UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

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

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

There were 377,096,272 shares of Common Stock, $0.10 par value, on June 30, 2021.

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (Unaudited)

	Three Months				Six Months
	2021		2020		2021		2020
Net sales	$	4,294	$	2,764	$	8,247	$	6,352
Cost of sales	1,522		1,216		2,966		2,473
Gross profit	$	2,772	$	1,548	$	5,281	$	3,879
Research, development and engineering expenses	310		233		598		487
Selling, general and administrative expenses	1,505		1,225		3,080		2,555
Recall charges	76		—		82		(6)
Amortization of intangible assets	149		110		330		228
Total operating expenses	$	2,040	$	1,568	$	4,090	$	3,264
Operating income (loss)	$	732	$	(20)	$	1,191	$	615
Other income (expense), net	(70)		(67)		(162)		(112)
Earnings (loss) before income taxes	$	662	$	(87)	$	1,029	$	503
Income taxes	70		(4)		135		93
Net earnings (loss)	$	592	$	(83)	$	894	$	410
Net earnings (loss) per share of common stock:
Basic	$	1.57	$	(0.22)	$	2.37	$	1.09
Diluted	$	1.55	$	(0.22)	$	2.34	$	1.08
Weighted-average shares outstanding (in millions):
Basic	376.9		375.5		376.6		375.1
Effect of dilutive employee stock compensation	5.4		—		5.4		4.8
Diluted	382.3		375.5		382.0		379.9
Cash dividends declared per share of common stock	$	0.63	$	0.575	$	1.26	$	1.15

Anti-dilutive shares excluded from the calculation of dilutive employee stock options were 4.3 for the three months 2020 and de minimis in all other periods.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

	Three Months				Six Months
	2021		2020		2021		2020
Net earnings (loss)	$	592	$	(83)	$	894	$	410
Other comprehensive income (loss), net of tax:
Pension plans	(4)		(4)		3		(8)
Unrealized gains (losses) on designated hedges	8		(30)		36		(56)
Financial statement translation	(80)		(58)		175		(45)
Total other comprehensive income (loss), net of tax	$	(76)	$	(92)	$	214	$	(109)
Comprehensive income (loss)	$	516	$	(175)	$	1,108	$	301

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

CONSOLIDATED BALANCE SHEETS

	June 30		December 31
	2021		2020
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	2,241	$	2,943
Marketable securities	84		81
Accounts receivable, less allowance of $141 ($131 in 2020)	2,714		2,701
Inventories:
Materials and supplies	658		678
Work in process	264		251
Finished goods	2,509		2,565
Total inventories	$	3,431	$	3,494
Prepaid expenses and other current assets	562		488
Total current assets	$	9,032	$	9,707
Property, plant and equipment:
Land, buildings and improvements	1,607		1,546
Machinery and equipment	3,755		3,636
Total property, plant and equipment	$	5,362	$	5,182
Less accumulated depreciation	2,624		2,430
Property, plant and equipment, net	$	2,738	$	2,752
Goodwill	12,802		12,778
Other intangibles, net	5,261		5,554
Noncurrent deferred income tax assets	1,751		1,530
Other noncurrent assets	2,114		2,009
Total assets	$	33,698	$	34,330
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	864	$	810
Accrued compensation	890		925
Income taxes	300		207
Dividends payable	238		237
Accrued product liabilities	444		515
Accrued expenses and other liabilities	1,510		1,586
Current maturities of debt	6		761
Total current liabilities	$	4,252	$	5,041
Long-term debt, excluding current maturities	12,734		13,230
Income taxes	927		990
Other noncurrent liabilities	1,965		1,985
Total liabilities	$	19,878	$	21,246
Shareholders' equity
Common stock, $0.10 par value	38		38
Additional paid-in capital	1,844		1,741
Retained earnings	12,881		12,462
Accumulated other comprehensive loss	(943)		(1,157)
Total shareholders' equity	$	13,820	$	13,084
Total liabilities and shareholders' equity	$	33,698	$	34,330

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

	Three Months				Six Months
	2021		2020		2021		2020
Common stock shares outstanding (in millions)
Beginning	376.7		375.4		376.1		374.5
Issuance of common stock under stock compensation and benefit plans	0.4		0.2		1.0		1.1
Repurchase of common stock	—		—		—		—
Ending	377.1		375.6		377.1		375.6
Common stock
Beginning	$	38	$	38	$	38	$	37
Issuance of common stock under stock compensation and benefit plans	—		—		—		1
Repurchase of common stock	—		—		—		—
Ending	$	38	$	38	$	38	$	38
Additional paid-in capital
Beginning	$	1,806	$	1,676	$	1,741	$	1,628
Issuance of common stock under stock compensation and benefit plans	(1)		—		(4)		(8)
Repurchase of common stock	—		—		—		—
Share-based compensation	39		30		107		86
Ending	$	1,844	$	1,706	$	1,844	$	1,706
Retained earnings
Beginning	$	12,525	$	12,024	$	12,462	$	11,748
Net earnings (loss)	592		(83)		894		410
Repurchase of common stock	—		—		—		—
Cash dividends declared	(236)		(216)		(475)		(433)
Ending	$	12,881	$	11,725	$	12,881	$	11,725
Accumulated other comprehensive income (loss)
Beginning	$	(867)	$	(623)	$	(1,157)	$	(606)
Other comprehensive income (loss)	(76)		(92)		214		(109)
Ending	$	(943)	$	(715)	$	(943)	$	(715)
Total Stryker shareholders' equity	$	13,820	$	12,754	$	13,820	$	12,754
Non-controlling interest	—		—		—		—
Total shareholders' equity	$	13,820	$	12,754	$	13,820	$	12,754

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months
	2021		2020
Operating activities
Net earnings	$	894	$	410
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	187		163
Amortization of intangible assets	330		228
Asset impairments	3		161
Share-based compensation	107		86
Recall charges	82		(6)
Sale of inventory stepped-up to fair value at acquisition	137		9
Changes in operating assets and liabilities:
Accounts receivable	(24)		671
Inventories	(128)		(181)
Accounts payable	57		(34)
Accrued expenses and other liabilities	22		(375)
Recall-related payments	(163)		(12)
Income taxes	(98)		(39)
Other, net	(76)		130
Net cash provided by operating activities	$	1,330	$	1,211
Investing activities
Acquisitions, net of cash acquired	(104)		(26)
Purchases of marketable securities	(31)		(23)
Proceeds from sales of marketable securities	28		31
Purchases of property, plant and equipment	(189)		(253)
Other investing, net	(2)		(9)
Net cash used in investing activities	$	(298)	$	(280)
Financing activities
Proceeds (payments) on short-term borrowings, net	(7)		8
Proceeds from issuance of long-term debt	5		2,293
Payments on long-term debt	(1,151)		(500)
Dividends paid	(475)		(431)
Repurchases of common stock	—		—
Cash paid for taxes from withheld shares	(74)		(68)
Other financing, net	(27)		(14)
Net cash provided by (used in) financing activities	$	(1,729)	$	1,288
Effect of exchange rate changes on cash and cash equivalents	(5)		(17)
Change in cash and cash equivalents	$	(702)	$	2,202
Cash and cash equivalents at beginning of period	2,943		4,337
Cash and cash equivalents at end of period	$	2,241	$	6,539

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

General Information

Management believes the accompanying unaudited Consolidated Financial Statements contain all adjustments, including normal recurring items, considered necessary to fairly present the financial position of Stryker Corporation and its consolidated subsidiaries ("Stryker," the "Company," "we," us" or "our") on June 30, 2021 and the results of operations for the three and six months 2021. The results of operations included in these Consolidated Financial Statements may not necessarily be indicative of our annual results. These statements should be read in conjunction with our Annual Report on Form 10-K for 2020.

New Accounting Pronouncements Not Yet Adopted

We evaluate all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) for consideration of their applicability. ASUs not included in our disclosures were assessed and determined to be either not applicable or are not expected to have a material impact on our Consolidated Financial Statements.

NOTE 2 - REVENUE RECOGNITION

Our policies for recognizing sales have not changed from those described in our Annual Report on Form 10-K for 2020.

We disaggregate our net sales by product line and geographic location for each of our segments as we believe it best depicts how the nature, amount, timing and certainty of our net sales and cash flows are affected by economic factors.

Net Sales by Product Line
	Three Months				Six Months
	2021		2020		2021		2020
Orthopaedics:
Knees	$	474	$	241	$	886	$	673
Hips	353		216		662		532
Trauma and Extremities	674		330		1,314		722
Other	127		107		250		189
	$	1,628	$	894	$	3,112	$	2,116
MedSurg:
Instruments	$	517	$	328	$	986	$	841
Endoscopy	518		316		987		771
Medical	640		632		1,262		1,219
Sustainability	73		48		134		115
	$	1,748	$	1,324	$	3,369	$	2,946
Neurotechnology and Spine:
Neurotechnology	$	611	$	369	$	1,181	$	852
Spine	307		177		585		438
	$	918	$	546	$	1,766	$	1,290
Total	$	4,294	$	2,764	$	8,247	$	6,352

Net Sales by Geography
	Three Months 2021				Three Months 2020
	United States		International		United States		International
Orthopaedics:
Knees	$	349	$	125	$	179	$	62
Hips	221		132		140		76
Trauma and Extremities	475		199		208		122
Other	99		28		96		11
	$	1,144	$	484	$	623	$	271
MedSurg:
Instruments	$	401	$	116	$	249	$	79
Endoscopy	407		111		253		63
Medical	488		152		454		178
Sustainability	72		1		48		—
	$	1,368	$	380	$	1,004	$	320
Neurotechnology and Spine:
Neurotechnology	$	371	$	240	$	211	$	158
Spine	217		90		128		49
	$	588	$	330	$	339	$	207
Total	$	3,100	$	1,194	$	1,966	$	798

Net Sales by Geography
	Six Months 2021				Six Months 2020
	United States		International		United States		International
Orthopaedics:
Knees	$	643	$	243	$	501	$	172
Hips	407		255		341		191
Trauma and Extremities	915		399		468		254
Other	193		57		165		24
	$	2,158	$	954	$	1,475	$	641
MedSurg:
Instruments	$	756	$	230	$	659	$	182
Endoscopy	761		226		617		154
Medical	961		301		908		311
Sustainability	132		2		114		1
	$	2,610	$	759	$	2,298	$	648
Neurotechnology and Spine:
Neurotechnology	$	706	$	475	$	512	$	340
Spine	410		175		324		114
	$	1,116	$	650	$	836	$	454
Total	$	5,884	$	2,363	$	4,609	$	1,743

Contract Assets and Liabilities

On June 30, 2021 and December 31, 2020 contract assets recorded in our Consolidated Balance Sheets were not significant.

Our contract liabilities arise as a result of consideration received from customers at inception of contracts for certain businesses or where the timing of billing for services precedes satisfaction of our performance obligations. We generally satisfy performance obligations within one year from the contract inception date. Our contract liabilities were $476 and $416 on June 30, 2021 and December 31, 2020.

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

STRYKER CORPORATION 2021 Second Quarter Form 10-Q

NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (AOCI)

Three Months 2021	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(3)	$	(252)	$	18	$	(630)	$	(867)
OCI	—		(9)		7		(75)		(77)
Income taxes	—		2		(3)		2		1
Reclassifications to:
Cost of sales	—		—		4		—		4
Other (income) expense	—		4		(1)		(9)		(6)
Income taxes	—		(1)		1		2		2
Net OCI	$	—	$	(4)	$	8	$	(80)	$	(76)
Ending	$	(3)	$	(256)	$	26	$	(710)	$	(943)

Three Months 2020	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(3)	$	(183)	$	21	$	(458)	$	(623)
OCI	(1)		(8)		(33)		(91)		(133)
Income taxes	—		2		8		39		49
Reclassifications to:
Cost of sales	—		—		(3)		—		(3)
Other (income) expense	1		3		(2)		(7)		(5)
Income taxes	—		(1)		—		1		—
Net OCI	$	—	$	(4)	$	(30)	$	(58)	$	(92)
Ending	$	(3)	$	(187)	$	(9)	$	(516)	$	(715)

Six Months 2021	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(3)	$	(259)	$	(10)	$	(885)	$	(1,157)
OCI	—		(1)		34		198		231
Income taxes	—		(2)		(11)		(10)		(23)
Reclassifications to:
Cost of sales	—		—		5		—		5
Other (income) expe