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, 2023

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 379,778,279 shares of Common Stock, $0.10 par value, on June 30, 2023.

STRYKER CORPORATION 2023 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
	2023		2022		2023		2022
Net sales	$	4,996	$	4,493	$	9,774	$	8,768
Cost of sales	1,815		1,667		3,577		3,208
Gross profit	$	3,181	$	2,826	$	6,197	$	5,560
Research, development and engineering expenses	346		351		685		764
Selling, general and administrative expenses	1,706		1,539		3,487		3,249
Recall charges, net	3		4		3		18
Amortization of intangible assets	161		160		322		310
Total operating expenses	$	2,216	$	2,054	$	4,497	$	4,341
Operating income	$	965	$	772	$	1,700	$	1,219
Other income (expense), net	(66)		(52)		(122)		(113)
Earnings before income taxes	$	899	$	720	$	1,578	$	1,106
Income taxes	161		64		248		127
Net earnings	$	738	$	656	$	1,330	$	979
Net earnings per share of common stock:
Basic	$	1.95	$	1.73	$	3.51	$	2.59
Diluted	$	1.93	$	1.72	$	3.47	$	2.56
Weighted-average shares outstanding (in millions):
Basic	379.7		378.3		379.4		378.0
Effect of dilutive employee stock compensation	4.2		3.9		4.2		4.5
Diluted	383.9		382.2		383.6		382.5
Cash dividends declared per share of common stock	$	0.75	$	0.695	$	1.50	$	1.39

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
	2023		2022		2023		2022
Net earnings	$	738	$	656	$	1,330	$	979
Other comprehensive income (loss), net of tax:
Marketable securities	—		—		—		(1)
Pension plans	(1)		8		(3)		7
Unrealized gains (losses) on designated hedges	11		24		2		25
Financial statement translation	(35)		161		(108)		214
Total other comprehensive income (loss), net of tax	$	(25)	$	193	$	(109)	$	245
Comprehensive income	$	713	$	849	$	1,221	$	1,224

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

CONSOLIDATED BALANCE SHEETS

	June 30		December 31
	2023		2022
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	1,401	$	1,844
Marketable securities	77		84
Accounts receivable, less allowance of $181 ($154 in 2022)	3,261		3,565
Inventories:
Materials and supplies	1,221		1,006
Work in process	391		348
Finished goods	2,981		2,641
Total inventories	$	4,593	$	3,995
Prepaid expenses and other current assets	819		787
Total current assets	$	10,151	$	10,275
Property, plant and equipment:
Land, buildings and improvements	1,646		1,739
Machinery and equipment	4,441		4,066
Total property, plant and equipment	$	6,087	$	5,805
Less allowance for depreciation	3,005		2,835
Property, plant and equipment, net	$	3,082	$	2,970
Goodwill	15,172		14,880
Other intangibles, net	4,917		4,885
Noncurrent deferred income tax assets	1,439		1,410
Other noncurrent assets	2,648		2,464
Total assets	$	37,409	$	36,884
Liabilities and shareholders' equity
Current liabilities
Accounts payable	$	1,326	$	1,413
Accrued compensation	929		1,149
Income taxes	298		292
Dividends payable	284		284
Accrued product liabilities	220		230
Accrued expenses and other liabilities	1,729		1,744
Current maturities of debt	1,798		1,191
Total current liabilities	$	6,584	$	6,303
Long-term debt, excluding current maturities	11,149		11,857
Income taxes	469		641
Other noncurrent liabilities	1,846		1,467
Total liabilities	$	20,048	$	20,268
Shareholders' equity
Common stock, $0.10 par value	38		38
Additional paid-in capital	2,127		2,034
Retained earnings	15,526		14,765
Accumulated other comprehensive loss	(330)		(221)
Total shareholders' equity	$	17,361	$	16,616
Total liabilities and shareholders' equity	$	37,409	$	36,884

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

	Three Months				Six Months
	2023		2022		2023		2022
Common stock shares outstanding (in millions)
Beginning	379.6		378.2		378.7		377.5
Issuance of common stock under stock compensation and benefit plans	0.2		0.1		1.1		0.8
Ending	379.8		378.3		379.8		378.3
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	$	2,090	$	1,947	$	2,034	$	1,890
Issuance of common stock under stock compensation and benefit plans	(2)		6		(20)		(8)
Share-based compensation	39		36		113		107
Ending	$	2,127	$	1,989	$	2,127	$	1,989
Retained earnings
Beginning	$	15,072	$	13,540	$	14,765	$	13,480
Net earnings	738		656		1,330		979
Cash dividends declared	(284)		(263)		(569)		(526)
Ending	$	15,526	$	13,933	$	15,526	$	13,933
Accumulated other comprehensive income (loss)
Beginning	$	(305)	$	(479)	$	(221)	$	(531)
Other comprehensive income (loss)	(25)		193		(109)		245
Ending	$	(330)	$	(286)	$	(330)	$	(286)
Total shareholders' equity	$	17,361	$	15,674	$	17,361	$	15,674

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months
	2023		2022
Operating activities
Net earnings	$	1,330	$	979
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	194		185
Amortization of intangible assets	322		310
Asset impairments	3		—
Share-based compensation	113		107
Recall charges, net	3		18
Sale of inventory stepped-up to fair value at acquisition	—		12
Changes in operating assets and liabilities:
Accounts receivable	308		(159)
Inventories	(589)		(523)
Accounts payable	(97)		34
Accrued expenses and other liabilities	(159)		(257)
Recall-related payments	(23)		(19)
Income taxes	(169)		(132)
Other, net	(103)		177
Net cash provided by operating activities	$	1,133	$	732
Investing activities
Acquisitions, net of cash acquired	(390)		(2,563)
Purchases of marketable securities	(35)		(38)
Proceeds from sales of marketable securities	42		29
Purchases of property, plant and equipment	(282)		(262)
Net cash used in investing activities	$	(665)	$	(2,834)
Financing activities
Proceeds (payments) on short-term borrowings, net	(4)		(376)
Proceeds from issuance of long-term debt	—		1,500
Payments on long-term debt	(201)		(252)
Payments of dividends	(569)		(525)
Cash paid for taxes from withheld shares	(111)		(84)
Other financing, net	(1)		(23)
Net cash provided by (used in) financing activities	$	(886)	$	240
Effect of exchange rate changes on cash and cash equivalents	(25)		(38)
Change in cash and cash equivalents	$	(443)	$	(1,900)
Cash and cash equivalents at beginning of period	1,844		2,944
Cash and cash equivalents at end of period	$	1,401	$	1,044

See accompanying notes to Consolidated Financial Statements.

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

STRYKER CORPORATION 2023 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, 2023 and the results of operations for the three and six months 2023. 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 2022. Certain immaterial reclassifications have been made to prior year's segment operating income to conform with current year presentation in our Consolidated Financial Statements.

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 2022.

We disaggregate our net sales by business 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.

Beginning in the first quarter 2023 we consolidated Other MedSurg and Neurotechnology into Endoscopy as Other MedSurg and Neurotechnology (primarily Sustainability Solutions) has been fully integrated into our Endoscopy business. Endoscopy includes sales related to Other of $87 and $77 for the three months 2023 and 2022 and $168 and $146 for the six months 2023 and 2022. We have reflected these changes in all historical periods presented.

Net Sales by Business
	Three Months				Six Months
	2023		2022		2023		2022
MedSurg and Neurotechnology:
Instruments	$	630	$	563	$	1,205	$	1,091
Endoscopy	705		677		1,403		1,284
Medical	841		666		1,619		1,330
Neurovascular	311		306		595		607
Neuro Cranial	373		337		728		660
	$	2,860	$	2,549	$	5,550	$	4,972
Orthopaedics and Spine:
Knees	$	562	$	500	$	1,128	$	964
Hips	393		364		768		691
Trauma and Extremities	766		676		1,535		1,361
Spine	296		290		580		569
Other	119		114		213		211
	$	2,136	$	1,944	$	4,224	$	3,796
Total	$	4,996	$	4,493	$	9,774	$	8,768

Net Sales by Geography
	Three Months 2023				Three Months 2022
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	512	$	118	$	451	$	112
Endoscopy	568		137		548		129
Medical	682		159		536		130
Neurovascular	123		188		113		193
Neuro Cranial	306		67		281		56
	$	2,191	$	669	$	1,929	$	620
Orthopaedics and Spine:
Knees	$	406	$	156	$	368	$	132
Hips	249		144		230		134
Trauma and Extremities	559		207		489		187
Spine	221		75		209		81
Other	85		34		86		28
	$	1,520	$	616	$	1,382	$	562
Total	$	3,711	$	1,285	$	3,311	$	1,182

Net Sales by Geography
	Six Months 2023				Six Months 2022
	United States		International		United States		International
MedSurg and Neurotechnology:
Instruments	$	962	$	243	$	865	$	226
Endoscopy	1,132		271		1,034		250
Medical	1,294		325		1,061		269
Neurovascular	241		354		223		384
Neuro Cranial	595		133		545		115
	$	4,224	$	1,326	$	3,728	$	1,244
Orthopaedics and Spine:
Knees	$	822	$	306	$	713	$	251
Hips	485		283		432		259
Trauma and Extremities	1,113		422		976		385
Spine	433		147		409		160
Other	146		67		158		53
	$	2,999	$	1,225	$	2,688	$	1,108
Total	$	7,223	$	2,551	$	6,416	$	2,352

Contract Assets and Liabilities

On June 30, 2023 and December 31, 2022 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. This occurs primarily when payment is received upfront for certain multi-period extended service contracts. Our contract liabilities of $784 and $741 on June 30, 2023 and December 31, 2022 are classified within accrued expenses and other liabilities and other noncurrent liabilities within our Consolidated Balance Sheets based on the timing of when we expect to complete our performance obligations.

Changes in contract liabilities during the six months 2023 were as follows:

	June 2023
Beginning contract liabilities	$	741
Revenue recognized from beginning of year contract liabilities	(230)
Net advance consideration received during the period	273
Ending contract liabilities	$	784

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

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

Three Months 2023	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(1)	$	29	$	43	$	(376)	$	(305)
OCI	(1)		1		24		(24)		—
Income taxes	—		(2)		(5)		(4)		(11)
Reclassifications to:
Cost of sales	—		—		(9)		—		(9)
Other (income) expense, net	1		(1)		(1)		(9)		(10)
Income taxes	—		1		2		2		5
Net OCI	—		(1)		11		(35)		(25)
Ending	$	(1)	$	28	$	54	$	(411)	$	(330)

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, net	—		2		(1)		(11)		(10)
Income taxes	—		—		—		2		2
Net OCI	—		8		24		161		193
Ending	$	(1)	$	(148)	$	65	$	(202)	$	(286)

Six Months 2023	Marketable Securities		Pension Plans		Hedges		Financial Statement Translation		Total
Beginning	$	(1)	$	31	$	52	$	(303)	$	(221)
OCI	(1)		3		27		(123)		(94)
Income taxes	—		(5)		(6)		28		17
Reclassifications to:
Cost of sales	—		—		(22)		—		(22)
Other (income) expense, net	1		(2)		(2)		(17)		(20)
Income taxes	—		1		5		4		10
Net OCI	—		(3)		2		(108)		(109)
Ending	$	(1)	$	28	$	54	$	(411)	$	(330)

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, net	—		4		(2)		(22)		(20)
Income taxes	—		(1)		—		5		4
Net OCI	(1)		7		25		214		245
Ending	$	(1)	$	(148)	$	65	$	(202)	$	(286)

NOTE 4 - DERIVATIVE INSTRUMENTS

We use operational and economic hedges, foreign currency exchange forward contracts, net investment hedges (both derivative and non-derivative financial instruments) and interest rate derivative instruments to manage the impact of currency exchange and interest rate fluctuations on earnings, cash flow and equity. We do not enter into derivative instruments for speculative purposes. We are exposed to potential credit loss in the event of nonperformance by counterparties on our outstanding derivative instruments but do not anticipate nonperformance by any of our counterparties. Should a

counterparty default, our maximum loss exposure is the asset balance of the instrument. We have not changed our hedging strategies, accounting practices or objectives from those disclosed in our Annual Report on Form 10-K for 2022.

Foreign Currency Hedges

June 2023	Cash Flow		Net Investment		Non-Designated		Total
Gross notional amount	$	809	$	1,630	$	3,885	$	6,324
Maximum term in years							3.4
Fair value:
Other current assets	$	30	$	—	$	24	$	54
Other noncurrent assets	2		79		—		81
Other current liabilities	(6)		—		(15)		(21)
Other noncurrent liabilities	—		(27)		—		(27)
Total fair value	$	26	$	52	$	9	$	87

December 2022	Cash Flow		Net Investment		Non-Designated		Total
Gross notional amount	$	1,053	$	1,598	$	3,417	$	6,068
Maximum term in years							3.9
Fair value:
Other current assets	$	20	$	—	$	9	$	29
Other noncurrent assets	1		89		—		90
Other current liabilities	(6)		—		(79)		(85)
Other noncurrent liabilities	(1)		(16)		—		(17)
Total fair value	$	14	$	73	$	(70)	$	17

We had €1.5 billion at June 30, 2023 and December 31, 2022 in certain forward currency contracts designated as net investment hedges to hedge a portion of our investments in certain of our entities with functional currencies denominated in Euros. In addition to these derivative financial instruments designated as net investment hedges, we had €4.4 billion at June 30, 2023 and December 31, 2022 of senior unsecured notes designated as net investment hedges to selectively hedge portions of our investment in certain international subsidiaries. The currency effects of our Euro-denominated senior unsecured notes are reflected in AOCI within shareholders' equity where they offset gains and losses recorded on our net investment in international subsidiaries.

The total after-tax gain (loss) recognized in OCI related to designated net investment hedges was ($101) in the six months 2023.

Net Currency Exchange Rate Gains (Losses)

Derivative		Three Months				Six Months
instrument:	Recorded in:	2023		2022		2023		2022
Cash Flow	Cost of sales	$	9	$	3	$	22	$	3
Net Investment	Other income (expense), net	9		11		17		22
Non-Designated	Other income (expense), net	5		2		9		3
	Total	$	23	$	16	$	48	$	28

Pretax gains (losses) on derivatives designated as cash flow hedges of $30 and net investment hedges of $34 recorded in AOCI are expected to be reclassified to cost of sales and other income (expense), net in earnings within 12 months of June 30, 2023. This cash flow hedge reclassification is primarily due to the sale of inventory that includes previously hedged purchases. A component of the AOCI amounts related to net investment hedges is reclassified over the life of the hedge instruments as we elected to exclude the initial value of the component related to the spot-forward difference from the effectiveness assessment.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

Interest Rate Hedges

Pretax gains of $5 recorded in AOCI related to other interest rate hedges closed in conjunction with debt issuances are expected to be reclassified to other income (expense), net in earnings within 12 months of June 30, 2023. The cash flow effect of interest rate hedges is recorded in cash flow from operations.

NOTE 5 - FAIR VALUE MEASUREMENTS

Our policies for managing risk related to foreign currency, interest rates, credit and markets and our process for determining fair value have not changed from those described in our Annual Report on Form 10-K for 2022.

In the third quarter 2022 we determined that certain commercial and regulatory milestones related to technology acquired in the purchase of Mobius Imaging and Cardan Robotics were no longer probable of being achieved and recorded a $110 reduction in the fair value of contingent consideration reflected in selling, general and administrative expenses.

In the second quarter 2023 we recorded $192 of contingent consideration related to the acquisition of Cerus Endovascular Limited (Cerus) described in Note 7.

There were no significant transfers into or out of any level of the fair value hierarchy in 2023.

Assets Measured at Fair Value	June		December
	2023		2022
Cash and cash equivalents	$	1,401	$	1,844
Trading marketable securities	192		166
Level 1 - Assets	$	1,593	$	2,010
Available-for-sale marketable securities:
Corporate and asset-backed debt securities	$	36	$	42
Foreign government debt securities	—		1
United States agency debt securities	5		3
United States treasury debt securities	35		36
Certificates of deposit	1		2
Total available-for-sale marketable securities	$	77	$	84
Foreign currency exchange forward contracts	135		119
Level 2 - Assets	$	212	$	203
Total assets measured at fair value	$	1,805	$	2,213

Liabilities Measured at Fair Value	June		December
	2023		2022
Deferred compensation arrangements	$	192	$	166
Level 1 - Liabilities	$	192	$	166
Foreign currency exchange forward contracts	$	48	$	102
Level 2 - Liabilities	$	48	$	102
Contingent consideration:
Beginning	$	121	$	306
Additions	192		1
Change in estimate and foreign exchange	(3)		(137)
Settlements	(1)		(49)
Ending	$	309	$	121
Level 3 - Liabilities	$	309	$	121
Total liabilities measured at fair value	$	549	$	389

Fair Value of Available for Sale Securities by Maturity
	June		December
	2023		2022
Due in one year or less	$	42	$	53
Due after one year through three years	$	35	$	31

On June 30, 2023 and December 31, 2022 the aggregate difference between the cost and fair value of available-for-sale marketable securities was nominal. Interest on cash and cash equivalents, short-term investments and marketable securities income was $11 and $20 in the three months and $25 and $35 in the six months 2023 and 2022, which was recorded in other income (expense), net.

Our investments in available-for-sale marketable securities had a minimum credit quality rating of A2 (Moody's), A (Standard & Poor's) and A (Fitch). We do not plan to sell the investments, and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.

NOTE 6 - CONTINGENCIES AND COMMITMENTS

We are involved in various ongoing proceedings, legal actions and claims arising in the normal course of business, including proceedings related to product, labor, intellectual property and other matters, the most significant of which are more fully described below. The outcomes of these matters will generally not be known for prolonged periods of time. In certain of the legal proceedings the claimants seek damages as well as other compensatory and equitable relief that could result in the payment of significant claims and settlements and/or the imposition of injunctions or other equitable relief. For legal matters for which management had sufficient information to reasonably estimate our future obligations, a liability representing management's best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within the range is not known, is recorded. The estimates are based on consultation with legal counsel, previous settlement experience and settlement strategies. If actual outcomes are less favorable than those estimated by management, additional expense may be incurred, which could unfavorably affect future operating results. We are self-insured for certain claims and expenses. The ultimate cost to us with respect to product liability claims could be materially different than the amount of the current estimates and accruals and could have a material adverse effect on our financial position, results of operations and cash flows.

In April 2022 the United States District Court for the District of Delaware issued a judgment following a jury verdict in favor of PureWick Corporation (PureWick) for its 2019 complaint seeking patent infringement damages related to our PrimaFit and PrimoFit products. Following a jury trial, the court awarded damages related to this complaint and we recorded charges of $28 in March 2022. Stryker plans to appeal the results of the trial. If ultimately successful, PureWick may seek to recover its legal fees. In June 2022 PureWick filed a motion to enhance the damages awarded, which the court denied in March 2023. In 2022 PureWick also filed a separate complaint seeking additional patent infringement damages related to our current PrimaFit products. A trial for this matter is currently set for December 2023.

We are currently investigating whether certain business activities in certain foreign countries violated provisions of the Foreign Corrupt Practices Act (FCPA) and have engaged outside counsel to conduct these investigations. We have been contacted by the United States Securities and Exchange Commission, United States Department of Justice and certain other regulatory authorities and are cooperating with these agencies. At this time we are unable to predict the outcome of the investigations or the potential impact, if any, on our financial statements.

Recall Matters

We have conducted voluntary recalls of certain products, including our Rejuvenate and ABG II Modular-Neck hip stems and certain lot-specific sizes and offsets of LFIT Anatomic CoCr V40 Femoral Heads. Additionally, we are responsible for certain product liability claims, primarily related to certain hip products sold by Wright Medical Group N.V. (Wright) prior to its 2014 divestiture of the OrthoRecon business.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

We have incurred, and expect to incur in the future, costs associated with the defense and settlement of claims and lawsuits related to our recalls. Based on the information that has been received, we have recorded reserves of $194, representing our best estimate of probable loss related to recall matters globally. The final outcomes of these matters are dependent on many factors that are difficult to predict. Accordingly the ultimate cost related to these matters may be materially different than the amount of our current estimate and accruals and could have a material adverse effect on our results of operations and cash flows.

Leases	June			December
	2023			2022
Right-of-use assets	$	481		$	473
Lease liabilities, current	$	125		$	121
Lease liabilities, non-current	$	363		$	357
Other information:
Weighted-average remaining lease term (years)	5.7			5.5
Weighted-average discount rate	3.60		%	3.22		%

	Three Months				Six Months
	2023		2022		2023		2022
Operating lease cost	$	41	$	38	$	79	$	73

NOTE 7 - ACQUISITIONS

We acquire stock in companies and various assets that continue to support our capital deployment and product development strategies. In the six months 2023 and 2022 cash paid for acquisitions, net of cash acquired was $390 and $2,563.

On May 2, 2023 we acquired Cerus for net cash consideration of $289 and up to $225 in future milestone payments that had a fair value of $192 at the acquisition date. Cerus designs, develops and manufactures neurovascular products used for the treatment of hemorrhagic stroke. Cerus is part of our Neurovascular business within MedSurg and Neurotechnology. Goodwill attributable to the acquisition is not deductible for tax purposes.

In February 2022 we completed the acquisition of Vocera Communications, Inc. (Vocera) for $79.25 per share, or an aggregate purchase price of $2.6 billion, net of cash acquired ($3.0 billion including convertible notes). Vocera is a leader in the digital care coordination and communication category. Vocera is part of our Medical business within MedSurg and Neurotechnology. Goodwill attributable to the acquisition reflects the strategic benefits of expanding our presence in adjacent markets, diversifying our product portfolio, advancing innovations, and accelerating our digital aspirations. This goodwill is not deductible for tax purposes.

In the six months 2022 note holders elected to redeem the 1.50% and 0.50% convertible notes assumed in the Vocera acquisition for $101 and $324. These repayments are classified as financing activities in the Consolidated Statements of Cash Flows.

Share-based awards for Vocera employees vested upon our acquisition and a charge of $132 was recorded in selling, general and administrative expenses in 2022.

Purchase price allocations for our significant acquisitions are:

Purchase Price Allocation of Acquired Net Assets
	2023		2022
	Cerus		Vocera
Tangible assets acquired:
Accounts receivable	$	1	$	33
Inventory	2		13
Deferred income tax assets	7		91
Other assets	1		92
Debt	—		(425)
Deferred income tax liabilities	(60)		(193)
Other liabilities	(22)		(117)
Intangible assets:
Customer and distributor relationships	—		603
Developed technology	240		175
Trade name	—		18
Goodwill	312		2,273
Purchase price, net of cash acquired of $7 and $281	$	481	$	2,563
Weighted average amortization period at acquisition (years):
Developed technologies	15		6
Customer relationships	—		15
Trademarks	—		9

The purchase price allocation for Cerus is based on preliminary valuations, primarily related to developed technology and deferred income taxes. Our estimates and assumptions are subject to change within the measurement period. The purchase price allocation for Vocera was finalized in the first quarter 2023 without material adjustments.

Consolidated Estimated Amortization Expense
Remainder of 2023		2024		2025		2026		2027
$	319	$	608	$	591	$	534	$	511

NOTE 8 - DEBT AND CREDIT FACILITIES

We have lines of credit issued by various financial institutions that are available to fund our day-to-day operating needs. Our credit facilities require us to comply with financial and other covenants. We were in compliance with all covenants on June 30, 2023.

In February 2022 we entered into a $1.5 billion term loan agreement that matures on February 22, 2025 and bears interest at a base rate based on the Term Secured Overnight Financing Rate (SOFR) plus 0.725%. Through June 30, 2023 we have repaid $850 on the term loan.

In the first quarter 2022 our Board of Directors approved an increase to the maximum amount of commercial paper that can be outstanding from $1,500 to $2,250.

On June 30, 2023 there were no borrowings outstanding under our revolving credit facility or our commercial paper program which allows for maturities up to 397 days from the date of issuance.

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

STRYKER CORPORATION 2023 Second Quarter Form 10-Q

Summary of Total Debt			June		December
			2023		2022
	Rate	Due
Senior unsecured notes:
	1.125%	November 30, 2023	$	598	$	585
	0.600%	December 1, 2023	600		599
	3.375%	May 15, 2024	597		596
	0.250%	December 3, 2024	922		903
	1.150%	June 15, 2025	647		647
	3.375%	November 1, 2025	749		748
	3.500%	March 15, 2026	996		995
	2.125%	November 30, 2027	812		795
	3.650%	March 7, 2028	597		597
	0.750%	March 1, 2029	865		848
	1.950%	June 15, 2030	992		991
	2.625%	November 30, 2030	699		684
	1.000%	December 3, 2031	807		790
	4.100%	April 1, 2043	392		392
	4.375%	May 15, 2044	396		396
	4.625%	March 15, 2046	983		983
	2.900%	June 15, 2050	642		642
Term loan			650		850
Other			3		7
Total debt			$	12,947	$	13,048
Less current maturities			1,798		1,191
Total long-term debt			$	11,149	$	11,857
			June		December
			2023		2022
Unamortized debt issuance costs			$	47	$	52
Borrowing capacity on existing facilities			$	2,160	$	2,162
Fair value of senior unsecured notes			$	11,082	$	10,910

The fair value of the senior unsecured notes was estimated using quoted interest rates, maturities and amounts of borrowings based on quoted active market prices and yields that took into account the underlying terms of the debt instruments. Substantially all of our debt is classified within Level 2 of the fair value hierarchy.

NOTE 9 - INCOME TAXES

Our effective tax rates were 17.9% and 15.7% in the three and six months 2023 and 8.9% and 11.5% in the three and six months 2022. The effective tax rates for the three and six months 2023 and 2022 reflect the continued lower effective income tax rates as a result of our European operations and certain discrete tax items. In addition, the effective tax rates for the three and six months 2022 reflect the reversal of deferred income tax on undistributed earnings of foreign subsidiaries as our revised capital plan determined that certain cash outside of the United States would no longer need to be repatriated during the period previously contemplated.

NOTE 10 - SEGMENT INFORMATION

	Three Months				Six Months
	2023		2022		2023		2022
MedSurg and Neurotechnology	$	2,860	$	2,549	$	5,550	$	4,972
Orthopaedics and Spine	2,136		1,944		4,224		3,796
Net sales	$	4,996	$	4,493	$	9,774	$	8,768
MedSurg and Neurotechnology	$	780	$	629	$	1,407	$	1,259
Orthopaedics and Spine	601		579		1,202		1,082
Segment operating income	$	1,381