisions which establish a waterfall approach for establishment of a replacement benchmark interest rate in the event that LIBO rates are unavailable, subject to spread adjustments to be determined with reference to the recommendations of relevant governmental bodies or, in certain circumstances, evolving or then-prevailing market conventions for determining or calculating such spread adjustment for U.S. dollar denominated syndicated credit facilities.  Any alternative, successor, or replacement rate may not be similar to, or produce the same value or economic equivalence of, the LIBO rate or have the same volume or liquidity as did the LIBO rate prior to its discontinuance or unavailability, which may increase our overall interest expense on unhedged variable rate indebtedness which is currently based on the LIBO rate.

We will continue to monitor the situation and address the potential reference rate changes in future debt obligations that we may incur.  Accordingly, the potential effect of the phase-out, replacement or unavailability of LIBOR, or the unavailability of any other interest rate benchmark such as EURIBOR or TIBOR, on our cost of capital cannot yet be determined.  Further, the use of an alternative base rate or a benchmark replacement rate as a basis for

calculating interest with respect to any outstanding variable rate indebtedness could lead to an increase in the interest we pay and a corresponding increase in our costs of capital or otherwise have a material adverse impact on our business, financial condition or results of operations.

We may have additional tax liabilities.

We are subject to income taxes in the U.S. and many foreign jurisdictions.  Significant judgment is required in determining our worldwide provision for income taxes.  In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.  We are regularly under audit by tax authorities.  Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.  The results of an audit or litigation could have a material effect on our financial statements in the period or periods for which that determination is made.

Changes in the tax laws of the jurisdictions where we do business, including an increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material increase in our tax expense.  For example, changes in the tax laws of foreign jurisdictions could arise as a result of the “base erosion and profit shifting” project undertaken by the Organisation for Economic Co-operation and Development (“OECD”).  The OECD, which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles.  These changes, as adopted by countries, could increase tax uncertainty and may have a material adverse impact on our business, financial condition or results of operations.

The proposed Build Back Better Act or similar legislation, if enacted, could lead to changes in tax laws that could negatively impact our effective tax rate.

The Build Back Better Act proposed an increase in the U.S. Global Intangible Low-Taxed Income (“GILTI”) foreign minimum tax rate from 10.5% to 15%, assessing the GILTI tax on a per country basis, reduction of the Foreign-Derived Intangible Income tax benefit, and disallowance of certain corporate interest expense. If any or all of these (or similar) proposals are ultimately enacted into law, in whole or in part, they could have a material adverse impact on our business, financial condition or results of operations.

If our independent agents and distributors are characterized as employees, we would be subject to additional tax and other liabilities.

We structure our relationships with independent agents and distributors in a manner that we believe results in an independent contractor relationship, not an employee relationship. Although we believe that our independent agents and distributors are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. Further, we have been subject to lawsuits challenging the characterization of these relationships in recent years. Changes in classification from independent contractor to employee can result in a change to various requirements associated with the payment of wages, tax withholding, and the provision of unemployment, health, and other traditional employer-employee related benefits. If regulatory authorities or state, federal or foreign courts were to determine that our independent agents or distributors are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes and to pay unemployment and other related payroll taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that our independent agents and distributors are our employees could have a material adverse effect on our business, financial condition or results of operations.

Future material impairments in the carrying value of our intangible assets, including goodwill, would negatively affect our operating results.

Goodwill and intangible assets represent a significant portion of our assets.  At December 31, 2021, we had $9.2 billion in goodwill and $6.3 billion of intangible assets.  The goodwill results from our acquisition activity and represents the excess of the consideration transferred over the fair value of the net assets acquired.  We assess at least annually whether events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable.  As discussed further in Note 11 to our consolidated financial statements, in the first quarter of 2020, we recorded goodwill impairment charges of $612.0 million as a result of the adverse impacts from the COVID-19 pandemic and a change in our reportable segments, and in the second quarter of 2021 and 2020, we recorded $16.3 million and $33.0 million, respectively, of in-process research and development (“IPR&D”) intangible asset impairments on certain IPR&D projects.  If the operating performance at one or more of our reporting units falls significantly below current levels, including if elective surgical procedures are deferred longer than our current expectations due to the COVID-19 pandemic, if competing or alternative technologies emerge, if

market conditions or future cash flow estimates for one or more of our businesses decline, or as a result of restructuring initiatives pursuant to which we reorganize our reporting units, we could be required to record additional impairment charges.  Any write-off of a material portion of our goodwill or unamortized intangible assets would negatively affect our results of operations.

Global Operational Risks

We conduct a significant amount of our sales activity outside of the U.S., which subjects us to additional business risks and may cause our profitability to decline due to increased costs.

We sell our products in more than 100 countries and derived approximately 40 percent of our net sales in 2021 from outside the U.S.  We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets, which could expose us to additional risks associated with international sales and operations.  Our international operations are, and will continue to be, subject to a number of risks and potential costs, including:

Violations of foreign laws or regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.

We are subject to risks arising from currency exchange rate fluctuations, which can increase our costs, cause our profitability to decline and expose us to counterparty risks.

A substantial portion of our foreign revenues is generated in Europe and Japan.  The U.S. Dollar value of our foreign-generated revenues varies with currency exchange rate fluctuations.  Significant increases in the value of the U.S. Dollar relative to the Euro, the Japanese Yen, the Swiss Franc or other currencies could have a material adverse effect on our results of operations.  Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective or may create additional financial obligations for us.  Further, if the counterparties to the derivative financial instrument transactions fail to honor their obligations due to financial distress or otherwise, we would be exposed to potential losses or the inability to recover anticipated gains from those transactions.

Legal, Regulatory and Compliance Risks

We are subject to costly and complex laws and governmental regulations relating to the development, design, product standards, packaging, advertising, promotion, postmarket surveillance,manufacturing, labeling and marketing of our products, non-compliance with which could adversely affect our business, financial condition and results of operations.

Our global regulatory environment is increasingly stringent, unpredictable and complex. The products we design, develop, manufacture and market are subject to rigorous regulation by the FDA and numerous other supranational, national, federal, regional, state and foreignlocal governmental authorities.  The process of obtaining regulatory approvals and clearances to market these products can be costly and time consuming and approvals might not be granted for future products on a timely basis, if at all.  Delays in receipt of, or failure to obtain, approvals for future products could result in delayed realization of product revenues or in substantial additional costs.

Both before and after a product is commercially released, we have ongoing responsibilities under FDA regulations and other local,supranational, national, federal, regional, state and foreign requirements.local requirements globally.  Compliance with these requirements, including the QSR, recordkeeping regulations, labeling and promotional requirements and adverse event reporting regulations, is subject to continual review and is monitored rigorously through periodic inspections by the FDA and other regulators, which may result in observations (such as on Form 483), and in some cases warning letters, that require corrective action, or other forms of enforcement.  If the FDA or another regulator were to conclude that we are not in compliance with applicable laws or regulations, or that any of our products are ineffective or pose an unreasonable health risk, they could ban such products, detain or seize adulterated or misbranded products, order a recall, repair, replacement, or refund of payment of such products, refuse to grant pending premarket approval applications, refuse to provide certificates for exports, and/or require us to notify healthcare professionals and others that the products present unreasonable risks of substantial harm to the public health.  Furthermore, the FDA strictly regulates the promotional claims that we may make about approved or cleared products. If the FDA determines that we have marketed or promoted a product for off-label use—uses other than those indicated on the labeling cleared by the FDA—we could be subject to fines, injunctions or other penalties.The FDA or other regulators may also impose operating restrictions, including a ceasing of operations onat one or more facilities, enjoin and restrain certain violations of applicable law pertaining to our products, seizure of products and assess civil or criminal penalties against our officers, employees or us.  The FDA or other regulators could also issue a corporate warning letter or a recidivist warning letter or negotiate the entry of a consent decree of permanent injunction with us, and/or recommend prosecution.  Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.

In 2012, we received a warning letter from the FDA citing concerns relating to certain processes pertaining to products manufactured at our Ponce, Puerto Rico manufacturing facility.  In May 2016,August 2018, we received a warning letter from the FDA related to observed non-conformities with current good manufacturing practice requirements of the QSR at our facility in Montreal, Quebec, Canada.  Warsaw North Campus manufacturing facility.  As of December 31, 2017, theseFebruary 25, 2022, this warning lettersletter remained pending.  Until the violations are corrected, we may become subject to additional regulatory action by the FDA as described above, the FDA may refuse to grant premarket approval applications and/or the FDA may refuse to grant export certificates, any of which could have a material adverse effect on our business, financial condition and results

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of operations.  Additional information regarding these and other FDA regulatory matters can be found in Note 1921 to our consolidated financial statements.

Governmental regulations outside the U.S. continue to become increasingly stringent and complex.  In the EU, for example, the MDR became effective in May 2021 and includes significant additional premarket and post-market requirements.  Complying with the requirements of this regulation requires us to incur significant expense.  Additionally, the availability of EU notified body services certified to the consolidated financial statements.new requirements is limited, which may delay the marketing approval for some of our products under the MDR.  Any such delays, or any failure to meet the requirements of the new regulation, could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.  Similarly, the separation of states from participation in the EU, such as through the cessation of the UK’s membership in the EU (commonly known as “Brexit”) and the separation of the Swiss and EU medical product markets with the adoption of MDR (commonly referred to as “Swexit”), may result in further regulatory risk and complexity as the former EU member or participant state establishes separate laws and regulations governing medical products.

Our products and operations are also often subject to the rules of industrial standards bodies, such as the International Standards Organization.  If we fail to adequately address any of these regulations, our business could be harmed.

If we fail to comply with healthcare fraud and abuse or data privacy and security laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

The sales, marketing and pricing of products and relationships that medical products companies have with healthcare providers are under increased scrutiny around the world.  Our industry is subject to various federal, state and foreign laws and regulations pertaining to healthcare fraud and abuse, including the federal False Claims Act, the federal Anti-Kickback Statute, the federal Stark law, the federal Physician Payments Sunshine Act, the Food, Drug, and Cosmetic Act and similar statelaws and foreign laws.regulations in the U.S. and around the world.  In addition, we are subject to various federal and foreign laws concerning anti-corruption and anti-bribery matters (including the FCPA), sales to countries or persons subject to economic sanctions and other matters affecting our international operations.  Violations of these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.  These laws are administered by, among others, the DOJ, the OIG-HHS, the SEC, the OFAC, the Bureau of Industry and Security of the U.S. Department of Commerce and state attorneys general.

We are also subject to federal, state and international data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal and protection of health-related and other personal information.  Certain of our affiliates are subject to privacy and security regulations promulgated under HIPAA.  The FDA also has issued guidance to which we may be subject concerning data security for medical devices.  The FDA and the DHS have also issued urgent safety communications regarding cybersecurity vulnerabilities of certain medical devices, which vulnerabilities may apply to some of our current or future devices.  

InternationalIn addition, certain of our affiliates are subject to privacy, security and breach notification regulations promulgated under HIPAA.  HIPAA governs the use, disclosure, and security of protected health information by HIPAA “covered entities” and their “business associates.”  Covered entities are health plans, health care clearinghouses and health care providers that engage in specific types of electronic transactions.  A business associate is any person or entity (other than members of a covered entity’s workforce) that performs a service on behalf of a covered entity involving the use or disclosure of protected health information.  HHS (through the Office for Civil Rights) has direct enforcement authority against covered entities and business associates with regard to compliance with HIPAA regulations.  On December 10, 2020, HHS issued an NPR to modify the HIPAA privacy rule.  Separately, HHS (through the National Coordinator for Health Information Technology) issued a new rule, which took effect on April 5, 2021, that limits “blocking” of electronic health information.  We intend to monitor both the NPR and the “information blocking” rule and assess their impact on the use of data in our business.

In addition to the FDA guidance and HIPAA regulations described above, a number of U.S. states have also enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, medical and financial information and other personal information.  These laws and regulations may be more restrictive and not preempted by U.S. federal laws.  For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individuals, and at times regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of personal information.  Other state laws include the CCPA, which took effect on January 1, 2020.  The CCPA, among other things, contains new disclosure obligations for businesses that collect personal information about California residents and affords those individuals numerous rights relating to their personal information that may affect our ability to use personal information or share it with our business partners.  A second law in California, the CPRA, passed via a ballot referendum in November 2020.  The CPRA expands the scope of the CCPA and establishes a new California Privacy Protection Agency that will enforce the law and issue regulations.  The CPRA is scheduled to take effect on January 1, 2023, with a lookback to January 1, 2022.  Other states have considered and/or enacted similar privacy laws.  We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.

The legislative and regulatory framework for privacy and data protection issues worldwide is rapidly evolving as countries continue to adopt privacy and data security laws.  Outside of the U.S., data protection laws, including the GDPR in the EU Data(“EU GDPR”) and the UK (“UK GDPR”), the LGPD in Brazil, and the Personal Information Protection Directive and member state implementing legislation, mayLaw (“PIPL”) in China, also apply to some of our operations in those countries in which we provide services to our customers.  The UK GDPR and restrict ourEU GDPR impose, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer UK and EU personal data.  Moreover,data, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the General Data Protection Regulation, an EU-wide regulation that will be fully enforceablegreater of 20 million Euros or 4% of total worldwide annual turnover of the preceding financial year under the EU GDPR, and up to the greater of 17.5 million Pounds or 4% of total worldwide annual turnover of the preceding financial year under the UK GDPR).  The issue of new standard contractual clauses (“SCCs”) governing cross-border data transfers between controllers and processors by May 25, 2018, will introduce newthe EU Commission, in conjunction with related requirements on

conducting data protection requirementstransfer impact assessments in respect of cross-border data transfers from the EU and substantial finesthe UK, may involve an increase in our costs of compliance as we transition to those SCCs and subject us to increased scrutiny by EU and UK regulators.  The PIPL, which took effect on November 1, 2021, shares many similarities with the EU GDPR.  This includes extraterritorial reach, strict restrictions on transfer of personal information (including in certain situations data localization or prior certification/authorization requirements), compliance obligations and sanctions for violationsnon-compliance (of up to 5% of annual turnover or 50 million Yuan).  It also seeks to impose additional requirements not currently contemplated under the EU GDPR.  The PIPL may increase our costs of compliance, subject us to enhanced scrutiny from Chinese regulators and affect our cross-border data protection rules.transfers.

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change.change, and may require substantial costs to monitor and implement compliance with any additional requirements.  Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

We are increasingly dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems or data, including from data breaches, our business could be adversely affected.

We are increasingly dependent on sophisticated information technology for our products and infrastructure.  As a result of technology initiatives, recently enacted regulations, changes in our system platforms and integration of new business acquisitions, including the Biomet merger, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.  We also have outsourced elements of our operations to third parties, and, as a result, we manage a number of third-party vendors who may or could have access to our confidential information.  Our information systems, and those of third-party vendors with whom we contract, require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information technology, evolving systems and regulatory standards and the increasing need to protect patient and customer information.  In addition, given their size and complexity, these systems could be vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors and/or business partners, or from cyber-attacks by malicious third parties attempting to gain unauthorized access to our products, systems or confidential information (including, but not limited to, intellectual property, proprietary business information and personal information).  Cyber-attacks, such as those involving the deployment of malware, are increasing in their frequency, sophistication and intensity and have become increasingly difficult to detect.  If we fail to maintain or protect our information systems and data integrity effectively, we could:

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While we have invested heavily in the protection of our data and information technology, there can be no assurance that our activities related to consolidating the number of systems we operate, upgrading and expanding our information systems capabilities, protecting and enhancing our systems and implementing new systems will be successful.  Despite our efforts, we cannot assure you that cyber-attacks or data breaches will not occur or that systems issues will not arise in the future.  Any significant breakdown, intrusion, breach, interruption, corruption or destruction of these systems could have a material adverse effectimpact on our business, and reputation.

Our success depends on our ability to effectively develop and market our products against those of our competitors.

We operate in a highly competitive environment.  Our presentfinancial condition or future products could be rendered obsolete or uneconomical by technological advances by one or more of our present or future competitors or by other therapies, including biological therapies.  To remain competitive, we must continue to develop and acquire new products and technologies. Competition is primarily on the basis of:

In markets outside of the U.S., other factors influence competition as well, including:

Our competitors may:

Any of these factors, alone or in combination, could cause us to have difficulty maintaining or increasing sales of our products.

If we fail to retain the independent agents and distributors upon whom we rely heavily to market our products, customers may not buy our products and our revenue and profitability may decline.

Our marketing success in the U.S. and abroad depends significantly upon our agents’ and distributors’ sales and service expertise in the marketplace.  Many of these agents have developed professional relationships with existing

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and potential customers because of the agents’ detailed knowledge of products and instruments.  A loss of a significant number of our agents could have a material adverse effect on our business and results of operations.

If we do not introduce new products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may decline.

Demand for our products may change, in certain cases, in ways we may not anticipate because of:

Without the timely introduction of new products and enhancements, our products may become obsolete over time.  If that happens, our revenue and operating results would suffer.  The success of our new product offerings will depend on several factors, including our ability to:

In addition, new materials, product designs and surgical techniques that we develop may not be accepted quickly, in some or all markets, because of, among other factors:

Moreover, innovations generally require a substantial investment in research and development before we can determine their commercial viability and we may not have the financial resources necessary to fund the production.  In addition, even if we are able to successfully develop enhancements or new generations of our products, these enhancements or new generations of products may not produce revenue in excess of the costs of development and they may be quickly rendered obsolete by changing customer preferences or the introduction by our competitors of products embodying new technologies or features.

If third-party payors decline to reimburse our customers for our products or reduce reimbursement levels, the demand for our products may decline and our ability to sell our products profitably may be harmed.

We sell our products and services to hospitals, doctors, dentists and other healthcare providers, all of which receive reimbursement for the healthcare services provided to their patients from third-party payors, such as domestic and international government programs, private insurance plans and managed care programs.  These third-party payors may deny reimbursement if they determine that a device used in a procedure was not in accordance with cost-

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effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.  Third-party payors may also decline to reimburse for experimental procedures and devices.

In addition, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for medical products and services.  If third-party payors reduce reimbursement levels to hospitals and other healthcare providers for our products, demand for our products may decline, or we may experience increased pressure to reduce the prices of our products, which could have a material adverse effect on our sales and results of operations.

We have also experienced downward pressure on product pricing and other effects of healthcare reform in our international markets.  If key participants in government healthcare systems reduce the reimbursement levels for our products, our sales and results of operations may be adversely affected.

The ongoing cost-containment efforts of healthcare purchasing organizations may have a material adverse effect on our results of operations.

Many customers for our products have formed group purchasing organizations in an effort to contain costs.  Group purchasing organizations negotiate pricing arrangements with medical supply manufacturers and distributors, and these negotiated prices are made available to a group purchasing organization’s affiliated hospitals and other members.  If we are not one of the providers selected by a group purchasing organization, affiliated hospitals and other members may be less likely to purchase our products, and, if the group purchasing organization has negotiated a strict compliance contract for another manufacturer’s products, we may be precluded from making sales to members of the group purchasing organization for the duration of the contractual arrangement.  Our failure to respond to the cost-containment efforts of group purchasing organizations may cause us to lose market share to our competitors and could have a material adverse effect on our sales and results of operations.

We conduct a significant amount of our sales activity outside of the U.S., which subjects us to additional business risks and may cause our profitability to decline due to increased costs.

We sell our products in more than 100 countries and derived approximately 40 percent of our net sales in 2017 from outside the U.S.  We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets, which could expose us to additional risks associated with international sales and operations.  Our international operations are, and will continue to be, subject to a number of risks and potential costs, including:

Violations of foreign laws or regulations could result in fines, criminal sanctions against us, our officers or our employees, prohibitions on the conduct of our business and damage to our reputation.

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We may have additional tax liabilities.

We are subject to income taxes in the U.S. and many foreign jurisdictions.  Significant judgment is required in determining our worldwide provision for income taxes.  In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.  We regularly are under audit by tax authorities.  Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.  The results of an audit or litigation could have a material effect on our financial statements in the period or periods for which that determination is made.

The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017 (the “2017 Tax Act”), with significant changes to the U.S. corporate income tax system, including a federal corporate income tax rate reduction from 35 percent to 21 percent, limitations on the deductibility of interest expense, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system.  The U.S. Treasury has provided limited guidance on aspects of the 2017 Tax Act, and we anticipate further guidance will be provided in the future.  On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), expressing its views on the application of Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes, in the reporting period that includes December 22, 2017.  For the financial statements that include the reporting period in which the 2017 Tax Act was enacted, SAB 118 provides a provisional approach to reflect the income tax effects of the 2017 Tax Act.  The actual effects of the 2017 Tax Act and the final amounts recorded may differ materially from our current estimates of provisional amounts included in this Annual Report on Form 10-K.  Further, our tax expense and cash flow could be materially impacted as we finalize the financial accounting for the 2017 Tax Act, and incorporate future regulatory guidance provided by the U.S. Treasury.

We are subject to risks arising from currency exchange rate fluctuations, which can increase our costs, cause our profitability to decline and expose us to counterparty risks.

A substantial portion of our foreign revenues is generated in Europe and Japan.  The U.S. Dollar value of our foreign-generated revenues varies with currency exchange rate fluctuations.  Significant increases in the value of the U.S. Dollar relative to the Euro or the Japanese Yen, as well as other currencies, could have a material adverse effect on our results of operations.  Although we address currency risk management through regular operating and financing activities, and, on a limited basis, through the use of derivative financial instruments, those actions may not prove to be fully effective.

Pending and future product liability claims and litigation could adversely impact our financial condition and results of operations and impair our reputation.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices.  In the ordinary course of business, we are the subject of product liability lawsuits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information resulted in an unsafe condition or injury to patients.  As discussed further in Note 1921 to theour consolidated financial statements, we are defending product liability lawsuits relating to the Durom^® Acetabular Component (“Durom Cup”), certain products within the NexGen Knee System,M/L Taper and M/L Taper with Kinectiv^® Technology hip stems and Versys^® Femoral Head implants, and the M2a-Magnum^TM hip system.  The majority of the Durom Cup cases are pending in a federal Multidistrict Litigation (“MDL”) in the District of New Jersey (In Re: Zimmer Durom Hip Cup Products Liability Litigation); the majority of the NexGen Knee System cases are pending in a federal MDL in the Northern District of Illinois (In Re: Zimmer NexGen Knee Implant Products Liability Litigation); and the majority of the M2a-Magnum hip system cases are pending in a federal MDL in the Northern District of Indiana (In Re: Biomet M2a Magnum Hip Implant Products Liability Litigation).  We are also currently defending a number of other product liability lawsuits and claims related to various other products.  Any product liability claim brought against us, with or without merit, can be costly to defend.  Product liability lawsuits and claims, safety alerts or product recalls, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers.

Although we maintain third-party product liability insurance coverage, we have substantial self-insured retention amounts that we must pay in full before obtaining any insurance proceeds to pay for defense costs, or to satisfy a judgment or settlement.  Furthermore, even if any product liability loss is covered by our insurance, it is possible that claims against us may exceed the coverage limits of our insurance policies and we would have to pay the amount of any defense costs, settlement or judgment that is in excess of our policy limits.  Product liability claims in excess of applicable insurance could have a material adverse effect on our business, financial condition and results of operations.

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We are substantially dependent on patent and other proprietary rights, and failing to protect such rights or to be successful in litigation related to our rights or the rights of others may result in our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and other proprietary rights against others.

Claims of intellectual property infringement and litigation regarding patent and other intellectual property rights are commonplace in our industry and are frequently time consuming and costly.  At any given time, we may be involved as either plaintiff or defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time.  While it is not possible to predict the outcome of patent and other intellectual property litigation, such litigation has in the past resulted in, and could in the future result in, our payment of significant monetary damages and/or royalty payments, negatively impact our ability to sell current or future products, or prohibit us from enforcing our patent and proprietary rights against others, which could have a material adverse effect on our business and results of operations.

PatentsOur success depends in part on our proprietary technology, processes, methodologies and other proprietary rights are essential to our business.information.  We rely on a combination of patents,patent, copyright, trademark, trade secrets and non-disclosuresecret and other agreementsintellectual property laws and nondisclosure, license, assignment and confidentiality arrangements to establish, maintain and protect our proprietary rights, as well as the intellectual property rights of third parties whose assets we license.  However, the steps we have taken to protect our proprietary intellectual property rights, and the rights of those from whom we will continue to do so.  While we intend to defend against any threats to ourlicense intellectual property, these patents, trade secrets and other agreements may not adequately protectbe adequate to prevent unauthorized use, misappropriation or theft of our intellectual property.  Further, our currently pending or future patent applications may not result in patents being issued to us, patents issued to or licensed by us in the past or in the future may be challenged or circumvented by competitors, and such patents may be found invalid, unenforceable or insufficiently broad to protect our technology or to provide us with any competitive advantage.  Third parties could obtain patents that may require us to negotiate licenses to conduct our business, and the required licenses may not be available on reasonable terms or at all.

In addition, intellectual property rights may be unavailable or of limited effect in some foreign countries.  If we do not obtain sufficient international protection for our intellectual property, our competitiveness in international markets could be impaired, which could limit our growth and revenue.

We also attempt to protect our trade secrets, proprietary know-how and continuing technological innovation with security measures, including the use of non-disclosure and other agreements with our employees, consultants and collaborators.  We cannot be certain that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information,information.  

In addition, intellectual property laws differ in various jurisdictions in which we operate and are subject to change at any time, which could further restrict our ability to protect our intellectual property and proprietary rights.  In particular, a portion of our revenues is derived from jurisdictions where adequately protecting intellectual property rights may prove more challenging or that third parties willimpossible.  We may also not otherwise gain accessbe able to detect unauthorized uses or take timely and effective steps to remedy unauthorized conduct.  To prevent or respond to unauthorized uses of our

intellectual property, we might be required to engage in costly and time-consuming litigation or other proceedings and we may not ultimately prevail.  Any failure to establish, maintain or protect our trade secretsintellectual property or proprietary knowledge.rights could have a material adverse effect on our business, financial condition, or results of operations.

We are involved in legal proceedings that may result in adverse outcomes.

In addition to intellectual property and product liability claims and lawsuits, we are involved in various commercial and securities litigation and claims and other legal proceedings that arise from time to time in the ordinary course of our business.  For example, as discussed further in Note 1921 to theour consolidated financial statements, we are defending a purported class action lawsuit, Shah v. Zimmer Biomet Holdings, Inc. et al., there have been four shareholder derivative actions filed purportedly on our behalf against us, certain of our current and former officers, certain currentdirectors and former members of our Board of Directors,officers and certain former stockholders of ours who sold shares of our common stock in secondary public offerings in 2016, alleging breaches of fiduciary duties and insider trading, based on allegations that we and other defendants violated federal securities laws by making made materially false and/or misleading statements and/or omissions about our compliance with FDA regulations and our ability to continue to accelerate our organic revenue growth rate in the second half of 2016.2016.  Although we believe we havethere are substantial defenses in these matters, litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.  Given the uncertain nature of legal proceedings generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome.  We could in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations in any particular period.

Future material impairments in the carrying valueRisks Related to Our Organizational Documents and Jurisdiction of our intangible assets, including goodwill, would negatively affect our operating results.

Our assets include intangible assets, primarily goodwill.  At December 31, 2017, we had $10.7 billion in goodwill.  The goodwill results from our acquisition activity, including the Biomet and LDR mergers, and represents the excess of the consideration transferred over the fair value of the net assets acquired.  We assess at least annually whether events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable.  As discussed further in Note 9 to the consolidated financial statements, we recorded goodwill impairment charges of $304.7 million in 2017.  If the operating performance at one or more of our business units falls significantly below current levels, if competing or alternative technologies emerge, or if market conditions or

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future cash flow estimates for one or more of our businesses decline, we could be required to record additional goodwill impairment charges.  Any write-off of a material portion of our unamortized intangible assets would negatively affect our results of operations.

We identified a material weakness in our internal control over financial reporting as of December 31, 2016.  While the particular material weakness has been remediated as of December 31, 2017, additional material weaknesses or relapses of this material weakness could result in a material misstatement in our financial statements.

We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  As discussed in Part II, Item 9A of this report, we identified a material weakness in our internal control over financial reporting as of December 31, 2016 related to management’s controls over accounting for income taxes.  A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.  During 2017, we executed our remediation plans to address the material weakness.  However, if the remedial measures are not adhered to or if additional material weaknesses or significant deficiencies in internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.

Developments relating to the UK’s referendum vote in favor of leaving the EU could adversely affect us.

The UK held a referendum in June 2016 in which voters approved the UK’s voluntary exit from the EU, commonly referred to as “Brexit”.  The effects of Brexit are expected to be far-reaching.  Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions in Europe and globally and could contribute to instability in global financial and foreign exchange markets.  Brexit could also have the effect of disrupting the free movement of goods, services and people between the UK and the EU; however, the full effects of Brexit are uncertain and will depend on any agreements the UK may make to retain access to EU markets.  Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate.  Also, as a result of Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the EU.  Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations and financial condition could be adversely affected by Brexit is uncertain.Incorporation

Anti-takeover provisions in our organizational documents could delay or prevent a change of control.

Certain provisions of our Restated Certificate of Incorporation, our Restated By-Laws and the Delaware General Corporation Law may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by our stockholders.

These provisions provide for, among other things:

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many of our stockholders.  As a result, our stockholders may be limited in their ability to obtain a premium for their shares.

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Our Restated By-Laws designate certain Delaware courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our Restated By-Laws provide that, unless we consent in writing to the selection of an alternative forum, a state court located within the State of Delaware (or, if no state court located in the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any stockholder (including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the Delaware General Corporation Law or our Restated Certificate of Incorporation or our Restated By-Laws, as either may be amended from time to time, or (iv) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine.  Any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have received notice of and consented to the foregoing provisions.  This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and

employees.  Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Not Applicable.

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The followingWe own or lease approximately 340 different facilities around the world, of which approximately half are in the U.S.  Our corporate headquarters is in Warsaw, Indiana.  Warsaw, Indiana is also home to our principal properties:most significant manufacturing, research and development (“R&D”), and other business activities for our Knees, Hips and S.E.T. product divisions.  Our Spine, CMFT and Dental products divisions also have business unit headquarters located in the U.S. that are the primary facilities for these product divisions’ manufacturing, R&D and other business activities.  Internationally, our EMEA regional headquarters is in Switzerland and our Asia Pacific regional headquarters is in Singapore.

We have approximately 35 manufacturing locations in the U.S. and internationally.  Our most significant locations outside of the U.S. are in Switzerland, Ireland, the U.K., China, and Puerto Rico.  We primarily own our manufacturing facilities in the U.S.; internationally, we occupy both owned and leased manufacturing facilities.

In addition to the above, weWe maintain sales and administrative offices and warehouse and distribution facilities in more than 4045 countries around the world.  These local market facilities are primarily leased due to common businesses practices and to allow us to be more adaptable to changing needs in the market.

We distribute our products both through large, centralized warehouses and through smaller, market specific facilities, depending on the needs of the market.  We maintain large, centralized warehouses in the U.S. and the Netherlands to be able to efficiently distribute our products to customers in the U.S. and EMEA.

We believe that all of the facilities and equipment are in good condition, well maintained and able to operate at present levels.  We believe the current facilities, including manufacturing, warehousing, research and developmentR&D and office space, provide sufficient capacity to meet ongoing demands.  

Information pertaining to certain legal proceedings in which we are involved can be found in Note 1921 to our consolidated financial statements included in Part II, Item 8 of this report and is incorporated herein by reference.

Not Applicable.

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PART II

Our common stock is traded on the New York Stock Exchange and the SIX Swiss Exchange under the symbol “ZBH.”  The high and low sales prices for our common stock on the New York Stock Exchange and the dividends declared for the calendar quarters of fiscal years 2017 and 2016 are as follows:

QUARTERLY HIGH-LOW SHARE PRICES AND DECLARED DIVIDENDS

We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.  As further discussed in Note 11 to the consolidated financial statements, our debt facilities restrict the payment of dividends under certain circumstances.

As of February 16, 2018,8, 2022, there were approximately 22,00015,400 holders of record of our common stock.  A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers and other financial institutions.  On February 16, 2018,

We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the closing priceBoard of our common stock,Directors and may be adjusted as reported on the New York Stock Exchange, was $120.48 per share.business needs or market conditions change.  

The information required by this Item concerning equity compensation plans is incorporated herein by reference to Item 12 of this report.

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The financial information for each of the past five years ended December 31 is set forth below (in millions, except per share amounts):

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The following discussion and analysis should be read in conjunction with the consolidated financial statements and the corresponding notes included elsewhere in this Annual Report on Form 10-K.  Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes.  Certain amountsThe following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2021 and 2020.  Discussion, analysis and comparisons of the years ended December 31, 2020 and 2019 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the 2016 and 2015 consolidated financial statements have been reclassified to conform toCompany's Annual Report on Form 10-K for the 2017 presentation.  year ended December 31, 2020.

On June 24, 2015,February 5, 2021, we completedannounced our merger with Biometintention to pursue a plan to spin off our Spine and itsDental businesses into a new public company.  The expected completion date of the spinoff of ZimVie is March 1, 2022.  The following discussion and analysis includes these businesses in our discussion of financial condition and results of operations have been included in our results starting on that date.  The Biomet merger was a transformational event for us and has had significant effects on all aspects of our business.  Accordingly, our sales and expenses have increased significantly since the merger date compared to prior periods.operations.

EXECUTIVE LEVEL OVERVIEW

2017 ResultsImpact of the COVID-19 Global Pandemic

NetOur results continue to be impacted by the COVID-19 global pandemic.  The vast majority of our net sales are derived from products used in elective surgical procedures.  As COVID-19 rapidly started to spread throughout the world in early 2020, our net sales decreased dramatically as countries took precautions to prevent the spread of the virus with lockdowns and stay-at-home measures and as hospitals deferred elective surgical procedures.  The timing, level and sustainability of the recovery of elective surgical procedures has been difficult to predict, as a number of factors are involved, including which geographies are affected and the different measures governments and healthcare systems take in response to the virus in those areas.  In the second half of 2021, the highly transmissible Delta and Omicron variants resulted in further deferrals of elective surgical procedures.  Additionally, we believe that staffing shortages at hospitals are also contributing to the deferral of elective surgical procedures.        

2021 Financial Highlights

In 2021, our net sales increased by 1.811.6 percent in 2017 compared to 20162020 primarily due to the acquisitionsignificant deferral of LDR Holding Corporationelective surgical procedures at the onset of the COVID-19 pandemic in the third quarter of 2016 and solid performance from our Asia Pacific operating segment.  In 2017, we experienced challenges across our Knees, Hips and S.E.T. product categories as a result of production delays from our Warsaw North Campus facility.  The production shortfall directly impacted our ability to fully meet case demand.  Throughout 2017, we worked to improve our production levels at this facility, but we continued to experience insufficient inventory levels across some brands within our Knee, Hip and S.E.T. product categories which impacted our ability to increase revenue.  

2020.  Our net earnings increased significantlywere $401.6 million in 20172021 compared to 2016a net loss of $138.9 million in 2020.  In 2021, we returned to profitability compared to a net loss in 2020, primarily due to higher net sales combined with fixed operating costs that did not increase proportionally to the increase in net sales, and a $1,272.4reduction in operating expenses including goodwill and intangible asset impairment charges and certain fixed overhead and hourly production worker labor expenses.  In 2020, we recognized $645.0 million income tax benefitof goodwill and intangible asset impairment charges primarily due to the forecasted impact of COVID-19 on our operating results.  In the second quarter of 2020, we recordedalso temporarily suspended or limited production at certain manufacturing facilities, resulting in additional expense recognized in cost of products sold that related to certain fixed overhead costs and hourly production worker labor expenses that are included in the cost of inventory when these facilities are operating at normal capacity.  The additional expense for suspended and limited production continued throughout 2020 and while we did recognize similar charges in 2021, they were lower than the 2020 charges.  These reduced expenses in 2021 were partially offset by a charge for the early extinguishment of debt, higher research and development expenses, including certain agreements we entered into to gain access to or acquire third-party in-process R&D projects, higher consulting and professional service expenses related to the 2017 Tax Act.  Additionally, net earnings increased in 2017 compared to 2016 due to a decrease in inventory step-up expense, lower Biomet integration-related expenses, lower performance-based compensation expense as a resultplanned spinoff of not achieving our 2017 operating plans and the recognition of $111.3 million of tax benefit as a result of lower tax rates unrelated to the impact of the 2017 Tax Act.  Partially offsetting these favorable items were $304.7 million of goodwill impairment charges on our Spine and Office Based Technologies reporting unitsDental businesses, and higher spending on quality remediation at our Warsaw North Campus facility.litigation-related charges.

20182022 Outlook

In December 2017, we announcedWe believe the appointment of a new Chief Executive Officer (“CEO”).  Our new CEO has begun an in-depth review of our businessCOVID-19 variant surges and formulating strategies to improve our performance.  His initial review likely will conclude during the first quarter and the implementation of those strategies will likely have an impact on our resultscontinuing staffing shortages that occurred late in 2018.  In the meantime, we have identified several immediate opportunities to improve our operational execution and address certain near-term challenges.  We2021 will continue to work toward completing our quality remediation efforts at our Warsaw North Campus facility and continue to invest in best-in-class quality management systems.  We will remain focused on fully restoring the supply of certain key brands within our Knee, Hip and S.E.T. product categories.  We also have several key product launches planned in 2018 that we believe will be a catalyst for our future performance.  

There are a few known items that are expected tonegatively impact our 2018 results.  Increased manufacturing costs relatednet sales in 2022.  As previously mentioned, we expect to quality remediation atspin off our Warsaw North Campus facility in 2017 will be recognized in 2018 as we sell that inventory.Spine and Dental businesses on March 1, 2022.  We expect ongoing benefits fromto apply discontinued operations accounting after the reduction of the U.S. corporate tax rate, but we planseparation, which will require us to reinvest those savings into the businessrecast our prior period results to drive sales growth.  Additionally, duereflect both continuing and discontinued operations.  Accordingly, it is difficult to underperformance against our operating plans in 2017, we expect expenses from our performance-based compensation programs to increase if we are able to achieve our plans in 2018.  We also expect our special items expense to decrease as we complete our Biomet integration plans and substantially complete our quality remediation at our Warsaw North Campus facility.    

U.S. Tax Reform

2017 Tax Act: The 2017 Tax Act includes a broad range of provisions, many of which significantly differ from those contained in previous U.S. tax law.  Changes in tax law are accounted for in the period of enactment.  As such, our 2017 consolidated financial statements reflect the immediate tax effect of the 2017 Tax Act.

The 2017 Tax Act contains several key provisions including, among other things:

During the fourth quarter of 2017, we recorded an income tax benefit of $1,272.4 million, which was comprised of the following:

The net benefit recorded was based on currently availableprovide forward-looking information and interpretations made in applying the provisions of the 2017 Tax Act as of the time of filing this Annual Report on Form 10-K.  We further refined our estimates related to the impact of the 2017 Tax Act subsequent to the issuance of our earnings release for the fourth quarter of 2017.  In accordance with authoritative guidance issued by the SEC, the income tax effect for certain aspects of the 2017 Tax Act represent provisional amounts for which our accountingthat is incomplete, but with respect to which a reasonable estimate could be determined and recorded during the fourth quarter of 2017.  The actual effects of the 2017 Tax Act and final amounts recorded may differ materially from our current estimate of provisional amounts due to, among other things, further interpretive guidance that may be issued by U.S. tax authorities or regulatory bodies, including the SEC and the Financial Accounting Standards Board (“FASB”).  We will continue to analyze the 2017 Tax Act and any additional guidance that may be issued so we can finalize the full effects of applying the new legislation on our financial statements in the measurement period, which ends in the fourth quarter of 2018.  See Note 15comparable to our consolidated financial statements for additional details related tohistorical results until the 2017 Tax Act.recasting of prior periods is complete.

RESULTS OF OPERATIONS

We analyze sales by three geographies, the Americas, EMEA and Asia Pacific, and by the following product categories: Knees, Hips,Knees; Hips; S.E.T., Dental,; Spine & CMFDental; and Other.  This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate

resources towards achieving operating profit goals.  We analyze sales by geography because the underlying market trends in any particular geography tend to be similar across product categories and because we primarily sell the same products in all geographies.  

As previously disclosed, sales increased significantly in 2016 when compared to prior years due to the inclusion of Biomet sales for the entire year.  Therefore, we analyze 2015 sales on a pro forma basis because it represents how the Zimmer and Biomet underlying businesses may have performed on a combined basis.  Pro forma sales assume the Biomet merger occurred on January 1, 2014 and therefore include the net sales of Biomet in 2015 prior to the closing of the merger.  

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Net Sales by Geography

The following tables present net sales by geography and the components of the percentage changes (dollars in millions):