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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, 2023
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13149
strykerlogoa74.jpg
STRYKER CORPORATION
(Exact name of registrant as specified in its charter)
Michigan38-1239739
(State of incorporation)(I.R.S. Employer Identification No.)
2825 Airview Boulevard Kalamazoo,Michigan49002
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.10 Par ValueSYKNew York Stock Exchange
1.125% Notes due 2023SYK23New York Stock Exchange
0.250% Notes due 2024SYK24ANew York Stock Exchange
2.125% Notes due 2027SYK27New York Stock Exchange
0.750% Notes due 2029SYK29New York Stock Exchange
2.625% Notes due 2030SYK30New York Stock Exchange
1.000% Notes due 2031SYK31New 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 379,894,650 shares of Common Stock, $0.10 par value, on September 30, 2023.
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
PART I – FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Stryker Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
Three MonthsNine Months
2023202220232022
Net sales$4,909 $4,479 $14,683 $13,247 
Cost of sales1,751 1,697 5,328 4,905 
Gross profit$3,158 $2,782 $9,355 $8,342 
Research, development and engineering expenses353 364 1,038 1,128 
Selling, general and administrative expenses1,701 1,455 5,188 4,704 
Recall charges, net9 (4)12 14 
Amortization of intangible assets164 159 486 469 
Total operating expenses$2,227 $1,974 $6,724 $6,315 
Operating income$931 $808 $2,631 $2,027 
Other income (expense), net(62)8 (184)(105)
Earnings before income taxes$869 $816 $2,447 $1,922 
Income taxes177 — 425 127 
Net earnings$692 $816 $2,022 $1,795 
Net earnings per share of common stock:
Basic$1.82 $2.16 $5.33 $4.75 
Diluted$1.80 $2.14 $5.27 $4.70 
Weighted-average shares outstanding (in millions):
Basic379.8 378.4 379.5 378.1 
Effect of dilutive employee stock compensation4.2 3.4 4.2 4.1 
Diluted384.0 381.8 383.7 382.2 
Cash dividends declared per share of common stock$0.75 $0.695 $2.25 $2.085 
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 MonthsNine Months
2023202220232022
Net earnings$692 $816 $2,022 $1,795 
Other comprehensive income (loss), net of tax:
Marketable securities— — — (1)
Pension plans(1)10 (4)17 
Unrealized gains (losses) on designated hedges2 8 4 33 
Financial statement translation80 179 (28)393 
Total other comprehensive income (loss), net of tax$81 $197 $(28)$442 
Comprehensive income$773 $1,013 $1,994 $2,237 

See accompanying notes to Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
1
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
CONSOLIDATED BALANCE SHEETS
September 30December 31
20232022
(Unaudited)
Assets
Current assets
Cash and cash equivalents$1,860 $1,844 
Marketable securities76 84 
Accounts receivable, less allowance of $187 ($154 in 2022)
3,276 3,565 
Inventories:
Materials and supplies1,299 1,006 
Work in process342 348 
Finished goods3,242 2,641 
Total inventories$4,883 $3,995 
Prepaid expenses and other current assets950 787 
Total current assets$11,045 $10,275 
Property, plant and equipment:
Land, buildings and improvements1,650 1,739 
Machinery and equipment4,505 4,066 
Total property, plant and equipment$6,155 $5,805 
Less allowance for depreciation3,049 2,835 
Property, plant and equipment, net$3,106 $2,970 
Goodwill15,138 14,880 
Other intangibles, net4,731 4,885 
Noncurrent deferred income tax assets1,406 1,410 
Other noncurrent assets2,616 2,464 
Total assets$38,042 $36,884 
Liabilities and shareholders' equity
Current liabilities
Accounts payable$1,296 $1,413 
Accrued compensation1,223 1,149 
Income taxes407 292 
Dividends payable285 284 
Accrued product liabilities224 230 
Accrued expenses and other liabilities1,715 1,744 
Current maturities of debt2,308 1,191 
Total current liabilities$7,458 $6,303 
Long-term debt, excluding current maturities10,382 11,857 
Income taxes465 641 
Other noncurrent liabilities1,832 1,467 
Total liabilities$20,137 $20,268 
Shareholders' equity
Common stock, $0.10 par value
38 38 
Additional paid-in capital2,183 2,034 
Retained earnings15,933 14,765 
Accumulated other comprehensive loss(249)(221)
Total shareholders' equity$17,905 $16,616 
Total liabilities and shareholders' equity$38,042 $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 Third Quarter Form 10-Q
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Three MonthsNine Months
2023202220232022
Common stock shares outstanding (in millions)
Beginning379.8 378.3 378.7 377.5 
Issuance of common stock under stock compensation and benefit plans0.1 0.1 1.2 0.9 
Ending379.9 378.4 379.9 378.4 
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$2,127 $1,989 $2,034 $1,890 
Issuance of common stock under stock compensation and benefit plans4 6 (16)(2)
Share-based compensation52 33 165 140 
Ending$2,183 $2,028 $2,183 $2,028 
Retained earnings
Beginning$15,526 $13,933 $14,765 $13,480 
Net earnings692 816 2,022 1,795 
Cash dividends declared(285)(263)(854)(789)
Ending$15,933 $14,486 $15,933 $14,486 
Accumulated other comprehensive income (loss)
Beginning$(330)$(286)$(221)$(531)
Other comprehensive income (loss)81 197 (28)442 
Ending$(249)$(89)$(249)$(89)
Total shareholders' equity$17,905 $16,463 $17,905 $16,463 

See accompanying notes to Consolidated Financial Statements.


Dollar amounts are in millions except per share amounts or as otherwise specified.
3
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months
20232022
Operating activities
Net earnings$2,022 $1,795 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation292 276 
Amortization of intangible assets486 469 
Asset impairments12 18 
Share-based compensation165 140 
Recall charges, net12 14 
Sale of inventory stepped-up to fair value at acquisition— 12 
Changes in operating assets and liabilities:
Accounts receivable266 (186)
Inventories(922)(754)
Accounts payable(118)111 
Accrued expenses and other liabilities165 5 
Recall-related payments(28)(26)
Income taxes(69)(262)
Other, net(100)9 
Net cash provided by operating activities$2,183 $1,621 
Investing activities
Acquisitions, net of cash acquired(390)(2,563)
Purchases of marketable securities(41)(43)
Proceeds from sales of marketable securities49 40 
Purchases of property, plant and equipment(430)(400)
Proceeds from settlement of net investment hedges— 197 
Other investing, net2 7 
Net cash used in investing activities$(810)$(2,762)
Financing activities
Proceeds (payments) on short-term borrowings, net540 (376)
Proceeds from issuance of long-term debt— 1,500 
Payments on long-term debt(852)(502)
Payments of dividends(854)(788)
Cash paid for taxes from withheld shares(121)(89)
Other financing, net(21)(48)
Net cash provided by (used in) financing activities$(1,308)$(303)
Effect of exchange rate changes on cash and cash equivalents(49)(80)
Change in cash and cash equivalents$16 $(1,524)
Cash and cash equivalents at beginning of period1,844 2,944 
Cash and cash equivalents at end of period$1,860 $1,420 

See accompanying notes to Consolidated Financial Statements.
Dollar amounts are in millions except per share amounts or as otherwise specified.
4
STRYKER CORPORATION
2023 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, 2023 and the results of operations for the three and nine 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 $84 and $72 for the three months 2023 and 2022 and $252 and $218 for the nine months 2023 and 2022. We have reflected these changes in all historical periods presented.
Net Sales by Business
Three MonthsNine Months
2023202220232022
MedSurg and Neurotechnology:
Instruments$628 $535 $1,833 $1,626 
Endoscopy738 662 2,141 1,946 
Medical798 765 2,417 2,095 
Neurovascular311 294 906 901 
Neuro Cranial384 332 1,112 992 
$2,859 $2,588 $8,409 $7,560 
Orthopaedics and Spine:
Knees$515 $481 $1,643 $1,445 
Hips362 347 1,130 1,038 
Trauma and Extremities752 672 2,287 2,033 
Spine291 280 871 849 
Other130 111 343 322 
$2,050 $1,891 $6,274 $5,687 
Total$4,909 $4,479 $14,683 $13,247 
Net Sales by Geography
Three Months 2023Three Months 2022
United StatesInternationalUnited StatesInternational
MedSurg and Neurotechnology:
Instruments$503 $125 $425 $110 
Endoscopy610 128 551 111 
Medical660 138 625 140 
Neurovascular120 191 110 184 
Neuro Cranial315 69 274 58 
$2,208 $651 $1,985 $603 
Orthopaedics and Spine:
Knees$385 $130 $365 $116 
Hips231 131 225 122 
Trauma and Extremities550 202 494 178 
Spine217 74 206 74 
Other87 43 85 26 
$1,470 $580 $1,375 $516 
Total$3,678 $1,231 $3,360 $1,119 
Net Sales by Geography
Nine Months 2023Nine Months 2022
United StatesInternationalUnited StatesInternational
MedSurg and Neurotechnology:
Instruments$1,465 $368 $1,290 $336 
Endoscopy1,742 399 1,585 361 
Medical1,954 463 1,686 409 
Neurovascular361 545 333 568 
Neuro Cranial910 202 819 173 
$6,432 $1,977 $5,713 $1,847 
Orthopaedics and Spine:
Knees$1,207 $436 $1,078 $367 
Hips716 414 657 381 
Trauma and Extremities1,663 624 1,470 563 
Spine650 221 615 234 
Other233 110 243 79 
$4,469 $1,805 $4,063 $1,624 
Total$10,901 $3,782 $9,776 $3,471 
            
Contract Assets and Liabilities
On September 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 $788 and $741 on September 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.
Dollar amounts are in millions except per share amounts or as otherwise specified.
5
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
Changes in contract liabilities during the nine months 2023 were as follows:
September 30
2023
Beginning contract liabilities$741 
Revenue recognized from beginning of year contract liabilities(306)
Net advance consideration received during the period353 
Ending contract liabilities$788 
NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (AOCI)
Three Months 2023Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
Beginning$(1)$28 $54 $(411)$(330)
OCI 1 (1)11 133 144 
Income taxes— 1 (2)(47)(48)
Reclassifications to:
Cost of sales— — (7)— (7)
Other (income) expense, net(1)(1)(2)(8)(12)
Income taxes— — 2 2 4 
Net OCI— (1)2 80 81 
Ending$(1)$27 $56 $(331)$(249)
Three Months 2022Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
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)
Nine Months 2023Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
Beginning$(1)$31 $52 $(303)$(221)
OCI — 2 38 10 50 
Income taxes— (4)(8)(19)(31)
Reclassifications to:
Cost of sales— — (29)— (29)
Other (income) expense, net— (3)(4)(25)(32)
Income taxes— 1 7 6 14 
Net OCI— (4)4 (28)(28)
Ending$(1)$27 $56 $(331)$(249)
Nine Months 2022Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
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)
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
September 2023Cash FlowNet InvestmentNon-DesignatedTotal
Gross notional amount$838 $1,583 $4,726 $7,147 
Maximum term in years3.1
Fair value:
Other current assets$31 $95 $86 $212 
Other noncurrent assets1 11 — 12 
Other current liabilities(8)— (6)(14)
Other noncurrent liabilities(1)(12)— (13)
Total fair value$23 $94 $80 $197 
December 2022Cash FlowNet InvestmentNon-DesignatedTotal
Gross notional amount$1,053 $1,598 $3,417 $6,068 
Maximum term in years3.9
Fair value:
Other current assets$20 $— $9 $29 
Other noncurrent assets1 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 September 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 €4.9 billion and €4.4 billion at September 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 $42 in the nine months 2023.
Net Currency Exchange Rate Gains (Losses)
DerivativeThree MonthsNine Months
instrument:Recorded in:2023202220232022
Cash FlowCost of sales$7 $7 $29 $10 
Net InvestmentOther income (expense), net8 8 25 30 
Non-DesignatedOther income (expense), net4 (1)13 2 
Total$19 $14 $67 $42 
Dollar amounts are in millions except per share amounts or as otherwise specified.
6
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
Pretax gains (losses) on derivatives designated as cash flow hedges of $35 and net investment hedges of $31 recorded in AOCI are expected to be reclassified to cost of sales and other income (expense), net in earnings within 12 months of September 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.
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 September 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
SeptemberDecember
20232022
Cash and cash equivalents$1,860 $1,844 
Trading marketable securities189 166 
Level 1 - Assets$2,049 $2,010 
Available-for-sale marketable securities:
Corporate and asset-backed debt securities$38 $42 
Foreign government debt securities— 1 
United States agency debt securities5 3 
United States treasury debt securities32 36 
Certificates of deposit1 2 
Total available-for-sale marketable securities$76 $84 
Foreign currency exchange forward contracts224 119 
Level 2 - Assets$300 $203 
Total assets measured at fair value$2,349 $2,213 
Liabilities Measured at Fair Value
SeptemberDecember
20232022
Deferred compensation arrangements$189 $166 
Level 1 - Liabilities$189 $166 
Foreign currency exchange forward contracts$27 $102 
Level 2 - Liabilities$27 $102 
Contingent consideration:
Beginning$121 $306 
Additions192 1 
Change in estimate and foreign exchange(8)(137)
Settlements(22)(49)
Ending$283 $121 
Level 3 - Liabilities$283 $121 
Total liabilities measured at fair value$499 $389 
Fair Value of Available for Sale Securities by Maturity
SeptemberDecember
20232022
Due in one year or less$43 $53 
Due after one year through three years$33 $31 
On September 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 $15 and $26 in the three months and $40 and $61 in the nine 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.
Dollar amounts are in millions except per share amounts or as otherwise specified.
7
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
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.
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 $198, 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
September 30December 31
20232022
Right-of-use assets $491 $473 
Lease liabilities, current $130 $121 
Lease liabilities, non-current $369 $357 
Other information:
Weighted-average remaining lease term (years)5.55.5
Weighted-average discount rate3.73 %3.22 %
Three MonthsNine Months
2023202220232022
Operating lease cost$48 $37 $127 $110 
NOTE 7 - ACQUISITIONS
We acquire stock in companies and various assets that continue to support our capital deployment and product development strategies. In the nine 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 nine 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
20232022
CerusVocera
Tangible assets acquired:
Accounts receivable$1 $33 
Inventory2 13 
Deferred income tax assets7 91 
Other assets1 92 
Debt— (425)
Deferred income tax liabilities(60)(193)
Other liabilities(22)(117)
Intangible assets:
Customer and distributor relationships— 603 
Developed technology240 175 
Trade name— 18 
Goodwill312 2,273 
Purchase price, net of cash acquired of $7 and $281
$481 $2,563 
Weighted average amortization period at acquisition (years):
Developed technologies136
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 20232024202520262027
$159 $607 $590 $533 $512 
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 September 30, 2023.
In August 2023 we repaid the remaining balance of $650 on the $1.5 billion term loan scheduled to mature on February 22, 2025. We also issued €500 of floating rate senior notes due November 16, 2024. The notes bear interest at a base rate based on the three-month Euro Interbank Offered Rate (EURIBOR) plus 0.3%. The notes are callable at February 16, 2024, May 16, 2024 or October 16, 2024 either by us or at the option of the notes holders. These notes are classified within current maturities of debt on our Consolidated Balance Sheet as of September 30, 2023.
Dollar amounts are in millions except per share amounts or as otherwise specified.
8
STRYKER CORPORATION
2023 Third Quarter Form 10-Q
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 September 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.
Summary of Total DebtSeptemberDecember
20232022
RateDue
Senior unsecured notes:
1.125%November 30, 2023$580 $585 
0.600%December 1, 2023600 599 
3.375%May 15, 2024598 596 
VariousNovember 16, 2024527 — 
0.250%December 3, 2024895 903 
1.150%June 15, 2025648 647 
3.375%November 1, 2025749 748 
3.500%March 15, 2026996 995 
2.125%November 30, 2027788 795 
3.650%March 7, 2028598 597 
0.750%March 1, 2029841 848 
1.950%June 15, 2030992 991 
2.625%November 30, 2030679 684 
1.000%December 3, 2031783 790 
4.100%April 1, 2043392 392 
4.375%May 15, 2044396 396 
4.625%March 15, 2046983 983 
2.900%June 15, 2050642 642 
Term loan— 850 
Other3 7 
Total debt$12,690 $13,048 
Less current maturities2,308 1,191 
Total long-term debt$10,382 $11,857 
SeptemberDecember
20232022
Unamortized debt issuance costs$45 $52 
Borrowing capacity on existing facilities$2,160 $2,162 
Fair value of senior unsecured notes$11,333 $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 20.4% and 17.4% in the three and nine months 2023 and 0.0% and 6.6% in the three and nine months 2022. The effective tax rates for the three and nine months 2023 and 2022 reflect the continued lower effective income tax rates as a result of our European operations and certain discrete tax items. The effective tax rates for the three and nine months 2022 also reflect income tax benefits of $162 due to the effective settlement of the United States federal income tax audit for years 2014 through 2018. In addition, the effective tax rate for the nine months 2022 reflects 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 MonthsNine Months
2023202220232022
MedSurg and Neurotechnology$2,859 $2,588 $8,409 $7,560 
Orthopaedics and Spine2,050