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Published: 2022-11-01 14:28:18 ET
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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, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13149
syk-20220930_g1.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 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 MonthsNine Months
2022202120222021
Net sales$4,479 $4,160 $13,247 $12,407 
Cost of sales1,697 1,518 4,905 4,484 
Gross profit$2,782 $2,642 $8,342 $7,923 
Research, development and engineering expenses364 306 1,128 904 
Selling, general and administrative expenses1,455 1,602 4,704 4,682 
Recall charges(4)16 14 98 
Amortization of intangible assets159 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), net8 (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):
Basic378.4 377.1 378.1 376.8 
Effect of dilutive employee stock compensation3.4 5.6 4.1 5.5 
Diluted381.8 382.7 382.2 382.3 
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 MonthsNine Months
2022202120222021
Net earnings$816 $438 $1,795 $1,332 
Other comprehensive income (loss), net of tax:
Marketable securities— 3 (1)3 
Pension plans10 5 17 8 
Unrealized gains (losses) on designated hedges8 7 33 43 
Financial statement translation179 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.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
CONSOLIDATED BALANCE SHEETS
September 30December 31
20222021
(Unaudited)
Assets
Current assets
Cash and cash equivalents$1,420 $2,944 
Marketable securities77 75 
Accounts receivable, less allowance of $150 ($167 in 2021)
3,103 3,022 
Inventories:
Materials and supplies852 691 
Work in process309 264 
Finished goods2,722 2,359 
Total inventories$3,883 $3,314 
Prepaid expenses and other current assets835 662 
Total current assets$9,318 $10,017 
Property, plant and equipment:
Land, buildings and improvements1,665 1,656 
Machinery and equipment3,869 3,842 
Total property, plant and equipment$5,534 $5,498 
Less accumulated depreciation2,736 2,665 
Property, plant and equipment, net$2,798 $2,833 
Goodwill14,993 12,918 
Other intangibles, net5,053 4,840 
Noncurrent deferred income tax assets1,390 1,760 
Other noncurrent assets2,431 2,263 
Total assets$35,983 $34,631 
Liabilities and shareholders' equity
Current liabilities
Accounts payable$1,213 $1,129 
Accrued compensation927 1,092 
Income taxes243 192 
Dividends payable263 263 
Accrued product liabilities391 401 
Accrued expenses and other liabilities1,526 1,465 
Current maturities of debt8 7 
Total current liabilities$4,571 $4,549 
Long-term debt, excluding current maturities12,751 12,472 
Income taxes621 913 
Other noncurrent liabilities1,577 1,820 
Total liabilities$19,520 $19,754 
Shareholders' equity
Common stock, $0.10 par value
38 38 
Additional paid-in capital2,028 1,890 
Retained earnings14,486 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.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
Three MonthsNine Months
2022202120222021
Common stock shares outstanding (in millions)
Beginning378.3 377.1 377.5 376.1 
Issuance of common stock under stock compensation and benefit plans0.1 0.1 0.9 1.1 
Ending378.4 377.2 378.4 377.2 
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 plans6 (3)(2)(7)
Share-based compensation33 34 140 141 
Ending$2,028 $1,875 $2,028 $1,875 
Retained earnings
Beginning$13,933 $12,881 $13,480 $12,462 
Net earnings816 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
20222021
Operating activities
Net earnings$1,795 $1,332 
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation276 278 
Amortization of intangible assets469 474 
Asset impairments18 119 
Share-based compensation140 141 
Recall charges14 98 
Sale of inventory stepped-up to fair value at acquisition12 231 
Changes in operating assets and liabilities:
Accounts receivable(186)(145)
Inventories(754)(231)
Accounts payable111 134 
Accrued expenses and other liabilities5 184 
Recall-related payments(26)(180)
Income taxes(262)(193)
Other, net9 21 
Net cash provided by operating activities$1,621 $2,263 
Investing activities
Acquisitions, net of cash acquired(2,563)(226)
Purchases of marketable securities(43)(38)
Proceeds from sales of marketable securities40 43 
Purchases of property, plant and equipment(400)(319)
Proceeds from settlement of net investment hedges197 — 
Other investing, net7 (5)
Net cash used in investing activities$(2,762)$(545)
Financing activities
Proceeds (payments) on short-term borrowings, net(376)7 
Proceeds from issuance of long-term debt1,500 5 
Payments on long-term debt(502)(1,151)
Payments of dividends(788)(713)
Cash paid for taxes from withheld shares(89)(88)
Other financing, net(48)(137)
Net cash provided by (used in) financing activities$(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 period2,944 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.
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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 MonthsNine Months
2022202120222021
MedSurg and Neurotechnology:
Instruments$535 $525 $1,626 $1,511 
Endoscopy590 525 1,728 1,512 
Medical765 636 2,095 1,898 
Neurovascular294 295 901 885 
Neuro Cranial332 299 992 890 
Other72 69 218 203 
$2,588 $2,349 $7,560 $6,899 
Orthopaedics and Spine:
Knees$481 $439 $1,445 $1,325 
Hips347 328 1,038 990 
Trauma and Extremities672 639 2,033 1,953 
Spine280 282 849 867 
Other111 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 2022Three Months 2021
United StatesInternationalUnited StatesInternational
MedSurg and Neurotechnology:
Instruments$425 $110 $415 $110 
Endoscopy480 110 418 107 
Medical625 140 496 140 
Neurovascular110 184 113 182 
Neuro Cranial274 58 244 55 
Other71 1 68 1 
$1,985 $603 $1,754 $595 
Orthopaedics and Spine:
Knees$365 $116 $321 $118 
Hips225 122 199 129 
Trauma and Extremities494 178 447 192 
Spine206 74 201 81 
Other85 26 97 26 
$1,375 $516 $1,265 $546 
Total$3,360 $1,119 $3,019 $1,141 
Net Sales by Geography
Nine Months 2022Nine Months 2021
United StatesInternationalUnited StatesInternational
MedSurg and Neurotechnology:
Instruments$1,290 $336 $1,171 $340 
Endoscopy1,371 357 1,179 333 
Medical1,686 409 1,457 441 
Neurovascular333 568 339 546 
Neuro Cranial819 173 724 166 
Other214 4 200 3 
$5,713 $1,847 $5,070 $1,829 
Orthopaedics and Spine:
Knees$1,078 $367 $964 $361 
Hips657 381 606 384 
Trauma and Extremities1,470 563 1,362 591 
Spine615 234 611 256 
Other243 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.
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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 $529 on September 30, 2022 and December 31, 2021.
NOTE 3 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (AOCI)
Three Months 2022Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
Beginning$(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)
Three Months 2021Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
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 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)
Nine Months 2021Marketable SecuritiesPension PlansHedgesFinancial Statement TranslationTotal
Beginning$(3)$(259)$(10)$(885)$(1,157)
OCI 4 1 40 269 314 
Income taxes— (2)(13)37 22 
Reclassifications to:
Cost of sales— — 9 — 9 
Other (income) expense, net— 12 7 (25)(6)
Income taxes(1)(3)— 6 2 
Net OCI$3 $8 $43 $287 $341 
Ending$— $(251)$33 $(598)$(816)
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 our 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 2021.
Foreign Currency Hedges
September 2022Cash FlowNet InvestmentNon-DesignatedTotal
Gross notional amount$923 $1,448 $3,137 $5,508 
Maximum term in years4.1
Fair value:
Other current assets$45 $— $140 $185 
Other noncurrent assets3 185 — 188 
Other current liabilities(7)— (10)(17)
Other noncurrent liabilities(1)— — (1)
Total fair value$40 $185 $130 $355 
December 2021Cash FlowNet InvestmentNon-DesignatedTotal
Gross notional amount$973 $2,266 $5,512 $8,751 
Maximum term in years4.9
Fair value:
Other current assets$15 $39 $92 $146 
Other noncurrent assets1 65 — 66 
Other current liabilities(7)— (10)(17)
Total fair value$9 $104 $82 $195 
We had €1.5 billion and €2.0 billion on September 30, 2022 and December 31, 2021 of certain foreign currency forward 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 on September 30, 2022 and December 31, 2021 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.
In the nine months 2022 we settled certain foreign currency forward contracts designated as net investment hedges resulting in cash proceeds of $197. The amounts in AOCI related to settled net investment hedges will remain in AOCI until the hedged investment is either sold or substantially liquidated.
On September 30, 2022 the total after tax gain (loss) in AOCI related to designated net investment hedges was $603.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
Net Currency Exchange Rate Gains (Losses)
DerivativeThree MonthsNine Months
instrument:Recorded in:2022202120222021
Cash FlowCost of sales$7 $(4)$10 $(9)
Net InvestmentOther income (expense), net8 8 30 25 
Non-DesignatedOther income (expense), net(1)(5)2 (6)
Total$14 $(1)$42 $10 
Pretax gains (losses) on derivatives designated as cash flow hedges of $50 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 as of September 30, 2022. 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, 2022. 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 2021.
During the three months 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.
There were no significant transfers into or out of any level of the fair value hierarchy in 2022.
Assets Measured at Fair Value
SeptemberDecember
20222021
Cash and cash equivalents$1,420 $2,944 
Trading marketable securities155 193 
Level 1 - Assets$1,575 $3,137 
Available-for-sale marketable securities:
Corporate and asset-backed debt securities$43 $48 
Foreign government debt securities1 2 
United States agency debt securities2 5 
United States Treasury debt securities30 19 
Certificates of deposit1 1 
Total available-for-sale marketable securities$77 $75 
Foreign currency exchange forward contracts373 212 
Level 2 - Assets$450 $287 
Total assets measured at fair value$2,025 $3,424 
Liabilities Measured at Fair Value
SeptemberDecember
20222021
Deferred compensation arrangements$155 $193 
Level 1 - Liabilities$155 $193 
Foreign currency exchange forward contracts$18 $17 
Level 2 - Liabilities$18 $17 
Contingent consideration:
Beginning$306 $393 
Additions1 62 
Change in estimate(137)(1)
Settlements(47)(148)
Ending$123 $306 
Level 3 - Liabilities$123 $306 
Total liabilities measured at fair value$296 $516 
Fair Value of Available for Sale Securities by Maturity
September 2022December 2021
Due in one year or less$50 $36 
Due after one year through three years$27 $39 
On September 30, 2022 and December 31, 2021 the aggregate difference between the cost and fair value of available-for-sale marketable securities was nominal. Interest and marketable securities income was $26 and $15 in the three months and $61 and $50 in the nine months 2022 and 2021, 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. The court awarded damages and we recorded charges of $28 in March 2022. In June 2022 PureWick filed a motion to seek enhancement of the judgment and if successful, the judgment could total approximately $100 and include an
Dollar amounts are in millions except per share amounts or as otherwise specified.
7
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
injunction against future sales. We intend to appeal the outcome of this case.
Recall Matters
In June 2012 we voluntarily recalled our Rejuvenate and ABG II Modular-Neck hip stems and terminated global distribution of these hip products. Product liability lawsuits relating to this voluntary recall have been filed against us. In November 2014 we entered into a settlement agreement to compensate eligible United States patients who had revision surgery prior to November 3, 2014 and in December 2016 the settlement program was extended to patients who had revision surgery prior to December 19, 2016. In September 2020 we entered into a second settlement agreement to compensate eligible United States patients who had revision surgery prior to September 9, 2020. There are remaining lawsuits that we will continue to defend against.
In August 2016 and May 2018 we voluntarily recalled certain lot-specific sizes and offsets of LFIT Anatomic CoCr V40 Femoral Heads. Product liability lawsuits and claims relating to this voluntary recall have been filed against us. In November 2018 we entered into a settlement agreement to resolve a significant number of claims and lawsuits related to the recalls. In April 2022 we executed a second agreement to resolve a significant number of claims and lawsuits related to the recalls. The specific terms of the settlement agreement, including the financial terms, are confidential.
With the acquisition of Wright Medical Group N.V. (Wright) in November 2020, we are responsible for certain product liability claims, primarily related to certain hip products sold by Wright prior to its 2014 divestiture of the OrthoRecon business. We will continue to evaluate each claim and the possible loss we may incur.
We have incurred, and expect to incur in the future, costs associated with the defense and settlement of these matters. For the nine months 2022 we have recorded charges of $14 primarily related to Wright hip products and made payments of $26 primarily related to Rejuvenate and ABG II Modular-Neck hip stems. Based on the information that has been received, we have estimated the remaining range of probable loss related to recall matters globally to be approximately $375 to $510. We have recorded reserves representing the remaining minimum of the range of probable loss. 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
SeptemberDecember
20222021
Right-of-use assets $456 $419 
Lease liabilities, current $116 $112 
Lease liabilities, non-current $349 $310 
Other information:
Weighted-average remaining lease term 5.5 years5.4 years
Weighted-average discount rate3.09 %2.86 %
Three MonthsNine Months
2022202120222021
Operating lease cost$37 $35 $110 $102 
NOTE 7 - ACQUISITIONS
We acquire stock in companies and various assets that continue to support our capital deployment and product development strategies. The aggregate purchase price of our acquisitions, net of cash acquired was $2,563 and $267 in the nine months 2022 and 2021.
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
2022Vocera
Tangible assets and liabilities:
Accounts receivable$33 
Inventory13 
Deferred income tax assets73 
Other assets92 
Debt(425)
Deferred income tax liabilities(182)
Other liabilities(115)
Intangible assets:
Customer and distributor relationships550 
Developed technology and patents178 
Trade name18 
Goodwill2,328 
Purchase price, net of cash acquired of $281
$2,563 
Weighted-average life of intangible assets13
Purchase price allocations for Vocera were based on preliminary valuations, primarily related to intangible assets and deferred income taxes. Our estimates and assumptions are subject to change within the measurement period.
Consolidated Estimated Amortization Expense
Remainder of 20222023202420252026
$159 $617 $587 $567 $510 
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. Certain of our credit facilities require us to comply with financial and other covenants. We were in compliance with all covenants on September 30, 2022.
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%. In the nine months 2022 we repaid $500 on the term loan.
Dollar amounts are in millions except per share amounts or as otherwise specified.
8
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
In 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, 2022 there were no borrowings outstanding under our credit facility or commercial paper program which allows for maturities up to 397 days from the date of issuance.
Summary of Total DebtSeptember 2022December 2021
RateDue
Senior unsecured notes:
1.125%November 30, 2023$530 $622 
0.600%December 1, 2023599 598 
3.375%May 15, 2024595 593 
0.250%December 3, 2024817 958 
1.150%June 15, 2025647 645 
3.375%November 1, 2025748 748 
3.500%March 15, 2026995 994 
2.125%November 30, 2027720 845 
3.650%March 7, 2028597 597 
0.750%March 1, 2029767 901 
1.950%June 15, 2030991 990 
2.625%November 30, 2030619 727 
1.000%December 3, 2031715 840 
4.100%April 1, 2043392 392 
4.375%May 15, 2044395 395 
4.625%March 15, 2046982 982 
2.900%June 15, 2050642 642 
Term loanFebruary 22, 20251,000 — 
Other8 10 
Total debt$12,759 $12,479 
Less current maturities of debt8 7 
Total long-term debt$12,751 $12,472 
September 2022December 2021
Unamortized debt issuance costs$55 $62 
Borrowing capacity on existing facilities$2,162 $2,162 
Fair value of senior unsecured notes$10,401 $13,391 
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 0.0% and 6.6% in the three and nine months 2022. In the three months 2022 income tax expense decreased $162 due to the effective settlement of the United States federal income tax audit for years 2014 through 2018. In addition, other income (expense), net includes a benefit of $50 related to the release of accrued interest associated with this settlement. The nine months 2022 additionally include the reversal of deferred income tax on undistributed earnings of foreign subsidiaries no longer determined to be indefinitely reinvested. Our effective tax rates of 11.5% and 12.6% in the three and nine months 2021 include certain discrete tax items.

NOTE 10 - SEGMENT INFORMATION
As previously disclosed, effective December 31, 2021 we changed our reportable business segments to (i) MedSurg and Neurotechnology and (ii) Orthopaedics and Spine to align to our new internal reporting structure. We have reflected these changes in all historical periods presented.
Three MonthsNine Months
2022202120222021
MedSurg and Neurotechnology$2,588 $2,349 $7,560 $6,899 
Orthopaedics and Spine1,891 1,811 5,687 5,508 
Net sales$4,479 $4,160 $13,247 $12,407 
MedSurg and Neurotechnology$626 $663 $1,838 $2,000 
Orthopaedics and Spine519 500 1,648 1,518 
Segment operating income$1,145 $1,163 $3,486 $3,518 
Items not allocated to segments:
Corporate and other
$(144)$(105)$(488)$(421)
Acquisition and integration-related costs78 (126)(108)(495)
Amortization of intangible assets
(159)(144)(469)(474)
Restructuring-related and other charges
(58)(178)(229)(209)
Medical device regulations
(38)(27)(98)(72)
Recall-related matters
4 (16)(14)(98)
Regulatory and legal matters
(20)7 (53)16 
Consolidated operating income$808 $574 $2,027 $1,765 
There were no significant changes to total assets by segment from information provided in our Annual Report on Form 10-K for 2021, other than the addition of the assets acquired in the Vocera acquisition which are included in the MedSurg and Neurotechnology segment.
NOTE 11 - ASSET IMPAIRMENTS
The government in China has launched regional and national programs for volume-based procurement ("VBP") of high-value medical consumables to reduce healthcare costs. Each VBP program has specific requirements to award contracts to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders may be guaranteed sales volume for certain products, while unsuccessful bidders may lose unit sales volume. The prices required for a successful bid have negatively impacted our existing commercial operations of joint replacement and trauma products in China.
As a result of the outcome of certain regional programs for our trauma products and the national VBP program for hips and knees we recorded charges of $105 to impair certain long-lived and intangible assets in the third quarter of 2021. These charges were included in selling, general and administrative expenses. The national VBP program for spine products took place in the third quarter of 2022 and we were unsuccessful in our bid. As a result we are exiting the spine business in China. Asset impairments recorded in the three months 2022 were not significant. Our total business in China represented approximately 2.5% of our revenues for the nine months 2022.

Dollar amounts are in millions except per share amounts or as otherwise specified.
9
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ABOUT STRYKER
Stryker is one of the world's leading medical technology companies and, together with our customers, we are driven to make healthcare better. We offer innovative products and services in Medical and Surgical, Neurotechnology, Orthopaedics and Spine that help improve patient and hospital outcomes. Alongside its customers around the world, Stryker impacts more than 100 million patients annually.
We segregate our operations into two reportable business segments: (i) MedSurg and Neurotechnology and (ii) Orthopaedics and Spine. MedSurg and Neurotechnology products include surgical equipment and navigation systems (Instruments), endoscopic and communications systems (Endoscopy), patient handling, emergency medical equipment and intensive care disposable products (Medical), minimally invasive products for the treatment of acute ischemic and hemorrhagic stroke (Neurovascular), a comprehensive line of products for traditional brain and open skull based surgical procedures; orthobiologic and biosurgery products, including synthetic bone grafts and vertebral augmentation products (Neuro Cranial) and other medical device products used in a variety of medical specialties. Orthopaedics and Spine products consist primarily of implants used in hip and knee joint replacements and trauma and extremity surgeries, and cervical, thoracolumbar and interbody systems used in spinal injury, deformity and degenerative therapies.
Macroeconomic Environment
The global economy is experiencing increased inflationary pressures in part due to global supply chain disruptions, labor shortages and other impacts of the COVID-19 pandemic and current macroeconomic environment which we anticipate will continue. Higher interest rates and capital costs, higher shipping costs, increased costs of labor and weakening foreign currency exchange rates are creating additional economic challenges. We expect these conditions to cause our customers to decrease or delay orders for our products and services, and the higher interest rates to impact demand for our capital products.
Our operations have been adversely impacted by the inflationary pressures primarily related to labor, steel and transportation costs as well as the impact of purchasing electronic components at premium prices on the spot market. Sales growth in certain products has been constrained by the continuing supply chain challenges and electronic component shortages, especially impacting the capital products in our MedSurg businesses.
Russia and Ukraine Conflict
The military conflict in Russia and Ukraine and the sanctions imposed by the United States government and other nations in response to this conflict have caused significant volatility and disruptions to the global markets. Given that we provide life-saving and life-enhancing products, we plan to continue operating in Russia provided we can safely do so. During the nine months 2022 net sales in Russia were approximately 0.3% of our revenues. Although Russia does not constitute a material portion of our business, there is uncertainty around the impact it will have on the global economy, supply chains and fuel and energy prices generally, and therefore our business. Refer to Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 for further details.
China Volume-Based Procurement and Import Purchase Evaluation
The government in China has launched regional and national programs for volume-based procurement ("VBP") of high-value medical consumables to reduce healthcare costs. Each VBP program has specific requirements to award contracts to the lowest bidders who are able to satisfy the quality and quantity requirements. The successful bidders may be guaranteed sales volume for certain products, while unsuccessful bidders may lose unit sales volume. The prices required for a successful bid have negatively impacted our existing commercial operations of joint replacement and trauma products in China. The national VBP program for spine products took place in the third quarter of 2022 and we were unsuccessful in our bid. As a result we are exiting the spine business in China. We expect regional VBP programs to be initiated for neurovascular products in the fourth quarter of 2022 and additional VBP programs may be initiated in the future. China has also issued national guiding standards for Import Purchase Evaluation which has increased the purchase of locally sourced equipment in China's public hospitals and is impacting our MedSurg business in China. Our business in China represented approximately 2.5% of our revenues for the nine months 2022.
Overview of the Three and Nine Months
In the three months 2022 we achieved sales growth of 7.7% from 2021. Excluding the impact of acquisitions and divestitures sales grew 9.9% in constant currency. We reported operating income margin of 18.0%, net earnings of $816 and net earnings per diluted share of $2.14. Excluding the impact of certain items, adjusted operating income margin(1) contracted by 310 basis points to 22.3%, with adjusted net earnings(1) of $810 and adjusted net earnings per diluted share(1) of $2.12, a decrease of 3.6% from 2021.
In the nine months 2022 we achieved sales growth of 6.8% from 2021. Excluding the impact of acquisitions and divestitures sales grew 8.3% in constant currency. We reported operating income margin of 15.3%, net earnings of $1,795 and net earnings per diluted share of $4.70. Excluding the impact of certain items, adjusted operating income margin(1) contracted by 240 basis points to 22.6%, with adjusted net earnings(1) of $2,422 and adjusted net earnings per diluted share(1) of $6.34, a decrease of 0.6% from 2021.
Recent Developments
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%. In June and September 2022 we repaid $250 and $250 of this term loan.
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. Refer to Note 7 to our Consolidated Financial Statements for further information.
Dollar amounts are in millions except per share amounts or as otherwise specified.
10
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
On August 16, 2022 the Inflation Reduction Act (“IRA”) was enacted into law. The IRA includes a 15% corporate alternative minimum tax effective in 2023 and a 1% tax on share repurchases after December 31, 2022. We are currently evaluating the impact of the IRA and do not expect the tax-related provisions to have a material impact on our Consolidated Financial Statements. The impact of the excise tax on share repurchases will be dependent on the extent of share repurchases made in future periods.
(1) Refer to "Non-GAAP Financial Measures" for a discussion of non-GAAP financial measures used in this report and a reconciliation to the most directly comparable GAAP financial measure.
CONSOLIDATED RESULTS OF OPERATIONS
Three MonthsNine Months
Percent Net SalesPercentagePercent Net SalesPercentage
2022202120222021Change2022202120222021Change
Net sales$4,479 $4,160 100.0 %100.0 %7.7 %$13,247 $12,407 100.0 %100.0 %6.8 %
Gross profit2,782 2,642 62.1 63.5 5.3 8,342 7,923 63.0 63.9 5.3 
Research, development and engineering expenses364 306 8.1 7.4 19.0 1,128 904 8.5 7.3 24.8 
Selling, general and administrative expenses1,455 1,602 32.5 38.5 (9.2)4,704 4,682 35.5 37.7 0.5 
Recall charges(4)16 (0.1)0.4 nm14 98 0.1 0.8 nm
Amortization of intangible assets159 144 3.5 3.5 10.4 469 474 3.5 3.8 (1.1)
Other income (expense), net8 (79)0.2 (1.9)nm(105)(241)(0.8)(1.9)(56.4)
Income taxes— 57 nmnm(100.0)127 192 nmnm(33.9)
Net earnings$816 $438 18.2 %10.5 %86.3 %$1,795 $1,332 13.6 %10.7 %34.8 %
Net earnings per diluted share$2.14 $1.14 87.7 %$4.70 $3.48 35.1 %
Adjusted net earnings per diluted share(1)
$2.12 $2.20 (3.6)%$6.34 $6.38 (0.6)%


nm - not meaningful
Geographic and Segment Net SalesThree MonthsNine Months
Percentage ChangePercentage Change
20222021As ReportedConstant
Currency		20222021As ReportedConstant
Currency
Geographic:
United States$3,360 $3,019 11.3 %11.3 %$9,776 $8,903 9.8 %9.8 %
International1,119 1,141 (1.9)11.7 3,471 3,504 (0.9)9.1 
Total$4,479 $4,160 7.7 %11.4 %$13,247 $12,407 6.8 %9.6 %
Segment:
MedSurg and Neurotechnology$2,588 $2,349 10.2 %13.5 %$7,560 $6,899 9.6 %12.1 %
Orthopaedics and Spine1,891 1,811 4.4 8.7 5,687 5,508 3.2 6.5 
Total$4,479 $4,160 7.7 %11.4 %$13,247 $12,407 6.8 %9.6 %
Supplemental Net Sales Growth Information
Three MonthsNine Months
Percentage ChangePercentage Change
United StatesInternationalUnited StatesInternational
20222021As ReportedConstant CurrencyAs ReportedAs ReportedConstant Currency20222021As ReportedConstant CurrencyAs ReportedAs ReportedConstant Currency
MedSurg and Neurotechnology:
Instruments$535 $525 1.8 %4.8 %2.3 %— %14.4 %$1,626 $1,511 7.6 %9.9 %10.1 %(1.0)%9.4 %
Endoscopy590 525 12.4 14.9 14.8 3.1 15.6 1,728 1,512 14.3 16.6 16.3 7.2 17.8 
Medical765 636 20.1 22.9 25.8 — 12.7 2,095 1,898 10.4 12.4 15.7 (7.3)1.2 
Neurovascular294 295 (0.3)7.6 (2.0)0.7 13.6 901 885 1.7 7.1 (1.7)3.8 12.7 
Neuro Cranial332 299 11.3 13.9 12.7 5.0 19.6 992 890 11.5 13.4 13.2 4.2 14.3 
Other72 69 5.9 6.0 5.8 12.9 16.4 218 203 7.8 7.8 7.3 42.1 45.2 
$2,588 $2,349 10.2 %13.5 %13.2 %1.3 %14.4 %$7,560 $6,899 9.6 %12.1 %12.7 %1.0 %10.4 %
Orthopaedics and Spine:
Knees$481 $439 9.6 %13.4 %13.7 %(1.7)%12.3 %$1,445 $1,325 9.1 %12.1 %11.8 %1.6 %12.8 %
Hips347 328 5.6 11.3 12.4 (5.0)9.6 1,038 990 4.8 9.2 8.3 (0.7)10.5 
Trauma and Extremities672 639 5.1 9.5 10.4 (7.1)7.3 2,033 1,953 4.1 7.2 7.9 (4.8)5.6 
Spine280 282 (1.0)2.6 2.0 (8.7)3.9 849 867 (2.1)0.6 0.6 (8.5)0.7 
Other111 123 (9.2)(5.6)(11.2)(1.7)15.5 322 373 (13.4)(10.6)(16.0)(4.3)9.0 
$1,891 $1,811 4.4 %8.7 %8.6 %(5.4)%8.8 %$5,687 $5,508 3.2 %6.5 %6.0 %(3.0)%7.7 %
Total $4,479 $4,160 7.7 %11.4 %11.3 %(1.9)%11.7 %$13,247 $12,407 6.8 %9.6 %9.8 %(0.9)%9.1 %
Dollar amounts are in millions except per share amounts or as otherwise specified.
11
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
Consolidated Net Sales
Consolidated net sales increased 7.7% in the three months 2022 as reported and 11.4% in constant currency, as foreign currency exchange rates negatively impacted net sales by 3.7%. Excluding the 1.5% impact of acquisitions and divestitures, net sales in constant currency increased by 10.6% from increased unit volume partially offset by 0.7% due to lower prices. The unit volume increase was due to higher shipments across all MedSurg and Neurotechnology products and most Orthopaedics and Spine products.
Consolidated net sales increased 6.8% in the nine months 2022 as reported and 9.6% in constant currency, as foreign currency exchange rates negatively impacted net sales by 2.8%. Excluding the 1.3% impact of acquisitions and divestitures, net sales in constant currency increased by 9.4% from increased unit volume partially offset by 1.1% due to lower prices. The unit volume increase was due to higher shipments across all MedSurg and Neurotechnology products and most Orthopaedics and Spine products.
MedSurg and Neurotechnology Net Sales
MedSurg and Neurotechnology net sales increased 10.2% in the three months 2022 as reported and 13.5% in constant currency, as foreign currency exchange rates negatively impacted net sales by 3.3%. Excluding the 2.7% impact of acquisitions and divestitures, net sales in constant currency increased by 9.8% from increased unit volume and 1.0% from higher prices. The unit volume increase was due to higher shipments across all MedSurg and Neurotechnology products.
MedSurg and Neurotechnology net sales increased 9.6% in the nine months 2022 as reported and 12.1% in constant currency, as foreign currency exchange rates negatively impacted net sales by 2.5%. Excluding the 2.3% impact of acquisitions and divestitures, net sales in constant currency increased by 9.5% from increased unit volume and 0.3% from higher prices. The unit volume increase was due to higher shipments across all MedSurg products.
Orthopaedics and Spine Net Sales
Orthopaedics and Spine net sales increased 4.4% in the three months 2022 as reported and 8.7% in constant currency, as foreign currency exchange rates negatively impacted net sales by 4.3%. Net sales in constant currency increased 11.6% from increased unit volume partially offset by 2.9% from lower prices. The unit volume increase was due to higher shipments across most Orthopaedics and Spine products.
Orthopaedics and Spine net sales increased 3.2% in the nine months 2022 as reported and 6.5% in constant currency, as foreign currency exchange rates negatively impacted net sales by 3.3%. Net sales in constant currency increased 9.3% from increased unit volume partially offset by 2.8% from lower prices. The unit volume increase was due to higher shipments across most Orthopaedics and Spine products.
Gross Profit
Gross profit as a percentage of sales in the three months 2022 decreased to 62.1% from 63.5% in 2021. Excluding the impact of the items noted below, gross profit decreased to 62.6% of sales in the three months 2022 from 66.3% in 2021 due to increased costs from purchases of electronic components at premium prices on the spot market and other inflationary pressures, primarily related to labor, steel and transportation, as well as inefficiencies from supply chain disruptions.
Gross profit as a percentage of sales in the nine months 2022 decreased to 63.0% from 63.9% in 2021. Excluding the impact of the items noted below, gross profit decreased to 63.3% of sales in the nine months 2022 from 65.9% in 2021 primarily due to increased costs from purchases of electronic components at premium prices on the spot market and other inflationary pressures, primarily related to labor, steel and transportation, as well as inefficiencies from supply chain disruptions.
Percent Net Sales
Three Months2022202120222021
Reported$2,782 $2,642 62.1 %63.5 %
Inventory stepped-up to fair value— 94 — 2.3 
Restructuring-related and other charges19 20 0.5 0.5 
Medical device regulations1 1 — — 
Adjusted$2,802 $2,757 62.6 %66.3 %
Percent Net Sales
Nine Months2022202120222021
Reported$8,342 $7,923 63.0 %63.9 %
Inventory stepped-up to fair value12 231 0.1 1.9 
Restructuring-related and other charges29 20 0.2 0.1 
Medical device regulations3 2 — — 
Adjusted$8,386 $8,176 63.3 %65.9 %
Research, Development and Engineering Expenses
Research, development and engineering expenses increased $58 or 19.0% in the three months 2022 and increased as a percentage of sales to 8.1% from 7.4% in 2021. Excluding the impact of the items noted below, expenses increased to 7.1% of sales in 2022 from 6.7% in 2021.
Research, development and engineering expenses increased $224 or 24.8% in the nine months 2022 and increased as a percentage of sales to 8.5% from 7.3% in 2021. Excluding the impact of the items noted below, expenses increased to 7.1% of sales in 2022 from 6.7% in 2021.
The increases for the three and nine months reflect our continued investment in innovation, integration of recent acquisitions and for the nine months the write-off of certain intangible assets.
Percent Net Sales
Three Months2022202120222021
Reported$364 $306 8.1 %7.4 %
Restructuring-related and other charges(8)— (0.2)— 
Medical device regulations(39)(26)(0.8)(0.7)
Adjusted$317 $280 7.1 %6.7 %
Percent Net Sales
Nine Months2022202120222021
Reported$1,128 $904 8.5 %7.3 %
Restructuring-related and other charges(87)— (0.7)— 
Medical device regulations(95)(70)(0.7)(0.6)
Adjusted$946 $834 7.1 %6.7 %
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $147 or 9.2% in the three months 2022 and decreased as a percentage of sales to 32.5% from 38.5% in 2021. During the three months 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 $110 to reduce the fair value of contingent consideration as well as $8 in research, development and engineering expenses to write off the related in-process research and development intangible asset. Excluding the impact of the items noted below, expenses decreased to 33.1% of sales in 2022 from 34.1% in 2021.
Dollar amounts are in millions except per share amounts or as otherwise specified.
12
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
Selling, general and administrative expenses increased $22 or 0.5% in the nine months 2022 and decreased as a percentage of sales to 35.5% from 37.7%. Share-based awards for Vocera employees vested upon our acquisition in 2022 and a charge of $132 was recorded. Excluding the impact of the items noted below, expenses decreased to 33.5% of sales in 2022 from 34.2% in 2021.
The decreases as a percentage of sales for the three and nine months were due to fixed cost leverage and continued cost discipline.
Percent Net Sales
Three Months2022202120222021
Reported$1,455 $1,602 32.5 %38.5 %
Other acquisition and integration-related78 (32)1.7 (0.8)
Restructuring-related and other charges(31)(158)(0.7)(3.8)
Medical device regulations2 — — — 
Regulatory and legal matters(20)7 (0.4)0.2 
Adjusted$1,484 $1,419 33.1 %34.1 %
Percent Net Sales
Nine Months2022202120222021
Reported$4,704 $4,682 35.5 %37.7 %
Other acquisition and integration-related(96)(264)(0.7)(2.1)
Restructuring-related and other charges(113)(189)(0.9)(1.5)
Regulatory and legal matters(53)16 (0.4)0.1 
Adjusted$4,442 $4,245 33.5 %34.2 %
Recall Charges
Recall charges were minimal in the three and nine months 2022 and the three months 2021. Charges of $98 in the nine months 2021 were primarily related to Rejuvenate and ABG II Modular-Neck hip stems. Refer to Note 6 to our Consolidated Financial Statements for further information.
Amortization of Intangible Assets
Amortization of intangible assets was $159 and $144 in the three months and $469 and $474 in the nine months 2022 and 2021. Refer to Note 7 to our Consolidated Financial Statements for further information.
Operating Income
Operating income increased $234 to 18.0% of sales in the three months 2022 from 13.8% of sales in 2021. Excluding the impact of the items noted below, operating income decreased to 22.3% of sales in 2022 from 25.4% in 2021 primarily due to higher costs from inflationary pressures, slightly lower selling price, unfavorable foreign currency and our continued investments in innovation, partially offset by leverage from higher sales volumes and cost discipline.
Operating income increased $262 or 14.8% to 15.3% of sales in the nine months 2022 from 14.2% of sales in 2021. Excluding the impact of the items noted below, operating income decreased to 22.6% of sales in 2022 from 25.0% in 2021 primarily due to higher costs from inflationary pressures, slightly lower selling price, unfavorable foreign currency and our continued investments in innovation, partially offset by leverage from higher sales and cost discipline.
Percent Net Sales
Three Months2022202120222021
Reported$808 $574 18.0 %13.8 %
Inventory stepped-up to fair value— 94 — 2.3 
Other acquisition and integration-related(78)32 (1.7)0.8 
Amortization of purchased intangible assets159 144 3.5 3.5 
Restructuring-related and other charges58 178 1.4 4.2 
Medical device regulations38 27 0.8 0.6 
Recall-related matters(4)16 (0.1)0.4 
Regulatory and legal matters20 (7)0.4 (0.2)
Adjusted$1,001 $1,058 22.3 %25.4 %
Percent Net Sales
Nine Months2022202120222021
Reported$2,027 $1,765 15.3 %14.2 %
Inventory stepped-up to fair value12 231 0.1 1.9 
Other acquisition and integration-related96 264 0.7 2.1 
Amortization of purchased intangible assets469 474 3.5 3.8 
Restructuring-related and other charges229 209 1.8 1.7 
Medical device regulations98 72 0.7 0.6 
Recall-related matters14 98 0.1 0.8 
Regulatory and legal matters53 (16)0.4 (0.1)
Adjusted$2,998 $3,097 22.6 %25.0 %
Other Income (Expense), Net
Other income (expense), net was $8 and ($79) in the three months and ($105) and ($241) in the nine months 2022 and 2021. The decrease in net expense in 2022 was primarily due to favorable investment returns and the reversal of accrued interest related to the effective settlement of the United States federal income tax audit for years 2014 through 2018. Refer to Note 9 to our Consolidated Financial Statements for further information.
Income Taxes
Our effective tax rates were 0.0% and 6.6% in the three and nine months 2022. In the three months 2022 income tax expense decreased $162 due to the effective settlement of the United States federal income tax audit for years 2014 through 2018. In addition, other income (expense), net includes a benefit of $50 related to the release of accrued interest associated with this settlement. The nine months 2022 additionally include the reversal of deferred income tax on undistributed earnings of foreign subsidiaries no longer determined to be indefinitely reinvested. Our effective tax rates of 11.5% and 12.6% in the three and nine months 2021 include certain discrete tax items.
Net Earnings
Net earnings increased to $816 or $2.14 per diluted share in the three months 2022 from $438 or $1.14 per diluted share in 2021. Adjusted net earnings per diluted share(1) was $2.12 in 2022, a decrease of 3.6% from 2021.
Net earnings increased to $1,795 or $4.70 per diluted share in the nine months 2022 from $1,332 or $3.48 per diluted share in 2021. Adjusted net earnings per diluted share(1) decreased 0.6% to $6.34 in 2022 from $6.38 in 2021.
Percent Net Sales
Three Months2022202120222021
Reported$816 $438 18.2 %10.5 %
Inventory stepped-up to fair value— 73 — 1.8 
Other acquisition and integration-related(82)24 (1.8)0.6 
Amortization of purchased intangible assets132 114 2.9 2.7 
Restructuring-related and other charges50 165 1.1 3.9 
Medical device regulations32 23 0.7 0.6 
Recall-related matters(4)12 (0.1)0.3 
Regulatory and legal matters15 (7)0.3 (0.2)
Tax matters(149)— (3.2)— 
Adjusted$810 $842 18.1 %20.2 %
Percent Net Sales
Nine Months2022202120222021
Reported$1,795 $1,332 13.6 %10.7 %
Inventory stepped-up to fair value9 176 0.1 1.4 
Other acquisition and integration-related46 204 0.3 1.6 
Amortization of purchased intangible assets371 378 2.8 3.1 
Restructuring-related and other charges190 198 1.4 1.7 
Medical device regulations82 60 0.6 0.5 
Recall-related matters10 85 0.1 0.7 
Regulatory and legal matters39 (19)0.3 (0.2)
Tax matters(120)26 (0.9)0.2 
Adjusted$2,422 $2,440 18.3 %19.7 %
Dollar amounts are in millions except per share amounts or as otherwise specified.
13
STRYKER CORPORATION
2022 Third Quarter Form 10-Q
Non-GAAP Financial Measures
We supplement the reporting of our financial information determined under accounting principles generally accepted in the United States (GAAP) with certain non-GAAP financial measures, including percentage sales growth in constant currency; percentage organic sales growth; adjusted gross profit; adjusted selling, general and administrative expenses; adjusted research, development and engineering expenses; adjusted operating income; adjusted other income (expense), net; adjusted effective income tax rate; adjusted net earnings; adjusted net earnings per diluted share (Diluted EPS); free cash flow; and free cash flow conversion. We believe these non-GAAP financial measures provide meaningful information to assist investors and shareholders in understanding our financial results and assessing our prospects for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are important indicators of our operations because they exclude items that may not be indicative of or are unrelated to our core operating results and provide a baseline for analyzing trends in our underlying businesses. Management uses these non-GAAP financial measures for reviewing the operating results of reportable business segments and analyzing potential future business trends in connection with our budget process and bases certain management incentive compensation on these non-GAAP financial measures. To measure percentage sales growth in constant currency, we remove the impact of changes in foreign currency exchange rates that affect the comparability and trend of sales. Percentage sales growth in constant currency is calculated by translating current and prior year results at the same foreign currency exchange rate. To measure percentage organic sales growth, we remove the impact of changes in foreign currency exchange rates, acquisitions and divestitures, which affect the comparability and trend of sales. Percentage organic sales growth is calculated by translating current year and prior year results at the same foreign currency exchange rates excluding the impact of acquisitions and divestitures. To measure earnings performance on a consistent and comparable basis, we exclude certain items that affect the comparability of operating results and the trend of earnings. To measure free cash flow, we adjust cash provided by operating activities by the amount of purchases of property, plant and equipment and proceeds from long-lived asset disposals and remove the impact of certain legal settlements and recall payments. To measure free cash flow conversion we divide free cash flow by adjusted net earnings. These adjustments are irregular in timing and may not be indicative of our past and future performance. The following are examples of the types of adjustments that may be included in a period:
1.Acquisition and integration-related costs. Costs related to integrating recently acquired businesses (e.g., costs associated with the termination of sales relationships, workforce reductions and other integration-related activities), changes in the fair value of contingent consideration and specific costs (e.g., inventory step-up and deal costs) related to the consummation of the acquisition process.
2.Amortization of purchased intangible assets. Periodic amortization expense related to purchased intangible assets.
3.Restructuring-related and other charges. Costs associated with the termination of sales relationships in certain countries, workforce reductions, elimination of product lines, certain long-lived and intangible asset write-offs and impairments and associated costs and other restructuring-related activities.
4.Medical device regulations. Costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the new medical device reporting regulations and other requirements of the European Union.
5.Recall-related matters. Our best estimate of the minimum of the range of probable loss to resolve the Rejuvenate, LFIT V40 and other product recalls.
6.Regulatory and legal matters. Our best estimate of the minimum of the range of probable loss to resolve certain regulatory matters and other legal settlements.
7.Tax matters. Charges represent the impact of accounting for certain significant and discrete tax items.
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, selling, general and administrative expenses, research, development and engineering expenses, operating income, other income (expense), net, effective income tax rate, net earnings and net earnings per diluted share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of our operations when viewed with our GAAP results and the reconciliations to corresponding GAAP financial measures at the end of the discussion of Consolidated Results of Operations below. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The weighted-average diluted shares outstanding used in the calculation of non-GAAP net earnings per diluted share are the same as those used in the calculation of reported net earnings per diluted share for the respective period.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
Reconciliation of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures
Three Months 2022Gross ProfitSelling, General & Administrative ExpensesResearch, Development & Engineering ExpensesOperating IncomeOther Income (Expense), NetNet EarningsEffective
Tax Rate		Diluted EPS
Reported$2,782 $1,455 $364 $808 $8 $816 — %$2.14 
Reported percent net sales62.1 %32.5 %8.1 %18.0 %0.2 %18.2 %
Acquisition and integration-related costs:
Inventory stepped-up to fair value— — — — — — — — 
Other acquisition and integration-related— 78 — (78)— (82)2.0 (0.21)
Amortization of purchased intangible assets— — — 159 — 132 0.5 0.34 
Restructuring-related and other charges19 (31)(8)58 — 50 — 0.13 
Medical device regulations1 2 (39)38 — 32 0.1 0.08 
Recall-related matters— — — (4)— (4)— (0.01)
Regulatory and legal matters— (20)— 20 — 15 0.2 0.04 
Tax matters— — — — (62)(149)11.7 (0.39)
Adjusted$2,802 $1,484 $317 $1,001 $(54)$810 14.5 %$2.12 
Adjusted percent net sales62.6 %33.1 %7.1 %22.3 %(1.2)%18.1 %
Three Months 2021Gross ProfitSelling, General & Administrative ExpensesResearch, Development & Engineering ExpensesOperating IncomeOther Income (Expense), NetNet EarningsEffective
Tax Rate		Diluted EPS
Reported$2,642 $1,602 $306 $574 $(79)$438 11.5 %$1.14 
Reported percent net sales63.5 %38.5 %7.4 %13.8 %(1.9)%10.5 %
Acquisition and integration-related costs:
Inventory stepped-up to fair value94 — — 94 — 73 1.9 0.19 
Other acquisition and integration-related— (32)— 32 — 24 0.8 0.06 
Amortization of purchased intangible assets— — — 144 — 114 2.0 0.30 
Restructuring-related and other charges20 (158)— 178 — 165 (2.6)0.44 
Medical device regulations1 — (26)27 — 23 (0.1)0.06 
Recall-related matters— — — 16 — 12 0.3 0.03 
Regulatory and legal matters— 7 — (7)— (7)0.2 (0.02)
Tax matters— — — — — — — — 
Adjusted$2,757 $1,419 $280 $1,058 $(79)$842 14.0 %$2.20 
Adjusted percent net sales66.3 %34.1 %6.7 %25.4 %(1.9)%20.2 %
Nine Months 2022Gross ProfitSelling, General & Administrative ExpensesResearch, Development & Engineering ExpensesOperating IncomeOther Income (Expense), NetNet EarningsEffective
Tax Rate		Diluted EPS
Reported$8,342 $4,704 $1,128 $2,027 $(105)$1,795 6.6 %$4.70 
Reported percent net sales63.0 %35.5 %8.5 %15.3 %(0.8)%13.6 %
Acquisition and integration-related costs:
Inventory stepped-up to fair value12 — — 12 — 9 — 0.02 
Other acquisition and integration-related— (96)— 96 — 46 1.9 0.12 
Amortization of purchased intangible assets— — — 469 — 371 1.7 0.97 
Restructuring-related and other charges29 (113)(87)229 — 190 0.4 0.50 
Medical device regulations3 — (95)98 — 82 0.1 0.21 
Recall-related matters— — — 14 — 10 0.1 0.03 
Regulatory and legal matters— (53)— 53 — 39 0.3 0.10 
Tax matters— — — — (74)(120)3.0 (0.31)
Adjusted$8,386 $4,442 $946 $2,998 $(179)$2,422 14.1 %$6.34 
Adjusted percent net sales63.3 %33.5 %7.1 %22.6 %(1.4)%18.3 %
Nine Months 2021Gross ProfitSelling, General & Administrative ExpensesResearch, Development & Engineering ExpensesOperating IncomeOther Income (Expense), NetNet EarningsEffective
Tax Rate		Diluted EPS
Reported$7,923 $4,682 $904 $1,765 $(241)$1,332 12.6 %$3.48 
Reported percent net sales63.9 %37.7 %7.3 %14.2 %(1.9)%10.7 %
Acquisition and integration-related costs:
Inventory stepped-up to fair value231 — — 231 — 176 1.4 0.46 
Other acquisition and integration-related— (264)— 264 — 204 1.4 0.53 
Amortization of purchased intangible assets— — — 474 — 378 1.7 0.99 
Restructuring-related and other charges20 (189)— 209 11 198 (0.7)0.52 
Medical device regulations2 — (70)72 — 60 0.1 0.16 
Recall-related matters— — — 98 — 85 (0.1)0.22 
Regulatory and legal matters— 16 — (16)(3)(19)0.2 (0.05)
Tax matters— — — — — 26 (1.8)0.07 
Adjusted$8,176 $4,245 $834 $3,097 $(233)$2,440 14.8 %$6.38 
Adjusted percent net sales65.9 %34.2 %6.7 %25.0 %(1.9)%19.7 %
Dollar amounts are in millions except per share amounts or as otherwise specified.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
FINANCIAL CONDITION AND LIQUIDITY
Nine Months20222021
Net cash provided by operating activities$1,621 $2,263 
Net cash used in investing activities(2,762)(545)
Net cash provided by (used in) financing activities(303)(2,077)
Effect of exchange rate changes on cash and cash equivalents(80)(21)
Change in cash and cash equivalents$(1,524)$(380)
Operating Activities
Cash provided by operating activities was $1,621 and $2,263 in the nine months 2022 and 2021. The decrease was primarily due to higher costs for certain electronic components and increases of other critical inventory to manage supply chain delays due to component shortages.
Investing Activities    
Cash used in investing activities was $2,762 and $545 in the nine months 2022 and 2021. The increase in cash used in 2022 was primarily due to the acquisition of Vocera and investments in capital projects partially offset by settlements of certain foreign currency forward contracts designated as net investment hedges.
Financing Activities
Cash provided by (used in) financing activities was ($303) and ($2,077) in the nine months 2022 and 2021. Cash used in 2022 was primarily driven by dividend payments and repayments of debt, including $500 of payments on the $1,500 term loan used to fund the acquisition of Vocera. Cash used in 2021 was primarily due to debt repayments of $750 in March 2021 and $400 for the term loan in June 2021. We did not repurchase any shares in the nine months 2022 and 2021. Dividends paid to common shareholders were $788 and $713 in the nine months 2022 and 2021.
Liquidity
Cash, cash equivalents and marketable securities were $1,497 and $3,019 on September 30, 2022 and December 31, 2021. Current assets exceeded current liabilities by $4,747 and $5,468 on September 30, 2022 and December 31, 2021. We anticipate being able to support our short-term liquidity and operating needs from a variety of sources including cash from operations, commercial paper and existing credit lines.
We raised funds in the capital markets in the past and may continue to do so from time-to-time. We continue to have strong investment-grade short-term and long-term debt ratings that we believe should enable us to refinance our debt as needed.
Our cash, cash equivalents and marketable securities held in locations outside the United States was approximately 47% on September 30, 2022 compared to 26% on December 31, 2021.
Critical Accounting Policies
There were no changes to our critical accounting policies from those disclosed in our Annual Report on Form 10-K for 2021.
New Accounting Pronouncements Not Yet Adopted
Refer to Note 1 to our Consolidated Financial Statements for information.
Guarantees and Other Off-Balance Sheet Arrangements
We do not have guarantees or other off-balance sheet financing arrangements, including variable interest entities, of a magnitude that we believe could have a material impact on our financial condition or liquidity.
OTHER MATTERS
Legal and Regulatory Matters
We are involved in various ongoing proceedings, legal actions and claims arising in the normal course of our business, including proceedings related to product, labor, intellectual property and other matters. Refer to Note 6 to our Consolidated Financial Statements for further information.
FORWARD-LOOKING STATEMENTS
This report contains statements referring to us that are not historical facts and are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, which are intended to take advantage of the "safe harbor" provisions of the Reform Act, are based on current projections about operations, industry conditions, financial condition and liquidity. Words that identify forward-looking statements include words such as "may," "could," "will," "should," "possible," "plan," "predict," "forecast," "potential," "anticipate," "estimate," "expect," "project," "intend," "believe," "may impact," "on track," "goal," "strategy" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, an acquisition or our businesses. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Those statements are not guarantees and are subject to risks, uncertainties and assumptions that are difficult to predict, including uncertainties related to the impact of the COVID-19 pandemic on our operations and financial results. Therefore, actual results could differ materially and adversely from these forward-looking statements. Some important factors that could cause our actual results to differ from our expectations in any forward-looking statements include those risks discussed in Item 1A. "Risk Factors" of our Annual Report on Form 10-K for 2021 and Part II, Item 1A. "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2022. This Form 10-Q should be read in conjunction with our Consolidated Financial Statements and accompanying notes to our Consolidated Financial Statements in our Annual Report on Form 10-K for 2021. We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions or circumstances on which those expectations may be based, or that affect the likelihood that actual results will differ from those contained in the forward-looking statements.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We consider our greatest potential area of market risk exposure to be exchange rate risk on our operations and financial results. Quantitative and qualitative disclosures about exchange rate risk are included in Item 7A "Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for 2021. There were no material changes from the information provided therein.
Dollar amounts are in millions except per share amounts or as otherwise specified.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of the Chief Executive Officer and Chief Financial Officer (the Certifying Officers), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) on September 30, 2022. Based on that evaluation, the Certifying Officers concluded the Company's disclosure controls and procedures were effective as of September 30, 2022.
Changes in Internal Control Over Financial Reporting
There was no change to our internal control over financial reporting during the nine months 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In February 2022 we completed the acquisition of Vocera and are currently integrating Vocera into our operations, compliance programs and internal control processes. Vocera constituted approximately 8.5% of our total assets as of September 30, 2022, including the goodwill and intangible assets recorded as part of the purchase price allocation and approximately 1% of our net sales in the nine months ended September 30, 2022. United States Securities and Exchange Commission guidance allows companies to exclude acquisitions from their assessment of the internal control over financial reporting during the first year following an acquisition while integrating the acquired company. We have excluded the acquired operations of Vocera from our assessment of the Company's internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1A.RISK FACTORS
We are not aware of any material changes to the risk factors included in Item 1A. "Risk Factors" in our Annual Report on Form 10-K for 2021 and Part II, Item 1A. "Risk Factors" in our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2022.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We issued 25 shares of our common stock in the three months 2022 as performance incentive awards to employees. These shares are not registered under the Securities Act of 1933 based on the conclusion that the awards would not be events of sale within the meaning of Section 2(a)(3) of the Act.
In March 2015 we announced that our Board of Directors had authorized us to purchase up to $2,000 of our common stock. The manner, timing and amount of repurchases are determined by management based on an evaluation of market conditions, stock price, and other factors and are subject to regulatory considerations. Purchases are made from time-to-time in the open market, in privately negotiated transactions or otherwise.
In the nine months 2022 we did not repurchase any shares of our common stock under our authorized repurchase program. The total dollar value of shares of our common stock that could be acquired under our authorized repurchase program was $1,033 as of September 30, 2022.
ITEM 5.OTHER INFORMATION
Section 13(r) of the Securities Exchange Act of 1934, as amended, requires an issuer to disclose in its annual or quarterly reports whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to parties subject to sanctions administered by the Office of Foreign Assets Control (“OFAC”) within the United States Department of the Treasury, whether or not such activities are prohibited or sanctionable under United States law. On March 2, 2021, the United States government designated the Russian Federal Security Service (the “FSB”) under additional sanctions authorities. On the same day, OFAC issued General License No. 1B (the “OFAC General License”), which generally authorizes certain licensing, permitting, certification, notification and related transactions with the FSB as may be required pursuant to Russian encryption product import controls for the importation, distribution or use of certain information technology products and radio frequency technology products in the Russian Federation.
As required under Russian law and as permitted under the OFAC General License, one of our subsidiaries in Russia periodically files notifications with or applies for import licenses and permits from the FSB on our behalf in connection with the importation of our products into Russia. These notification and licensing activities are free of charge, and none of our gross revenue or net profits are attributable to such activities. We expect to continue to file notifications with and apply for import licenses and permits from the FSB to qualify our products for importation and distribution in the Russian Federation to the extent required under Russian law, but only so long as such notification and licensing activities are authorized by the OFAC General License, any successor general license or other authorization issued by OFAC.
During the three months 2022 we filed two notifications with the FSB as described above.
ITEM 6.EXHIBITS
31(i)
31(ii)
32(i)*
32(ii)*
101.INSiXBRL Instance Document
101.SCHiXBRL Schema Document
101.CALiXBRL Calculation Linkbase Document
101.DEFiXBRL Definition Linkbase Document
101.LABiXBRL Label Linkbase Document
101.PREiXBRL Presentation Linkbase Document
104Cover Page Interactive Data File (the cover page XBRL tags are embedded within the Inline XBRL document)
* Furnished with this Form 10-Q
Dollar amounts are in millions except per share amounts or as otherwise specified.
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STRYKER CORPORATION
2022 Third Quarter Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
STRYKER CORPORATION
(Registrant)
Date:November 1, 2022/s/ KEVIN A. LOBO
Kevin A. Lobo
Chair, Chief Executive Officer and President
Date:November 1, 2022/s/ GLENN S. BOEHNLEIN
Glenn S. Boehnlein
Vice President, Chief Financial Officer
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