Varex Imaging (VI4) Risk Analysis

We market and distribute certain X-ray tubes through distributors and third-party/multi-vendor service organizations for use as equivalent replacements for specific OEM tubes. These products are subject to medical device certification and product registration laws that vary by country and are subject to periodic review and change by local regulatory authorities. Some of these laws and regulations can operate as barriers to trade and can be difficult to navigate predictably. Certain countries also require re-registration if the product is altered in any significant way. Re-registration can be costly and time-consuming, and customers may choose competitors' products that do not require re-registration. If we are unable to obtain or renew product registrations, we may be unable to market or distribute the affected products for replacement applications in the relevant country.

We are a global importer of raw materials used in our finished products and an exporter of finished goods to customers worldwide. Tariffs, trade wars, import/export restrictions, boycotts, embargoes, government investigations, trade policies, and compliance matters have in the past limited, are currently limiting, and in the future could limit our ability and our customers' ability to compete. Tariffs on imported materials have increased our costs and prices and lowered gross margins on some of our products, and retaliatory tariffs have increased our customers' costs for products exported from the United States, which has caused us to make, and may in the future require us to make, price and other concessions or cause customers to reduce or stop purchasing our products. For example, changes to tariff policies in 2025 by the United States and other countries, particularly bilateral United States and Chinese tariffs, impacted our results of operations and profitability in fiscal year 2025 and the first half of fiscal year 2026. Although certain IEEPA-based tariffs have been invalidated, the United States has imposed or proposed tariffs and trade measures under other authorities, including Section 122 and 301 of the Trade Act of 1974, Section 232 of the Trade Expansion Act, and Section 338 of the Tariff Act of 1930, and may continue to do so. Additional tariffs, trade restrictions, or retaliatory actions targeting specific industries, such as X-ray imaging products, medical equipment or other products we manufacture, or the components or raw materials used in manufacturing our products, could increase our costs and prices, lower gross margins, adversely impact revenue, make our products less competitive, and otherwise adversely affect our business, results of operations and financial condition. Tariff exclusions, refunds, drawback programs, foreign trade zones, bonded warehouse mechanisms and other mitigation measures may provide only partial relief, may require government approval or administrative action, may be unavailable or delayed, and may be subject to further litigation, negotiation or policy changes. Even if we are able to obtain refunds, exclusions, drawback or other mitigation benefits, we may incur additional costs to pursue them, and disputes may arise with customers, suppliers, logistics providers or other parties regarding allocation, timing or entitlement to any recovered amounts. China's stated policy of reducing its dependence on foreign manufacturers and technology companies may reduce demand for our products and our customers' products in China. China and other jurisdictions may require or incentivize the use of local suppliers, local manufacturing, local content, local partnerships, certification, product registration, local testing, technology-transfer expectations, price preferences, reimbursement preferences, procurement restrictions, or similar requirements that favor locally manufactured goods. These measures could reduce demand for our products, limit our ability to participate directly or indirectly, require us or our customers to restructure supply chains or manufacturing footprints, increase compliance costs, or make our products less competitive. In April 2025, the China Ministry of Commerce ("MOFCOM") initiated investigations related to imports of X-ray tubes and certain medical CT X-ray tubes and tube inserts for CT devices originating from the United States and India (the "MOFCOM Investigations"). We produce CT tubes and inserts in the United States and export them to China, but do not produce CT tubes and inserts in India. The MOFCOM Investigations were suspended indefinitely in November 2025, but they could be recommenced, expanded or replaced by other trade, procurement, localization, anti-dumping, countervailing duty, safeguard, export-control or industrial policy measures. Any such measures could affect our ability to export CT tubes and inserts, other X-ray imaging components or related products to China, affect customer procurement decisions in China, or require us to alter pricing, sourcing, production, product registration or distribution strategies. Increasing tensions between countries, such as China and Taiwan, and other conflicts including the Ukraine-Russia war, the conflict involving the United States and Israel with Iran, as well as other Middle East conflicts, may lead to new or expanded tariffs, sanctions, boycotts, embargoes, export controls, or other restrictions on the flow of goods. Such conflicts have caused, are causing, and could in the future cause disruptions in the regions and industries we serve, supply chain disruption, increased costs for goods, raw materials, transportation and logistics, reduced customer demand and delays in our ability to timely deliver products. Any of the foregoing factors could adversely affect our business, results of operations and financial condition by increasing our costs and prices, lowering gross margins, reducing demand for our products or our customers' products, making our products less competitive, limiting our ability to export or sell certain products, impairing our ability to fulfill orders on a timely basis, or requiring us to alter pricing, sourcing, production, product registration, regulatory certification, supplier qualification, distribution, supply chain or manufacturing strategies. These factors could also require us to reconsider our current operating model, including whether we can continue to operate in specifically impacted locations or need to relocate or restructure existing operations, which may require us to invest significant additional capital we had anticipated using for other purposes, such as expanding existing operations, entering new markets or paying down debt.

Outside the United States, some of our products are regulated as medical devices by foreign governmental agencies similar to the FDA. To market our products internationally, we must obtain clearances or approvals for products and product modifications, which can be time consuming, expensive, uncertain, and which can delay our ability to market products. Delays in the receipt of or failure to receive regulatory approvals, the inclusion of significant limitations on the indicated uses, the loss of previously obtained approvals or failure to comply with existing or future regulatory requirements could restrict or prevent us from doing business in a country or subject us to a variety of enforcement actions and civil or criminal penalties, which would materially and adversely affect our business. In addition, compliance with changing regulatory schemes may add complexity, cost, and delays in marketing, or selling our products. Within the European Union ("EU") and the European Economic Area ("EEA"), we must obtain, and in turn affix, a CE mark certification, that indicates that a product meets the essential requirements of the EU's Medical Device Regulations ("MDR") and other applicable EU medical device requirements. By affixing the CE mark to our product, we are certifying that our product complies with the laws and regulations required by the EU/EEA countries, thereby allowing the free movement of the product within these countries and others that accept CE mark standards. If we cannot support our performance claims and demonstrate compliance with the applicable European laws, the MDR and other applicable requirements, we could lose our right to affix the CE mark to our products, which would prevent us from selling our products within the EU/EEA/Switzerland territory and in other countries that recognize the CE mark. EU medical device requirements continue to evolve, including requirements relating to EUDAMED registration, unique device identification, notified body procedures, post-market surveillance, market surveillance and conformity assessment. These changes may increase the cost and complexity of maintaining existing registrations and certifications, obtaining new or modified certifications, supporting customers' regulatory submissions, and placing products on the EU market. Delays, capacity constraints or changes in notified body processes, or our inability to satisfy new or revised data, registration or conformity assessment requirements, could delay product launches, restrict sales, require product or process changes, or increase compliance costs. We are subject to international laws and regulations of general applicability relating to matters such as environmental protection, safe working conditions, data privacy, and manufacturing practices, as well as others. These are often comparable to, or more stringent than, equivalent regulations in the United States. Sales overseas are also affected by regulation of matters such as product standards, packaging, labeling, environmental and product recycling requirements, import and export restrictions, tariffs, duties, and taxes. In addition, we are required to timely file various reports with international regulatory authorities similar to the reports we are required to timely file with United States regulatory authorities, including reports required by international adverse event reporting regulations. If these reports are not timely filed, regulators may impose sanctions, including temporarily suspending our market authorizations or CE mark, and sales of our products may suffer as a result. As we enter new businesses or pursue new opportunities internationally, or as regulatory schemes change, we may become subject to additional laws, rules, and regulations, and compliance can be costly. In China, revised medical device good manufacturing practice, registration, procurement, localization, adverse event reporting, digital record, outsourcing, contract manufacturing and quality management requirements may increase compliance costs or affect our ability, or our customers' ability, to manufacture, register, import, distribute or sell products in China. If we or our customers are unable to comply with these requirements, or if regulators interpret or apply them in a manner unfavorable to foreign manufacturers or imported components, our sales, margins, product development timelines and competitive position could be adversely affected. The failure by us or our agents to comply with these laws, rules, and regulations could delay the introduction of new products, cause reputational harm, or result in investigations, fines, injunctions, civil penalties, criminal prosecution, or an inability to sell our products in or to import our products into certain countries, which could materially and adversely affect our business.

. We are subject to the U.S. Foreign Corrupt Practices Act and anti-corruption laws, and similar laws in foreign countries, such as the U.K. Bribery Act. Any violation of these laws by us or our agents or distributors could create substantial liability for us, subject our officers and directors to personal liability, and damage our reputation. We operate in many countries, including India and China, where the public sector is perceived as being corrupt. Our strategic business plans include expanding into regions and countries that are rated as higher risk for corruption activity by Transparency International e.V., an international non-profit that publishes an annual corruption perception index, which could subject us and our officers and directors to increased scrutiny and liability from our business operations. Becoming familiar with and implementing the infrastructure necessary to comply with laws, rules, and regulations applicable to new business activities and mitigating and protecting against corruption risks could be costly. Failure by us or our agents or distributors to comply with these laws, rules, and regulations could delay our expansion into high-growth areas and materially and adversely affect our business.

. We are subject to various competition and trade compliance laws in the jurisdictions where we operate throughout the world. Regulatory authorities in those jurisdictions may have the power to subject us to sanctions, tariffs, and duties and may impose changes or conditions in how we conduct our business. An increasing number of jurisdictions provide private rights of action for competitors or consumers to assert claims of anti-competitive conduct and seek damages. Increased government scrutiny of our actions or enforcement or private rights of action could materially and adversely affect our business or damage our reputation. We may be required to conduct internal investigations or face audits or investigations by one or more domestic or foreign government agencies, which could be costly and time consuming and could divert our management and key personnel from our business operations. An adverse investigation or audit outcome could subject us to fines and penalties, which could materially and adversely affect our business and financial results. The currently indefinitely suspended MOFCOM Investigations are an example of the type of investigations or audits we have faced, and could in the future face. Competition laws may prohibit or increase the cost of future acquisitions.

. We may sell products to healthcare providers through distributors or engage healthcare providers to provide services. The U.S. Medicare and Medicaid anti-kickback statute, and similar state laws, prohibit payments or other remuneration intended to induce hospitals, physicians, or others to refer patients, or to purchase, lease, or order, or arrange for or recommend the purchase, lease, or order of healthcare products or services reimbursable by federal or state healthcare programs, including Medicare and Medicaid. These laws limit the financial arrangements we may have with hospitals, physicians, or other potential purchasers of our products. They particularly impact how we structure our sales offerings, including discount practices, customer support, education and training programs, physician consulting, research grants, and other fee-for-service arrangements. These laws are broadly written, and it is often difficult to determine precisely how these laws will be applied to specific circumstances. Federal and state false claims laws prohibit knowingly presenting, or causing to be presented, false or fraudulent claims for payment to Medicare, Medicaid, or other government payors, or claims for items or services that were not provided as claimed. Although we do not submit claims directly to payors, manufacturers can be, and have been, held liable if they are deemed to have caused the submission of false or fraudulent claims, including by providing inaccurate billing or coding information or by promoting products for uses not approved or cleared by the FDA (off-label promotion). Violations of anti-kickback and false claims laws can result in substantial civil and criminal penalties and exclusion from healthcare programs. Even an unsuccessful challenge or investigation could result in adverse publicity, defense costs, and harm to our business and results of operations. In addition, federal and state laws, including the Physician Payment Sunshine Act and laws in states such as Massachusetts and Vermont, require tracking and reporting of payments and ownership interest involving physicians, healthcare providers, and hospitals. Compliance can require costly systems and processes, and failure to comply can result in significant civil monetary penalties.