UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13149

 

STRYKER CORPORATION

(Exact name of registrant as specified in its charter)

Michigan				38-1239739
(State of incorporation)				(I.R.S. Employer Identification No.)
2825 Airview Boulevard,	Kalamazoo,		Michigan	49002
(Address of principal executive offices)				(Zip Code)
		(269)	385-2600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.10 Par Value	SYK	New York Stock Exchange
1.125% Notes due 2023	SYK23	New York Stock Exchange
0.250% Notes due 2024	SYK24A	New York Stock Exchange
2.125% Notes due 2027	SYK27	New York Stock Exchange
0.750% Notes due 2029	SYK29	New York Stock Exchange
2.625% Notes due 2030	SYK30	New York Stock Exchange
1.000% Notes due 2031	SYK31	New York Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ☒    No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes ☐ No ☒

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐	Small reporting company	☐

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $63,413,151,504 at June 30, 2020. There were 376,200,942 shares outstanding of the registrant’s common stock, $0.10 par value, on January 31, 2021.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement to be filed with the U.S. Securities and Exchange Commission relating to the 2021 Annual Meeting of Shareholders (the 2021 proxy statement) are incorporated by reference into Part III.

STRYKER CORPORATION 2020 FORM 10-K

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	9
Item 2.	Properties	9
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.	Financial Statements and Supplementary Data	19
	Report of Independent Registered Public Accounting Firm	19
	Consolidated Statements of Earnings	21
	Consolidated Statements of Comprehensive Income	21
	Consolidated Balance Sheets	22
	Consolidated Statements of Shareholders’ Equity	23
	Consolidated Statements of Cash Flows	24
	Notes to Consolidated Financial Statements	25
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	37
Item 9A.	Controls and Procedures	37
Item 9B.	Other Information	38
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	38
Item 11.	Executive Compensation	38
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	38
Item 13.	Certain Relationships and Related Transactions, and Director Independence	38
Item 14.	Principal Accounting Fees and Services	38
PART IV
Item 15.	Exhibits, Financial Statement Schedules	39
Item 16.	Form 10-K Summary	42

STRYKER CORPORATION 2020 FORM 10-K

PART I

ITEM 1. BUSINESS.

Stryker Corporation (Stryker or the Company) is one of the world's leading medical technology companies and, together with its customers, is driven to make healthcare better. The Company offers innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes.

Our core values guide our behaviors and actions and are fundamental to how we execute our mission.

Stryker was incorporated in Michigan in 1946 as the successor company to a business founded in 1941 by Dr. Homer H. Stryker, a prominent orthopaedic surgeon and the inventor of several medical products. Our products are sold in over 75 countries through company-owned subsidiaries and branches, as well as third-party dealers and distributors, and include implants used in joint replacement and trauma surgeries; Mako Robotic-Arm Assisted technology; surgical equipment and surgical navigation systems; endoscopic and communications systems; patient handling, emergency medical equipment and intensive care disposable products; neurosurgical, neurovascular and spinal devices; as well as other products used in a variety of medical specialties. In the United States most of our products are marketed directly to doctors, hospitals and other healthcare facilities.

As used herein, and except where the context otherwise requires, "Stryker," "we," "us," and "our" refer to Stryker Corporation and its consolidated subsidiaries.

Business Segments and Geographic Information

We segregate our operations into three reportable business segments: Orthopaedics, MedSurg and Neurotechnology and Spine. Financial information regarding our reportable business segments and certain geographic information is included under "Consolidated Results of Operations" in Item 7 of this report and Note 14 to our Consolidated Financial Statements.

Net Sales by Reportable Segment
	2020				2019				2018
Orthopaedics	$	4,959	34	%	$	5,252	35	%	$	4,991	37	%
MedSurg	6,400		45		6,492		44		6,045		44
Neurotechnology and Spine	2,992		21		3,140		21		2,565		19
Total	$	14,351	100	%	$	14,884	100	%	$	13,601	100	%

Orthopaedics

Orthopaedics products consist primarily of implants used in total joint replacements, such as hip, knee and shoulder, and trauma and extremities surgeries. We bring patients and physicians

advanced implant designs and specialized instrumentation that make orthopaedic surgery and recovery simpler, faster and more effective. We support surgeons with the technology and services they need as they develop new surgical techniques. The Mako Robotic-Arm Assisted Surgical System was designed to help surgeons provide patients with a personalized surgical experience based on their specific diagnosis and anatomy. The Mako System currently offers three applications supporting Partial Knee, Total Hip and Total Knee procedures. Mako is the only robotic-arm assisted technology enabled by 3D CT-based pre-operative planning, and with AccuStop™ haptic technology, Mako provides surgeons the ability to know more about their patients' anatomy so they can cut less in bone preparation and implant placement with intra-operative haptic guidance.

Stryker is one of four leading global competitors for joint replacement and trauma and extremities products and robotics; the other three being Zimmer Biomet Holdings, Inc. (Zimmer), DePuy Synthes (a Johnson & Johnson company) and Smith & Nephew plc (Smith & Nephew).

Composition of Orthopaedics Net Sales
	2020				2019				2018
Knees	$	1,567	32	%	$	1,815	35	%	$	1,701	34	%
Hips	1,206		24		1,383		26		1,336		27
Trauma and Extremities	1,722		35		1,639		31		1,580		32
Other	464		9		415		8		374		7
Total	$	4,959	100	%	$	5,252	100	%	$	4,991	100	%

In 2020 we completed the acquisition of Wright Medical Group N.V. (Wright) for an aggregate purchase price of $4.1 billion ($5.6 billion including convertible notes). Wright develops, manufactures and markets a complementary product portfolio of surgical solutions for upper extremities (shoulder, elbow, wrist and hand), lower extremities (foot and ankle) and biologics. The Wright acquisition enhances our global market position in trauma and extremities, providing opportunities to advance innovation and reach more patients.

MedSurg

MedSurg products include surgical equipment, patient and caregiver safety technologies, and navigation systems (Instruments), endoscopic and communications systems (Endoscopy), patient handling, emergency medical equipment and intensive care disposable products (Medical), reprocessed and remanufactured medical devices (Sustainability) and other medical device products used in a variety of medical specialties.

Stryker is one of five leading global competitors in Instruments; the other four being Zimmer, Medtronic plc., Johnson & Johnson and ConMed Linvatec, Inc. (a subsidiary of CONMED Corporation). In Endoscopy we compete with Smith & Nephew, ConMed Linvatec, Arthrex, Inc., Karl Storz GmbH & Co., Olympus Optical Co. Ltd. and STERIS plc. In Medical our primary competitors are Hill-Rom Holdings, Inc., Zoll Medical Corporation, Medline Industries and Ferno-Washington, Inc.

Composition of MedSurg Net Sales
	2020				2019				2018
Instruments	$	1,863	29	%	$	1,959	30	%	$	1,822	30	%
Endoscopy	1,763		28		1,983		31		1,846		31
Medical	2,524		39		2,264		35		2,118		35
Sustainability	250		4		286		4		259		4
Total	$	6,400	100	%	$	6,492	100	%	$	6,045	100	%

In 2020 Instruments launched a new system of corded power tools for conducting small bone orthopaedic procedures and Zipline Medical (2019 acquisition) single use, surgical site closure devices that are utilized across multiple procedures, including orthopaedic arthroplasty, where it provides improved outcomes.

Dollar amounts in millions except per share amounts or as otherwise specified. 1

STRYKER CORPORATION 2020 FORM 10-K

In 2020 Medical launched the ProCuity Bed Series, connected and scalable beds for all patient care environments with wireless and advanced fall prevention technologies, the first smart bed series to market.

Neurotechnology and Spine

Neurotechnology and Spine products include neurosurgical, neurovascular, craniomaxillofacial and spinal implant devices. Our neurotechnology offering includes products used for minimally invasive endovascular techniques; a comprehensive line of products for traditional brain and open skull based surgical procedures; orthobiologic and biosurgery products, including synthetic bone grafts and vertebral augmentation products; and minimally invasive products for the treatment of acute ischemic and hemorrhagic stroke. The Craniomaxillofacial implant offering includes cranial, maxillofacial, and chest wall devices as well as dural substitutes and sealants. Our spinal implant offering includes cervical and thoracolumbar systems that include fixation, minimally invasive, and interbody systems used in spinal injury, complex spine and degenerative therapies.

Stryker is one of five leading global competitors in Neurotechnology; the other four being Medtronic, Johnson & Johnson, Terumo Corporation and Penumbra, Inc. Stryker is one of five leading global competitors in Spine; the other four being Medtronic Sofamor Danek, Inc. (a subsidiary of Medtronic), DePuy Synthes, Nuvasive, Inc. and Globus Medical, Inc.

Composition of Neurotechnology and Spine Net Sales
	2020				2019				2018
Neurotechnology	$	1,945	65	%	$	1,983	63	%	$	1,737	68	%
Spine	1,047		35		1,157		37		828		32
Total	$	2,992	100	%	$	3,140	100	%	$	2,565	100	%

In 2020 Stryker received Food and Drug Administration (FDA) pre-market approval (PMA) for the next generation Surpass Evolve™ Flow Diverter to treat unruptured large and giant wide-neck intracranial aneurysms. In addition, Stryker received China National Medical Products Administration (NMPA) approval for the Surpass Streamline™ Flow Diverter. These two devices further expand our commercial footprint into the global flow diversion market.

In 2020 Stryker received FDA PMA of its Neuroform Atlas™ Stent System for the treatment of wide-neck intracranial aneurysms in conjuction with embolic detachable coils in the posterior circulation of the neurovasculature. The Neuroform Atlas™ device was previously approved for the anterior circulation. Neuroform Atlas™ Stent System has also been approved and has launched in China.

Also in 2020 Stryker launched the next generation Trevo product and line extensions of numerous Access products.

Raw Materials and Inventory

Raw materials essential to our business are generally readily available from multiple sources; however, certain of our raw materials are currently sourced from single suppliers. Substantially all products we manufacture are stocked in inventory, while certain MedSurg products are assembled to order.

Patents and Trademarks

Patents and trademarks are significant to our business to the extent that a product or an attribute of a product represents a unique design or process. Patent protection of such products restricts competitors from duplicating these unique designs and features. We seek to obtain patent protection on our products whenever appropriate for protecting our competitive advantage. On December 31, 2020 we owned approximately 4,045 United

States patents and approximately 6,407 patents in other countries.

Seasonality

Our business is generally not seasonal in nature; however, the number of orthopaedic implant surgeries is typically lower in the summer months, and sales of capital equipment are generally higher in the fourth quarter. The dollar amount of customer backlog orders at any given time is not meaningful to an understanding of our business taken as a whole.

Competition

In each of our product lines we compete with local and global companies. The development of new and innovative products is important to our success in all areas of our business. Competition in research involving the development and improvement of new and existing products and processes is particularly significant. The competitive environment requires substantial investments in continuing research and maintaining sales forces.

We believe our commitment to innovation, quality and service and our reputation differentiates us in the highly competitive product categories in which we operate and enables us to compete effectively. We believe that our competitive position in the future will depend to a large degree on our ability to develop new products and make improvements to existing products.

Regulation

Our businesses are subject to varying degrees of governmental regulation in the countries in which we operate, and the general trend is toward increasingly stringent regulation.

In the United States the Medical Device Amendments of 1976 to the Federal Food, Drug and Cosmetic Act and its subsequent amendments and the regulations issued and proposed thereunder provide for regulation by the FDA of the design, manufacture and marketing of medical devices, including most of our products. Many of our new products fall into FDA classifications that require notification submitted as a 510(k) and review by the FDA before we begin marketing them. Certain of our products require extensive clinical testing, consisting of safety and efficacy studies, followed by pre-market approval (PMA) applications for specific surgical indications. Certain of our products also fall under the FDA's drug classification, as well as other FDA classifications.

The FDA's Quality System regulations set forth standards for our product design and manufacturing processes, require the maintenance of certain records and provide for inspections of our facilities by the FDA. There are also certain requirements of state, local and foreign governments that must be complied with in the manufacture and marketing of our products.

The member states of the European Union (EU) adopted the European Medical Device Directives, which form a single set of medical device regulations for all EU member countries. These regulations require companies that manufacture and distribute medical devices in EU member countries to meet certain quality system requirements and obtain CE marking for their products. We have authorization to apply the CE marking to substantially all of our products. In addition, the EU enacted the EU Medical Device Regulation (EU MDR) in May 2017 with an effective date of May 2021, which imposes stricter requirements for the marketing and sale of medical devices, including in the areas of clinical evaluation requirements, quality systems, labeling and post-market surveillance. More recently, a free trade agreement was executed between the UK and the EU that became effective January 1, 2021. A gap analysis and compliance plan is being implemented to ensure compliance and minimize business

Dollar amounts in millions except per share amounts or as otherwise specified. 2

STRYKER CORPORATION 2020 FORM 10-K

disruption. Finally, we are required to comply with the unique regulatory requirements of each country within which we market and sell our products, including China, whose National Medical Products Administration (NMPA) has recently promulgated more stringent regulatory requirements.

Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. It is not possible to predict at this time the long-term impact of such cost containment measures on our future business. In addition, business practices in the healthcare industry are scrutinized, particularly in the United States, by federal and state government agencies. The resulting investigations and prosecutions carry the risk of significant civil and criminal penalties.

Environment

We are subject to various rules and regulation in the United States and internationally related to the protection of human health and the environment. Our operations involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. We believe our policies, practices and procedures are properly designed to comply, in all material respects, with applicable environmental laws and regulations. We do not expect compliance with these requirements to have a material effect on purchases of property, plant and equipment, cash flows, net earnings or competitive position.

Employees

On December 31, 2020 we had approximately 43,000 employees globally, with approximately 24,000 employees in the United States. Our talented employees are an integral reason for our standing as one of the world's leading medical technology companies where, together with our customers, we are driven to make healthcare better. Our company values of integrity, accountability, people and performance are a key component of that mission. As one of our core values, we recognize that we must and will continue to focus on our people.

Our success is dependent on our ability to attract the best talent that reflects our diverse communities. To do so, we continue to focus on the basics of creating a great workplace. We believe in attracting the right people, maintaining and building employee engagement and developing our employees. We believe when people are able to do what they do best, they will look forward to coming to work and in turn, will deliver great business results. Stryker is made up of hardworking, results-oriented people who are driven to go above and beyond for our customers.

Our leadership team and Board of Directors receive regular updates on our people and culture strategy and provide feedback on our strategy and goals, including alignment to mission and values, peer benchmarking and stakeholder feedback.

Employee Development

Employee development at Stryker is extensive and exists at all levels of the organization, including company-wide training on our Code of Conduct, job-related technical training and management and leadership training. Our development programs include on-the-job learning, coaching and mentoring, management and leadership development courses, team building and collaboration training and immersive experiences with expert partners.

We encourage all employees to establish individual development plans, in partnership with their manager, to help employees gain the needed development experience to grow their careers.

Employee Engagement

An engaged workplace culture that drives performance and business outcomes is central to our mission. Listening to and learning from our employees forms the foundation of an engaging culture. More than 90% of our global employees participate in our annual engagement survey, which provides a valued platform for listening and allows us to take action based on the feedback collected.

We supplement our annual engagement survey with targeted pulse surveys to gather feedback on topics relevant to the current climate. Additionally, we establish forums for collecting qualitative feedback to gain insights and identify actions we can take to ensure all employees feel included, engaged and able to achieve their full potential.

We also provide tools and resources that enable managers and teams to act on the insights we gain from our surveys and to drive employee engagement and strong business outcomes.

Diversity, Equity and Inclusion (DE&I)

An essential part of our culture is respecting each individual’s strengths and values. Building on this foundation, we are focused on maintaining an inclusive, engaging work environment and prioritizing DE&I in keeping with our values of integrity and people, and we continue to integrate this strategy with our efforts to attract, develop and retain a diverse workforce. Key components of our overall DE&I strategy include:

•Strengthen the diversity of our workforce: We are committed to recruiting and hiring top talent from all backgrounds, providing targeted development for under-represented talent and further integrating DE&I into our policies, processes and practices.

•Advance a culture of inclusion, engagement and belonging: We focus on establishing an equitable culture that removes barriers, engages talent from different backgrounds and inspires employees to reach their full potential. Our current efforts are focused on advancing our employee resources groups, educating our employees on DE&I and continuing our work to build inclusive leadership capabilities.

•Maximize the power of inclusion to drive innovation and growth: We leverage our talent to create diverse teams to solve complex problems and leverage diverse inputs to advance our mission of making healthcare better.

Attracting and Hiring

We understand that every employee drives our success. We focus on attracting, identifying and selecting strong candidates who will be successful at Stryker and ensuring that each person we hire brings the talent, expertise and passion we need to continue to be successful.

Competitive Pay and Benefits

Our compensation and benefits programs are designed to attract and retain top talent and to incentivize performance and alignment to our mission and values.

We offer market-competitive base pay and benefits to our employees in countries around the world. We regularly evaluate our compensation and benefit offerings and levels, using recognized outside consulting firms to ensure fairness and competitiveness in our offerings.

Most of our employees also have variable components to their compensation packages that reward employees based on individual, business unit and/or company-wide performance.

Dollar amounts in millions except per share amounts or as otherwise specified. 3

STRYKER CORPORATION 2020 FORM 10-K

Information about our Executive Officers

As of January 31, 2021
Name	Age	Title	First Became an Executive Officer
Kevin A. Lobo	55	Chairman and Chief Executive Officer	2011
Yin C. Becker	57	Vice President, Communications, Public Affairs and Corporate Marketing	2016
William E. Berry Jr.	55	Vice President, Corporate Controller and Principal Accounting Officer	2014
Glenn S. Boehnlein	59	Vice President, Chief Financial Officer	2016
M. Kathryn Fink	51	Vice President, Chief Human Resources Officer	2016
Robert S. Fletcher	50	Vice President, Chief Legal Officer	2019
Viju S. Menon	53	Group President, Global Quality and Operations	2018
Timothy J. Scannell	56	President and Chief Operating Officer	2008

Each of our executive officers was elected by our Board of Directors to serve in the office indicated until the first meeting of the Board of Directors following the annual meeting of shareholders in 2021 or until a successor is chosen and qualified or until his or her resignation or removal. Each of our executive officers held the position above or served Stryker in various executive or administrative capacities for at least five years, except for Mr. Fletcher and Mr. Menon. Prior to joining Stryker in April 2019, Mr. Fletcher held various legal leadership roles with Johnson & Johnson for the previous 14 years, most recently as the Worldwide Vice President, Litigation. Prior to joining Stryker in April 2018, Mr. Menon held various senior supply chain leadership roles with Verizon Communications Inc. during the previous eight years, most recently as the Chief Supply Chain Officer.

Available Information

Our main corporate website address is www.stryker.com. Copies of our filings with the United States Securities and Exchange Commission (SEC) are available free of charge on our website within the "Investors Relations" section as soon as reasonably practicable after having been electronically filed or furnished to the SEC. All SEC filings are also available at the SEC's website at www.sec.gov.

ITEM 1A. RISK FACTORS.

This report contains statements that are not historical facts and are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current projections about operations, industry conditions, financial condition and liquidity. Words that identify forward-looking statements include words such as "may," "could," "will," "should," "possible," "plan," "predict," "forecast," "potential," "anticipate," "estimate," "expect," "project," "intend," "believe," "may impact," "on track," "goal," "strategy" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, an acquisition or our businesses. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Those statements are not guarantees and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results could differ materially and adversely from these forward-looking statements. Some important factors that could cause our actual results to differ from our expectations in any forward-looking statements include the risks discussed below.

Our operations and financial results are subject to various risks and uncertainties discussed below that could materially and adversely affect our business, cash flows, financial condition and results of operations. Additional risks and uncertainties not currently known to us or that we currently deem not to be material may also materially and adversely affect our business, cash flows, financial condition or results of operations.

COVID-19 PANDEMIC RISKS

The COVID-19 pandemic has materially adversely affected, and could continue to materially adversely affect, our operations, supply chain, manufacturing, product distribution and other business activities: The global COVID-19 pandemic has led to severe disruptions in the market and the United States and international economies that may continue for a prolonged duration and trigger a recession or a period of economic slowdown. In response, various governmental authorities and private enterprises have implemented, and may continue to implement, numerous measures to contain the pandemic, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. A significant number of our global suppliers, vendors, distributors and manufacturing facilities are located in regions that have been affected by the pandemic and those operations have been, and could continue to be, materially affected by restrictive government measures implemented in response to the pandemic. As a result, some of our distributors and indirect channels have at times been unable to distribute our products or provide required services. Any delay or shortage in the supply of components or materials or delay in delivering our products may result in our inability to satisfy consumer demand for our products in a timely manner or at all, which could harm our reputation, future sales and profitability.

In addition, the pandemic could adversely impact our ability to retain key employees and the continued service and availability of skilled personnel necessary to run our complex productions, as well as our executive officers and other members of our management team, third-party suppliers, manufacturers, distributors and vendors. To the extent our management or other personnel are impacted in significant numbers by the pandemic and are not available to perform their job duties, we could experience delays in, or the suspension of, our manufacturing operations, research and product development activities, regulatory work streams, clinical development programs and other important commercial functions. Moreover, the actions we take to mitigate the effect of the pandemic on our workforce could reduce the efficiency of our operations or prove insufficient. Further, our relationships with our employees may be disrupted due to the cost-saving and other measures implemented in response to the COVID-19 pandemic, including employee furloughs, which could result in increased employment litigation and claims for severance or other benefits tied to terminations or furloughs or attempts to unionize portions of our workforce. The extent of the pandemic’s effect on our business will depend on future developments, including the duration, spread and intensity of the pandemic and the successful development, distribution and acceptance of vaccines for COVID-19, all of which are uncertain and difficult to predict. We are not able at this time to estimate with certainty the effect of these and other unforeseen factors on our business, but the adverse impact on our business, cash flows, financial condition and results of operations could be material. A prolonged impact of COVID-19 also could heighten many of the other risks described in this report.

We have experienced, and may continue to experience, a significant and unpredictable need to adjust our operations as market demand for certain of our products has shifted and continues to shift or as may be mandated by

Dollar amounts in millions except per share amounts or as otherwise specified. 4

STRYKER CORPORATION 2020 FORM 10-K

governmental authorities in response to the COVID-19 pandemic: Some of our products are particularly sensitive to reductions in elective medical procedures. Elective medical procedures were suspended, especially in the first and fourth quarters of 2020 and the first quarter of 2021, in many of the markets where our products are marketed and sold, which negatively affected our business, cash flows, financial condition and results of operations. It is not possible to predict the exact timing of a broad resumption of elective medical procedures and, to the extent individuals are required to continue to de-prioritize, delay or cancel elective procedures as a result of the COVID-19 pandemic or otherwise, our business, cash flows, financial condition and results of operations could be negatively affected.

In addition, our products in certain divisions, such as Medical, have experienced, and could continue to experience, higher demand as our customers focus on treating COVID-19 patients. Unpredictable increases in demand for certain of our products could exceed our capacity to meet such demand timely, which could adversely affect our customer relationships and result in negative publicity. In this regard, the accelerated development and production of products and services in an effort to address medical and other requirements as a result of the pandemic could increase the risk of regulatory enforcement actions, product defects or related claims.

Further, in an effort to increase the wider availability of needed medical and other supplies and products in response to the pandemic, governments may require us (such as under the United States Defense Production Act) to allocate manufacturing capacity in a way that adversely affects our regular operations, results in differential treatment of customers and/or adversely affects our reputation and customer relationships. It is also possible that certain of our operations are deemed non-essential and thus subject to suspension or other restrictions by government orders. We cannot predict how these changes in operations, if implemented, would affect our future operations and commercial activities as the impact of the pandemic begins to subside.

LEGAL AND REGULATORY RISKS

Current economic and political conditions make tax rules in jurisdictions subject to significant change: Our future results of operations could be affected by changes in the effective tax rate as a result of changes in tax laws, regulations and judicial rulings. In December 2017 the Tax Cuts and Jobs Act of 2017 was signed into law in the United States. We are continuing to evaluate the impact of tax reform as new guidance and regulations are published. In addition, further changes in the tax laws of foreign jurisdictions could arise, including as a result of the base erosion and profit shifting (BEPS) project undertaken by the Organisation for Economic Cooperation and Development (OECD). The OECD, which represents a coalition of member countries, has issued recommendations that, in some cases, would make substantial changes to numerous long-standing tax positions and principles. These contemplated changes, to the extent adopted by OECD members and/or other countries, could increase tax uncertainty and may adversely affect our provision for income taxes.

We could be negatively impacted by future changes in the allocation of income to each of the income tax jurisdictions in which we operate: We operate in multiple income tax jurisdictions both in the United States and internationally. Accordingly, our management must determine the appropriate allocation of income to each jurisdiction based on current interpretations of complex income tax regulations. Income tax

authorities regularly perform audits of our income tax filings. Income tax audits associated with the allocation of income and other complex issues, including inventory transfer pricing and cost sharing, product royalty and foreign branch arrangements, may require an extended period of time to resolve and may result in significant income tax adjustments.

The impact of United States healthcare reform legislation on our business remains uncertain: In 2010 the Patient Protection and Affordable Care Act (ACA) was enacted. While the provisions of the ACA are intended to expand access to health insurance coverage and improve the quality of healthcare over time, other provisions of the legislation, including Medicare provisions aimed at decreasing costs, comparative effectiveness research, an independent payment advisory board and pilot programs to evaluate alternative payment methodologies, are having a meaningful effect on the way healthcare is developed and delivered and could have a significant effect on our business. There have been ongoing litigation and congressional efforts to modify or repeal all or certain provisions of the ACA. We face uncertainties that might result from modification or repeal of any of the provisions of the ACA, including as a result of current and future executive orders and legislative actions. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

We are subject to extensive governmental regulation relating to the classification, manufacturing, labeling, marketing and sale of our products: The classification, manufacturing, sterilization, labeling, marketing and sale of our products are subject to extensive and evolving regulations and rigorous regulatory enforcement by the FDA, European Union (EU), the NMPA in China, and other governmental authorities in the United States and internationally. The process of obtaining regulatory clearances and/or approvals to market and sell our products can be costly and time consuming and the clearances and/or approvals might not be granted timely. We have ongoing responsibilities under the laws and regulations applicable to the manufacturing of products within our facilities and those contracted by third parties that are subject to periodic inspections by the FDA and other governmental authorities to determine compliance with the quality system, medical device reporting regulations and other requirements. Costs to comply with regulations, including the EU Medical Device Regulation enacted by the EU in May 2017 and effective in May 2021, the free trade agreement recently executed between the UK and the EU that became effective January 1, 2021, and the regulatory laws established by the NMPA in China, and costs associated with remediation can be significant. If we fail to comply with applicable regulatory requirements, we may be subject to a range of sanctions, including substantial fines, warning letters that require corrective action, product seizures, recalls, the suspension of product manufacturing, revocation of approvals, exclusion from future participation in government healthcare programs, substantial fines and criminal prosecution.

We are subject to federal, state and foreign healthcare regulations, including anti-bribery, anti-corruption, anti-kickback and false claims laws, globally and could face substantial penalties if we fail to comply with such regulations and laws: The relationships that we, and third-parties that market and/or sell our products, have with healthcare professionals, such as physicians, hospitals, healthcare organizations and others, are subject to scrutiny under various state and federal laws often referred to collectively as healthcare

Dollar amounts in millions except per share amounts or as otherwise specified. 5

STRYKER CORPORATION 2020 FORM 10-K

fraud and abuse laws. In addition, the United States and foreign government regulators have increased the enforcement of the Foreign Corrupt Practices Act (FCPA) and other anti-bribery and anti-kickback laws. We also must comply with a variety of other laws that impose extensive tracking and reporting related to all transfers of value provided to certain healthcare professionals and others. These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to incur substantial costs to monitor compliance or to alter our practices. Violations of these laws may be punishable by criminal or civil sanctions, including substantial fines, imprisonment of current or former employees and exclusion from participation in governmental healthcare programs. In 2013 and 2018 we settled claims brought by the United States Securities and Exchange Commission (SEC) related to the FCPA. Pursuant to these settlements, we paid fines and penalties and retained an independent compliance consultant. We are working to implement recommendations that resulted from the independent compliance consultant’s review of our commercial practices.

We are subject to privacy, data protection and data security regulations and laws globally, and could face substantial penalties if we fail to comply with such regulations and laws: We are subject to a variety of laws and regulations globally regarding privacy, data protection, and data security, including those related to the collection, storage, handling, use, disclosure, transfer, and security of personally identifiable healthcare information. For example, in the United States, privacy and security regulations under the Health Insurance Portability and Accountability Act of 1996, including the expanded requirements under the Health Information Technology for Economic and Clinical Health Act of 2009, establish comprehensive standards with respect to the use and disclosure of protected health information (PHI), by covered entities, in addition to setting standards to protect the confidentiality, integrity and security of PHI. Further, the EU’s General Data Protection Regulation (GDPR), which became effective in May 2018, applies to all of our activities related to products and services that we offer to EU customers and employees. The GDPR established new requirements regarding the handling of personal data and includes significant penalties for non-compliance (including possible fines of up to 4% of total company revenue). Other governmental authorities around the world are considering similar types of legislative and regulatory proposals concerning data protection, which could impose significant limitations and increase our cost of providing our products and services where we process personal data. These laws and regulations are broad in scope and are subject to evolving interpretation and we have in the past been, and in the future could be, required to incur substantial costs to monitor compliance or to alter our practices.

We may be adversely affected by product liability claims, unfavorable court decisions or legal settlements: We are exposed to potential product liability risks inherent in the design, manufacture and marketing of medical devices, many of which are implanted in the human body for long periods of time or indefinitely. We may be exposed to additional potential product liability risks related to products designed, manufactured and marketed in response to the COVID-19 pandemic, including discretionary products and products permitted under the Emergency Use Authorization granted by the FDA. We are currently defendants in a number of product liability matters, including those relating to our Rejuvenate and ABGII Modular-Neck hip stems, LFIT Anatomic CoCr V40 Femoral Heads and the product liability lawsuits and claims relating to Wright legacy hip products discussed in Note 7 to our Consolidated Financial Statements. These matters are subject to many uncertainties and

outcomes are not predictable. Further, in November 2020 the European Parliament voted in favor of the European Representative Actions Directive (the Collective Redress Directive), which mandates a class action regime in each member state to facilitate domestic and cross-border class actions in a wide range of areas, including product liability claims with medical devices. The Collective Redress Directive will take effect in 2023 after a 24-month implementation period. The Collective Redress Directive, when implemented, could result in additional litigation risks and significant legal expenses for us. In addition, we may incur significant legal expenses regardless of whether we are found to be liable.

Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products: The medical device industry is characterized by extensive intellectual property litigation and, from time to time, we are the subject of claims of infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert management and operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringement against us could result in payment of significant monetary damages and/or royalty payments or negatively impact our ability to sell current or future products in the affected category.

Dependence on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may impact offerings in our product portfolios: Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection, it could allow others to sell products that directly compete with proprietary features in our product portfolio. Also, our issued patents may be subject to claims challenging their validity and scope and raising other issues. In addition, currently pending or future patent applications may not result in issued patents.

MARKET RISKS

We have exposure to exchange rate fluctuations on cross border transactions and translation of local currency results into United States Dollars: We report our financial results in United States Dollars and approximately 30% of our net sales are denominated in foreign currencies, including the Australian Dollar, British Pound, Canadian Dollar, Euro and Japanese Yen. Cross border transactions with external parties and intercompany relationships result in increased exposure to foreign currency exchange effects. While we use derivative instruments to manage the impact of currency exchange, our hedging strategies may not be successful, and our unhedged exposures continue to be subject to currency fluctuations. In addition, the weakening or strengthening of the United States Dollar results in favorable or unfavorable translation effects when the results of our foreign locations are translated into United States Dollars.

Additional capital that we may require in the future may not be available to us or may only be available to us on unfavorable terms, which could negatively affect our liquidity: Our future capital requirements will depend on many factors, including operating requirements, current and future acquisitions and the need to refinance existing debt. Our ability to issue additional debt or enter into other financing arrangements on acceptable terms could be adversely affected by our debt levels, unfavorable changes in economic conditions or uncertainties that affect the capital markets, including disruption caused by the COVID-19 pandemic. Changes in credit ratings issued by nationally recognized credit rating agencies could also adversely affect our access to and cost of financing. Higher

Dollar amounts in millions except per share amounts or as otherwise specified. 6

STRYKER CORPORATION 2020 FORM 10-K

borrowing costs or the inability to access capital markets could adversely affect our ability to support future growth and operating requirements. In addition, we have experienced, and could continue to experience, loss of sales and profits due to delayed payments or insolvency of healthcare professionals, hospitals and other customers and suppliers facing liquidity issues caused by the COVID-19 pandemic. As a result, we may be compelled to take additional measures to preserve our cash flow, including through the reduction of operating expenses or suspension of dividend payments, at least until the consequences of the pandemic subside.

BUSINESS AND OPERATIONAL RISKS

We are subject to cost containment measures in the United States and other countries resulting in pricing pressures: Initiatives to limit the growth of general healthcare expenses and hospital costs are ongoing in the markets in which we do business. These initiatives are sponsored by government agencies, legislative bodies and the private sector and include price regulation and competitive pricing. For example, China has implemented a volume-based procurement process designed to decrease prices for medical devices and other products. Pricing pressure has also increased due to continued consolidation among healthcare providers, trends toward managed care, the shift toward governments becoming the primary payers of healthcare expenses, reduction in reimbursement levels and medical procedure volumes and government laws and regulations relating to sales and promotion, reimbursement and pricing generally.

We operate in a highly competitive industry in which competition in the development and improvement of new and existing products is significant: The markets in which we compete are highly competitive. New products and surgical procedures are introduced on an ongoing basis and our present or future products could be rendered obsolete or uneconomical by technological advances by our competitors, who may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing and other resources or be more successful in attracting potential customers, employees and strategic partners.

We may be unable to maintain adequate working relationships with healthcare professionals: We seek to maintain close working relationships with respected physicians and medical personnel in healthcare organizations such as hospitals and universities who assist in product research and development. We rely on these professionals to assist us in the development and improvement of proprietary products. As a result of the COVID-19 pandemic, our access to these professionals has been limited as hospitals have restricted access for non-patients, including our research and development specialists and other employees, and governmental authorities have imposed travel restrictions, shutdowns or similar measures, which has adversely affected our ability to develop, market and sell products. If we are unable to maintain these relationships, our ability to develop, market and sell new and improved products could be further adversely affected.

We rely on indirect distribution channels and major distributors that are independent of Stryker: In many markets, we rely on indirect distribution channels to market, distribute, and sell our products. These indirect channels often are the main point of contact for the healthcare professional and healthcare organization customers who buy and use our products. Our ability to market, distribute, and sell our products through indirect channels has been adversely affected as a result of precautionary responses to the COVID-19 pandemic, including

travel restrictions, suspension and shutdown orders and other measures intended to limit person-to-person contact. Our ability to continue to market, distribute, and sell our products may be at risk if the indirect channels become insolvent, choose to sell competitive products, choose to stop selling medical technology, or are subject to new or additional government regulation, whether related to the COVID-19 pandemic or for unrelated reasons.

We are subject to additional risks associated with our extensive global operations: We develop, manufacture and distribute our products globally. Our global operations are subject to risks and potential costs, including changes in reimbursement, changes in regulatory requirements, differing local product preferences and product requirements, diminished protection of intellectual property in some countries, tariffs and other trade protection measures, international trade disputes and import or export requirements, difficulty in staffing and managing foreign operations, introduction of new internal business structures and programs, political and economic instability (such as the United Kingdom's exit from the European Union, commonly referred to as "Brexit"), and disruptions of transportation due to a global pandemic of contagious diseases like COVID-19 or otherwise, such as reduced availability of transportation, port closures, increased border controls or closures, increased transportation costs and increased security threats to our supply chain. Our business could be adversely impacted if we are unable to successfully manage these and other risks of global operations in an increasingly volatile environment.

We may be unable to capitalize on previous or future acquisitions: In addition to internally developed products, we invest in new products and technologies through acquisitions. Such investments are inherently risky, and we cannot guarantee that any acquisition will be successful or will not have a material unfavorable impact on us. The risks include the activities required and resources allocated to integrate new businesses, diversion of management time that could adversely affect management's ability to focus on other projects, the inability to realize the expected benefits, savings or synergies from the acquisition, the loss of key personnel, litigation resulting from the acquisition and exposure to unexpected liabilities of acquired companies. In addition, we cannot be certain that the businesses we acquire will become or remain profitable.

We may be unable to capitalize on the Wright acquisition: The success of the Wright acquisition will depend, in part, on our ability to successfully combine and integrate Wright into our businesses and realize the anticipated benefits, including synergies, from the transaction. If we are unable to achieve these objectives within the anticipated time frame, or at all, the anticipated benefits may not be realized fully or at all, or may take longer to realize than expected.

The integration of Wright into Stryker may result in material challenges, including: the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of the companies; blending the cultures of Stryker and Wright; maintaining employee morale and retaining key management, sales and other employees; retaining existing business and operational relationships; the possibility of faulty assumptions underlying expectations regarding the integration process; consolidating corporate and administrative infrastructures and eliminating duplicative operations; unanticipated issues in integrating information technology, communications and other systems; continuing the regular and uninterrupted cadence of product launches; and unforeseen

Dollar amounts in millions except per share amounts or as otherwise specified. 7

STRYKER CORPORATION 2020 FORM 10-K

costs, expenses and liabilities (including litigation related liabilities) associated with the acquisition.

We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity breach or failure of one or more key information technology systems, networks, processes, associated sites or service providers: We rely extensively on information technology (IT) systems to conduct business. In addition, we rely on networks and services, including internet sites, cloud and SaaS solutions, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in conducting our business. Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and product offerings, as well as the confidentiality, availability and integrity of our data. A security breach, whether of our products, of our customers’ network security and systems or of third-party hosting services, could impact the use of such products and the security of information stored therein. While we have made investments seeking to address these threats, including monitoring of networks and systems, hiring of experts, employee training and security policies for employees and third-party providers, the techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures. In addition, a greater number of our employees working remotely during the COVID-19 pandemic has exposed us, and may continue to expose us to greater risks related to cybersecurity and cyber-liability. If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to reputational, competitive and business harm as well as litigation and regulatory action.

An inability to successfully manage the implementation of our new global enterprise resource planning (ERP) system could adversely affect our operations and operating results: We are in the process of implementing a new global ERP system. This system will replace many of our existing operating and financial systems. Such an implementation is a major undertaking, both financially and from a management and personnel perspective. Any disruptions, delays or deficiencies in the design and implementation of our new ERP system could adversely affect our ability to process orders, ship products, provide services and customer support, send invoices and track payments, fulfill contractual obligations or otherwise operate our business.

We may be unable to attract and retain key employees: Our sales, technical and other key personnel play an integral role in the development, marketing and selling of new and existing products. If we are unable to recruit, hire, develop and retain a talented, competitive work force in our highly competitive industry, we may not be able to meet our strategic business objectives. In addition, if we are unable to maintain an inclusive culture that aligns our diverse work force with our mission and values, this could adversely impact our ability to recruit, hire, develop and retain key talent.

Interruption of manufacturing operations could adversely affect our business: We and our suppliers have manufacturing sites all over the world; however, the manufacturing of certain of our product lines is concentrated in one or more plants or geographic regions. Orthopaedics has principal manufacturing and distribution facilities in the United States in Florida, Georgia, Minnesota, New Jersey, Tennessee and Virginia and outside the United States in China, France, Germany, Ireland and Switzerland. MedSurg has principal manufacturing and distribution facilities in the United States in Arizona, California, Florida, Illinois, Michigan, Puerto Rico, Texas and Washington and outside the United States in France, Germany, Ireland, Mexico, Switzerland and Turkey. Neurotechnology and Spine has principal manufacturing and distribution facilities in Illinois, Utah and Virginia and outside the United States in China, France, Ireland and Switzerland. Damage to our facilities, to our suppliers’ or service providers' facilities, or to our central distribution centers in Indiana and the Netherlands as a result of natural disasters or otherwise, as well as issues in our manufacturing arising from a failure to follow specific internal protocols and procedures, compliance concerns relating to the quality systems regulation, equipment breakdown or malfunction, environmental hazard incidents or changes to environmental regulations or other factors, could adversely affect the availability of our products. In the event of an interruption in manufacturing, we may be unable to move quickly to alternate means of producing affected products to meet customer demand. In the event of a significant interruption, we may experience lengthy delays in resuming production of affected products due to the need for regulatory approvals, and we may experience loss of market share, additional expense and harm to our reputation.

We use a variety of raw materials, components, devices and third-party services in our global supply chains, production and distribution processes; significant shortages, price increases or unavailability of third-party services could increase our operating costs, require significant capital expenditures, or adversely impact the competitive position of our products: Our reliance on certain suppliers to secure raw materials, components and finished devices, and on certain third-party service providers, such as sterilization service providers, exposes us to product shortages and unanticipated increases in prices. In addition, several raw materials, components, finished devices and services are procured from a sole-source due to the quality considerations, unique intellectual property considerations or constraints associated with regulatory requirements. If sole-source suppliers or service providers are acquired or were unable or unwilling to deliver these materials or services, we may not be able to manufacture or have available one or more products during such period of unavailability and our business could suffer. In certain cases we may not be able to establish additional or replacement suppliers for such materials or service providers for such services in a timely or cost effective manner, largely as a result of FDA and other regulations that require, among other things, validation of materials, components and services prior to their use in or with our products.

Our insurance program may not be adequate to cover future losses: We maintain third-party insurance to cover our exposure to certain property and casualty losses and are self-insured for claims and expenses related to other property and casualty losses, including product liability, intellectual property infringement and enforcement, environmental, and cybersecurity and data privacy losses. We manage a portion of our exposure to self-insured losses through a wholly-owned captive insurance company. Insurance coverage limits provided by third-party

Dollar amounts in millions except per share amounts or as otherwise specified. 8

STRYKER CORPORATION 2020 FORM 10-K

insurers and/or our captive may not be sufficient to fully cover unanticipated losses.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

We have approximately 28 company-owned and 353 leased locations worldwide including 56 manufacturing locations. We believe that our properties are in good operating condition and adequate for the manufacture and distribution of our products. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities.

ITEM 3. LEGAL PROCEEDINGS.

We are involved in various proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor and intellectual property, and the matters described in more detail in Note 7 to our Consolidated Financial Statements.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock is traded on the New York Stock Exchange under the symbol SYK.

Our Board of Directors considers payment of cash dividends at its quarterly meetings. On January 31, 2021 there were 2,582 shareholders of record of our common stock.

We did not repurchase any shares in the three months ended December 31, 2020 and the total dollar value of shares that could be acquired under our authorized repurchase program at December 31, 2020 was $1,033. As previously announced we intend to maintain the suspension of our share repurchase program through 2021.

In the fourth quarter 2020 we did not issue shares of our common stock as performance incentive awards to employees. When issued, these shares are not registered under the Securities Act of 1933 based on the conclusion that the awards would not be events of sale within the meaning of Section 2(a)(3) of the Act.

The following graph compares our total returns (including reinvestments of dividends) against the Standard & Poor’s (S&P) 500 Index and the S&P 500 Health Care Index. The graph assumes $100 (not in millions) invested on December 31, 2015 in our common stock and each of the indices.

Company / Index	2015		2016		2017		2018		2019		2020
Stryker Corporation	$	100.00	$	130.69	$	170.99	$	175.15	$	237.03	$	280.09
S&P 500 Index	$	100.00	$	111.96	$	136.40	$	130.42	$	171.49	$	203.04
S&P 500 Health Care Index	$	100.00	$	97.31	$	118.79	$	126.47	$	152.81	$	173.36

Dollar amounts in millions except per share amounts or as otherwise specified. 9

STRYKER CORPORATION 2020 FORM 10-K

ITEM 6. SELECTED FINANCIAL DATA.

Statement of Earnings Data	2020		2019		2018		2017		2016
Net sales	$	14,351	$	14,884	$	13,601	$	12,444	$	11,325
Cost of sales	5,294		5,188		4,663		4,264		3,821
Gross profit	$	9,057	$	9,696	$	8,938	$	8,180	$	7,504
Research, development and engineering expenses	984		971		862		787		715
Selling, general and administrative expenses	5,361		5,356		5,099		4,552		4,137
Recall charges	17		192		23		173		158
Amortization of intangible assets	472		464		417		371		319
Total operating expenses	$	6,834	$	6,983	$	6,401	$	5,883	$	5,329
Operating income	$	2,223	$	2,713	$	2,537	$	2,297	$	2,175
Other income (expense), net	(269)		(151)		(181)		(234)		(254)
Earnings before income taxes	$	1,954	$	2,562	$	2,356	$	2,063	$	1,921
Income taxes	355		479		(1,197)		1,043		274
Net earnings	$	1,599	$	2,083	$	3,553	$	1,020	$	1,647
Net earnings per share of common stock:
Basic	$	4.26	$	5.57	$	9.50	$	2.73	$	4.40
Diluted	$	4.20	$	5.48	$	9.34	$	2.68	$	4.35
Dividends declared per share of common stock	$	2.355	$	2.135	$	1.93	$	1.745	$	1.565
Balance Sheet Data
Cash, cash equivalents and current marketable securities	$	3,024	$	4,425	$	3,699	$	2,793	$	3,384
Accounts receivable, net	2,701		2,893		2,332		2,198		1,967
Inventories(1)	3,494		2,980		2,955		2,465		2,030
Property, plant and equipment, net	2,752		2,567		2,291		1,975		1,569
Total assets	$	34,330	$	30,167	$	27,229	$	22,197	$	20,435
Accounts payable	810		675		646		487		437
Total debt	13,991		11,090		9,859		7,222		6,914
Shareholders’ equity	$	13,084	$	12,807	$	11,730	$	9,980	$	9,550
Cash Flow Data
Net cash provided by operating activities	$	3,277	$	2,191	$	2,610	$	1,559	$	1,915
Purchases of property, plant and equipment	487		649		572		598		490
Depreciation	340		314		306		271		227
Acquisitions, net of cash acquired	4,222		802		2,451		831		4,332
Amortization of intangible assets	472		464		417		371		319
Dividends paid	863		778		703		636		568
Repurchase of common stock	—		307		300		230		13
Other Data
Number of shareholders of record	2,597		2,636		2,732		2,850		3,010
Approximate number of employees	43,000		40,000		36,000		33,000		33,000

(1)    Loaner instrumentation not intended to be sold of $302 in 2019 has been reclassified from inventories to other noncurrent assets to conform with current year presentation. Refer to Note 1 to our Consolidated Financial Statements for further information.

Dollar amounts in millions except per share amounts or as otherwise specified. 10

STRYKER CORPORATION 2020 FORM 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

About Stryker

Stryker is one of the world's leading medical technology companies and, together with our customers, we are driven to make healthcare better. We offer innovative products and services in Orthopaedics, Medical and Surgical, and Neurotechnology and Spine that help improve patient and hospital outcomes. Our goal is to achieve sales growth at the high-end of the medical technology (MedTech) industry and maintain our long-term capital allocation strategy that prioritizes: (1) Acquisitions, (2) Dividends and (3) Share repurchases.

COVID-19 Pandemic

The COVID-19 global pandemic has led to severe disruptions in the market and the global and United States economies that may continue for a prolonged duration and trigger a recession or a period of economic slowdown. In response, various governmental authorities and private enterprises have implemented numerous measures to contain the pandemic, such as travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns. A significant number of our global suppliers, vendors, distributors and manufacturing facilities are located in regions that have been affected by the pandemic. Those operations have been materially adversely affected by restrictive government and private enterprise measures implemented in response to the pandemic.

Some of our products are particularly sensitive to reductions in elective medical procedures. Elective medical procedures were suspended in the first quarter of 2020 in many of the markets where our products are marketed and sold, which negatively affected our business, cash flows, financial condition and results of operations. While we saw progressive improvement in the second and third quarters, to the extent individuals are required to continue to de-prioritize or delay elective procedures as a result of the COVID-19 pandemic or otherwise, as we experienced in the fourth quarter, our business, cash flows, financial condition and results of operations could be negatively affected.

Overview of 2020

The response to the COVID-19 pandemic has included unprecedented measures to slow the spread of the virus taken by local governments and health care authorities globally, including

the postponement of elective medical procedures and social contact restrictions, which have had, and could continue to have, a significant negative impact on Stryker’s operations and financial results.

In 2020 reported net sales declined 3.6%. Excluding the impact of acquisitions, sales declined 4.8% in constant currency. We reported net earnings of $1,599 and net earnings per diluted share of $4.20. Excluding the impact of certain items, we achieved adjusted net earnings(1) of $2,827 and adjusted net earnings per diluted share(1) of $7.43 representing a decline of 10.0%.

We continued our capital allocation strategy by investing $4,222 in acquisitions and paying $863 in dividends to our shareholders.

In 2020 we received $3,292 from issuance of debt and had total debt repayments of $2,297. We exercised our right under the acquisition clause of our credit and term loan facilities to increase the maximum permitted leverage to 5.0:1 effective as of December 31, 2020. Refer to Note 10 to our Consolidated Financial Statements for further information.

In 2020 we completed acquisitions for total net cash consideration of $4,222 and $82 in future milestone payments primarily due upon the achievement of certain regulatory and commercial milestones. In November 2020 we completed the acquisition of Wright for $30.75 per share, or an aggregate purchase price of $4.1 billion ($5.6 billion including convertible notes). Wright is a global medical device company focused on extremities and biologics. Wright is part of our Trauma and Extremities business within Orthopaedics. In December 2020 we completed the acquisition of OrthoSensor, Inc. (OrthoSensor). OrthoSensor is a leader in the digital evolution of musculoskeletal care and sensor technology for total joint replacement. OrthoSensor is part of our Joint Replacement business within Orthopaedics.

In 2020 we did not repurchase any shares of our common stock under our authorized repurchase program. The total dollar value of shares of our common stock that could be acquired under our authorized repurchase program was $1,033 as of December 31, 2020. We previously announced our intention to suspend our share repurchase program through 2021.

(1)    Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP financial measures used in this report and a reconciliation to the most directly comparable GAAP financial measure.

CONSOLIDATED RESULTS OF OPERATIONS

							Percent Net Sales						Percentage Change
	2020		2019		2018		2020		2019		2018		Current Year End		Prior Year End
Net sales	$	14,351	$	14,884	$	13,601	100.0	%	100.0	%	100.0	%	(3.6)	%	9.4	%
Gross profit	9,057		9,696		8,938		63.1		65.1		65.7		(6.6)		8.5
Research, development and engineering expenses	984		971		862		6.9		6.5		6.3		1.3		12.6
Selling, general and administrative expenses	5,361		5,356		5,099		37.4		36.0		37.5		0.1		5.0
Recall charges, net of insurance proceeds	17		192		23		0.1		1.3		0.2		(91.1)		nm
Amortization of intangible assets	472		464		417		3.3		3.1		3.1		1.7		11.3
Other income (expense), net	(269)		(151)		(181)		(1.9)		(1.0)		(1.3)		78.1		(16.6)
Income taxes	355		479		(1,197)								(25.9)		nm
Net earnings	$	1,599	$	2,083	$	3,553	11.1	%	14.0	%	26.1	%	(23.2)	%	(41.4)	%
Net earnings per diluted share	$	4.20	$	5.48	$	9.34							(23.4)	%	(41.3)	%
Adjusted net earnings per diluted share(1)	$	7.43	$	8.26	$	7.31							(10.0)	%	13.0	%

Dollar amounts in millions except per share amounts or as otherwise specified. 11

STRYKER CORPORATION 2020 FORM 10-K

Geographic and Segment Net Sales							Percentage Change
							Current Year End				Prior Year End
	2020		2019		2018		As Reported		Constant Currency		As Reported		Constant Currency
Geographic:
United States	$	10,455	$	10,957	$	9,848	(4.6)	%	(4.6)	%	11.3	%	11.3	%
International	3,896		3,927		3,753		(0.8)		(0.9)		4.6		9.3
Total	$	14,351	$	14,884	$	13,601	(3.6)	%	(3.6)	%	9.4	%	10.7	%
Segment:
Orthopaedics	$	4,959	$	5,252	$	4,991	(5.6)	%	(5.7)	%	5.2	%	6.7	%
MedSurg	6,400		6,492		6,045		(1.4)		(1.3)		8.8		9.9
Neurotechnology and Spine	2,992		3,140		2,565		(4.7)		(4.9)		19.2		20.5
Total	$	14,351	$	14,884	$	13,601	(3.6)	%	(3.6)	%	9.4	%	10.7	%

Supplemental Net Sales Growth Information
					Percentage Change														Percentage Change
									United States		International												United States		International
	2020		2019		As Reported		Constant Currency		As Reported		As Reported		Constant Currency		2019		2018		As Reported		Constant Currency		As Reported		As Reported		Constant Currency
Orthopaedics:
Knees	$	1,567	$	1,815	(13.7)	%	(13.7)	%	(13.1)	%	(15.3)	%	(15.5)	%	$	1,815	$	1,701	6.7	%	8.1	%	8.2	%	2.6	%	7.6	%
Hips	1,206		1,383		(12.8)		(12.7)		(12.0)		(14.1)		(13.8)		1,383		1,336		3.5		5.2		5.4		0.3		4.8
Trauma and Extremities	1,722		1,639		5.1		4.7		8.4		(0.9)		(1.9)		1,639		1,580		3.7		5.2		4.9		1.6		5.8
Other	464		415		11.7		11.4		15.8		(4.9)		(6.5)		415		374		11.2		12.0		11.5		10.0		14.2
	$	4,959	$	5,252	(5.6)	%	(5.7)	%	(3.9)	%	(9.2)	%	(9.6)	%	$	5,252	$	4,991	5.2	%	6.7	%	6.8	%	1.9	%	6.4	%
MedSurg:
Instruments	$	1,863	$	1,959	(5.0)	%	(5.0)	%	(4.7)	%	(6.1)	%	(6.2)	%	$	1,959	$	1,822	12.0	%	13.1	%	12.9	%	8.7	%	13.8	%
Endoscopy	1,763		1,983		(11.1)		(11.0)		(10.7)		(12.5)		(12.2)		1,983		1,846		7.5		8.6		10.1		(1.8)		3.4
Medical	2,524		2,264		11.5		11.8		6.9		28.9		30.3		2,264		2,118		6.9		8.1		9.6		(2.4)		2.9
Sustainability	250		286		(12.3)		(12.3)		(12.4)		nm		nm		286		259		10.4		10.4		9.9		nm		nm
	$	6,400	$	6,492	(1.4)	%	(1.3)	%	(2.9)	%	4.7	%	5.3	%	$	6,492	$	6,045	8.8	%	9.9	%	10.8	%	1.3	%	6.5	%
Neurotechnology and Spine:
Neurotechnology	$	1,945	$	1,983	(1.9)	%	(2.1)	%	(7.7)	%	8.8	%	8.2	%	$	1,983	$	1,737	13.5	%	14.9	%	13.9	%	12.7	%	16.7	%
Spine	1,047		1,157		(9.5)		(9.6)		(12.5)		(0.6)		(0.9)		1,157		828		31.1		32.3		34.7		21.3		25.4
	$	2,992	$	3,140	(4.7)	%	(4.9)	%	(9.6)	%	6.1	%	5.6	%	$	3,140	$	2,565	19.2	%	20.5	%	21.3	%	14.9	%	18.9	%
Total	$	14,351	$	14,884	(3.6)	%	(3.6)	%	(4.6)	%	(0.8)	%	(0.9)	%	$	14,884	$	13,601	9.4	%	10.7	%	11.3	%	4.6	%	9.3	%

nm - not meaningful

Consolidated Net Sales

Consolidated net sales in 2020 were significantly negatively impacted by the global response to the COVID-19 pandemic. Consolidated net sales decreased 3.6% as reported and in constant currency. Excluding the 1.2% impact of acquisitions, net sales in constant currency decreased by 4.1% from decreased unit volume and 0.7% due to lower prices. The unit volume decrease was primarily due to lower shipments of instruments, endoscopy, neurotechnology, spine, knee and hip products partially offset by higher shipments of medical products.

Consolidated net sales in 2019 increased 9.4% as reported and 10.7% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.3%. Excluding the 2.6% impact of acquisitions, net sales in constant currency increased by 9.0% from increased unit volume partially offset by 0.9% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments, endoscopy, neurotechnology, knee, hip and trauma and extremities products.

Orthopaedics Net Sales

Orthopaedics net sales in 2020 decreased 5.6% as reported and 5.7% in constant currency, as foreign currency exchange rates positively impacted net sales by 0.1%. Excluding the 2.4% impact of acquisitions, net sales in constant currency decreased due to the postponement of elective medical procedures as part of the global response to the COVID-19 pandemic with 6.6% from decreased unit volume and 1.5% due to lower prices. The unit volume decrease was primarily due to lower shipments of knee, hip and trauma and extremities products.

Orthopaedics net sales in 2019 increased 5.2% as reported and 6.7% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.5%. Net sales in constant currency increased by 8.2% from unit volume partially offset by 1.5% due to lower prices. The unit volume increase was primarily due to higher shipments of knee, hip and trauma and extremities products.

MedSurg Net Sales

MedSurg net sales in 2020 decreased 1.4% as reported and 1.3% in constant currency, as foreign currency exchange rates negatively impacted net sales by 0.1%. Excluding the 0.5% impact of acquisitions, net sales in constant currency decreased by 1.8% from decreased unit volume with a nominal impact from changes in pricing. The unit volume decrease was primarily due to lower shipments of instruments, endoscopy, and sustainability solutions products partially offset by higher shipments of medical products.

MedSurg net sales in 2019 increased 8.8% as reported and 9.9% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.1%. Excluding the 1.0% impact of acquisitions, net sales in constant currency increased by 9.4% from increased unit volume partially offset by 0.5% due to lower prices. The unit volume increase was primarily due to higher shipments of medical, instruments, endoscopy and sustainability solutions products.

Neurotechnology and Spine Net Sales

Neurotechnology and Spine net sales in 2020 decreased 4.7% as reported and 4.9% in constant currency, as foreign currency

Dollar amounts in millions except per share amounts or as otherwise specified. 12

STRYKER CORPORATION 2020 FORM 10-K

exchange rates positively impacted net sales by 0.2%. Excluding the 0.8% impact of acquisitions, net sales in constant currency decreased by 4.9% from decreased unit volume and 0.8% due to lower prices. The unit volume decrease was primarily due to lower shipments of spine and neurotechnology products.

Neurotechnology and Spine net sales in 2019 increased 19.2% as reported and 20.5% in constant currency, as foreign currency exchange rates negatively impacted net sales by 1.3%. Excluding the 11.6% impact of acquisitions, net sales in constant currency increased by 9.6% from increased unit volume partially offset by 0.7% due to lower prices. The unit volume increase was primarily due to higher shipments of neurotechnology products.

Gross Profit

Gross profit was significantly negatively impacted by the global response to the COVID-19 pandemic in 2020, decreasing as a percentage of net sales to 63.1% from 65.1% in 2019. Excluding the impact of the items noted below, gross profit decreased to 63.8% from 65.9% in 2019 primarily due to lower sales volumes, lower selling prices, lower manufacturing volumes and unfavorable product mix due to the postponement of elective medical procedures as part of the global response to the COVID-19 pandemic.

Gross profit as a percentage of net sales decreased to 65.1% in 2019 from 65.7% in 2018. Excluding the impact of the items noted below, gross profit decreased to 65.9% in 2019 from 66.1% in 2018 primarily due to the impact of lower selling prices.

							Percent Net Sales
	2020		2019		2018		2020		2019		2018
Reported	$	9,057	$	9,696	$	8,938	63.1	%	65.1	%	65.7	%
Inventory stepped up to fair value	48		67		16		0.3		0.5		0.1
Restructuring-related and other charges	53		38		27		0.4		0.3		0.3
Medical device regulations	2		6		2		—		—		—
Adjusted	$	9,160	$	9,807	$	8,983	63.8	%	65.9	%	66.1	%

Research, Development and Engineering Expenses

Research, development and engineering expenses as a percentage of net sales increased to 6.9% in 2020 from 6.5% in 2019 and 6.3% in 2018. Excluding the impact of the items noted below, expenses increased to 6.3% in 2020 from 6.1% in 2019 and were consistent with 2018. Projects to develop new products, investments in new technologies, integration of recent acquisitions and the impact of lower sales contributed to the increase partially offset by operating expense savings actions in response to the COVID-19 pandemic.

							Percent Net Sales
	2020		2019		2018		2020		2019		2018
Reported	$	984	$	971	$	862	6.9	%	6.5	%	6.3	%
Medical device regulations	(79)		(56)		(10)		(0.6)		(0.4)		—
Adjusted	$	905	$	915	$	852	6.3	%	6.1	%	6.3	%

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of net sales in 2020 increased to 37.4% from 36.0% in 2019 and included charges related to certain in process asset impairments (primarily the portion of our investment in a new global ERP system that was in process of being developed for future deployment) and other exit costs resulting from our decision to suspend certain investments due to pandemic-related constraints. Excluding the impact of the items noted below, expenses decreased to 33.1% in 2020 from 33.5% in 2019

primarily due to operating expense savings actions taken in response to the COVID-19 pandemic.

Selling, general and administrative expenses as a percentage of net sales in 2019 decreased to 36.0% from 37.5% in 2018. Excluding the impact of the items noted below, expenses decreased to 33.5% in 2019 from 33.9% in 2018 primarily due to leverage from higher sales volumes and continued focus on our operating expense improvement initiatives, partially offset by the leverage from recent acquisitions.

							Percent Net Sales
	2020		2019		2018		2020		2019		2018
Reported	$	5,361	$	5,356	$	5,099	37.4	%	36.0	%	37.5	%
Other acquisition and integration-related	(194)		(208)		(108)		(1.4)		(1.4)		(0.8)
Restructuring-related and other charges	(406)		(188)		(192)		(2.9)		(1.3)		(1.4)
Regulatory and legal matters	(6)		24		(185)		—		0.2		(1.4)
Adjusted	$	4,755	$	4,984	$	4,614	33.1	%	33.5	%	33.9	%

Recall Charges, Net of Insurance Proceeds

Recall charges were $17, $192 and $23 in 2020, 2019 and 2018. Charges were primarily due to the previously disclosed Rejuvenate and ABGII Modular-Neck hip stems and LFIT V40 femoral head voluntary recalls. Refer to Note 7 to our Consolidated Financial Statements for further information.

Amortization of Intangible Assets

Amortization of intangible assets was $472, $464 and $417 in 2020, 2019 and 2018. The increase in 2020 and 2019 was due to acquisitions. Refer to Notes 6 and 8 to our Consolidated Financial Statements for further information.

Operating Income

Operating income was significantly negatively impacted by the global response to the COVID-19 pandemic in 2020, decreasing as a percentage of sales to 15.5% from 18.2% in 2019 and 18.7% in 2018. Excluding the impact of the items noted below, operating income decreased to 24.4% of sales in 2020 from 26.3% in 2019 and 25.9% in 2018, primarily due to unfavorable business mix and the impact of lower sales volumes from the postponement of elective medical procedures as part of the global response to the COVID-19 pandemic partially offset by continued focus on our operating expense savings actions.

							Percent Net Sales
	2020		2019		2018		2020		2019		2018
Reported	$	2,223	$	2,713	$	2,537	15.5	%	18.2	%	18.7	%
Inventory stepped up to fair value	48		67		15		0.3		0.5		0.1
Other acquisition and integration-related	194		208		108		1.4		1.4		0.8
Amortization of intangible assets	472		464		417		3.3		3.2		3.0
Restructuring-related and other charges	458		226		220		3.2		1.5		1.6
Medical device regulations	81		62		12		0.6		0.4		0.1
Recall-related matters	17		192		23		0.1		1.3		0.2
Regulatory and legal matters	6		(24)		185		—		(0.2)		1.4
Adjusted	$	3,499	$	3,908	$	3,517	24.4	%	26.3	%	25.9	%

Other Income (Expense), Net

Other income (expense), net was ($269), ($151) and ($181) in 2020, 2019 and 2018. The increase in net expense in 2020 was primarily due to increased interest expense driven by the

Dollar amounts in millions except per share amounts or as otherwise specified. 13

STRYKER CORPORATION 2020 FORM 10-K

additional debt from the bond offerings completed in December 2019 and June 2020. Refer to Note 10 to our Consolidated Financial Statements for further information.

Income Taxes

Our effective tax rate was 18.2%, 18.7% and (50.8%) for 2020, 2019 and 2018. The effective income tax rate for 2020 reflects the continued lower effective income tax rates as a result of our European operations, the tax effect related to the transfer of intellectual property between tax jurisdictions and the tax effect of future remittances of the undistributed earnings of foreign subsidiaries.

The effective income tax rate for 2019 reflects the tax related to the transfer of intellectual properties between tax jurisdictions and the continued lower effective income tax rates as a result of our European operations. The effective income tax rate for 2018 reflects the tax effect related to the transfer of intellectual properties between tax jurisdictions, the continuing impact of complying with the Tax Cuts and Jobs Act of 2017 (the Tax Act), and continued lower effective income tax rates as a result of our European operations.

Net Earnings

Earnings were significantly negatively impacted by the global response to the COVID-19 pandemic in 2020. Net earnings decreased to $1,599 or $4.20 per diluted share from $2,083 or $5.48 per diluted share in 2019 and $3,553 or $9.34 per diluted share in 2018. Adjusted net earnings per diluted share(1) of $7.43 decreased 10.0% from $8.26 in 2019 compared to $7.31 in 2018. The impact of foreign currency exchange rates reduced net earnings per diluted share by approximately $0.02, $0.14 and $0.06 in 2020, 2019 and 2018.

							Percent Net Sales
	2020		2019		2018		2020		2019		2018
Reported	$	1,599	$	2,083	$	3,553	11.1	%	14.0	%	26.1	%
Inventory stepped up to fair value	36		51		9		0.3		0.3		0.1
Other acquisition and integration-related	157		160		90		1.1		1.1		0.7
Amortization of intangible assets	381		375		338		2.6		2.6		2.5
Restructuring-related and other charges	397		180		179		2.8		1.2		1.3
Medical device regulations	63		48		10		0.4		0.3		0.1
Recall-related matters	13		154		18		0.1		1.0		0.1
Regulatory and legal matters	8		(33)		141		0.1		(0.2)		1.0
Tax matters	173		121		(1,559)		1.2		0.8		(11.5)
Adjusted	$	2,827	$	3,139	$	2,779	19.7	%	21.1	%	20.4	%

Non-GAAP Financial Measures

We supplement the reporting of our financial information determined under accounting principles generally accepted in the United States (GAAP) with certain non-GAAP financial measures, including percentage sales growth in constant currency; percentage organic sales growth; adjusted gross profit; adjusted selling, general and administrative expenses; adjusted research, development and engineering expenses; adjusted operating income; adjusted other income (expense), net; adjusted effective income tax rate; adjusted net earnings; adjusted net earnings per diluted share (Diluted EPS); free cash flow; and free cash flow conversion. We believe these non-GAAP financial measures provide meaningful information to assist investors and shareholders in understanding our financial results and assessing our prospects for future performance. Management believes

percentage sales growth in constant currency and the other adjusted measures described above are important indicators of our operations because they exclude items that may not be indicative of or are unrelated to our core operating results and provide a baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures for reviewing the operating results of reportable business segments and analyzing potential future business trends in connection with our budget process and bases certain management incentive compensation on these non-GAAP financial measures. To measure percentage sales growth in constant currency, we remove the impact of changes in foreign currency exchange rates that affect the comparability and trend of sales. Percentage sales growth in constant currency is calculated by translating current and prior year results at the same foreign currency exchange rate. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates and acquisitions, which affect the comparability and trend of sales. Percentage organic sales growth is calculated by translating current year results at prior year average foreign currency exchange rates excluding the impact of acquisitions. To measure earnings performance on a consistent and comparable basis, we exclude certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing and may not be indicative of our past and future performance. The following are examples of the types of adjustments that may be included in a period:

1.Acquisition and integration-related costs. Costs related to integrating recently acquired businesses and specific costs (e.g., inventory step-up and deal costs) related to the consummation of the acquisition process.

2.Amortization of purchased intangible assets. Periodic amortization expense related to purchased intangible assets.

3.Restructuring-related and other charges. Costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, certain long-lived asset impairments and associated costs and other restructuring-related activities.

4.Medical Device Regulations. Costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device reporting regulations and other requirements of the European Union and China regulations for medical devices.

5.Recall-related matters. Our best estimate of the minimum of the range of probable loss to resolve the Rejuvenate, LFIT V40 and other product recalls.

6.Regulatory and legal matters. Our best estimate of the minimum of the range of probable loss to resolve certain regulatory matters and other legal settlements.

7.Tax matters. Charges represent the impact of accounting for certain significant and discrete tax items.

To measure free cash flow, we adjust cash provided by operating activities by the amount of purchases of property, plant and equipment and proceeds from long-lived asset disposals and remove the impact of certain legal settlements and recall payments. To measure free cash flow conversion we divide free cash flow by adjusted net earnings.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, selling, general and administrative expenses,

Dollar amounts in millions except per share amounts or as otherwise specified. 14

STRYKER CORPORATION 2020 FORM 10-K

research, development and engineering expenses, operating income, other income (expense), net, effective income tax rate, net earnings and net earnings per diluted share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of our operations when viewed with our GAAP results and the reconciliations to corresponding GAAP financial measures at the end of the discussion of Consolidated Results of Operations

below. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

The weighted-average diluted shares outstanding used in the calculation of non-GAAP net earnings per diluted share are the same as those used in the calculation of reported net earnings per diluted share for the respective period.

Reconciliation of the Most Directly Comparable GAAP Financial Measure to Non-GAAP Financial Measure

2020	Gross Profit		Selling, General & Administrative Expenses		Research, Development & Engineering Expenses		Operating Income		Other income (expense), net		Net Earnings		Effective Tax Rate		Diluted EPS
Reported	$	9,057	$	5,361	$	984	$	2,223	$	(269)	$	1,599	18.2	%	$	4.20
Acquisition and integration-related charges:
Inventory stepped-up to fair value	48		—		—		48		—		36		0.3		0.10
Other acquisition and integration-related	—		(194)		—		194		—		157		0.7		0.41
Amortization of purchased intangible assets	—		—		—		472		—		381		1.6		1.00
Restructuring-related and other charges	53		(406)		—		458		—		397		0.2		1.04
Medical device regulations	2		—		(79)		81		—		63		0.4		0.17
Recall-related matters	&