ITEM 1A. RISK FACTORS
Our business faces many risks, and you should carefully consider the following risk factors, together with all of the other information included in this report, including the financial statements and related notes contained in Item 8, “Financial Statements and Supplementary Data,” and the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report, when deciding to invest in us. Any of the risks discussed below, or elsewhere in this report or in our other SEC filings, could have a material impact on our business, financial condition or results of operations. Additional risks not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition or results of operations in the future. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock.
Operational Risks
We depend heavily on a limited number of customers, and if we lose any of them or they significantly reduce their business with us, we would lose a substantial portion of our revenues.
In 2025, our top three customers collectively accounted for approximately 49 % of our revenues. Reductions in demand from these customers has negatively impacted our results of operations during prior fiscal years and may impact our future results of operations if significant reductions in demand from any significant customer or groups of customers occur. We have long-term supply agreements with a majority, but not all, of our large customers; however, these customers may not agree to renew or extend our supply agreements with them. Furthermore, many of our supply agreements do not contain minimum purchase level requirements. In addition, we are dependent on the continued growth, viability and financial stability of these customers. The markets in which these customers operate are subject to rapid technological change, market adoption risk, strong competition and short product life cycles. As a result, when these customers are adversely affected by these and other factors, we have in the past been and may in the future be adversely affected. The loss of any large customer, a material reduction of business with that customer, or a delay or failure by that customer to make payments due to us, would harm our business, financial condition and results of operations.
We are subject to pricing pressures from customers and contractual pricing constraints, which could harm our operating results and financial condition.
Given the dynamics of the industry in which we operate, we have reduced prices for some of our customers in recent years, and we expect customer pressure for continued price reductions in future periods. These additional price reductions, if they were to occur, may cause our operating results and financial condition to suffer.
We rely on third-party suppliers for raw materials, key products, subcomponents, and services. Unavailability of, or increased prices for, these materials, products, subcomponents, or services could adversely affect our results of operations and financial condition.
Our business depends on a continuous supply of raw materials. The principal raw materials used in our business include platinum, stainless steel, gold, copper, titanium, nitinol, lithium, palladium, iridium, tantalum, nickel cobalt, ruthenium, vanadium oxide, carbon monoflouride and plastics, among others. The supply and price of raw materials has been and may continue to be susceptible to fluctuations due to transportation issues, government regulations, price controls, industry bans, wars in Ukraine and the Middle East, increased tensions in Asia relating to China and Taiwan, changing geopolitical conditions, including any political instability resulting from war, terrorism, insurrections and foreign civil unrest, tariffs, worldwide economic conditions or other unforeseen circumstances. Increasing global demand for raw materials has caused prices of certain materials to increase. Significant increases in the cost of raw materials that cannot be recovered through increases in the prices of our products could adversely affect our results of operations. There can be no assurance that our customers will support or approve higher prices or that price increases and productivity gains or procurement deflation projects or savings will fully offset any raw material cost increases in the future. In addition, there are a limited number of worldwide suppliers of several raw materials needed to manufacture our products. For reasons of quality, cost effectiveness or availability, we obtain some raw materials from a single supplier. Although we work closely with our suppliers to seek to ensure continuity of supply, we may not be to continue to procure raw materials to our business in sufficient quantities or at all or to procure them at acceptable price levels. A or in deliveries from our suppliers, price increases or decreased availability of raw materials could have an effect on our ability to meet our commitments to our customers and increase our operating costs. Finally, continued uncertainty around inflationary pressures and macroeconomic conditions have increased the risk of creating new, or existing, economic we face with regard to our supply chain. Inflation has the potential to increase our overall cost structure, and sustained inflation has resulted in, and may continue to result in, higher interest rates and capital costs, increased shipping costs, supply , increased costs of labor, exchange rates, and other similar effects. While we have implemented cost containment measures and taken other actions to offset these inflationary pressures in our global supply chain,
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we may not be able to completely offset all the increases in our operational costs, which could adversely affect our results of operations and financial condition.
We rely on third-party manufacturers and service providers to supply many of the products and subcomponents that are incorporated into our products and components. These third-party manufacturers and service providers have their own complex supply chains and related risks, whether due to the shipping risks described below, the raw material and availability risks described above, or other causes. Manufacturing problems may occur with these and other outside sources, as a supplier may fail to develop or manufacture products and subcomponents for us on a timely basis or at all, or may supply us with products and subcomponents that do not meet our quality, quantity and cost requirements. Our third-party suppliers are also subject to shipping risks, including container shortages, blocked shipping lanes, and port backlogs. If any of these problems occur, we may be unable to obtain substitute sources for these products and subcomponents on a timely basis or on terms acceptable to us or at all, which could harm our ability to manufacture our own products and components profitably or on time. In addition, to the extent the processes our third-party suppliers use to manufacture products and subcomponents are proprietary, we may be to obtain comparable products and subcomponents from alternative suppliers.
Our business is also subject to potential increased costs and expenses and other risks resulting from existing and potential future U.S. and foreign legislation, regulations, trade agreements, tariffs, trade wars, import restrictions, boycotts, embargoes, government investigations, trade policies and compliance matters relating to the products we manufacture outside of the U.S and import into the U.S. and other materials we import for the production of products, including the tariffs on steel and copper that the U.S. has imposed and other tariffs that the current U.S. presidential administration has imposed or threatened to impose, particularly relating to imports into the U.S. from Canada, Mexico and Ireland, and China. Additionally, government actions on quotas, duties, tariffs or taxes or restrictions on imports, all or any of which could adversely affect our operations, increase the costs of products that we manufacture outside the U.S. or adversely impact our profits or margins. Adverse changes in import costs and restrictions, including tariffs, or the failure by us or our suppliers to comply with trade regulations or similar laws, could our business. If additional tariffs or trade restrictions are implemented by the U.S. or other countries in connection with a global trade war, the cost of our products manufactured in Mexico or other countries and imported into the U.S. or other countries could increase further, which, in turn, could affect the demand for these products, make our products less competitive and have an effect on our business and results of operations. We cannot predict whether new or additional trade actions such as customs quotas, duties, tariffs, taxes or restrictions will be imposed by the U.S. government or the governments of other countries, and such actions may have a material effect on our business, financial conditions and cash flow.
If we are not able to match our manufacturing capacity with demand for our products, our financial results may suffer.
Many of our products have a long production cycle, and we must anticipate demand for our products to ensure adequate manufacturing and testing capacity and make certain decisions based on our estimates, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, working capital management, facility and capacity requirements, facility footprint planning, personnel needs and other resource requirements. Rapid increases in customer demand may stress personnel and other capacity resources. If we are unable to anticipate demand, and our manufacturing or testing capacity does not keep pace with product demand, we will be unable to fulfill orders in a timely manner, which could result in a loss of business from such customer and may negatively impact our financial results and overall business. Conversely, if demand for our products decreases, the fixed costs associated with excess manufacturing capacity may harm our financial results, including by decreasing gross margins and increasing research and development costs as a percentage of revenue.
Interruptions of our manufacturing operations could delay production and adversely affect our operations.
Our products are designed and manufactured in facilities located around the world. In most cases, the manufacturing of specific product lines is concentrated in one or a few locations. If an event (including any weather, natural disaster or adverse climate change-related events, war or terrorism, civil unrest, disruption in utilities and other services affecting our facilities or a future pandemic, epidemic, outbreak of a contagious disease or other public health crisis) occurred that resulted in material damage, loss or incapacitation of one or more of these manufacturing facilities or if we lacked sufficient labor to fully operate any of our facilities, we may not be able to transfer the manufacture of the relevant products to another facility or location in a cost-effective or timely manner, if at all, which could materially and adversely affect our business. This potential inability to transfer production could occur for a number of reasons, including but not limited to a of necessary relevant manufacturing capability or capacity at another facility, or the regulatory requirements of the FDA or other governmental regulatory agencies. Other in our manufacturing operations for any reason, including equipment , to follow specific protocols and procedures, civil or environmental factors could lead to an to supply our customers with our products, costs, revenues and to our reputation. For example, we have recently seen civil in certain U.S. cities where we have manufacturing facilities, such as Minneapolis, where we manufacture a large number of products. In addition, our business involves complex manufacturing processes and the use of various materials, chemicals and other regulated substances, such as trichloroethylene, which can be to our associates. We must also comply with various health and safety regulations in the U.S. and abroad in connection with our operations. Although we employ safety procedures in the design and
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operation of our facilities, there is a risk that an accident or death could occur. Any accident, such as a chemical spill or fire, could result in significant manufacturing delays or claims for damages resulting from injuries, which would harm our business, results of operations and financial condition. The potential liability resulting from any such accident or death, to the extent not covered by insurance, could harm our financial condition or operating results. Any disruption of operations at any of our facilities, and in particular our larger facilities, could result in production delays, which could adversely affect our operations and harm our business.
We may not be able to attract, train and retain a sufficient number of qualified associates to maintain and grow our business.
We monitor the markets in which we compete and assess opportunities to better align expenses with revenues, while preserving our ability to make needed investments in RD&E projects, capital and our associates that we believe are critical to our long-term success. Our success depends, and our continued success will depend, in large part upon our ability to attract, train, retain and motivate highly skilled associates. There is currently aggressive competition for employees who have experience in technology and engineering. We compete intensely with other companies to recruit and hire from this limited pool. The industries in which we compete for employees are characterized by high levels of employee attrition. Although we believe we offer competitive salaries and benefits, we have had to, and may in the future have to, increase spending to attract, train and retain qualified personnel. If we are unable to attract, train and retain a sufficient number of qualified associates to maintain and grow our business, it could have an adverse impact on our results of operations.
Quality problems with our products could result in warranty claims and additional costs, could harm our reputation and could erode our competitive advantage.
Quality is important to us and our customers, and our products are held to high quality and performance standards. In the event our products fail to meet these standards, we generally allow customers to return defective or damaged products under warranty. We carry a safety stock of inventory for our customers that may be impacted by warranty claims. We reserve for our exposure to warranty claims based upon recent historical experience and other specific information as it becomes available. However, these reserves may not be adequate to cover future warranty claims. If our reserves for warranty claims are inadequate, additional warranty costs or inventory write-offs may need to be incurred in the future, which could harm our operating results. We also could be subject to negative publicity and our reputation could be harmed if we fail to meet quality standards. This could our competitive over competitors, causing us to or see a material reduction in business from customers and resulting in lower revenues. In addition, we might be required to devote significant resources to address any quality issues associated with our products, which could reduce the resources available for product development and other matters.
Our operations are subject to cyber-attacks and other information technology disruptions that could have a material adverse effect on our business, results of operations and financial condition.
We are a global company with a complex business model. In the ordinary course of business, our operations are, and in the future are expected to continue to be, dependent on digital technologies and information technology (“IT”) systems. Due to the complex nature of our business, we are increasingly dependent upon our technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data. We use these technologies and systems for internal purposes, including data storage, processing and transmissions, as well as in our interactions with customers and suppliers. The security of this information and these systems are important to our operations and business strategy. Our IT systems and infrastructure have been, and in the future are expected to continue to be, subject to the risk of cyber-attacks by hackers or malware, or breach due to associate error, malfeasance or other disruptions, including natural disasters, failures in hardware or software and power fluctuations. As the techniques used to obtain unauthorized access, disable or degrade service or infrastructure and systems change frequently, have become increasingly sophisticated and may be to detect for long periods of time, we may be to anticipate these techniques or implement adequate preventive measures. If our systems for protecting cybersecurity risks or other IT prove , our business could be , resulting in numerous consequences, including temporary or permanent of, to, third party access to, or or public disclosure of our or a third party’s intellectual property, proprietary or confidential information, or customer, supplier, or employee data; of our business operations; , including individual , consumer class actions and commercial ; regulatory intervention and sanctions or ; publicity; and increased costs required to prevent, respond to, or mitigate such cybersecurity attacks or IT . In addition, any such could compromise our networks and the information stored there could be accessed, publicly or . Emerging technologies such as generative artificial intelligence (“AI”) may be used by actors to identify , create more targeted and sophisticated phishing narratives or otherwise social engineering capabilities, which may increase our landscape. In addition, the adoption or use of AI tools by us, our customers, suppliers and other business partners and third-party vendors may introduce new , propagate outputs, or proprietary, confidential or personal data to parties, which could increase cybersecurity and operational risks. may be introduced from the use of AI by us, our customers, suppliers and other business partners and third-party vendors. These risks could our reputation and brand, and our relationships with customers, suppliers, employees and other third parties, and may result in
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or proceedings against us. In certain circumstances, we may rely on third-party vendors to process, store and transmit data for our business whose operations are subject to similar risks. While we conduct security risk assessments prior to engaging third party suppliers and other vendors and business partners to validate that they maintain appropriate safeguards to protect our and their information systems in connection with the services they provide, as described below in greater detail under Item 1C, “Cybersecurity,” it is possible that they suffer a cybersecurity attack, including one amplified by the use of AI-based tools, that negatively impacts us. These risks could have a material adverse effect on our business, financial condition and results of operations. If we are unable to protect our business against or efficiently respond to cybersecurity attacks, it could have a material adverse impact on our business, results of operations and financial condition.
Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly demanding, with the imposition of new and changing requirements across businesses, including SEC rules requiring timely public disclosure of material cybersecurity incidents. We are required to comply with increasingly complex and changing legal and regulatory requirements that govern the collection, use, storage, security, transfer, disclosure and other processing of personal data in the U.S. and in other countries, including, but not limited to, HIPAA, HITECH, the California Privacy Rights Act and the EU’s General Data Protection Regulation (“GDPR”). The GDPR imposes stringent EU data protection requirements and provides for significant penalties for noncompliance. HIPAA also imposes stringent data privacy and security requirements and the regulatory authority has imposed significant fines and penalties on organizations found to be out of compliance. We or our third-party providers and business partners may also be subjected to audits or investigations by one or more domestic or foreign government agencies relating to compliance with information security and privacy laws and regulations, and with the laws and regulations could results in material or .
Global climate change and related emphasis on environmental, social and governance (“ESG”) matters by various stakeholders could negatively affect our business or the price of our common stock.
Customer, investor and employee expectations relating to ESG are continuing to evolve. In addition, certain governmental and non-governmental organizations are enhancing or advancing requirements specific to ESG matters. Stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements. Stakeholders may begin to request or require disclosures on ESG topics such as greenhouse gas emissions, human capital matters and specific ESG-risk management practices, including as a result of existing and potential legislation, such as the Corporate Sustainability Reporting Directive in the European Union and the California climate rules. A failure to adequately meet stakeholder expectations and/or applicable legal and regulatory requirements may result in material noncompliance, the loss of business, reputational impacts, reduced investor demand to purchase or continue to hold our common stock, diluted market valuation and an inability to attract customers. In addition, our adoption of certain standards or mandated compliance with certain requirements could necessitate additional investments that could increase our operating costs and have a impact on our .
The long-term effects of global climate change are difficult to predict and may be widespread. Global climate change could disrupt our operations by impacting the availability and cost of materials within our supply chain and could also increase our other operating costs. The economic and market uncertainty created by transitioning to low-carbon alternatives may result in reduced demand or product obsolescence for certain of our customers’ products, which in turn would result in reduced profit margin associated with certain of our customers, or loss of customers that we may not be able to replace. Further, increased public awareness and concern regarding global climate change may result in new or enhanced legal requirements to reduce or mitigate the effects of greenhouse gas emissions. If legislation or regulations are enacted in jurisdictions in which we do business that are more stringent than our current obligations, we and companies in our supply chain may experience increased compliance burdens and costs to meet these obligations, which could cause in the sourcing, manufacturing and distribution of our products and affect our business, financial condition or results of operations. Additionally, the impacts of climate change may further include customer preferences and requirements. to meet these preferences or requirements could potentially result in of market share.
We are dependent upon our senior management team and key technical personnel and the loss of any of them could significantly harm us.
Our future performance depends to a significant degree upon the continued contributions of our senior management team and key technical personnel. In general, only highly qualified and trained scientists have the necessary skills to develop our products, which are often highly technical in nature. The loss or unavailability to us of any member of our senior management team or a key technical employee could significantly harm us. We face intense competition for these professionals from our competitors, customers and companies operating in our industry. To the extent that the services of members of our senior management team and key technical personnel would be unavailable to us for any reason, we would be required to hire other personnel to manage and operate our Company and to develop our products and technology, which could adversely impact our business. We may not be able to locate or employ these qualified personnel on acceptable terms or may need to increase spending to attract these qualified personnel.
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Consolidation in the healthcare industry could result in greater competition and reduce our revenues and harm our business and our operating results.
Many healthcare industry companies are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price reductions for our products or may undertake additional vertical integration or supplier diversification initiatives. If we are forced to reduce our prices, our revenues would decrease and our operating results would suffer.
Strategic Risks
If we are unable to successfully market our current or future products, our business will be harmed and our revenues and operating results will be adversely affected.
If the markets for our products do not grow as we or industry experts forecast, our revenues could be less than expected. Furthermore, it is difficult to predict the rate at which the markets for our products will grow or if new and increased competition will result in market saturation. Slower growth in the cardiac rhythm management, neuromodulation, and cardio and vascular markets in particular would adversely impact our revenues. In addition, we face the risk that our products will lose widespread market acceptance. Our customers may not continue to utilize the products we offer and a market may not develop for our future products.
Heightened geopolitical tensions and resulting trade restrictions, including escalating or retaliatory tariffs between regions, could increase the cost of our products or otherwise make products manufactured in certain locations less competitive in key markets, which could reduce customer demand and impair our ability to successfully market our current or future products.
We have in the past spent and in the future may need to spend more time and resources than we expect to develop, market and introduce new products. We may at times determine that it is not technically or economically feasible for us to continue to manufacture certain products and we may not be successful in developing or marketing replacement products. Additionally, new products and technologies that we develop may not be rapidly accepted because of industry-specific factors, including the need for regulatory clearance, entrenched patterns of clinical practice, uncertainty over third-party reimbursement and our competitors developing products that provide better features, clinical outcomes or economic value than those that we currently offer or subsequently develop, and we may not be able to recover all or a meaningful part of our investment in the new products and technologies. If any of these events occurs, our business will be harmed and our revenues and operating results will be adversely affected.
We may face intense competition that could harm our business, including competitors, insourcing and the possibility of dual sourcing; and we may be unable to compete successfully against new entrants and established companies with greater resources.
Competition in connection with the manufacturing of our medical products across all of our product lines, which is fragmented and subject to rapid technological change, has intensified in recent years and may continue to intensify in the future. We encounter significant competition across our product lines and in each market in which our medical products are sold from various medical device companies, some of which may have greater financial, operational, personnel, sales, technical and marketing resources than we do and are more well-established. In addition, our medical customers have in the past elected, and may in the future elect, to in source production or implement supplier diversification initiatives. Such actions have in the past resulted in, and may in the future result in, the customer manufacturing or dual sourcing some or all of the components or products that we currently supply to them, which could cause our operating results to suffer.
In addition, some of our competitors outside of the U.S. may have resources and support from their governments that we do not, such as preferences for local manufacturers, and may not be subject to the same tariffs, trade policies, trade compliance regulations and government investigations as us.
Our competitors are not all subject to the same standards, regulatory and/or other legal requirements to which we are subject and, therefore, they could have a competitive advantage in developing, manufacturing, and marketing products and services. Any inability to develop, gain regulatory approval for, and supply commercial quantities of competitive products to existing and potential customers as quickly and effectively as our competitors could limit acceptance of our products and negatively and materially affect our operating results.
If we do not respond to changes in technology, our products may become obsolete or less competitive and we may experience a loss of customers and lower revenues.
We sell our products to customers in several industries that are characterized by extensive research and development, rapid technological changes, new product introductions and evolving industry standards. To be successful, we must anticipate our customers’ needs and demands, as well as potential shifts in preferences. Without the timely introduction of new products, technologies and enhancements, our products and services will likely become technologically obsolete or less competitive over
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time and we may lose or see a reduction in business from a significant number of our customers. We dedicate a significant amount of effort and resources to the development of our products, technologies and enhancements. Rapid advancements in AI may also require us to adapt our products and capabilities more quickly than in the past, and our failure to effectively adopt or integrate AI technologies could make our products less competitive. Our product development efforts may be affected by a number of factors, including our ability to anticipate customer needs, develop or acquire new technologies and enhancements (including but not limited to AI), secure intellectual property protection for our products, and manufacture products in a cost-effective manner. In addition, we would be harmed if our products and technologies do not meet customer requirements and expectations. Our inability, for technological or other reasons, to successfully develop and introduce new and innovative products, technologies and could result in a of customers and lower revenues. Moreover, once introduced, new products may materially and impact sales of our existing products or make them less or even , which could materially and impact our revenues and operating results.
We intend to develop new products and expand into new geographic and product markets, which may not be successful and could harm our operating results.
We intend to develop new and modified products using our existing technologies and engineering capabilities and to continue to expand into new geographic and product markets. These efforts have required, and will continue to require, us to make substantial investments, including significant RD&E expenditures and capital expenditures for new, expanded or improved manufacturing facilities. Additionally, many of the new products we are developing take longer and more resources to develop and commercialize than those products we are currently marketing, including more time and resources required to obtain regulatory approvals.
Specific risks in connection with expanding into new geographic and product markets include: longer product development cycles, the inability to transfer our quality standards and technology into new products, the failure to receive or the delay in receipt of regulatory approval for new products or modifications to existing products and the failure of our existing customers or the market generally to accept the new or modified products. Our inability to develop new products or expand into new geographic and product markets, as currently intended, could hurt our business, financial condition and results of operations.
If we are not successful in making acquisitions to expand and develop our business, our operating results may suffer.
One facet of our growth strategy is to make acquisitions that complement our core competencies in technology and manufacturing to enable us to manufacture and sell additional or enhanced products to our existing customers and to expand our business into related markets. Our continued growth through acquisitions depends on our ability to successfully identify and acquire companies that complement or enhance our existing business on acceptable terms. We may not be able to identify or complete future acquisitions. In addition, we will need to comply with the terms of our current or any future debt agreements to pursue and complete future acquisitions. In connection with pursuing this growth strategy, some of the risks that we may encounter include expenses associated with and difficulties in identifying potential targets, the costs associated with unsuccessful acquisitions, the acquisition or assumption of unexpected or unanticipated liabilities or costs resulting from the acquisition of a target company or the operation of an acquired business, and higher prices for acquired companies because of significant competition for acquisition targets.
Successful integration and anticipated benefits of acquisitions cannot be assured and integration matters could divert attention of management away from operations.
Part of our business strategy includes acquiring additional businesses and assets, which we have done in each of the last seven years. If we do not successfully integrate acquisitions, we may not realize anticipated operating advantages, gains from synergies and cost savings. Our ability to realize the anticipated benefits from acquisitions will depend, to a large extent, on our ability to integrate these acquired businesses with our legacy businesses. Integrating and coordinating aspects of the operations and personnel of the acquired business with legacy businesses involves complex operational, technological and personnel-related challenges. This process is time-consuming and expensive, disrupts the businesses of both companies and may not result in the achievement of the full benefits expected by us, including cost synergies expected to arise from supply chain efficiencies and overlapping general and administrative functions.
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The potential difficulties, and resulting costs and delays, include:
• managing a larger combined company;
• consolidating corporate and administrative infrastructures;
• issues in integrating manufacturing, warehouse and distribution facilities, supply chain, RD&E and sales forces;
• difficulties attracting and retaining key personnel;
• loss of customers and suppliers and inability to attract new customers and suppliers;
• unanticipated issues in integrating information technology, communications and other systems;
• incompatibility of purchasing, logistics, marketing, administration and other systems and processes; and
• unforeseen or unexpected liabilities or costs related to the acquisition of a target company or the operation of an acquired business, which may be beyond the scope of any applicable insurance coverage we may have.
Additionally, the integration of our legacy businesses with an acquired company’s operations, products and personnel may place a significant burden on management and other internal resources. The attention of our management may be directed towards integration considerations and may be diverted from our day-to-day business operations, and matters related to the integration may require commitments of time and resources that could otherwise have been devoted to other opportunities that might have been more beneficial to us and our business. The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could harm our business, financial condition and operating results.
We may not be able to maintain the levels of operating efficiency that acquired companies or businesses have achieved or might achieve separately. Successful integration of each acquisition will depend upon our ability to manage those operations and to eliminate redundant and excess costs. Difficulties in integration may be magnified if we make multiple acquisitions over a relatively short period of time. Because of difficulties in combining and expanding operations, we may not be able to achieve the cost savings and other benefits that we hoped to achieve after these acquisitions.
Market, Financial and Indebtedness Risks
Our operating results may fluctuate, which may make it difficult to forecast our future performance and may result in volatility in our common stock price and declines in the price of common stock could subject us to litigation.
The price of our common stock has been and is likely to continue to be volatile. For example, between January 1, 2025 and February 18, 2026, our common stock’s daily closing price on NYSE has ranged from a low of $63.32 to a high of $144.36. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities litigation. We are currently experiencing securities class action litigation and may experience more such litigation following recent or future periods of volatility or declines in our stock price. For more information, see Note 14, “Commitments and Contingencies,” of the Notes to Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” of this report. Any securities litigation could result in substantial costs and divert our management’s attention and resources, which could adversely affect our business.
The price of our common stock may fluctuate significantly for numerous reasons, including the fluctuation of our operating results, which have fluctuated in the past and are likely to continue to fluctuate from quarter to quarter, making forecasting future performance difficult and resulting in volatility in our common stock price. These fluctuations are due to a variety of factors, including the following:
• timing of orders placed by our customers and revisions of our customers’ forecasts;
• our customers’ approach to inventory management;
• changes in the mix of our revenue represented by our various products and customers could result in reductions in our profits if the mix of our revenue represented by lower margin products increases;
• a portion of our costs are fixed in nature, which results in our operations being sensitive to fluctuations in production volumes;
• increased costs and decreased availability of raw materials or supplies, including due to tariffs; and
• our ability to effectively execute on operational initiatives to drive manufacturing efficiencies.
We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term stockholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves.
On November 4, 2025, we announced that our Board of Directors had approved a share repurchase program with no expiration date, under which we are authorized to repurchase shares of common stock for up to $200 million on the open market, in privately-negotiated purchases, including accelerated share repurchases, or otherwise. As of December 31, 2025, approximately $150 million remained available under the program.
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Although the Board of Directors has authorized the share repurchase program, the share repurchase program does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares. The timing and amount of repurchases will depend upon several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. Our ability to repurchase shares of stock may be limited by restrictive covenants in our debt agreements and in the indentures governing the 2028 Convertible Notes and 2030 Convertible Notes. The repurchase program may be limited, suspended or discontinued at any time without prior notice. Repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. Additionally, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. Although our share repurchase program is intended to enhance long-term stockholder value, there is no assurance that it will do so.
On February 19, 2026, we entered into an accelerated share repurchase agreement (“ASR Agreement”) to repurchase approximately $50 million of our common stock under our previously authorized share repurchase program. The ultimate number of shares repurchased will be based on the volume-weighted average price of our common stock during the repurchase period under the ASR Agreement, less a discount and subject to adjustments in accordance with the terms and conditions of the ASR Agreement. After giving effect to the ASR Agreement, we will have approximately $100 million of capacity remaining under our share repurchase program.
Activist shareholders could negatively impact our business and cause disruptions.
We value constructive input from investors and regularly engage in dialogue with our shareholders regarding strategy and performance. While our Board of Directors and management team welcome their views and opinions with the goal of enhancing value for all shareholders, we may be subject to actions or proposals from activist shareholders that may not align with our business strategies or the best interests of all of our shareholders.
In the event of such shareholder activism — particularly with respect to matters which our board of directors, in exercising their fiduciary duties, disagree with or have determined not to pursue — our business could be adversely affected because responding to such actions by activist shareholders can be costly and time-consuming, disruptive to our operations and divert the attention of management, our Board of Directors and our employees, and our ability to execute our strategic plan could also be impaired as a result. Such an activist campaign could require us to incur substantial legal, public relations and other advisory fees and proxy solicitation expenses. Further, we may become subject to, or we may initiate, litigation as a result of proposals by activist shareholders or matters relating thereto, which could be a further distraction to our board of directors and management and could require us to incur significant additional costs. In addition, perceived uncertainties as to our future direction, strategy, or leadership created as a consequence of activist shareholders may result in the of potential business , our ability to attract new or retain existing investors, customers, directors, employees, or other partners, relationships with us, and the market price of our ordinary shares could also experience periods of increased as a result.
We have significant indebtedness that could adversely affect our operations, financial condition, and cash flows if we fail to meet certain financial covenants required by our debt agreements or if our access to capital markets is interrupted.
At December 31, 2025, we had $1.2 billion in principal amount of debt outstanding under the Senior Secured Credit Facilities and the 2.125% convertible senior notes due 2028 (the “2028 Convertible Notes”) and the 1.875% convertible senior notes due 2030 (the “2030 Convertible Notes”). As of December 31, 2025, our debt service obligations, comprised of interest on our outstanding indebtedness and commitment fees on the unused portion of our Revolving Credit Facility, are estimated to be approximately $27 million for 2026. The outstanding indebtedness and the terms and covenants of the agreements under which this debt was incurred, could, among other things:
• require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our outstanding indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, RD&E expenditures and other general corporate requirements;
• limit our ability to obtain additional financing to fund future working capital, capital expenditures, RD&E expenditures and other general corporate requirements in the future;
• delay or prevent an otherwise beneficial takeover or takeover attempt of us;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
• restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities;
• place us at a competitive disadvantage compared to our competitors that have less outstanding indebtedness; and
• adversely affect the market price of our common stock, including by dilution resulting from the conversion of all or some of our 2028 Convertible Notes or our 2030 Convertible Notes.
Additionally, our failure to comply with the covenants contained in the 2021 Credit Agreement governing our Senior Secured Credit Facilities, if not waived, could cause a default under our Senior Secured Credit Facilities that requires repayment in full, or
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acceleration, of debt payments. If that were to occur, there can be no assurance that we would be able to refinance or obtain a replacement financing on favorable terms or at all.
Economic and credit market uncertainty could interrupt our access to capital markets, borrowings, or financial transactions to hedge certain risks, which could adversely affect our business prospects and financial condition.
To date, we have been able to access debt and equity financing that has allowed us to complete acquisitions, make investments in growth opportunities and fund working capital requirements. In addition, we enter into financial transactions to hedge certain risks, including foreign exchange and interest rate risk, as further discussed below. Our continued access to capital markets, the stability of our lenders under our Senior Secured Credit Facilities and their willingness to support our needs, and the stability of the parties to our financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund operations, and fund our strategic initiatives. An interruption in our access to external financing or financial transactions to hedge risk could adversely affect our business prospects and financial condition.
In addition, certain of our borrowings are at variable interest rates and therefore we are subject to interest rate risk. Changes in interest rates directly impact the amount of interest we pay on our variable rate obligations and continued or sustained increases in interest rates could negatively impact our business.
The conditional conversion features of the 2028 Convertible Notes and the 2030 Convertible Notes could adversely affect our financial condition and operating results.
The holders of our 2028 Convertible Notes have had the ability to, and may in the future continue to have the ability to, convert their notes at their option prior to the scheduled maturities and the holders of our 2030 Convertible Notes may in the future have the ability to convert their notes at their option prior to the scheduled maturities. One of the conditional conversion features of the 2028 Convertible Notes has been triggered from time and time, most recently as of June 30, 2025, due to the trading price of our common stock exceeding 130% of the 2028 Convertible Notes conversion price on at least 20 out of the 30 consecutive trading days prior to such date. Whether the 2028 Convertible Notes or the 2030 Convertible Notes will be convertible in any future period will depend on the satisfaction, with respect to the 2028 Convertible Notes, of this condition or, with respect to the 2030 Convertible Notes, another conversion condition at such time. If one or more noteholders elect to convert their 2028 Convertible Notes, or, once eligible for conversion, the 2030 Convertible Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, holders of our 2028 Convertible Notes and our 2030 Convertible Notes will have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the indenture governing the 2028 Convertible Notes or the indenture governing the 2030 Convertible Notes), at a repurchase price equal to the principal amount of the 2028 Convertible Notes or the 2030 Convertible Notes to be repurchased, plus accrued and special interest, if any, to but not including, the fundamental change repurchase date. We may not have enough available cash or be to obtain financing at the time we are required to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or pay the cash amounts due upon conversion of such notes. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or pay the cash amounts due upon conversion of such notes. Our to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or to pay the cash amounts due upon conversion of such notes when required will constitute a under the indenture governing the 2028 Convertible Notes or the 2030 Convertible Notes, as applicable. A under the indenture governing the 2028 Convertible Notes or the indenture governing the 2030 Convertible Notes or the fundamental change itself could also lead to a under agreements governing our other indebtedness, including the 2021 Credit Agreement governing the Senior Secured Credit Facilities, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to all amounts due under the other indebtedness, the 2028 Convertible Notes and the 2030 Convertible Notes. We could also be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Convertible Notes and 2030 Convertible Notes as a current liability rather than a long-term liability if any of the conditional conversion features are triggered or upon the occurrence of a fundamental change, which would result in a material reduction of our net working capital.
Certain provisions in the 2028 Convertible Notes, the indenture governing the 2028 Convertible Notes, the 2030 Convertible Notes and the indenture governing the 2030 Convertible Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.
Certain provisions in the 2028 Convertible Notes, the 2030 Convertible Notes, the indenture governing the 2028 Convertible Notes and the indenture governing the 2030 Convertible Notes could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover constitutes a fundamental change, holders of the 2028 Convertible Notes and the 2030 Convertible Notes will have the right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the 2028 Convertible Notes or indenture governing the 2030 Convertible Notes), we may be required to increase the conversion rate for holders of the 2028 Convertible Notes or the 2030 Convertible Notes, as applicable, who convert their notes in connection with such takeover. In either case, and in other cases, our obligations under the 2028 Convertible Notes, the 2030 Convertible Notes, the indenture governing the 2028 Convertible Notes
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or the indenture governing the 2030 Convertible Notes could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of our common stock may view as favorable.
Transactions relating to our 2028 Convertible Notes or the 2030 Convertible Notes may affect the market price of our common stock.
The conversion of some or all of our 2028 Convertible Notes or the 2030 Convertible Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such 2028 Convertible Notes or the 2030 Convertible Notes. Our 2028 Convertible Notes have in the past been, and may in the future continue to be, convertible at the option of their holders under certain circumstances. In addition, our 2030 Convertible Notes will become convertible at the option of their holders under certain circumstances. If holders of our 2028 Convertible Notes or our 2030 Convertible Notes elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.
In connection with the pricing of the 2028 Convertible Notes and the 2030 Convertible Notes, we entered into capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce potential dilution to our common stock upon conversion of any 2028 Convertible Notes or any 2030 Convertible Notes and/or offset or substantially offset any cash payments we are required to make in excess of the principal amount of converted 2028 Convertible Notes or 2030 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.
In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the 2028 Convertible Notes or the 2030 Convertible Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2028 Convertible Notes or the 2030 Convertible Notes). This activity could cause or avoid an increase or decrease in the market price of our common stock.
In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our common stock, which could adversely affect the trading price of our common stock.
We are subject to counterparty risk with respect to the capped call transactions for the 2028 Convertible Notes and the 2030 Convertible Notes.
The option counterparties for the capped call transactions for the 2028 Convertible Notes and the 2030 Convertible Notes are financial institutions, and we will be subject to the risk that any or all of them might default with respect to any such capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our common stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurance as to the financial or viability of the option counterparties.
A significant portion of our sales and operations is currently generated from customers located outside of the U.S., and are subject to a variety of market and financial risks and costs that could adversely affect our profitability and operating results.
Our sales outside the U.S., which accounted for approximately 47% of sales for 2025, and our operations in Europe, Asia, Mexico, South America, Central America and the Caribbean are and will continue to be subject to a number of risks and potential costs, including:
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• changes in foreign economic conditions or regulatory requirements;
• exchange controls, currency restrictions and changes in foreign currency exchange rates, and in particular the relative strength of the U.S. dollar, which is our functional and reporting currency;
• local product preferences and product requirements;
• outstanding accounts receivables that take longer to collect than is typical in the U.S.;
• difficulties in enforcing agreements through foreign legal systems;
• less protection of intellectual property in some countries outside of the U.S.;
• trade protection measures, including costs we may incur as a result of the enactment of new tariffs or changes in existing tariffs (in particular, the potential new tariffs imposed by the current U.S. presidential administration on goods imported into the U.S. from Mexico, where we currently manufacture a significant portion of our products) or our inability to pass these tariff costs on to our customers, and import and export licensing requirements;
• work force instability and differing labor regulations;
• significant natural disasters and other events or factors impact local infrastructure;
• political and economic instability, including civil or international conflicts, war and terrorism;
• transportation delays or interruptions; and
• complex tax and cash management issues.
These risks are also present in connection with our entry into new geographic markets.
Some of our locations expose us to higher security risks, which could result in both harm to our employees and contractors or substantial costs. Some of our services are performed in or adjacent to high-risk locations where the country or location and surrounding area experience political, social, or economic turmoil, war or civil unrest, or high levels of criminal or terrorist activities. In those locations where we have employees or operations, we may incur substantial costs to maintain the safety of our personnel, and we may suffer the loss of employees and contractors, which could harm our business, reputation, and operating results.
Additionally, as a result of our international operations, we are subject to exposure from currency exchange rate fluctuations. We purchase forward currency contracts in certain currencies to reduce our exposure; however, these transactions may not be adequate or effective to protect us from the exposure for which they are purchased. Historically, foreign currency exchange rate fluctuations have not had a material effect on our net financial results. However, fluctuations in foreign currency exchange rates could have a significant impact on our financial results in the future.
We have a complex tax profile due to the global nature of our operations and may experience increases and variability in our quarterly and annual effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities and changes in tax rates.
Our global operations encompass multiple taxing jurisdictions. Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax uncertainties, changes in tax laws and rates, and the extent to which we are able to realize net operating loss and other carryforwards included in deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among other matters, may significantly affect our effective income tax rate in the future.
The tax regimes we are subject to or operate under may be subject to significant changes, and changes in international tax laws or additional changes in U.S. tax laws could materially affect our financial position and results of operations. Changes in applicable tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our income tax expense and profitability. Certain provisions of the One Big Beautiful Bill Act (OBBA), including Net CFC Tested Income (formerly GILTI), as well as the 15% global minimum tax under the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Global Anti-Base Erosion Rules, may impact our income tax expense, profitability, and capital allocation decisions and may negatively impact our effective tax rate. If tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is possible such changes could adversely impact our financial results.
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Our effective income tax rate is the result of the income tax rates in the various countries in which we do business. Our mix of income and losses in these jurisdictions affects our effective tax rate. For example, relatively more income in higher tax rate jurisdictions would increase our effective tax rate and thus lower our net income. Similarly, if we generate losses in tax jurisdictions for which no benefits are available, our effective income tax rate will increase. Our effective income tax rate may also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our deferred tax asset valuation allowance. Our effective income tax rate has fluctuated from 15.4% in 2023, to 18.0% in 2024 and to 18.0% for 2025. A significant increase in our effective income tax rate could have a material adverse impact on our earnings.
We have recorded deferred tax assets based on our assessment that we will be able to realize the benefits of favorable tax attributes. Realization of deferred tax assets involve significant judgments and estimates which are subject to change and ultimately depends on generating sufficient taxable income of the appropriate character during the appropriate periods. Changes in circumstances may affect the likelihood of such realization, which in turn may trigger a write-down of our deferred tax assets, the amount of which would depend on a number of factors. A write-down would reduce our reported net income, which may adversely impact our financial condition or results of operations or cash flows. In addition, we are potentially subject to ongoing and periodic tax examinations and audits in various jurisdictions. An adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.
We may never realize the full value of our intangible assets, which represent a significant portion of our total assets.
At December 31, 2025, we had $1.9 billion of goodwill and other intangible assets, representing 57% of our total assets. These intangible assets consist primarily of goodwill, trademarks, tradenames, customer relationships and patented technology arising from our acquisitions. Goodwill and other intangible assets with indefinite lives are not amortized, but are tested annually or upon the occurrence of certain events that indicate that the assets may be impaired. Definite lived intangible assets are amortized over their estimated useful lives and are tested for impairment upon the occurrence of certain events that indicate that the assets may not be recoverable. We may not receive the recorded value for our intangible assets if we sell or liquidate our business or assets. In addition, our significant amount of intangible assets increases the risk of a large charge to earnings in the event that the recoverability of these intangible assets is impaired. In the event of a significant charge to earnings, the market price of our common stock could be adversely affected. In addition, intangible assets with definite lives, which represent $735.1 million of our net intangible assets at December 31, 2025, will continue to be amortized. These expenses will continue to reduce our future earnings or increase our future losses. The accounting for intangible assets requires reliance on forward-looking estimates of sales and/or earnings. Estimating the future performance of our business is extremely and the range of from internal estimates could be more significant in the current market environment.
Legal and Compliance Risks
Regulatory issues resulting from product complaints, recalls or regulatory audits could harm our ability to produce and supply products or bring new products to market.
The products that we design, manufacture and distribute, including our customers’ finished medical devices, product components that are incorporated into our customers’ finished medical devices, and our own finished medical devices, are designed, manufactured and distributed globally in compliance with applicable regulations and standards. However, a product complaint, recall (either voluntary or as required by any governmental authority) or negative regulatory audit may cause our products, including product components and finished medical devices, to be removed from the market and harm our operating results or financial condition. In addition, during the period in which corrective action is being taken by us to remedy a product complaint, recall or negative regulatory audit, regulators may not allow our new products or components to be cleared for marketing and sale.
If we become subject to product liability claims, our operating results and financial condition could suffer.
Our business exposes us to potential product liability claims, which may take the form of a one-off claim from a single claimant or a class action lawsuit covering multiple claimants. Product failures, including those that arise from the failure to meet product specifications, misuse or malfunction, or design flaws, or the use of our products with other components, systems or medical devices not manufactured or sold by us could result in product liability claims or a recall. Many of our products are components that interact with our customers’ medical devices. For example, our batteries are produced to meet electrical performance, longevity and other specifications, but the actual performance of those products is dependent on how they are utilized as part of our customers’ devices over the lifetime of their products. Product performance and device interaction from time to time have been, and may in the future be, different than expected for a number of reasons. Consequently, it is possible that customers may experience problems with their medical devices that could require device or other corrective action, where our batteries or other products or components met the specification at delivery, and for reasons that are not related primarily or at all to any by our product to perform in accordance with specifications. It is possible that our customers (or end-users) may in the future assert that our products caused or contributed to device . Even if these do not lead to product liability or contract , they could our reputation and our customer relationships. Furthermore, the design and manufacturing of finished medical devices of the types that we also produce entail an inherent risk of product liability . Some of the medical devices
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that we manufacture and sell are designed to be implanted into the human body. A number of factors could result in an unsafe condition or injury to, or death of, a patient with respect to these medical devices. These factors could also result in product liability claims, a recall of one or more of our medical devices or a safety alert relating to one or more of our medical devices.
Provisions contained in our agreements with key customers attempting to limit our damages, including provisions to limit damages to liability for negligence, may not be enforceable in all instances or may otherwise fail to adequately protect us from liability for damages. Product liability claims or product recalls, regardless of their ultimate outcome and whether related to a product component or a finished medical device, could require us to spend significant time and money in litigation and require us to pay significant damages and could divert the attention of our management from our business operations. We may choose to settle product liability claims against us regardless of their actual merit, and the occurrence of product liability claims or product could affect our operating results and financial condition.
We carry product liability insurance with coverage that is limited in scope and amount. We may not be able to maintain this insurance at a reasonable cost or on reasonable terms, or at all. This insurance may not be adequate to protect us against product liability claims made against us.
If we are unable to protect our intellectual property and proprietary rights, our business could be harmed.
We rely on a combination of patents, licenses, trade secrets and know-how to establish and protect our rights to our technologies and products. However, these measures afford only limited protection, and our patent rights, whether issued, subject to license or in process, and our other intellectual property protections may be misappropriated, circumvented or invalidated. The laws of some foreign countries do not offer the same level of protection for our intellectual property as the laws of the U.S. Further, no assurances can be given that any patent application we have filed or will file will result in a patent being issued, or that any existing or future patents will afford adequate or meaningful protection against competitors or against similar technologies. In addition, competitors may design around our technology or develop competing technologies that do not infringe our proprietary rights. As patents and other intellectual property protection expire, we may lose our competitive advantage. If third parties infringe or misappropriate our patents or other proprietary rights, our business could be .
In addition, we cannot assure you that our existing or planned products do not or will not infringe on the intellectual property rights of others or that others will not claim such infringement. Our industry has experienced extensive ongoing patent litigation which can result in the incurrence of significant legal costs for indeterminate periods of time, injunctions against the manufacture or sale of infringing products and significant royalty payments. At any given time, we may be a plaintiff or defendant in these types of actions. We cannot assure you that we will be able to prevent competitors from challenging our patents or other intellectual property rights or entering markets we currently serve.
In addition to seeking formal patent protection whenever possible, we attempt to protect our proprietary rights and trade secrets by entering into confidentiality agreements with employees, consultants and third parties with which we do business. However, these agreements may be breached and, if a breach occurs, there may be no adequate remedies available to us and we may be unable to prevent the unauthorized disclosure or use of our technical knowledge, practices or procedures. If our trade secrets become known, we may lose our competitive advantages.
We may be subject to intellectual property claims, which could be costly and time consuming and could divert our management’s attention from our business operations.
In producing our products, third parties may claim that we are infringing on their intellectual property rights, and we may be found to have infringed on those intellectual property rights. We may be unaware of the intellectual property rights of others that may be used in our technology and products. In addition, third parties may claim that our patents have been improperly granted and may seek to invalidate our existing or future patents. If any claim for invalidation prevailed, third parties may manufacture and sell products that compete with our products and our revenues from any related license agreements would decrease accordingly. Former employers of our associates may assert claims that these associates have improperly disclosed to us the confidential or proprietary information of those former employers. We also typically do not receive significant indemnification from parties that license technology to us against third-party claims of intellectual property .
Legal disputes relating to intellectual property have occurred in the past and may occur in the future. Any litigation or other challenges regarding our patents or other intellectual property, with or without merit, could be costly and time consuming and could divert the attention of our management and key personnel from our business operations. We do not maintain insurance for intellectual property infringement, so costs of defense, whether or not we are successful in defending an infringement claim, will be borne by us and could be significant. The complexity of the technology involved in producing our products and the uncertainty of intellectual property litigation increases these risks. If we are not successful in defending these claims, we could be required to stop selling, shipments of, or redesign our products, the use of related technologies or designs, pay monetary amounts as , and indemnification obligations that we have with some of our customers. of intellectual property may also require us to enter into royalty or license agreements. However, we may not be to
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obtain royalty or license agreements on terms acceptable to us, or at all. We also may be made subject to significant damages or injunctions against development and sale of our products.
A failure to comply with customer-driven policies and standards and third-party certification requirements or standards could adversely affect our business and reputation.
Our customers have in the past, and may in the future, require us to comply with their own or third-party quality standards, business policies, commercial terms, or other policies or standards, which have been, and may continue to be, even more restrictive than current laws and regulations as well as our pre-existing policies or terms with our suppliers, before they commence, or continue, doing business with us. These policies or standards may be customer-driven, established by the market sectors in which we operate or imposed by third-party organizations.
Our compliance with these heightened or additional policies, standards and third-party certification requirements, and managing a supply chain in accordance with those policies, standards and requirements, could be costly and time consuming, and our failure to comply could adversely affect our operations, customer relationships, reputation and profitability. In addition, our adoption of these standards could adversely affect our cost competitiveness and ability to provide customers with required service levels. In certain circumstances, to meet the requirements or standards of our customers, we may be obligated to select certain suppliers or make other sourcing choices, and we may bear responsibility for adverse outcomes even if these matters are the result of third-party actions or outside of our control.
Our failure to obtain licenses from third parties for new technologies or the loss of these licenses could impair our ability to design and manufacture new products and reduce our revenues.
We occasionally license technologies from third parties rather than depending exclusively on our own proprietary technology and developments. Our ability to license new technologies from third parties is and will continue to be critical to our ability to offer new and improved products. We may not be able to continue to identify new technologies developed by others and even if we are able to identify new technologies, we may not be able to negotiate licenses on favorable terms, or at all. Additionally, we may lose rights granted under licenses for reasons beyond our control or if the license has a finite term and cannot be renewed on favorable terms or at all.
Our business is subject to environmental regulations that could be costly to comply with.
Federal, state and local regulations impose various environmental controls on the manufacturing, transportation, storage, use and disposal of batteries and hazardous chemicals and other materials used in, and hazardous waste produced by the manufacturing of our products. Conditions relating to our historical operations, including a former manufacturing facility located in South Plainfield, New Jersey previously operated by a subsidiary of Lake Region Medical, may require expenditures for clean-up in the future that could materially adversely affect our financial results. In addition, changes in environmental laws and regulations have imposed and in the future may impose costly compliance requirements on us or otherwise subject us to future liabilities. Additional or modified regulations relating to the manufacture, transportation, storage, use and disposal of materials used to manufacture our products or restricting disposal or transportation of batteries may be imposed that may result in higher costs or lower operating results. In addition, we cannot predict the effect that additional or modified environmental regulations may have on us or our customers.
Our international operations expose us to legal and regulatory risks, which could adversely affect our business.
Our international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements. In addition, our international operations are governed by various U.S. laws and regulations, including the U.S. Foreign Corrupt Practices Act and other similar anti-corruption laws in other countries that prohibit us and our business partners and other intermediaries from making improper payments or offers of payment to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. In recent years, both the U.S. and non-U.S. regulators have increased regulation, enforcement, inspections, and governmental investigations of the medical device industry, including increased U.S. government oversight and enforcement of the U.S. Foreign Corrupt Practices Act. Any alleged or actual violations of these or other U.S. or foreign regulations may subject us to government scrutiny, severe criminal or civil sanctions and other liabilities and could affect our business, reputation, operating results, and financial condition.
The healthcare industry is highly regulated and subject to various political, economic and regulatory changes that could increase our compliance costs and force us to modify how we develop and price our products.
The healthcare industry is highly regulated and is influenced by changing political, economic and regulatory factors. Several of our product lines are subject to international, federal, state and local health and safety, packaging and product content regulations, including the European Medical Device Regulation, which was adopted by the EU as a common legal framework for all EU member states. In addition, medical devices are subject to regulation by the FDA and similar governmental agencies. These regulations cover a wide variety of product activities from design and development to labeling, manufacturing, promotion, sales and distribution. Compliance with these regulations is time consuming, burdensome and expensive and could adversely affect our ability to sell products. This may result in higher than anticipated costs or lower than anticipated revenues.
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Furthermore, healthcare industry regulations are complex, change frequently and have tended to become more stringent over time. Federal and state legislatures have periodically considered and implemented programs to reform or amend the U.S. healthcare system at both the federal and state levels. In addition, these regulations may contain proposals to increase governmental involvement in healthcare, lower reimbursement rates or otherwise change the environment in which healthcare industry participants operate. We may be required to incur significant expenses to comply with these regulations or remedy past violations of these regulations. Our failure to comply with applicable government regulations could also result in cessation of portions or all of our operations, impositions of fines and restrictions on our ability to carry on or expand our operations, seizures or recalls of our products or those of our customers, inability to sell our products and adverse publicity affecting both us and our customers.
Furthermore, our facilities are subject to periodic inspection by the FDA and other federal, state and foreign government authorities, which require manufacturers of medical devices to adhere to certain regulations, which require, among other things, periodic audits, design controls, quality control testing and documentation procedures, as well as complaint evaluations and investigation The FDA also requires the reporting of certain adverse events and product malfunctions and requires the reporting of certain recalls or other field safety corrective actions for medical devices. Issues identified through such inspections and reports may result in FDA enforcement action through any of the actions discussed above. Moreover, issues identified through such inspections and reports may require significant resources to resolve.
In response to perceived increases in healthcare costs in recent years, there have been and continue to be proposals by the presidential administrations of both major U.S. political parties, members of Congress, state governments, regulators and third-party payors to control these costs and, more generally, to reform the U.S. healthcare system, including by amending, repealing or replacing the Patient Protection and Affordable Care Act. Elements of health care reform such as comparative effectiveness research, an independent payment advisory board, payment system reforms including shared savings pilots and other provisions could meaningfully change the way healthcare is developed and delivered and may materially adversely impact numerous aspects of our business, results of operations and financial condition.
Our business is indirectly subject to healthcare industry third-party coverage and reimbursement and cost containment measures that could result in reduced sales of our products.
Several of our customers rely on third-party payors, such as government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which our products are used. Even when we develop or acquire a promising new product, demand for the product may be limited unless reimbursement approval is obtained from private and government third-party payors. Internationally, healthcare reimbursement systems vary significantly. In some countries, medical centers are constrained by fixed budgets, regardless of the volume and nature of patient treatment. Other countries require application for, and approval of, government or third-party reimbursement. Without both favorable coverage determinations by, and the financial support of, government and third-party insurers, the market for many of our products would be adversely affected. In this regard, we cannot be sure that third-party payors will maintain the current level of coverage and reimbursement to our customers for use of our existing products. Adverse coverage determinations, including reductions in the amount of reimbursement, could harm our business by discouraging customers’ selection of, and reducing the prices they are willing to pay for, our products.
In addition, the continuing efforts of governments, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval for payment from these third-party payors for procedures in which our products are used. If this occurs, sales of medical devices may decline significantly and our customers may reduce or eliminate purchases of our products or demand further price reductions. The cost containment measures that healthcare payors are instituting, both in the U.S. and internationally, could reduce our revenues and harm our operating results.
