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 September 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 378,429,929 shares of Common Stock, $0.10 par value, on September 30, 2022.

STRYKER CORPORATION 2022 Third Quarter Form 10-Q

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Stryker Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)

	Three Months				Nine Months
	2022		2021		2022		2021
Net sales	$	4,479	$	4,160	$	13,247	$	12,407
Cost of sales	1,697		1,518		4,905		4,484
Gross profit	$	2,782	$	2,642	$	8,342	$	7,923
Research, development and engineering expenses	364		306		1,128		904
Selling, general and administrative expenses	1,455		1,602		4,704		4,682
Recall charges	(4)		16		14		98
Amortization of intangible assets	159		144		469		474
Total operating expenses	$	1,974	$	2,068	$	6,315	$	6,158
Operating income	$	808	$	574	$	2,027	$	1,765
Other income (expense), net	8		(79)		(105)		(241)
Earnings before income taxes	$	816	$	495	$	1,922	$	1,524
Income taxes	—		57		127		192
Net earnings	$	816	$	438	$	1,795	$	1,332
Net earnings per share of common stock:
Basic	$	2.16	$	1.17	$	4.75	$	3.54
Diluted	$	2.14	$	1.14	$	4.70	$	3.48
Weighted-average shares outstanding (in millions):
Basic	378.4		377.1		378.1		376.8
Effect of dilutive employee stock compensation	3.4		5.6		4.1		5.5
Diluted	381.8		382.7		382.2		382.3
Cash dividends declared per share of common stock	$	0.695	$	0.63	$	2.085	$	1.89

Anti-dilutive shares excluded from the calculation of dilutive employee stock options were 5.0 for the three months 2022 and 4.2 for the nine months 2022 and de minimis in all other periods.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months				Nine Months
	2022		2021		2022		2021
Net earnings	$	816	$	438	$	1,795	$	1,332
Other comprehensive income (loss), net of tax:
Marketable securities	—		3		(1)		3
Pension plans	10		5		17		8
Unrealized gains (losses) on designated hedges	8		7		33		43
Financial statement translation	179		112		393		287
Total other comprehensive income (loss), net of tax	$	197	$	127	$	442	$	341
Comprehensive income	$	1,013	$	565	$	2,237	$	1,673

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Third Quarter Form 10-Q

CONSOLIDATED BALANCE SHEETS

	September 30		December 31
	2022		2021
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,420	$	2,944
Marketable securities	77		75
Accounts receivable, less allowance of $150 ($167 in 2021)	3,103		3,022
Inventories:
Materials and supplies	852		691
Work in process	309		264
Finished goods	2,722		2,359
Total inventories	$	3,883	$	3,314
Prepaid expenses and other current assets	835		662
Total current assets	$	9,318	$	10,017
Property, plant and equipment:
Land, buildings and improvements	1,665		1,656
Machinery and equipment	3,869		3,842
Total property, plant and equipment	$	5,534	$	5,498
Less accumulated depreciation	2,736		2,665
Property, plant and equipment, net	$	2,798	$	2,833
Goodwill	14,993		12,918
Other intangibles, net	5,053		4,840
Noncurrent deferred income tax assets	1,390		1,760
Other noncurrent assets	2,431		2,263
Total assets	$	35,983	$	34,631
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	1,213	$	1,129
Accrued compensation	927		1,092
Income taxes	243		192
Dividends payable	263		263
Accrued product liabilities	391		401
Accrued expenses and other liabilities	1,526		1,465
Current maturities of debt	8		7
Total current liabilities	$	4,571	$	4,549
Long-term debt, excluding current maturities	12,751		12,472
Income taxes	621		913
Other noncurrent liabilities	1,577		1,820
Total liabilities	$	19,520	$	19,754
Shareholders' equity
Common stock, $0.10 par value	38		38
Additional paid-in capital	2,028		1,890
Retained earnings	14,486		13,480
Accumulated other comprehensive loss	(89)		(531)
Total shareholders' equity	$	16,463	$	14,877
Total liabilities and shareholders' equity	$	35,983	$	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 Third Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

	Three Months				Nine Months
	2022		2021		2022		2021
Common stock shares outstanding (in millions)
Beginning	378.3		377.1		377.5		376.1
Issuance of common stock under stock compensation and benefit plans	0.1		0.1		0.9		1.1
Ending	378.4		377.2		378.4		377.2
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	$	1,989	$	1,844	$	1,890	$	1,741
Issuance of common stock under stock compensation and benefit plans	6		(3)		(2)		(7)
Share-based compensation	33		34		140		141
Ending	$	2,028	$	1,875	$	2,028	$	1,875
Retained earnings
Beginning	$	13,933	$	12,881	$	13,480	$	12,462
Net earnings	816		438		1,795		1,332
Cash dividends declared	(263)		(238)		(789)		(713)
Ending	$	14,486	$	13,081	$	14,486	$	13,081
Accumulated other comprehensive income (loss)
Beginning	$	(286)	$	(943)	$	(531)	$	(1,157)
Other comprehensive income (loss)	197		127		442		341
Ending	$	(89)	$	(816)	$	(89)	$	(816)
Total shareholders' equity	$	16,463	$	14,178	$	16,463	$	14,178

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Third Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months
	2022		2021
Operating activities
Net earnings	$	1,795	$	1,332
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	276		278
Amortization of intangible assets	469		474
Asset impairments	18		119
Share-based compensation	140		141
Recall charges	14		98
Sale of inventory stepped-up to fair value at acquisition	12		231
Changes in operating assets and liabilities:
Accounts receivable	(186)		(145)
Inventories	(754)		(231)
Accounts payable	111		134
Accrued expenses and other liabilities	5		184
Recall-related payments	(26)		(180)
Income taxes	(262)		(193)
Other, net	9		21
Net cash provided by operating activities	$	1,621	$	2,263
Investing activities
Acquisitions, net of cash acquired	(2,563)		(226)
Purchases of marketable securities	(43)		(38)
Proceeds from sales of marketable securities	40		43
Purchases of property, plant and equipment	(400)		(319)
Proceeds from settlement of net investment hedges	197		—
Other investing, net	7		(5)
Net cash used in investing activities	$	(2,762)	$	(545)
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	(502)		(1,151)
Payments of dividends	(788)		(713)
Cash paid for taxes from withheld shares	(89)		(88)
Other financing, net	(48)		(137)
Net cash provided by (used in) financing activities	$	(303)	$	(2,077)
Effect of exchange rate changes on cash and cash equivalents	(80)		(21)
Change in cash and cash equivalents	$	(1,524)	$	(380)
Cash and cash equivalents at beginning of period	2,944		2,943
Cash and cash equivalents at end of period	$	1,420	$	2,563

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2022 Third 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 September 30, 2022 and the results of operations for the three and nine 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.

In September 2022 the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs: Disclosure of Supplier Finance Program Obligations, which requires entities that utilize supplier finance programs in connection with the purchase of goods and services to disclose information about the key terms of the programs, a rollforward of the obligations under the programs and where those obligations are presented in the balance sheet. The new disclosure requirements are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating these new expanded disclosure requirements.

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				Nine Months
	2022		2021		2022		2021
MedSurg and Neurotechnology:
Instruments	$	535	$	525	$	1,626	$	1,511
Endoscopy	590		525		1,728		1,512
Medical	765		636		2,095		1,898
Neurovascular	294		295		901		885
Neuro Cranial	332		299		992		890
Other	72		69		218		203
	$	2,588	$	2,349	$	7,560	$	6,899
Orthopaedics and Spine:
Knees	$	481	$	439	$	1,445	$	1,325
Hips	347		328		1,038		990
Trauma and Extremities	672		639		2,033		1,953
Spine	280		282		849		867
Other	111		123		322		373
	$	1,891	$	1,811	$	5,687	$	5,508
Total	$	4,479	$	4,160	$	13,247	$	12,407

Net Sales by Geography
	Three Months 2022				Three Months 2021
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	425	$	110	$	415	$	110
Endoscopy	480		110		418		107
Medical	625		140		496		140
Neurovascular	110		184		113		182
Neuro Cranial	274		58		244		55
Other	71		1		68		1
	$	1,985	$	603	$	1,754	$	595
Orthopaedics and Spine:
Knees	$	365	$	116	$	321	$	118
Hips	225		122		199		129
Trauma and Extremities	494		178		447		192
Spine	206		74		201		81
Other	85		26		97		26
	$	1,375	$	516	$	1,265	$	546
Total	$	3,360	$	1,119	$	3,019	$	1,141

Net Sales by Geography
	Nine Months 2022				Nine Months 2021
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	1,290	$	336	$	1,171	$	340
Endoscopy	1,371		357		1,179		333
Medical	1,686		409		1,457		441
Neurovascular	333		568		339		546
Neuro Cranial	819		173		724		166
Other	214		4		200		3
	$	5,713	$	1,847	$	5,070	$	1,829
Orthopaedics and Spine:
Knees	$	1,078	$	367	$	964	$	361
Hips	657		381		606		384
Trauma and Extremities	1,470		563		1,362		591
Spine	615		234		611		256
Other	243		79		290		83
	$	4,063	$	1,624	$	3,833	$	1,675
Total	$	9,776	$	3,471	$	8,903	$	3,504

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

STRYKER CORPORATION 2022 Third Quarter Form 10-Q

Contract Assets and Liabilities

On September 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 $661 and $529 on September 30, 2022 and December 31, 2021.

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

Three Months 2022	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(1)	$	(148)	$	65	$	(202)	$	(286)
OCI	—		11		19		304		334
Income taxes	—		(3)		(1)		(119)		(123)
Reclassifications to:
Cost of sales	—		—		(7)		—		(7)
Other (income) expense, net	—		3		(2)		(8)		(7)
Income taxes	—		(1)		(1)		2		—
Net OCI	$	—	$	10	$	8	$	179	$	197
Ending	$	(1)	$	(138)	$	73	$	(23)	$	(89)

Three Months 2021	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(3)	$	(256)	$	26	$	(710)	$	(943)
OCI	4		2		6		71		83
Income taxes	—		—		(2)		47		45
Reclassifications to:
Cost of sales	—		—		4		—		4
Other (income) expense, net	—		4		(2)		(8)		(6)
Income taxes	(1)		(1)		1		2		1
Net OCI	$	3	$	5	$	7	$	112	$	127
Ending	$	—	$	(251)	$	33	$	(598)	$	(816)

Nine Months 2022	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	—	$	(155)	$	40	$	(416)	$	(531)
OCI	(1)		15		55		658		727
Income taxes	—		(3)		(7)		(242)		(252)
Reclassifications to:
Cost of sales	—		—		(10)		—		(10)
Other (income) expense, net	—		7		(4)		(30)		(27)
Income taxes	—		(2)		(1)		7		4
Net OCI	$	(1)	$	17	$	33	$	393	$	442
Ending	$	(1)	$	(138)	$	73	$	(23)	$	(89)