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, 2022

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 378,320,706 shares of Common Stock, $0.10 par value, on June 30, 2022.

STRYKER CORPORATION 2022 Second Quarter Form 10-Q

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

	Three Months				Six Months
	2022		2021		2022		2021
Net sales	$	4,493	$	4,294	$	8,768	$	8,247
Cost of sales	1,667		1,522		3,208		2,966
Gross profit	$	2,826	$	2,772	$	5,560	$	5,281
Research, development and engineering expenses	351		310		764		598
Selling, general and administrative expenses	1,539		1,505		3,249		3,080
Recall charges	4		76		18		82
Amortization of intangible assets	160		149		310		330
Total operating expenses	$	2,054	$	2,040	$	4,341	$	4,090
Operating income	$	772	$	732	$	1,219	$	1,191
Other income (expense), net	(52)		(70)		(113)		(162)
Earnings before income taxes	$	720	$	662	$	1,106	$	1,029
Income taxes	64		70		127		135
Net earnings	$	656	$	592	$	979	$	894
Net earnings per share of common stock:
Basic	$	1.73	$	1.57	$	2.59	$	2.37
Diluted	$	1.72	$	1.55	$	2.56	$	2.34
Weighted-average shares outstanding (in millions):
Basic	378.3		376.9		378.0		376.6
Effect of dilutive employee stock compensation	3.9		5.4		4.5		5.4
Diluted	382.2		382.3		382.5		382.0
Cash dividends declared per share of common stock	$	0.695	$	0.63	$	1.39	$	1.26

Anti-dilutive shares excluded from the calculation of dilutive employee stock options were 4.5 for the three months 2022 and de minimis in all other periods.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months				Six Months
	2022		2021		2022		2021
Net earnings	$	656	$	592	$	979	$	894
Other comprehensive income (loss), net of tax:
Marketable securities	—		—		(1)		—
Pension plans	8		(4)		7		3
Unrealized gains (losses) on designated hedges	24		8		25		36
Financial statement translation	161		(80)		214		175
Total other comprehensive income (loss), net of tax	$	193	$	(76)	$	245	$	214
Comprehensive income	$	849	$	516	$	1,224	$	1,108

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Second Quarter Form 10-Q

CONSOLIDATED BALANCE SHEETS

	June 30		December 31
	2022		2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,044	$	2,944
Marketable securities	83		75
Accounts receivable, less allowance of $144 ($167 in 2021)	3,145		3,022
Inventories:
Materials and supplies	790		691
Work in process	315		264
Finished goods	2,644		2,359
Total inventories	$	3,749	$	3,314
Prepaid expenses and other current assets	804		662
Total current assets	$	8,825	$	10,017
Property, plant and equipment:
Land, buildings and improvements	1,662		1,656
Machinery and equipment	3,887		3,842
Total property, plant and equipment	$	5,549	$	5,498
Less accumulated depreciation	2,746		2,665
Property, plant and equipment, net	$	2,803	$	2,833
Goodwill	15,115		12,918
Other intangibles, net	5,245		4,840
Noncurrent deferred income tax assets	1,625		1,760
Other noncurrent assets	2,419		2,263
Total assets	$	36,032	$	34,631
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	1,160	$	1,129
Accrued compensation	779		1,092
Income taxes	300		192
Dividends payable	263		263
Accrued product liabilities	400		401
Accrued expenses and other liabilities	1,495		1,465
Current maturities of debt	7		7
Total current liabilities	$	4,404	$	4,549
Long-term debt, excluding current maturities	13,374		12,472
Income taxes	787		913
Other noncurrent liabilities	1,793		1,820
Total liabilities	$	20,358	$	19,754
Shareholders' equity
Common stock, $0.10 par value	38		38
Additional paid-in capital	1,989		1,890
Retained earnings	13,933		13,480
Accumulated other comprehensive loss	(286)		(531)
Total shareholders' equity	$	15,674	$	14,877
Total liabilities and shareholders' equity	$	36,032	$	34,631

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

	Three Months				Six Months
	2022		2021		2022		2021
Common stock shares outstanding (in millions)
Beginning	378.2		376.7		377.5		376.1
Issuance of common stock under stock compensation and benefit plans	0.1		0.4		0.8		1.0
Ending	378.3		377.1		378.3		377.1
Common stock
Beginning	$	38	$	38	$	38	$	38
Issuance of common stock under stock compensation and benefit plans	—		—		—		—
Ending	$	38	$	38	$	38	$	38
Additional paid-in capital
Beginning	$	1,947	$	1,806	$	1,890	$	1,741
Issuance of common stock under stock compensation and benefit plans	6		(1)		(8)		(4)
Share-based compensation	36		39		107		107
Ending	$	1,989	$	1,844	$	1,989	$	1,844
Retained earnings
Beginning	$	13,540	$	12,525	$	13,480	$	12,462
Net earnings	656		592		979		894
Cash dividends declared	(263)		(236)		(526)		(475)
Ending	$	13,933	$	12,881	$	13,933	$	12,881
Accumulated other comprehensive income (loss)
Beginning	$	(479)	$	(867)	$	(531)	$	(1,157)
Other comprehensive income (loss)	193		(76)		245		214
Ending	$	(286)	$	(943)	$	(286)	$	(943)
Total shareholders' equity	$	15,674	$	13,820	$	15,674	$	13,820

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months
	2022		2021
Operating activities
Net earnings	$	979	$	894
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	185		187
Amortization of intangible assets	310		330
Asset impairments	—		3
Share-based compensation	107		107
Recall charges	18		82
Sale of inventory stepped-up to fair value at acquisition	12		137
Changes in operating assets and liabilities:
Accounts receivable	(159)		(24)
Inventories	(523)		(128)
Accounts payable	34		57
Accrued expenses and other liabilities	(257)		22
Recall-related payments	(19)		(163)
Income taxes	(132)		(98)
Other, net	177		(76)
Net cash provided by operating activities	$	732	$	1,330
Investing activities
Acquisitions, net of cash acquired	(2,563)		(104)
Purchases of marketable securities	(38)		(31)
Proceeds from sales of marketable securities	29		28
Purchases of property, plant and equipment	(262)		(189)
Other investing, net	—		(2)
Net cash used in investing activities	$	(2,834)	$	(298)
Financing activities
Proceeds (payments) on short-term borrowings, net	(376)		(7)
Proceeds from issuance of long-term debt	1,500		5
Payments on long-term debt	(252)		(1,151)
Payments of dividends	(525)		(475)
Cash paid for taxes from withheld shares	(84)		(74)
Other financing, net	(23)		(27)
Net cash provided by (used in) financing activities	$	240	$	(1,729)
Effect of exchange rate changes on cash and cash equivalents	(38)		(5)
Change in cash and cash equivalents	$	(1,900)	$	(702)
Cash and cash equivalents at beginning of period	2,944		2,943
Cash and cash equivalents at end of period	$	1,044	$	2,241

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 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, 2022 and the results of operations for the three and six months 2022. 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 2021.

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.

New Accounting Pronouncements Recently Adopted

On January 1, 2022 we adopted ASU 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This update requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers. The adoption of this update did not 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 2021.

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
	2022		2021		2022		2021
MedSurg and Neurotechnology:
Instruments	$	563	$	517	$	1,091	$	986
Endoscopy	600		518		1,138		987
Medical	666		640		1,330		1,262
Neurovascular	306		301		607		590
Neuro Cranial	337		310		660		591
Other	77		73		146		134
	$	2,549	$	2,359	$	4,972	$	4,550
Orthopaedics and Spine:
Knees	$	500	$	474	$	964	$	886
Hips	364		353		691		662
Trauma and Extremities	676		674		1,361		1,314
Spine	290		307		569		585
Other	114		127		211		250
	$	1,944	$	1,935	$	3,796	$	3,697
Total	$	4,493	$	4,294	$	8,768	$	8,247

Net Sales by Geography
	Three Months 2022				Three Months 2021
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	451	$	112	$	401	$	116
Endoscopy	473		127		407		111
Medical	536		130		488		152
Neurovascular	113		193		115		186
Neuro Cranial	281		56		256		54
Other	75		2		72		1
	$	1,929	$	620	$	1,739	$	620
Orthopaedics and Spine:
Knees	$	368	$	132	$	349	$	125
Hips	230		134		221		132
Trauma and Extremities	489		187		475		199
Spine	209		81		217		90
Other	86		28		99		28
	$	1,382	$	562	$	1,361	$	574
Total	$	3,311	$	1,182	$	3,100	$	1,194

Net Sales by Geography
	Six Months 2022				Six Months 2021
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	865	$	226	$	756	$	230
Endoscopy	891		247		761		226
Medical	1,061		269		961		301
Neurovascular	223		384		226		364
Neuro Cranial	545		115		480		111
Other	143		3		132		2
	$	3,728	$	1,244	$	3,316	$	1,234
Orthopaedics and Spine:
Knees	$	713	$	251	$	643	$	243
Hips	432		259		407		255
Trauma and Extremities	976		385		915		399
Spine	409		160		410		175
Other	158		53		193		57
	$	2,688	$	1,108	$	2,568	$	1,129
Total	$	6,416	$	2,352	$	5,884	$	2,363

Contract Assets and Liabilities

On June 30, 2022 and December 31, 2021 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 $640 and $529 on June 30, 2022 and December 31, 2021.

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

STRYKER CORPORATION 2022 Second Quarter Form 10-Q

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

Three Months 2022	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(1)	$	(156)	$	41	$	(363)	$	(479)
OCI	—		8		32		268		308
Income taxes	—		(2)		(4)		(98)		(104)
Reclassifications to:
Cost of sales	—		—		(3)		—		(3)
Other (income) expense	—		2		(1)		(11)		(10)
Income taxes	—		—		—		2		2
Net OCI	$	—	$	8	$	24	$	161	$	193
Ending	$	(1)	$	(148)	$	65	$	(202)	$	(286)

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)

Six Months 2022	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	—	$	(155)	$	40	$	(416)	$	(531)
OCI	(1)		4		36		354		393
Income taxes	—		—		(6)		(123)		(129)
Reclassifications to:
Cost of sales	—		—		(3)		—		(3)
Other (income) expense	—		4		(2)		(22)		(20)
Income taxes	—		(1)		—		5		4
Net OCI	$	(1)	$	7	$	25	$	214	$	245
Ending	$	(1)	$	(148)	$	65	$	(202)	$	(286)

Six Months 2021	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(3)	$	(259)	$	(10)	$	(885)	$	(1,157)